# BANK OF BARODA & ANR v. MBL INFRASTRUCTURES LIMITED & ORS

- **Citation:** [2022] 12 S.C.R. 761
- **Court:** Supreme Court of India
- **Decided:** 2022-01-18
- **Case number:** Civil Appeal No. 8411 of 2019
- **Bench:** Sanjay Kishan Kaul, M.M. Sundresh
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/bank-of-baroda-anr-v-mbl-infrastructures-limited-ors-35475
- **Pages:** 36

## Headnote

Insolvency and Bankruptcy Code, 2016 - s.29A(h) (as
amended by the Act 26 of 2018) - Interpretation and scope of -
Held: s.29A(h) creates one more category of persons not being
eligible to be a resolution applicant - Other than the persons
mentioned thereunder, there may not be any disqualification - The
word "person" is of a wider import to include a promoter or a
director, as the case may be - The definition of "person" as
mentioned u/s.3(23) of the Code includes certain categories of
persons and thus, there is no such exclusion - It is merely illustrative/
inclusive in nature and therefore, the persons mentioned in s.29A
alone are ineligible to be resolution applicants - Once a person
executes a guarantee in favour of a creditor with respect to the
credit facilities availed by a corporate debtor, and in a case where
an application for insolvency resolution has been admitted, with
the further fact of the said guarantee having been invoked, the bar
qua eligibility would certainly come into play - What the provision
requires is a guarantee in favour of 'a creditor' - Once an application
for insolvency resolution is admitted on behalf of 'a creditor' then
the process would be one of rem, and therefore, all creditors of the
same class would have their respective rights at par with each other
- The word "such creditor" in s.29A(h) has to be interpreted to
mean similarly placed creditors after the application for insolvency
application is admitted by the adjudicating authority - As a result,
what is required to earn a disqualification under the said provision
is a mere existence of a personal guarantee that stands invoked by
a single creditor, notwithstanding the application being filed by any
other creditor seeking initiation of insolvency resolution process,
subject to further compliance of invocation of the said personal
guarantee by any other creditor - Ineligibility has to be seen from
the point of view of the resolution process - It can never be said
that there can be ineligibility qua one creditor as against others -
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The ineligibility is to the participation in the resolution process of
the corporate debtor - Exclusion is meant to facilitate a fair and
transparent process - The provision after the amendment speaks of
invocation by a creditor - The manner of invocation can never be a
factor for the adjudicating authority to adjudge, as against its
existence - Adequate importance will have to be given to the latter
part of the provision which also disqualifies a person whose liability
under the personal guarantee executed in favour of a creditor,
remains unpaid in full or in part for the amount due from him, upon
invocation - s.29A has a laudable object of protecting and balancing
the interest of the committee of creditors and the corporate debtor,
while shutting the doors to canvas the interests of others - It
consciously excludes certain categories of persons - s.29A(h)
foresees the creditors who are otherwise either already under the
insolvency resolution process or are entitled to go under it -
Interpretation of Statutes - Purposive Interpretation.
Insolvency and Bankruptcy Code, 2016 - Object of -
Discussed.
Insolvency and Bankruptcy Code, 2016 - s.29A - Objective
of - Discussed.
Insolvency and Bankruptcy Code, 2016 - s.29A(h) (as
amended by the Act 26 of 2018) - Date of reckoning - Whether the
date of submission of resolution plan or the date of adjudication by
the authority - Held: If there is a bar at the time of submission of
resolution plan by a resolution applicant, it is obviously not
maintainable - However, if the submission of the plan is maintainable
at the time at which it is filed, and thereafter, by the operation of the
law, a person becomes ineligible, which continues either till the
time of approval by the CoC, or adjudication by the authority, then
the subsequent amended provision would govern the question of
eligibility of resolution applicant t

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 [2022] 12 S.C.R. 761
761
BANK OF BARODA & ANR.
v.
MBL INFRASTRUCTURES LIMITED & ORS.
(Civil Appeal No. 8411 of 2019)
JANUARY 18, 2022
[SANJAY KISHAN KAUL AND M.M. SUNDRESH, JJ.]
