# ARCELORMITTAL INDIA PRIVATE LIMITED v. SATISH KUMAR GUPTA & ORS

- **Citation:** [2018] 12 S.C.R. 362
- **Court:** Supreme Court of India
- **Decided:** 2018-10-04
- **Case number:** Civil Appeal Nos. 9402-9405 of 2018
- **Bench:** R. F. Nariman, Indu Malhotra
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/arcelormittal-india-private-limited-v-satish-kumar-gupta-ors-32299
- **Pages:** 133

## Headnote

Insolvency and Bankruptcy Code, 2016: s.29A - Issue relates
to ineligibility of resolution applicants to submit resolution plans
after the introduction of s.29A into the Code - Petition filed under
the Code for financial debts owed to the financial creditors-Banks
by the corporate debtor ESIL for Rs.45,000 crores - RP (Resolution
Professional) invited an expression of interest from potential
resolution applicants - Appellant (AMIPL) and one entity Numetal
submitted expression of interest - Submission of resolution plan by
AMIPL and Numetal - RP found both AMIPL and Numetal ineligible
under s.29A - RP held that AM Netherlands mentioned as a
connected person of AMIPL was disclosed as a promoter of Uttam
Galva which was declared as a NPA - Similar was the situation of
Numetal - AMIPL and Numetal challenged the order of RP before
Adjudicating Authority (NCLT) - On 2.4.2018, pursuant to the RP's
invitation, fresh resolution plans submitted by AMIPL, Numetal and
one other entity 'Vedanta' - On 19.4.2018, NCLT passed order in
all the IAs, wherein it first held that there was no patent illegality in
the decision of RP for declaring ineligibility of applicants - It then
went on to hold that RP ought to have produced both the resolution
plans before the Committee of Creditors (CoC) and to follow the
provision of s.29A(c) r/w s.30(4) for affording opportunity to the
resolution applicants before declaring them ineligible and, therefore,
remanded back the matter to RP and CoC on this ground - Pending
appeals before NCLAT, on 8.5.2018, CoC disqualified AMIPL and
Numetal - On 7.9.2018, NCLAT held that at the time of first resolution
plan by Numetal, one of the shareholders being 'AEL' was related
party and therefore, Numetal was not eligible to submit resolution
plan in terms of s.29A and that on 29.3.2018, as the AEL was not
the shareholder of Numetal and all the three shareholders being
eligible, Numetal was eligible - Therefore, resolution plan submitted
[2018] 12 S.C.R. 362
362
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by Numetal to be considered by CoC to find out its viability - As
regards AMIPL, order of NCLT was affirmed subject to condition
that AMIPL shall make payment of all overdue amount with interest
thereon and charges relating to NPA of both the "Uttam Galva"
and "KSS Petron" within three days - Instant appeals filed by AMIPL
and Numetal - Held: The ingredients of sub-clause (c) of s.29A are
that, the ineligibility to submit a resolution plan attaches if any
person, as is referred to in the opening lines of s.29A, either itself
has an account, or is a promoter of, or in the management or control
of, a corporate debtor which has an account, which account has
been classified as a non-performing asset, for a period of at least
one year from the date of such classification till the date of
commencement of the corporate insolvency resolution process - If
it is shown, on facts, that, at a reasonably proximate point of time
before the submission of the resolution plan, the affairs of the
persons referred to in s.29A are so arranged, as to avoid paying
off the debts of the non-performing asset concerned, such persons
must be held to be ineligible to submit a resolution plan - In the
instant case, since both the resolution plans even on 2.4.2018,
were hit by s.29A(c), and since the proviso to s.29A(c) will not apply
as the corporate debtors related to AMIPL and Numetal have not
paid off their respective NPAs, ordinarily, these appeals would be
disposed of by merely declaring both resolution applicants to be
ineligible under s.29A(c) - However, in order to do complete justice
under Art.142 of the Constitution of India, one more opportunity is
given to both resolution applicants to pay off the NPAs of their
related corporate debtors within a period of two weeks in
accordance with the proviso to s.29A(c) - If such payments are
made within the said period, both resolution applicants can resubmit
their resolution plans dated 2.4.2018 to CoC, who are then

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ARCELORMITTAL INDIA PRIVATE LIMITED
v.
SATISH KUMAR GUPTA & ORS.
(Civil Appeal Nos. 9402-9405 of 2018)
OCTOBER 4, 2018
[R. F. NARIMAN AND INDU MALHOTRA, JJ.]
