NCLAT Delhi: Section 29A(C) Disqualifies Those Managing And Controlling Corporate Debtor Who Failed To Clear Debts

The National Company Law Appellate Tribunal New Delhi, comprising Mr. Justice Ashok Bhushan and Mr. Barun Mitra held that Section 29A of Insolvency and Bankruptcy Code, 2016 disqualifies not only those in management and control of the Corporate Debtor when its account was declared Non-Performing Asset but also those in management and control of the Corporate Debtor in close proximity of time before the Resolution Plan was submitted, who failed to clear the debts of the Corporate Debtor. NCLAT Verdict: The NCLAT Delhi dismissed the appeal and held that Section 29A of IBC disqualifies not only those in management and control of the Corporate Debtor when its account was declared NPA but also those in management and control of the Corporate Debtor in close proximity of time before the Resolution Plan was submitted, who failed to clear the debts of the Corporate Debtor. Person not eligible to be resolution applicant A person shall not be eligible to submit a resolution plan, if such person, or any other person acting jointly or in concert with such person— at the time of submission of the resolution plan has an account, or an account of a corporate debtor under the management or control of such person or of whom such person is a promoter, classified as non-performing asset in accordance with the guidelines of the Reserve Bank of India issued under the Banking Regulation Act, 1949 3 and at least a period of one year has lapsed from the date of such classification till the date of commencement of the corporate insolvency resolution process of the corporate debtor: Provided that the person shall be eligible to submit a resolution plan if such person makes payment of all overdue amounts with interest thereon and charges relating to non-performing asset accounts before submission of resolution plan; Provided further that nothing in this clause shall apply to a resolution applicant where such applicant is a financial entity and is not a related party to the corporate debtor. II.--For the purposes of this clause, where a resolution applicant has an account, or an account of a corporate debtor under the management or control of such person or of whom such person is a promoter, classified as non-performing asset and such account was acquired pursuant to a prior resolution plan approved under this Code, then, the provisions of this clause shall not apply to such resolution applicant for a period of three years from the date of approval of such resolution plan by the Adjudicating Authority under this Code; It observed that the MoU did not imply that the Appellant was given the management and control after the investment of 51% equity shares.