Insolvency and Bankruptcy Code, 2016 - s.29A(h) (as
amended by the Act 26 of 2018) - Interpretation and scope of -
Held: s.29A(h) creates one more category of persons not being
eligible to be a resolution applicant - Other than the persons
mentioned thereunder, there may not be any disqualification - The
word "person" is of a wider import to include a promoter or a
director, as the case may be - The definition of "person" as
mentioned u/s.3(23) of the Code includes certain categories of
persons and thus, there is no such exclusion - It is merely illustrative/
inclusive in nature and therefore, the persons mentioned in s.29A
alone are ineligible to be resolution applicants - Once a person
executes a guarantee in favour of a creditor with respect to the
credit facilities availed by a corporate debtor, and in a case where
an application for insolvency resolution has been admitted, with
the further fact of the said guarantee having been invoked, the bar
qua eligibility would certainly come into play - What the provision
requires is a guarantee in favour of 'a creditor' - Once an application
for insolvency resolution is admitted on behalf of 'a creditor' then
the process would be one of rem, and therefore, all creditors of the
same class would have their respective rights at par with each other
- The word "such creditor" in s.29A(h) has to be interpreted to
mean similarly placed creditors after the application for insolvency
application is admitted by the adjudicating authority - As a result,
what is required to earn a disqualification under the said provision
is a mere existence of a personal guarantee that stands invoked by
a single creditor, notwithstanding the application being filed by any
other creditor seeking initiation of insolvency resolution process,
subject to further compliance of invocation of the said personal
guarantee by any other creditor - Ineligibility has to be seen from
the point of view of the resolution process - It can never be said
that there can be ineligibility qua one creditor as against others -
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The ineligibility is to the participation in the resolution process of
the corporate debtor - Exclusion is meant to facilitate a fair and
transparent process - The provision after the amendment speaks of
invocation by a creditor - The manner of invocation can never be a
factor for the adjudicating authority to adjudge, as against its
existence - Adequate importance will have to be given to the latter
part of the provision which also disqualifies a person whose liability
under the personal guarantee executed in favour of a creditor,
remains unpaid in full or in part for the amount due from him, upon
invocation - s.29A has a laudable object of protecting and balancing
the interest of the committee of creditors and the corporate debtor,
while shutting the doors to canvas the interests of others - It
consciously excludes certain categories of persons - s.29A(h)
foresees the creditors who are otherwise either already under the
insolvency resolution process or are entitled to go under it -
Interpretation of Statutes - Purposive Interpretation.
Insolvency and Bankruptcy Code, 2016 - Object of -
Discussed.
Insolvency and Bankruptcy Code, 2016 - s.29A - Objective
of - Discussed.
Insolvency and Bankruptcy Code, 2016 - s.29A(h) (as
amended by the Act 26 of 2018) - Date of reckoning - Whether the
date of submission of resolution plan or the date of adjudication by
the authority - Held: If there is a bar at the time of submission of
resolution plan by a resolution applicant, it is obviously not
maintainable - However, if the submission of the plan is maintainable
at the time at which it is filed, and thereafter, by the operation of the
law, a person becomes ineligible, which continues either till the
time of approval by the CoC, or adjudication by the authority, then
the subsequent amended provision would govern the question of
eligibility of resolution applicant to submit a resolution plan - If
there is ineligibility which in turn prohibits the other stakeholders
to proceed further and the amendment being in the nature of
providing a better process, and that too in the interest of the creditors
and the debtor, the same is required to be followed as against the
provision that stood at an earlier point of time - Thus, a mere filing
of the submission of a resolution plan has got no rationale, as it
does not create any right in favour of a facilitator nor it can be
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extinguished - It cannot be said that what is good today cannot be
applied merely because an applicant was eligible to submit a
resolution plan at an earlier point of time- It is only a part of
procedural law.
Insolvency and Bankruptcy Code, 2016 - s.12(3) - Held:
There is a marked difference between extension and exclusion -
Exclusion would come into play when the decision is challenged
before a higher forum - Extension is one which is to be exercised
by the authority constituted.
Swiss Ribbons (P) Ltd. v. Union of India (2019) 4 SCC
17; K.N. Rajkumar v. V.N. Nagarajan 2021 SCC OnLine
732; Arcellor Mittal India Pvt. Ltd. v. Satish Kumar
Gupta (2019) 2 SCC 1 : [2018] 12 SCR 362; Committee
of Creditors, Essar Steel India Ltd. v. Satish Kumar
Gupta (2020) 8 SCC 531 : [2019] 16 SCR 275; Apollo
Joti LLC & Ors. v. Jyoti Structures Ltd. (Company
Appeal (AT) (Insolvency) No. 548 of 2018; DBS Bank
Ltd. v. Sharad Sanghi (Civil Appeal No. 3434-3436 of
2019); Ebix Singapore Pvt. Ltd. v. COC of Educomp
Solutions Ltd. 2021 SCC OnLine SC 707; National Spot
Exchange v. Anil Kohli 2021 SCC OnLine SC 716;
Reserve Bank of India v. Peerless General Finance and
Investment Company Limited, (1987) 1 SCC 424 : [1987]
2 SCR 1; Union of India v. Elphinstone Spg. and Wvg.
Co. Ltd., (2001) 4 SCC 139 : [2001] 1 SCR 221;
Phoenix Arc (P) Ltd. v. Spade Financial Services Ltd.,
(2021) 3 SCC 475; Arun Kumar Jagatramka v. Jindal
Steel & Power Limited, (2021) 7 SCC 474 : Swiss
Ribbons (P) Ltd. v. Union of India, (2019) 4 SCC 17 :
[2019] 3 SCR 535; Chitra Sharma & Ors. v. Union of
India, (2018) 18 SCC 575 : [2018] 12 SCR 1044 -
referred to.
