"Connected Person” under Explanation-I of Section 29A(J) of IBC relates to Resolution Applicant, not Corporate Debtor: NCLT [Read Order]
"Connected Person” under Explanation-I of Section 29A(J) of IBC Relates to Resolution Applicant, not Corporate Debtor, rules NCLT
Connected Person – Explanation – IBC Relates – Resolution Applicant – Corporate Debtor – NCLT – taxscan
Connected Person – Explanation – IBC Relates – Resolution Applicant – Corporate Debtor – NCLT – taxscan
The Hyderabad Bench of the National Company Law Tribunal ( NCLT ) held that the term "Connected Person” under Explanation-I of Section 29A(J) of the Insolvency and Bankruptcy Code, 2016 ( IBC ) relates to the resolution applicant, not the corporate debtor.
This application was filed under section 60 (5) of the IBC and Rule 11 of the National Company Law Tribunal Rules, 2016, by the suspended director herein after referred to as the “Applicant” of M/s NCS Sugars Ltd herein after referred to as the “Corporate Debtor”, against the Resolution Professional and Committee of Creditors ( “Respondents no. 1 & 2” respectively) .
It was averred that the applicant requested the Information Memorandum in the 20th Committee of Creditors meeting and via email but was denied by the Resolution Professional, citing that it contained details discussed in CoC meetings. However, it was represented that the Applicant, as a potential resolution applicant, has the right to access this information. Due to the lack of access to the Information Memorandum, the Applicant couldn't submit its Expression of Interest within the specified timeline and was consequently excluded from the list of prospective resolution applicants.
The Resolution Professional denied all allegations made by the Applicant, stating the same as false and devoid of merit. It is averred that the Applicant, being a promoter and member of the suspended board of the Corporate Debtor, is subject to certain disqualifications under Section 29A of the Insolvency and Bankruptcy Code. Although exemptions exist for MSME Corporate Debtors, they only pertain to certain clauses of Section 29A, not all.
A Two-Member Bench comprising Charan Singh, Member ( Technical ) and Dr.Venkata Ramakrishna Badarinath Nandula, Member ( Judicial ) observed that “The Resolution applicant herein, being an ex-director of the corporate debtor, we are of the view that contention of the respondent that the applicant is disqualified to submit resolution plan as CD is debarred by SEBI and that the applicant is a connected party to the CD is not maintainable. Further, we should always bear in mind that legislature while passing the Bill, has given some special relaxation under Section 29(A) to MSME promoters so that they are allowed to participate in the resolution process of corporate debtor.”
To Read the full text of the Order CLICK HERE
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