Section 29A does not disqualify a resolution applicant permanently: Tribunal
The intention of Section 29A could never have been to disqualify a resolution applicant permanently if there is an initial disqualification, the Kolkata bench of the NCLT said in a matter involving Avantha Holdings Limited and resolution professional of Jhabua Power Limited & others.
The tribunal said that if there is a resolution applicant whose disqualification can be cured prior to the final consideration of the resolution plan or plans, then such persons must be encouraged and permitted to do so.
“This can only result in betterment of value for the corporate debtor, and never to its detriment,” it said adding that we have to look into the purpose behind enactment of section 29A and not read it too literally.
The tribunal further said the eligibility of the resolution applicant will have to be tested at a meaningful stage, that is, when the plan is ripe for consideration by the Committee of Creditors.
“That is the only way we can infuse life and meaning to section 29A,” it said.
The NCLT was hearing a plea by Avantha Holdings Ltd, the former promoter of Jhabua Power Ltd. Avantha Holdings had requested the tribunal to declare that NTPC is not compliant with section 29A of the Code and therefore, ineligible to participate in the CIRP of the Corporate Debtor Jhabua Power Limited.
It had also requested the NCLT to set aside the decision of the CoC arbitrarily rejecting its proposal under Section 12A and direct the CoC to consider the proposal submitted by it.
The NCLT, however, rejected all the plea of the applicant. It said that there is nothing to be gained by rejecting the NTPC plan just because it had a connected account which was classified as NPA on a technical ground when it submitted its First Plan, and that too when it was in no way responsible for the same.
“The process envisaged for a resolution plan is a process of selection and not of rejection,” it reiterated.
Brief of the case
Avantha Holdings Limited, is the promoter and shareholder of Avantha Power and Infrastructure Limited which in turn holds 17.9% shares of Jhabua Power Limited — the Corporate Debtor.
Avantha Holdings had submitted its settlement offer to the Resolution Professional by way of letters dated 21 December 2020, 26 December 2020 and 25 January 2021 and requested the Resolution Professional to place the proposal before the Committee of Creditors (CoC) for its consideration.
However, the CoC did not find much merit in Avantha Holdings proposal and instead accorded consideration to the Resolution Plan submitted by National Thermal Power Corporation Limited (NTPC).
Avantha alleged that NTPC submitted its First Plan on 30 December 2019 without an affidavit certifying compliance under section 29A of the Code. It said that NTPC was the promoter of and held equity shares in Ratnagiri Gas and Power Private Limited (RGPPL) to the extent of 25.51% and Konkan LNG Limited (KLL) to the extent of 20.23%, and was in control and management of both RGPPL and KLL.
The accounts of RGPPL and KLL had been classified as Non-Performing Assets (NPAs) by their respective lenders and prior to the insolvency commencement date, and that the same has not been cleared as on the date of submission of the First Plan. This according to Avantha made NTPC ineligible under Section 29A, a plea NCLT refused to concur with.
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