Maxwell On Interpretation Of Statues, 11th Edition;
Craies In Statute Law, 7th Edition, Pg. 262; A Driedger,
Construction Of Statute, 2nd Edition, 1983, Pg. 37 -
referred to.
Seaford Court Estates Ltd. v. Asher, (1949) 2 KB 481 -
referred to.
BANK OF BARODA & ANR. v. MBL INFRASTRUCTURES
LIMITED & ORS.
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Case Law Reference
(2019) 4 SCC 17
referred to
Para 33
[2018] 12 SCR 362
referred to
Para 33
[2019] 16 SCR 275
referred to
Para 33
[1987] 2 SCR 1
referred to
Para 40
[2001] 1 SCR 221
referred to
Para 41
(2019) 2 SCC 1
referred to
Para 42
(2021) 3 SCC 475
referred to
Para 42
(2021) 7 SCC 474
referred to
Para 42
[2019] 3 SCR 535
referred to
Para 43
[2018] 12 SCR 1044
referred to
Para 48
CIVIL APPELLATE JURISDICTION : Civil Appeal No.8411 of
2019.
From the Judgment and Order dated 16.08.2019 of the National
Company Law Appellate Tribunal, New Delhi in Company Appeal (AT)
(Insolvency) No.225 of 2018.
Tushar Mehta, SG, M/s Cyril Amarchand Mangaldas, Advs. for
the Appellants.
Ranjit Kumar, Parag Tripathi, Sr. Advs., Ms. Anusuya Salwan,
Ms. S. Janani, Abhishek Pundir, Bankim Garg, Ms. Mishika Bajpai,
Chaitanya Bansal, Dr. Sudhir Bisla, Ms. Sumitra Bisla, Satyendra Kumar,
Sanjay Kapur, Ms. Megha Karnwal, Arjun Bhatia, Mrs. Shubhra Kapur,
Lalit Rajput, Ankur Mittal, Ms. Meera Morali, Ms. Aishwarya Pandey,
Atul Kumar, Abhimanyu Sharma, Ms. Deepali, Karunakar Rath, Tarun
Gupta, Ms. Archana Pathak Dave, Mithilesh Kumar Pandey, Amit Singh,
Rakesh Kumar-I, Sataroop Das, Nikhil Kohli, Ms. Isha Singh, Rahul
Sinha, Ms. Shivee Pandey, Dr. (Mrs.) Vipin Gupta, Advs. for the
Respondents.
The Judgment of the Court was delivered by
M. M. SUNDRESH, J.
1. A judicial interpretation of Section 29A(h) of the Insolvency
and Bankruptcy Code, 2016 (hereinafter referred to as "the Code"), as
amended by the Act 26 of 2018 is sought from us.
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2. We have heard Shri. Tushar Mehta, learned Solicitor General
and Mr. Bishwajit Dubey, learned counsel appearing for the Appe1llant,
and Shri. Ranjit Kumar and Shri. Parag P. Tripathi, learned senior counsels
on behalf of Respondent Nos. 1 and 3, respectively. Perused the
documents filed by both sides, and additionally, we had the benefit of
going through the written arguments placed on record.
A BRIEF JOURNEY:
3. M/s. MBL Infrastructures Limited (Respondent No.1) was set
up by one, Mr. Anjanee Kumar Lakhotiya (Respondent No. 3) in the
early 1990s. Loans/ credit facilities were obtained by the Respondent
No.1 from the consortium of banks (State Bank of Mysore now State
Bank of India as lead bank), some of who are also arrayed as respondents
apart from the appellant. On the failure of the Respondent No.1 to act in
tune with the terms of repayment, some of the respondents were forced
to invoke the personal guarantees extended by the Respondent No.3 for
the credit facilities availed by the Respondent No.1.
4. M/s. RBL Bank issued a notice under Section 13(2) of the
Securitisation and Reconstruction of Financial Assets and Enforcement
of Security Interest Act, 2002 ('SARFAESI Act' for short), after duly
invoking the personal guarantee of the Respondent No.3. This was
followed by a similar action at the hands of Respondent No.8 (M/s
Allahabad Bank) and M/s. State Bank of Bikaner and Jaipur. We are
given to understand that M/s. State Bank of Bikaner and Jaipur got
merged with State Bank of India. The aforesaid two proceedings invoking
Section 13(2) of the SARFAESI Act were initiated in the month of
February and March, 2013, respectively.
5. On the aforesaid factual setting, M/s. RBL Bank filed an
application bearing No. (IB)-170/KB/2017 under Section 7 of the Code
before the National Company Law Tribunal, Kolkata (hereinafter
referred to as "adjudicating authority") to initiate corporate insolvency
resolution process (CIRP) against Respondent No.1. It was admitted
vide order dated 30.03.2017, appointing an Interim Resolution
Professional, leading to imposition of moratorium in terms of Section 14
of the Code. After the expiry of the initial period of CIRP, an application
was filed by the Resolution Professional for extending the duration of
CIRP by an additional 90 days, which was duly granted.