Insolvency and Bankruptcy Code, 2016: s.29A - Issue relates
to ineligibility of resolution applicants to submit resolution plans
after the introduction of s.29A into the Code - Petition filed under
the Code for financial debts owed to the financial creditors-Banks
by the corporate debtor ESIL for Rs.45,000 crores - RP (Resolution
Professional) invited an expression of interest from potential
resolution applicants - Appellant (AMIPL) and one entity Numetal
submitted expression of interest - Submission of resolution plan by
AMIPL and Numetal - RP found both AMIPL and Numetal ineligible
under s.29A - RP held that AM Netherlands mentioned as a
connected person of AMIPL was disclosed as a promoter of Uttam
Galva which was declared as a NPA - Similar was the situation of
Numetal - AMIPL and Numetal challenged the order of RP before
Adjudicating Authority (NCLT) - On 2.4.2018, pursuant to the RP's
invitation, fresh resolution plans submitted by AMIPL, Numetal and
one other entity 'Vedanta' - On 19.4.2018, NCLT passed order in
all the IAs, wherein it first held that there was no patent illegality in
the decision of RP for declaring ineligibility of applicants - It then
went on to hold that RP ought to have produced both the resolution
plans before the Committee of Creditors (CoC) and to follow the
provision of s.29A(c) r/w s.30(4) for affording opportunity to the
resolution applicants before declaring them ineligible and, therefore,
remanded back the matter to RP and CoC on this ground - Pending
appeals before NCLAT, on 8.5.2018, CoC disqualified AMIPL and
Numetal - On 7.9.2018, NCLAT held that at the time of first resolution
plan by Numetal, one of the shareholders being 'AEL' was related
party and therefore, Numetal was not eligible to submit resolution
plan in terms of s.29A and that on 29.3.2018, as the AEL was not
the shareholder of Numetal and all the three shareholders being
eligible, Numetal was eligible - Therefore, resolution plan submitted
[2018] 12 S.C.R. 362
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by Numetal to be considered by CoC to find out its viability - As
regards AMIPL, order of NCLT was affirmed subject to condition
that AMIPL shall make payment of all overdue amount with interest
thereon and charges relating to NPA of both the "Uttam Galva"
and "KSS Petron" within three days - Instant appeals filed by AMIPL
and Numetal - Held: The ingredients of sub-clause (c) of s.29A are
that, the ineligibility to submit a resolution plan attaches if any
person, as is referred to in the opening lines of s.29A, either itself
has an account, or is a promoter of, or in the management or control
of, a corporate debtor which has an account, which account has
been classified as a non-performing asset, for a period of at least
one year from the date of such classification till the date of
commencement of the corporate insolvency resolution process - If
it is shown, on facts, that, at a reasonably proximate point of time
before the submission of the resolution plan, the affairs of the
persons referred to in s.29A are so arranged, as to avoid paying
off the debts of the non-performing asset concerned, such persons
must be held to be ineligible to submit a resolution plan - In the
instant case, since both the resolution plans even on 2.4.2018,
were hit by s.29A(c), and since the proviso to s.29A(c) will not apply
as the corporate debtors related to AMIPL and Numetal have not
paid off their respective NPAs, ordinarily, these appeals would be
disposed of by merely declaring both resolution applicants to be
ineligible under s.29A(c) - However, in order to do complete justice
under Art.142 of the Constitution of India, one more opportunity is
given to both resolution applicants to pay off the NPAs of their
related corporate debtors within a period of two weeks in
accordance with the proviso to s.29A(c) - If such payments are
made within the said period, both resolution applicants can resubmit
their resolution plans dated 2.4.2018 to CoC, who are then given a
period of 8 weeks to accept, by the requisite majority, the best
amongst the plans submitted, including the resolution plan submitted
by Vedanta - In the event that no plan is found worthy of acceptance
by the requisite majority of the CoC, the corporate debtor, i.e. ESIL,
shall go into liquidation - Constitution of India - Art.142 - Company
law.
Insolvency and Bankruptcy Code, 2016: s.29A(c) - It is
important for the competent authority to see that persons, who are
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otherwise ineligible and hit by sub-clause (c), do not wriggle out of
the proviso to sub-clause (c) by other means, so as to avoid the
consequences of the proviso - For this purpose, despite the fact
that the relevant time for the ineligibility under sub-clause (c) to
attach is the time of submission of the resolution plan, antecedent
facts reasonably proximate to this point of time can always be seen,
to determine whether the persons referred to in s.29A are, in
substance, seeking to avoid the consequences of the proviso to subclause (c) before submitting a resolution plan.
Insolvency and Bankruptcy Code, 2016: s.29A - Point of time
at which the disqualification in sub-clause (c) of s.29A will attach -
Held: The stage of ineligibility attaches when the resolution plan is
submitted by a resolution applicant - The date of commencement of
the corporate insolvency resolution process is only relevant for the
purpose of calculating whether one year has lapsed from the date
of classification of a person as a non-performing asset.
Insolvency and Bankruptcy Code, 2016: s.3(37) - By s.3(37)
of the Code, words and expressions used but not defined in the
Code but defined inter alia by the SEBI Act, 1992, and the Companies
Act, 2013, shall have the meanings respectively assigned to them in
those Acts - SEBI (Substantial Acquisition of Shares and Takeovers)
Regulations, 2011 - s.2(1)(q).