6. Two resolution plans were received by the Resolution
Professional (Respondent No.2 herein) as he then was, of which, one
BANK OF BARODA & ANR. v. MBL INFRASTRUCTURES
LIMITED & ORS. [M. M. SUNDRESH, J.]
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was authored by Respondent No.3 on 29.06.2017. This was done prior
to the introduction of Section 29A of the Code.
7. A series of meetings took place with the active participation of
the Committee of Creditors (CoC) on the resolution plan submitted by
the Respondent No.3 between October 16, 2017 to November 17, 2017.
A decision was made in the 9th meeting of the CoC held on 18.11.2017
seeking an appropriate resolution plan at the hands of Respondent No.3.
In tune with the aforesaid directive, the Respondent No.3 submitted a
modified resolution plan on 22.11.2017.
8. Thereafter, by way of the Insolvency and Bankruptcy Code
(Amendment) Ordinance, 2017, Section 29A was introduced to the Code
with which we are concerned in the present lis, specifically 29A(c) and
(h). The same are reproduced as under:
"Section 29 A - Persons 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 with such
person or any other person who is a promoter or in the management
or control of such person, -
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(c) 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 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 nonperforming asset accounts before submission of resolution plan;
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(h) has executed an enforceable guarantee in favour of a creditor,
in respect of a corporate debtor under insolvency resolution process
or liquidation under this code."
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9. The CoC held its meeting on 01.12.2017 to deliberate upon the
impact of the amendment qua the eligibility of the Respondent No.3 in
submitting a resolution plan in the CIRP proceedings. In view of the
lingering doubt expressed, the Respondent No.3 filed an application
bearing CA(IB) No.543/KB/2017 praying for a declaration that he was
not disqualified from submitting a resolution plan under sub-section (c)
and (h) of Section 29A of the Code.
10. The adjudicating authority, vide its order dated 18.12.2017
held that the Respondent No.3 was eligible to submit a resolution plan,
notwithstanding the fact that he did extend his personal guarantees on
behalf of the Respondent No.1 which were duly invoked by some of the
creditors, as aforesaid. This issue was never placed and raised before
the adjudicating authority. Though the adjudicating authority took note of
Section 29A(c) of the Code, it did not give any specific findings on it.
However, it ruled that inasmuch as the personal guarantee having not
been invoked and the Respondent No.3 merely having extended his
personal guarantee, as such there is no disqualification per se under
Section 29A(h) of the Code as the liability under a guarantee arises only
upon its invocation. Thus, only those guarantors who had antecedents
which might adversely impact the credibility of the process are alone to
be excluded. As debt payable by Respondent No.3 was not crystalized,
he could not be construed as a defaulter for breach of the guarantee.
Incidentally, a finding has been given that the Respondent No.3 did not
commit any default. With the aforesaid clarification, the application filed
was allowed by taking into consideration the amendment made on
23.11.2017, introducing Section 29A to the Code.
11. The aforesaid order was assailed by the Punjab National Bank
(Respondent No.10) before the National Company Law Appellate
Tribunal (hereinafter referred to as "appellate tribunal") in Company
Appeal (AT) (Insolvency) No. 330 of 2017. Upon hearing the Respondent
No.10, the following interim order was passed on 21.12.2017:
"Let notice be issued to respondents by speed post. Requisites by
next dated. Dasti service permitted.
Copy of this order may also be forwarded to the respondents.
The appellant will file the certified copy of the impugned order by
5th January, 2018. Post the matter on 11th January, 2018.
In the meantime, if the 2nd Respondent filed any Resolution Plan,
the Resolution Professional and the Committee of Creditors may
BANK OF BARODA & ANR. v. MBL INFRASTRUCTURES
LIMITED & ORS. [M. M. SUNDRESH, J.]
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go through the same but the Adjudicating Authority will not accept
or reject the resolution plan or pass any order in lower court
without prior approval of this Appellant Tribunal."
12. On the very same day, the resolution plan submitted by the
Respondent No.3 was put to vote by the Respondent No.2 in the 12th
meeting of the CoC by way of e-voting, and the process was completed
the next day. The plan received 68.50% vote share of the CoC. Six
financial creditors voted against the plan, including Respondent No.10
(PNB) and RBL Bank. The extended 270 day period of CIRP expired
on 25.12.2017.
13. RBL Bank filed an appeal against the order dated 18.12.2017
being Company Appeal (AT) (Insolvency) No.1 of 2018 wherein an
order was passed upon hearing the parties on 11.01.2018 facilitating the
adjudicating authority to proceed further but not to accept the resolution
plan, without its prior approval.