Doctrines/Principles: Doctrine of lifting veil - Held: The
doctrine is applicable even to group companies, so that one is able
to look at the economic entity of the group as a whole.
Words and phrases: Expression "acting jointly" - Meaning
of in the context of s.29A of Insolvency and Bankruptcy Code, 2016.
Disposing of the appeals, the Court
HELD: 1.1 Where a statute itself lifts the corporate veil,
or where protection of public interest is of paramount importance,
or where a company has been formed to evade obligations
imposed by the law, the court will disregard the corporate veil.
Further, this principle is applied even to group companies, so
that one is able to look at the economic entity of the group as a
whole. [Para 34] [427-F-G]
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Faqir Chand Gulati v. Uppal Agencies Pvt. Ltd. & Anr.
(2008) 10 SCC 345 : [2008] 10 SCR 697; Laurel
Energetics Private Limited v. Securities and Exchange
Board of India, (2017) 8 SCC 541 : [2017] 5 SCR 1005
- held inapplicable.
1.2 The expression "acting jointly" in the opening sentence
of Section 29A cannot be confused with "joint venture agreements".
All that is to be seen by the expression "acting jointly" is whether
certain persons have got together and are acting "jointly" in the
sense of acting together. If this is made out on the facts, no
super added element of "joint venture" as is understood in law is
to be seen. The other important phrase is "in concert". By
Section 3(37) of the Code, words and expressions used but not
defined in the Code but defined inter alia by the SEBI Act, 1992,
and the Companies Act, 2013, shall have the meanings
respectively assigned to them in those Acts. In exercise of powers
conferred by Sections 11 and 30 of the SEBI Act, 1992, the 2011
Takeover Regulations have been promulgated by SEBI. By
Regulation 2(1)(q) of the 2011 Takeover Regulations, "persons
acting in concert" is defined. Under sub-clause (2) of clause (q),
a deeming fiction is enacted, by which a presumption is raised in
the categories mentioned, that a person falling within one category
is deemed to be acting in concert with another person mentioned
in the same category, unless the contrary is established. The
corporate veil is not merely torn but is left in tatters by subclauses (i) to (iv) of Regulation 2(1)(q)(2). Sub-clause (v) covers
"immediate relatives" i.e., father and son, brothers, etc.
Explanation to Regulation 2(1)(q)(2) defines "associate", which
subsumes not merely immediate relatives but other forms in which
a person can be associated with another - which includes the form
of trust, partnership firm and HUF. Wherever persons act jointly
or in concert with the "person" who submits a resolution plan, all
such persons are covered by Section 29A. [Paras 35, 38, 39] [427G-H; 428-A-C; 431-E; 433-D-F]
Technip SA v. SMS Holding (Pvt.) Ltd. & Ors. (2005) 5 SCC 465 :
[2005] 1 Suppl. SCR 223; M/s. Daiichi Sankyo Company Ltd. v.
Jayaram Chigurupati & Ors. (2010) 7 SCC 449 : [2010] 8
 SCR 251 - relied on.
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2.1 The opening words of Section 29A state: "a person
shall not be eligible to submit a resolution plan...". It is therefore
clear that the stage of ineligibility attaches when the resolution
plan is submitted by a resolution applicant. The date of
commencement of the corporate insolvency resolution process
is only relevant for the purpose of calculating whether one year
has lapsed from the date of classification of a person as a nonperforming asset. Further, the expression used is "has", is in
praesenti. This is to be contrasted with the expression "has been",
which is used in sub-clauses (d) and (g), which refers to an anterior
point of time. [Para 43] [437-D-F]
2.2 The ingredients of sub-clause (c) are that, the
ineligibility to submit a resolution plan attaches if any person, as
is referred to in the opening lines of Section 29A, either itself
has an account, or is a promoter of, or in the management or
control of, a corporate debtor which has an account, which account
has been classified as a non-performing asset, for a period of at
least one year from the date of such classification till the date of
commencement of the corporate insolvency resolution process.
For the purpose of applying sub-clause (c), any one of three things,
which are disjunctive, needs to be established. The expression
"management" would refer to the de jure management of a
corporate debtor. The de jure management of a corporate debtor
would ordinarily vest in a Board of Directors, and would include,
in accord with the definitions of "manager", "managing director"
and "officer" in Sections 2(53), 2(54) and 2(59) respectively of
the Companies Act, 2013, the persons mentioned therein. The
expression "control" is defined in Section 2(27) of the Companies
Act, 2013. The expression "control" is defined in two parts. The
first part refers to de jure control, which includes the right to
appoint a majority of the directors of a company. The second
part refers to de facto control. So long as a person or persons
acting in concert, directly or indirectly, can positively influence,
in any manner, management or policy decisions, they could be
said to be "in control". A management decision is a decision to
be taken as to how the corporate body is to be run in its day to
day affairs. A policy decision would be a decision that would be
beyond running day to day affairs, i.e., long term decisions. So
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long as the management or policy decisions can be, or are in fact,
taken by virtue of shareholding, management rights, shareholders
agreements, voting agreements or otherwise, control can be said
to exist. Thus, the expression "control", in Section 29A(c),
denotes only positive control, which means that the mere power
to block special resolutions of a company cannot amount to control.