14. The Respondent No.3 filed an application on 12.01.2018
invoking Section 60 of the Code bearing CA No.(IB) 50/KB/2018 seeking
an appropriate direction to the dissenting and abstaining creditors to
facilitate a possible change of mind by supporting the resolution plan, as
modified. Thereafter, Bank of Maharashtra (Respondent No. 11), since
impleaded by the order of this court dated 26.10.2021, sent a letter to
Respondent No.2 dated 31.01.2018 setting forth its conditions for its
approval of the resolution plan. Further, Indian Overseas Bank was
pleased to give its approval to the resolution plan. As such, the resolution
plan gathered 78.50% vote share.
15. In the meanwhile, Section 29A(h) went through a further
amendment which came into effect from 18.01.2018:
"Section 29 A - Persons 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 -
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(h) has executed an enforceable guarantee in favour of a creditor,
in respect of a corporate debtor against which an application for
insolvency resolution made by such creditor has been admitted
under this code."
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16. On 23.03.2018, the appellate tribunal passed the following
order in the appeals filed by Respondent No.10 and RBL Bank:
"When the matter was taken up learned counsel appearing on
behalf of the Appellant - 'Punjab National Bank' sought permission
to withdraw the appeal. One of the learned counsel appearing on
behalf of the Respondent opposed the prayer. However, we are
not inclined to the ground of opposition as made by the Respondent.
Bank intends to withdraw the appeal, without any liberty. In this
background, without taking into consideration the grounds shown
in the affidavit for withdrawal, we allow the Appellant to withdraw
the Appeal without any liberty to challenge the same very impugned
order. The appeal is dismissed as withdrawn. I.A. No.311 of 2018
stands disposed of. The 'question of law' may be decided in some
other case. No cost.
The interim order passed by this Appellant Tribunal on 21st
December, 2017 stands vacated."
17. The above order was passed while permitting the appellants
to withdraw the appeals against the order of eligibility of Respondent
No.3, in view of the resolution plan having reached the mandatory
requirement of 75% as warranted under Section 30(4) of the Code.
Thus, it is clear that those appellants did not have any grievance on the
plan as accepted by the majority of the CoC. However, the request
made by the present appellant who filed I.A. No. 311 of 2018 before the
appellate tribunal, seeking to be impleaded as a party to the aforesaid
proceedings to continue the lis was not favourably considered though no
reason was assigned in the aforesaid order. We may also note that the
appellant before us who incidentally filed the aforesaid application was
not heard before the adjudicating authority. Suffice it is to state that the
appellant did raise its objection to the withdrawal of appeal, presumably
on the premise that it wanted to continue by substituting itself in place of
the original appellants.
18. The resolution professional, the Respondent No.2 filed a report
dated 12.02.2018 for recording the increase in voting share up to 78.50%
together with the resolution plan stating that it was accordingly passed.
Only on the aforesaid factual setting the pending appeal before the
appellate tribunal was withdrawn on 27.02.2018. The adjudicating
authority approved the resolution plan submitted by its order dated
18.04.2018 inter alia holding that there is a marked difference between
BANK OF BARODA & ANR. v. MBL INFRASTRUCTURES
LIMITED & ORS. [M. M. SUNDRESH, J.]
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extension and exclusion and therefore, the rigor of Section 12(1) of the
Code would not get attracted on the facts of the case particularly when
there were pending proceedings with interim orders. It was further held
that the issue qua the eligibility under Section 29A(h) decided already,
coupled with the resolution plan crossing the requisite threshold of
approval by the CoC, i.e. 75% vote share, having considered the technoeconomic viability and feasibility of the plan, the application filed for
approval of the resolution plan submitted by the Respondent No.3 was
liable to be allowed. A direction was accordingly given, holding that the
approved resolution plan shall come into force with immediate effect.
19. The appellant before us put into challenge, the aforesaid order
passed by the adjudicating authority in Company Appeal (AT)(Insolvency)
No. 194 of 2018.
20. In the meanwhile, Section 29A(h) went through a further
change by way of ordinance dated 06.06.2018, which subsequently
became an Act with effect from the same date through the Act 26 of
2018:
"Section 29 A- Persons 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 -
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(h) has executed a guarantee in favour of a creditor, in
respect of a corporate debtor against which an application for
insolvency resolution made by such creditor has been admitted
under this code and such guarantee has been invoked by the credit
and remains unpaid if full or part."
21. The appellate tribunal did explore other possibilities during the
pendency of the appeal. It also directed the Respondent No.3 to submit
a revised resolution plan. After hearing the parties, the order passed by
the adjudicating authority was confirmed, dismissing the appeal filed by
the appellant while approving the revised resolution plan submitted by
the Respondent No.3 before it. After the disposal of the appeals filed
including that of the appellant along with the others who have not
challenged the same before us, the shareholders of the Respondent No.1
approved the fund raising of Rs.300 crores in the Annual General Meeting.