"Control" here, as contrasted with "management", means de facto
control of actual management or policy decisions that can be or
are in fact taken. [Para 44-48] [438-A-E]
M/s Subhkam Ventures (I) Private Limited v. The
Securities and Exchange Board of India (Appeal No. 8
of 2009 decided on 15.1.2010) - relied on.
2.3 Section 29A(c) speaks of a corporate debtor "under the
management or control of such person". The expression "under"
would seem to suggest positive or proactive control, as opposed
to mere negative or reactive control. This becomes even clearer
when sub-clause (g) of Section 29A is read, wherein the
expression used is "in the management or control of a corporate
debtor". Under sub-clause (g), only a person who is in proactive
or positive control of a corporate debtor can take the proactive
decisions mentioned in sub-clause (g), such as, entering into
preferential, undervalued, extortionate credit, or fraudulent
transactions. It is thus clear that in the expression "management
or control", the two words take colour from each other, in which
case the principle of noscitur a sociis must also be held to apply.
Thus viewed, what is referred to in sub-clauses (c) and (g) is de
jure or de facto proactive or positive control, and not mere negative
control which may flow from an expansive reading of the definition
of the word "control" contained in Section 2(27) of the Companies
Act, 2013, which is inclusive and not exhaustive in nature. [Para
50] [440-F-H; 441-A]
Chintalapati Srinivasa Raju v. Securities and Exchange
Board of India, (2018) 7 SCC 443; Securities and
Exchange Board of India v. Kishore R. Ajmera (2016)
6 SCC 368 : [2016] 1 SCR 1118 - relied on.
2.4 Sub-clause (a) refers to a de jure position, namely, where
a person is expressly named in a prospectus or identified by the
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company in an annual return as a promoter. Sub-clauses (b) and
(c) speak of a de facto position. Under sub-clause (b), so long as
a person has "control" over the affairs of a company, directly or
indirectly, in any manner, he could be said to be a promoter of
such company. Under sub-clause (c), such person need not be a
member of the Board of Directors of a company, but can be a
person who in fact advises, directs or instructs the Board to act.
Under the proviso, only a person who acts in a professional
capacity is excluded from the talons of sub-clause (c). Any person
who wishes to submit a resolution plan, if he or it does so acting
jointly, or in concert with other persons, which person or other
persons happen to either manage or control or be promoters of a
corporate debtor, who is classified as a non-performing asset and
whose debts have not been paid off for a period of at least one
year before commencement of the corporate insolvency
resolution process, becomes ineligible to submit a resolution plan.
The first proviso to sub-clause (c) makes it clear that the
ineligibility can only be removed if the person submitting a
resolution plan makes payment of all overdue amounts with
interest thereon and charges relating to the non-performing asset
in question before submission of a resolution plan. Any person
who wishes to submit a resolution plan acting jointly or in concert
with other persons, any of whom may either manage, control or
be a promoter of a corporate debtor classified as a non-performing
asset in the prescribed period must first pay off the debt of the
said corporate debtor classified as a non-performing asset in order
to become eligible under Section 29A(c). [Paras 53, 54] [442-A-G]
3.1 If a person has been a promoter, or in the management,
or control, of a corporate debtor in which a preferential
transaction, undervalued transaction, extortionate credit
transaction or fraudulent transaction has taken place, and in
respect of which an order has been made by the Adjudicating
Authority under the Code, such person is ineligible to present a
resolution plan under Section 29A(g). This ineligibility cannot
be cured by paying off the debts of the corporate debtor.
Therefore, it is only such persons who do not fall foul of subclause (g), who are eligible to submit resolution plans under subclause (c) of Section 29A, if they happen to be persons who were
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in the erstwhile management or control of the corporate debtor.
[Para 56] [444-B-D]
3.2 It is important for the competent authority to see that
persons, who are otherwise ineligible and hit by sub-clause (c),
do not wriggle out of the proviso to sub-clause (c) by other means,
so as to avoid the consequences of the proviso. For this purpose,
despite the fact that the relevant time for the ineligibility under
sub-clause (c) to attach is the time of submission of the resolution
plan, antecedent facts reasonably proximate to this point of time
can always be seen, to determine whether the persons referred
to in Section 29A are, in substance, seeking to avoid the
consequences of the proviso to sub-clause (c) before submitting
a resolution plan. If it is shown, on facts, that, at a reasonably
proximate point of time before the submission of the resolution
plan, the affairs of the persons referred to in Section 29A are so
arranged, as to avoid paying off the debts of the non-performing
asset concerned, such persons must be held to be ineligible to
submit a resolution plan, or otherwise both the purpose of the
first proviso to sub-section (c) of Section 29A, as well as the larger
objective sought to be achieved by the said sub-clause in public
interest, will be defeated. [Para 57] [446-E-G]
Madras Petrochem Ltd. and Anr. v. Board for Industrial
and Financial Reconstruction and Ors., (2016) 4 SCC
1: [2016] 11 SCR 419; Innoventive Industries Ltd. v.
ICICI Bank & Anr. (2018) 1 SCC 407 : [2017] 8
SCR 33; E.V. Mathai v. Subordinate Judge, Kottayam
& Ors., (1969) 2 SCC 194 : [1970] 1 SCR 345 - relied
on.
4.1 How the corporate insolvency resolution process is to
work from the inception. Before admission of an application under
Section 7 by a financial creditor, the Adjudicating Authority is,
under Section 7(4), to first ascertain the existence of a default
within 14 days of receipt of the application, as specified in Section
7(4). Upon satisfaction that such default has occurred, it may
then admit such application, subject to rectification of defects,
which the proviso in Section 7(5) says must be done within 7
days of receipt of such notice from the Adjudicating Authority by
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the applicant. The time frame within which ascertainment of default
is to take place, as well as the time within which the defect is to
be rectified are directory in nature, the reason being that the
stage of these provisions is before admission of the application.
The corporate insolvency resolution process commences from
the date of admission of the application vide Section 7(6). Section
7(7) makes it incumbent upon the Adjudicating Authority to
communicate the order accepting or rejecting the application to
the financial creditor and the corporate debtor within a period of
7 days of such admission or rejection. [Para 69] [462-E-H]
Surendra Trading Co. v. Juggilal Kamlapat Jute Mills
Company Ltd. & Ors. (2017) 16 SCC 143 - relied on.
4.2 The time limit for completion of the insolvency
resolution process is laid down in Section 12. A period of 180
days from the date of admission of the application is given by
Section 12(1). This is extendable by a maximum period of 90
days only if the Committee of Creditors, by a vote of 66%, votes
to extend the said period, and only if the Adjudicating Authority
is satisfied that such process cannot be completed within 180
days. The authority may then, by order, extend the duration of
such process by a maximum period of 90 days. What is also of
importance is the proviso to Section 12(3) which states that any
extension of the period under Section 12 cannot be granted more
than once. This has to be read with the third proviso to Section
30(4), which states that the maximum period of 30 days mentioned
in the second proviso is allowable as the only exception to the
extension of the aforesaid period not being granted more than
once. Section 33 makes it clear that when either of these two
contingencies occurs, the corporate debtor is required to be
liquidated in the manner laid down in Chapter III. Section 12,
construed in the light of the object sought to be achieved by the
Code, and in the light of the consequence provided by Section
33, therefore, makes it clear that the periods previously
mentioned are mandatory and cannot be extended. In fact, even
the literal language of Section 12(1) makes it clear that the
provision must read as being mandatory. The expression "shall
be completed" is used. Further, sub-section (3) makes it clear
that the duration of 180 days may be extended further "but not
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exceeding 90 days", making it clear that a maximum of 270 days
is laid down statutorily. Also, the proviso to Section 12 makes it
clear that the extension "shall not be granted more than once".
[Paras 70, 71, 72] [463-A-C, E-G; 464-A]
4.3 Regulation 40A of the CIRP Regulations presents a
model timeline of the corporate insolvency resolution process,
on the basis that the time available is 180 days. It is of utmost
importance for all authorities concerned to follow this model
timeline as closely as possible. [Para 74] [466-F-G; 470-F]
4.4 It is settled law that a statute is designed to be workable,
and the interpretation thereof should be designed to make it so
workable. [Para 75] [470-G-H]
Commissioner of Income Tax, Delhi v. S. Teja Singh
[1959] Supp. 1 SCR 394 - relied on.
4.5 Given the timeline, and given the fact that a resolution
applicant has no vested right that his resolution plan be
considered, it is clear that no challenge can be preferred to the
Adjudicating Authority at this stage. A writ petition under Article
226 filed before a High Court would also be turned down on the
ground that no right, much less a fundamental right, is affected at
this stage. This is also made clear by the first proviso to Section
30(4), whereby a Resolution Professional may only invite fresh
resolution plans if no other resolution plan has passed muster.