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22. The appeals including that of the appellant were dismissed on
the ground that the resolution plan was approved with 78.50% of the
voting share of the CoC, and it was backed by the techno-economic
report qua the viability and feasibility. The earlier decision of the
adjudicating authority dated 18.12.2017 has attained finality qua the issue
of eligibility of the Respondent No.3 under Section 29A of the Code to
submit a resolution plan, and it cannot sit in appeal over the decision of
the adjudicating authority or the CoC in the absence of any apparent
discrimination. It is this decision of the appellate authority confirming the
order passed by the adjudicating authority, which is tested before us.
23. Before we proceed with the submissions made at the Bar, we
have to record one more fact, namely, Section 30 of the Code also
underwent a change by the introduction of amendment dated 06.06.2018
by way of an ordinance followed by an Act through which the percentage
required for approval of a resolution plan by the CoC has been brought
down from 75% to 66% of the voting share of the CoC.
SUBMISSIONS OF THE APPELLANT:
24. We will collectively consider the submissions of the learned
counsel appearing for the appellant and the Respondent No.7, though
the said respondent did not choose to file any appeal before us.
25. Section 29A has to be given a holistic interpretation as the
objective is to weed out undesirable persons with the intention of promoting
primacy of debt by disqualifying guarantors who have not fulfilled their
co-extensive liability with the insolvent corporate debtor. The Respondent
No.3 (who is a promoter of the corporate debtor) was ineligible to submit
a resolution plan under Section 29A(h) of the Code, as several personal
guarantees executed by the Respondent No.3 in favour of various
creditors of the Respondent No.1 stood invoked, prior commencement
of CIRP. There is a clear suppression on the part of Respondent No.3,
which was not taken note of by the adjudicating authority on both the
occasions. Even the Respondent No.2 failed to bring the said fact before
the adjudicating authority. Therefore, the premise on which the
adjudicating held the Respondent No.3 eligible to submit a resolution
plan is ex facie false.
26. The law which was prevailing on the date of the application
has to be seen, therefore, the disqualification gets attracted on the date
of filing of the application and on the same analogy not only Section
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29A(h) but also Section 30(4) has to be interpreted. As fraud vitiates all
solemn acts, the appeal deserves to be allowed. A legal ineligibility cannot
be done away with by alleged estoppel, such ineligibility is a matter of
fact to be considered by Courts irrespective of any waiver by any party
or creditor. The approval of the resolution plan was made after the
mandatory period of 270 days, i.e. after the expiry of the CIRP period.
Since there is clear infraction of Section 12, the orders passed are liable
to be interfered with. The learned Solicitor General has sought to place
reliance on the judgment of this Court in K. Shashidhar vs. Union of
India (Order dated 05.02.2019 in Civil Appeal 10673 of 2018). The revised
plan before the appellate tribunal was never approved by the adjudicating
authority, including the conditional assent given by the Respondent No.11,
which were erroneously accepted.
27. There is no bar in law for questioning the eligibility before the
adjudicating authority as the appellant was neither a party before it on
earlier occasion nor an adjudication was made on the merits by the
appellate tribunal. Therefore, the order passed by the appellate tribunal
confirming that of the adjudicating authority requires to be set aside.
SUBMISSIONS OF THE RESPONDENT:
28. A decision made by the CoC in its commercial wisdom on
being satisfied with the report of the expert on the viability and feasibility
of the resolution plan, is not required to be interfered with by this Court
by substituting its views. The revised plan as accepted by the appellate
tribunal is an improvement to the earlier one submitted by the Respondent
No.3 and, therefore, there cannot be any grievance on that count.
29. The object of the Code has to be read with Section 29A(h).
The appellant being aware of the decision of the adjudicating authority
in the first instance ought to have taken it further, as such the appellant
is estopped from questioning the eligibility of the Respondent No.3 to
submit a resolution plan under Section 29A(h) of the Code. The provision
has to be literally interpreted to the extent that a personal guarantor is
barred from submitting a resolution plan only when the creditor invoking
the jurisdiction of the adjudicating authority has invoked a personal
guarantee executed in favour of said creditor by the resolution applicant.
30. No personal guarantee stood invoked by RBL Bank at the
time of application to the adjudicating authority under Section 7 of the
Code. It is further submitted that the invocation of the consortium
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guarantee by Allahabad Bank and State Bank of Bikaner and Jaipur
under Section 13(2) of the SARFAESI Act, 2002 is ex facie illegal in
terms of the inter-se agreement executed between the members of the
consortium of banks. Even otherwise the same is not relevant as neither
Allahabad Bank nor State Bank of Bikaner and Jaipur filed an application
before the adjudicating authority.