However, a Resolution Professional is only to "examine" and
"confirm" that each resolution plan conforms to what is provided
by Section 30(2). The Resolution Professional is required to
examine that the resolution plan submitted by various applicants
is complete in all respects, before submitting it to the Committee
of Creditors. The Resolution Professional is not required to take
any decision, but merely to ensure that the resolution plans
submitted are complete in all respects before they are placed
before the Committee of Creditors, who may or may not approve
it. The fact that the Resolution Professional is also to confirm
that a resolution plan does not contravene any of the provisions
of law for the time-being in force, including Section 29A of the
Code, only means that his prima facie opinion is to be given to
the Committee of Creditors that a law has or has not been
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contravened. Section 30(2)(e) does not empower the Resolution
Professional to "decide" whether the resolution plan does or does
not contravene the provisions of law. Thus, the importance of
the Resolution Professional is to ensure that a resolution plan is
complete in all respects, and to conduct a due diligence in order
to report to the Committee of Creditors whether or not it is in
order. Even though it is not necessary for the Resolution
Professional to give reasons while submitting a resolution plan
to the Committee of Creditors, it would be in the fitness of things
if he appends the due diligence report carried out by him with
respect to each of the resolution plans under consideration, and
to state briefly as to why it does or does not conform to the law.
[Paras 76-78] [471-F-H; 472-A-E; 473-D-E]
5.1 A Resolution Professional has presented a resolution
plan to the Committee of Creditors for its approval, but the
Committee of Creditors does not approve such plan after
considering its feasibility and viability, as the requisite vote of
not less than 66% of the voting share of the financial creditors is
not obtained. The first proviso to Section 30(4) furnishes the
answer, which is that all that can happen at this stage is to require
the Resolution Professional to invite a fresh resolution plan within
the time limits specified where no other resolution plan is available
with him. It is clear that at this stage again no application before
the Adjudicating Authority could be entertained as there is no
vested right or fundamental right in the resolution applicant to
have its resolution plan approved, and as no adjudication has yet
taken place. It is the Committee of Creditors which will approve
or disapprove a resolution plan, given the statutory parameters
of Section 30. [Paras 79, 80] [473-E-H; 474-A]
5.2 Regulation 39 of CIRP Regulations shows that the
disapproval of the Committee of Creditors on the ground that
the resolution plan violates the provisions of any law, including
the ground that a resolution plan is ineligible under Section 29A,
is not final. The Adjudicating Authority, acting quasi-judicially,
can determine whether the resolution plan is violative of the
provisions of any law, including Section 29A of the Code, after
hearing arguments from the resolution applicant as well as the
Committee of Creditors, after which an appeal can be preferred
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from the decision of the Adjudicating Authority to the Appellate
Authority under Section 61. If, on the other hand, a resolution
plan has been approved by the Committee of Creditors, and has
passed muster before the Adjudicating Authority, this
determination can be challenged before the Appellate Authority
under Section 61, and may further be challenged before the
Supreme Court under Section 62, if there is a question of law
arising out of such order, within the time specified in Section 62.
Section 64 also makes it clear that the timelines that are to be
adhered to by the NCLT and NCLAT are of great importance,
and that reasons must be recorded by either the NCLT or NCLAT
if the matter is not disposed of within the time limit specified.
Section 60(5), when it speaks of the NCLT having jurisdiction to
entertain or dispose of any application or proceeding by or against
the corporate debtor or corporate person, does not invest the
NCLT with the jurisdiction to interfere at an applicant's behest
at a stage before the quasi-judicial determination made by the
Adjudicating Authority. [Paras 80, 81] [474-C-G]
Lachmeshwar Prasad Shukul & Ors. v. Keshwar Lal
Chaudhuri & Ors. AIR 1941 FC 5; Jang Singh v. Brijlal
& Ors. [1964] 2 SCR 146; A.S. Antulay v. R.S. Nayak
& Ors. [1988] Supp. 1 SCR - relied on.
6.1 Facts of this case: Numetal was incorporated in
Mauritius on 13.10.2017, expressly for the purpose of submission
of a resolution plan qua the corporate debtor, i.e., ESIL. Two
other companies, viz., AHL and AEL, were also incorporated on
the same day in Mauritius. The son of the promoter of ESIL held
the entire share capital of AHL, which in turn held the entire
shareholding of AEL, which in turn held the entire share capital
of Numetal. At this stage there can be no doubt whatsoever that
the son of the promoter, would be deemed to be a person acting
in concert with the corporate debtor, being covered by Regulation
2(1)(q)(v) of the 2011 Takeover Regulations. On 18.10.2017, AEL
transferred its shareholding of 26.1% in Numetal to a group
company, viz., ECL. This group company was ultimately owned
by 'Virgo Trust' and 'Triton Trust', the beneficiaries of which are
companies owned by the promoter of ESIL, his brother and their
immediate family members. The very next day, the son of
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promoter of ESIL settled an irrevocable and discretionary trust,
viz., the 'Crescent Trust', and settled the entire share capital of
AHL into the Trust, at a par value of USD 10,000. The
beneficiaries of this Trust were general charities, as well as
entitles owned by the brother of promoter of the corporate debtor,
and entities owned by son of promoter. [Paras 84-86] [476-C-F;
477-C-D]
6.2 On 20.11.2017, the son of the promoter of ESIL settled
'Prisma Trust', another irrevocable and discretionary trust, whose
beneficiaries are "general charities" and one 'Solis Enterprises
Limited', a company incorporated in Bermuda, whose share
capital is held by the son of promoter of ESIL. Numetal by a
response dated 30.3.2018, admitted that while the trust deed
relating to Prisma Trust allowed the trustee to benefit any English
or Bermuda charity, "no particular charity is named at this stage".