31. The first respondent is an on-going concern as of now and the
resolution plan is under implementation since 18.04.2018. The object of
the Code is revival of the Corporate Debtor and liquidation is the last
resort. Any interference at this stage will have an adverse effect and
militate against the very object of the Code. The Respondent No.3 has
infused over Rs. 63 crores since the resolution plan has been in operation
and has further received approval of the shareholders to raise Rs. 300
crores to revive the Respondent No.1. Since the approval of the resolution
plan submitted by the Respondent No.3, several projects of national
importance have been completed and various others are under execution.
Further, all workmen have also been paid in full, and all current employees,
operational creditors and statutory dues are being regularly paid.
32. Both the forums have rightly construed the issue qua extension
and exclusion. Admittedly, there were earlier rounds of litigation and
proceedings were pending against the interim orders. This issue has also
been concluded finally by this Court inter alia holding that in such a
scenario exclusion has to be granted, in light of the time spent in litigation.
33. Buttressing the aforesaid submissions, the counsels for the
Respondents have sought to place reliance on the following decisions:
•
Swiss Ribbons (P) Ltd. v. Union of India, (2019) 4 SCC 17
•
K.N. Rajkumar v. V.N. Nagarajan 2021 SCC OnLine 732
•
Arcellor Mittal India Pvt. Ltd. v. Satish Kumar Gupta, (2019)
2 SCC 1
•
Committee of Creditors, Essar Steel India Ltd. v. Satish
Kumar Gupta (2020) 8 SCC 531.
•
Apollo Joti LLC & Ors. v. Jyoti Structures Ltd. (Company
Appeal (AT) (Insolvency) No. 548 of 2018.
•
DBS Bank Ltd. vs. Sharad Sanghi (Civil Appeal No. 34343436 of 2019)
BANK OF BARODA & ANR. v. MBL INFRASTRUCTURES
LIMITED & ORS. [M. M. SUNDRESH, J.]
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•
Ebix Singapore Pvt. Ltd. vs. COC of Educomp Solutions
Ltd. 2021 SCC OnLine SC 707
•
National Spot Exchange v. Anil Kohli 2021 SCC OnLine
SC 716
STATUTORY INTERPRETATION:
34. The principle governing statutory interpretation has been
repeated with regularity by this Court on quite a few occasions. While
construing the said principle adequate thought will have to be given to
the nature of the statute and the provisions contained thereunder. The
focus is on avoiding any interpretation which might cause an injury or
destroy the intent behind the legislation.
35. Lord Denning in Seaford Court Estates Ltd. v. Asher, (1949)
2 KB 481 deals with the role required to be played by the Court even
when there is a possible defect:
"When a defect appears a Judge cannot simply fold his hands and
blame the draftsman. He must set to work on the constructive
task of finding the intention of Parliament and then he must
supplement the written word so as to give 'force and life' to the
intention of the legislature. A Judge should ask himself the question
how, if the makers of the Act had themselves come across this
ruck in the texture of it, they would have straightened it out? He
must then do as they would have done. A Judge must not alter the
material of which the Act is woven, but he can and should iron out
the creases."
36. MAXWELL ON INTERPRETATION OF STATUES, 11th
Edition
"It is said to be the duty of the judge to make such construction of
a statute as shall suppress the mischief and advance the remedy.
Even where the usual meaning of the language falls short of whole
object of the legislature, a more extended meaning may be
attributed to the words, if they are fairly susceptible of it. The
construction must not, of course, be strained to include cases plainly
omitted from the natural meaning of the words." (Pg. 66)
"...In determining either the general object of the legislature, or
the meaning of its language in any particular passage, it is obvious
that the intention which appears to be most in accord with
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convenience, reason, justice or legal principles, should, in all cases
of doubtful significance, be presumed to be the true one." (Pg.
183)
37. CRAIES IN STATUTE LAW, 7th Edition, Pg. 262:
"... It is the duty of Courts of justice to try to get at the real
intention of the legislature by carefully attending to the whole scope
of the statute to be construed' .. that in each case you must look
to the subject-matter, consider the importance of the provision
and the relation of that provision to the general object intended to
be secured by the Act, and upon a review of the case in that
aspect decide whether the enactment is what is called imperative
or only directory."
38. A DRIEDGER, CONSTRUCTION OF STATUTE, 2nd Edition,
1983, Pg. 37:
"Today there is only one principle or approach, namely, the words
of an Act are to be read in their entire context and in their
grammatical and ordinary sense harmoniously with the Scheme
of the Act, the object of the Act, and the intention of Parliament."
39. As repeated on various other occasions by this Court, judging
a statute through 'Literal to Heydon's Golden rule' has gone through a
complete circle. Thus, we have come to a stage of applying a reasonable,
creative and fair construction principle.
40. The often quoted words of Justice Chinnappa Reddy in the
celebrated judgment in the Reserve Bank of India v. Peerless General
Finance and Investment Company Limited, (1987) 1 SCC 424 holds the
field even today:
"33. Interpretation must depend on the text and the context. They
are the bases of interpretation. One may well say if the text is the
texture, context is what gives the colour. Neither can be ignored.