The Trustee of AEL is one 'Rhone Trustee', Singapore. The son
of promoter of ESIL was the ultimate natural person who held
the beneficial interest in AEL through Prisma Trust, through Solis
Enterprises Limited. This emerged from Section 6.7 of the
resolution plan submitted by Numetal to the Resolution
Professional. The Resolution Professional, after looking at this
affidavit of Prisma Trust, correctly noted that statements of such
a nature would not have been made by a truly independent trustee
of a discretionary trust, which demonstrated that the trustee was
under the complete control of the son of promoter of ESIL. This
in turn indicated that Prisma Trust was one more smokescreen
in the chain of control, which would conceal the fact that the actual
control over AEL is by none other than the son of the promoter.
[Paras 87, 88] [477-D-F; 478--B-C]
6.3 One day later on 22.11.2017, the trustees of the Prisma
Trust acquired 100% of the shareholding of AHL for a par value
of approximately USD 10,000 from the trustees of the Crescent
Trust. On this very date, merely one day before the Ordinance
bringing into force Section 29A was promulgated, ECL transferred
its shareholding of 26.1% of the share capital of Numetal to
Crinium Bay, an indirect wholly owned subsidiary of VTB Bank,
whose shares in turn are held by the Russian Government. AEL
also transferred shares representing 13.9% of the share capital
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of Numetal to Crinium Bay, thus making Crinium Bay's total
holding in Numetal 40%. On the same date, AEL also transferred
shares representing 25.1% of the share capital of Numetal to
Indo, and also transferred shares representing 9.9% of the share
capital of Numetal to TPE. These transfers were likely to have
taken place between 10.2.2018 and 12.2.2018. At the time of
submission of its first Resolution Plan dated 12.2.2018, the
shareholding of Numetal was as follows: Crinium Bay: 40% Indo
: 25.1% TPE: 9.9% AEL: 25%. As of this date, the son of
promoter, who is the ultimate beneficiary in the chain of control
of the trusts which in turn controlled AEL, was very much on the
scene, holding through AEL 25% of the shareholding of Numetal.
[Paras 89-90] [478-D-H]
7.1 One other extremely important fact is that the earnest
money in the form of Rs. 500 crores, credited to the account of
the corporate debtor, was provided to Numetal by AEL as a
shareholder of the resolution applicant, viz. Numetal. This earnest
money deposit of Rs.500 crores made by AEL continued to remain
with the Resolution Professional till date, despite the fact that,
by the time the second resolution plan was submitted by Numetal
on 2.4.2018, AEL had exited as a shareholder of Numetal. Under
clause 4.4.4 of the request for proposal for submission of
resolution plans for ESIL, the earnest money deposit stands to
be forfeited if any condition thereof is breached or the
qualifications of the potential resolution applicant are found to be
untrue. [Para 91] [479-A-C]
7.2 Clause 6.7 of Numetal's resolution plan stipulated that
it satisfied the minimum tangible net worth requirement, as set
out under the request for proposal, because Crinium Bay held
40% of the shareholding of Numetal, and that VTB Bank, Crinium
Bay's holding company had sufficient net worth, as on 31.12.2016,
to comply with the requirement under the request for proposal.
The excerpted portions of Numetal's resolution plan make it clear
that, since Numetal itself was a newly incorporated entity, with
no financial or experience credentials of its own, it therefore
relied entirely on the credentials of each of its constituent
shareholders. This shows that Numetal itself revealed in its
resolution plan that its corporate veil should be lifted, for without
lifting this veil, none of the parameters of the request for proposal
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could have been met by Numetal itself. It is thus clear that the
four shareholders of Numetal were persons "acting jointly" within
the meaning of Section 29A. This being the case, it is clear that
the argument that VTB Bank is a "connected person", being
ineligible under sub-clause (j), would have to be rejected, as VTB
Bank is itself, through its wholly owned subsidiary of Crinium
Bay, a person acting jointly with the three other shareholders of
Numetal, and would, therefore, fall within the first part of Section
29A itself. This being so, it cannot be said that VTB Bank is a
person "connected to" any one of the persons acting jointly, as it
is itself a person acting jointly, and therefore covered by the first
part of Section 29A. [Paras 92, 93] [481-C-D; 482-B-D]
7.3 On 29.3.2018, AEL transferred its 25% shareholding
in Numetal to the other three constituent shareholders, thereby
leaving its shareholding in Numetal as 'Nil'. In response to the
Resolution Professional's invitation, the second Resolution Plan,
therefore, submitted by Numetal on 2.4.2018, did not have AEL
as a constituent of Numetal; instead, Crinium Bay continued with
40% of the shareholding of Numetal, with TPE's holding now
augmented to 29.5% and Indo's to 34.1%. Given the fact that
the son of promoter is a person deemed to be acting in concert
with his father (who was a promoter of the corporate debtor ESIL),
there is no doubt whatsoever that Section 29A(c) would be
attracted as on the date of submission of the first resolution plan,
viz. 12.2.2018, as AEL was held by Prisma Trust, whose ultimate
beneficiary is son of promoter himself. This would show that the
NPA declared over a year before the date of commencement of
the corporate resolution process of ESIL (i.e. in 2015) would
render Numetal ineligible to submit a resolution plan. The only
manner in which Numetal could successfully present a resolution
plan would be to first pay off the debts of ESIL, as well as those of
such other corporate debtors of the Ruia group of companies,
which were declared as NPAs prior to the aforesaid period of one
year, before submitting its resolution plan. However, if the date
of the second resolution plan is to be seen, son of promoter of
the corporate debtor ESIL appears to have disappeared from the
scene altogether, as the three entities left are stated to be
independent entities in the form of two Russian entities and one
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UAE entity. Viewed on 2.4.2018, therefore, it could not be said
that son of promoter of the corporate debtor ESIL had disappeared
from the scene altogether, so as to obviate the application of
Section 29A(c). This is for two reasons. First, Rs.500 crores
that was deposited towards submission of earnest money
continued to remain deposited by AEL even post 2.4.2018,
showing thereby that son of promoter of the corporate debtor
ESIL continued to be present, insofar as Numetal's second
resolution plan was concerned. Further, having regard to the
reasonably proximate state of affairs before submission of the
resolution plan on 2.4.2018, beginning with Numetal's initial
corporate structure, and continuing with the changes made till
date, it is evident that, the object of all the transactions that have
taken place after Section 29A came into force on 23.11.2017 was
undoubtedly to avoid the application of Section 29A(c), including
its proviso. Therefore, whether the first or second resolution
plan is taken into account, both would clearly be hit by Section
29A(c), as the looming presence of son of promoter of the
corporate debtor ESIL was found all along, from the date of
incorporation of Numetal, till the date of submission of the second
resolution plan. [Paras 94, 95] [482-E-H; 483-A-E]
8.1 The ultimate shareholder of the resolution applicant,
viz. AMIPL, is directly the ultimate shareholder of AMNLBV as
well, which is an L.N. Mittal Group Company. When the corporate
veil of the various companies is pierced, both AMIPL and
AMNLBV are found to be managed and controlled by Shri L.N.
Mittal, and are therefore persons deemed to be acting in concert
as per Regulation 2(1)(q)(2)(i) of the 2011 Takeover Regulations.
That AMNLBV is a promoter of Uttam Galva is clear from the
aforementioned facts, being expressly stated as such in Uttam
Galva's annual returns. The reasonably proximate facts prior to
the submission of both resolution plans by AMIPL would show
that there is no doubt whatsoever that AMNLBV's shares in
Uttam Galva were sold only in order to get out of the ineligibility
mentioned by Section 29A(c), and consequently the proviso
thereto. The fact that the lenders with whom AMNLBV had a
Non Disposal Undertaking have not yet moved any forum for a
declaration that the sale of the shares, being without their consent,
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is non est, does not absolve AMNLBV from having failed to first
obtain their consent before selling off its shares in Uttam Galva.
Such sale is directly contrary to the Non Disposal Undertaking
given to the lenders. Quite apart from this, it is also clear that
shares worth Rs.19.50 each were sold at a distress value of Re.1
each, so as to overcome the provisions of Section 29A(c) and the
proviso thereto. It is clear therefore that the Uttam Galva
transaction clearly renders AMIPL ineligible under Section 29A(c)
of the Code. [Para 109] [491-G-H; 492-A-D]
8.2 Insofar as the transaction with regard to KSS Petron is
concerned, the facts are that on 3.3.2011, Fraseli, an entity
registered and incorporated in Luxemburg, which is managed
and controlled by Shri L.N. Mittal, held 32.22% of the
shareholding of KSS Global, a company domiciled in the
Netherlands. On 19.5.2011, by a Shareholders Agreement
entered into between KSS Holding, KSS Infra EALQ, Fraseli
and KSS Global, the first three companies were each given a
right to appoint an equal number of directors on the board of
directors of KSS Global, which in turn held 100% of the share
capital of KSS Petron, a company incorporated in India. Fraseli
was also granted affirmative voting rights on decisions regarding
certain specified matters, both at the board and the shareholder
level, in respect of KSS Global and all companies controlled by
it, which would include KSS Petron.