Both are important. That interpretation is best which makes the
textual interpretation match the contextual. A statute is best
interpreted when we know why it was enacted. With this
knowledge, the statute must be read, first as a whole and then
section by section, clause by clause, phrase by phrase and word
by word. If a statute is looked at, in the context of its enactment,
with the glasses of the statute-maker, provided by such context,
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its scheme, the sections, clauses, phrases and words may take
colour and appear different than when the statute is looked at
without the glasses provided by the context. With these glasses
we must look at the Act as a whole and discover what each
section, each clause, each phrase and each word is meant and
designed to say as to fit into the scheme of the entire Act. No part
of a statute and no word of a statute can be construed in isolation.
Statutes have to be construed so that every word has a place and
everything is in its place...."
41. Apropos the passage in the case of Union of India v. Elphinstone
Spg. and Wvg. Co. Ltd., (2001) 4 SCC 139:
"While examining a particular statute for finding out the legislative
intent it is the attitude of Judges in arriving at a solution by striking
a balance between the letter and spirit of the statute without
acknowledging that they have in any way supplemented the statute
would be the proper criterion. The duty of Judges is to expound
and not to legislate is a fundamental rule. There is no doubt a
marginal area in which the courts mould or creatively interpret
legislation and they are thus finishers, refiners and polishers of
legislation which comes to them in a state requiring varying degrees
of further processing. (See: Corocraft Ltd. v. Pan American
Airways Inc. [(1968) 3 WLR 714 : (1968) 2 All ER 1059 : (1969)
1 QB 616] WLR, p. 732 and State of Haryana v. Sampuran
Singh [(1975) 2 SCC 810] .) But by no stretch of imagination a
Judge is entitled to add something more than what is there in the
statute by way of a supposed intention of the legislature. It is,
therefore, a cardinal principle of construction of statutes that the
true or legal meaning of an enactment is derived by considering
the meaning of the words used in the enactment in the light of any
discernible purpose or object which comprehends the mischief
and its remedy to which the enactment is directed."
42. Touching upon the very interpretation of the Code, this Court
on more than one occasion has adopted the very same approach in
Arcellor Mittal India Pvt. Ltd. v. Satish Kumar Gupta, (2019) 2 SCC 1,
Phoenix Arc (P) Ltd. v. Spade Financial Services Ltd., (2021) 3 SCC
475 and Arun Kumar Jagatramka v. Jindal Steel & Power Limited, (2021)
7 SCC 474.
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INSOLVENCY AND BANKRUPTCY CODE, 2016:
43. The Code has got its laudable object. The idea is to facilitate
a process of rehabilitation and revival of the corporate debtor with the
active participation of the creditors. Thus, there are two principal actors
in the entire process, viz., (i)the committee of creditors and, (ii) the
corporate debtor. The others are mere facilitators. There can never be
any other interest than that of the committee of creditors and the corporate
debtor. We do not wish to multiply the rationale behind the enactment
except by quoting the decision of this Court in the case of Swiss Ribbons
(P) Ltd. v. Union of India, (2019) 4 SCC 17, which has also found
acceptance by the subsequent decision in the case of Arun
Kumar(supra):
"27. As is discernible, the Preamble gives an insight into what is
sought to be achieved by the Code. The Code is first and foremost,
a Code for reorganisation and insolvency resolution of corporate
debtors. Unless such reorganisation is effected in a time-bound
manner, the value of the assets of such persons will deplete.
Therefore, maximisation of value of the assets of such persons so
that they are efficiently run as going concerns is another very
important objective of the Code. This, in turn, will promote
entrepreneurship as the persons in management of the corporate
debtor are removed and replaced by entrepreneurs. When,
therefore, a resolution plan takes off and the corporate debtor is
brought back into the economic mainstream, it is able to repay its
debts, which, in turn, enhances the viability of credit in the hands
of banks and financial institutions. Above all, ultimately, the
interests of all stakeholders are looked after as the corporate debtor
itself becomes a beneficiary of the resolution scheme-workers
are paid, the creditors in the long run will be repaid in full, and
shareholders/investors are able to maximise their investment.
Timely resolution of a corporate debtor who is in the red, by an
effective legal framework, would go a long way to support the
development of credit markets. Since more investment can be
made with funds that have come back into the economy, business
then eases up, which leads, overall, to higher economic growth
and development of the Indian economy. What is interesting to
note is that the Preamble does not, in any manner, refer to
liquidation, which is only availed of as a last resort if there is
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either no resolution plan or the resolution plans submitted are not
up to the mark. Even in liquidation, the liquidator can sell the
business of the corporate debtor as a going concern.
28. It can thus be seen that the primary focus of the legislation is
to ensure revival and continuation of the corporate debtor by
protecting the corporate debtor from its own management and
from a corporate death by liquidation. The Code is thus a beneficial
legislation which puts the corporate debtor back on its feet, not
being a mere recovery legislation for creditors.