Tribunal Ignores MCA's Clarification and Breached Fair Process: NCLAT Sets Aside NCLT Order Declaring Promoters Ineligible u/s 29A [Read Order]
The Bench found NCLT’s Approach Violative of Natural Justice which Resulted in a Jurisdictional Error
In a recent ruling, the National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, has set aside the order of the National Company Law Tribunal (NCLT), New Delhi Bench.
The NCLT Bench had declared the promoters of JC World Hospitality Pvt. Ltd. ineligible under Section 29A and rejected their resolution plan.
The Bench found that the NCLT had erred in accepting additional documents filed by Amrapali Fincap Ltd. while refusing to consider a key clarification issued by the Ministry of Corporate Affairs (MCA).
The Appellate Tribunal held that this selective treatment of evidence violated the principles of natural justice, and further observed that, being an MSME, the corporate debtor’s promoters were entitled to the statutory relaxation under Section 240A of the IBC.
The appeals arose from a common NCLT order dated 22 July 2025 passed in the corporate insolvency resolution process (CIRP) of JC World Hospitality Pvt. Ltd., where the Adjudicating Authority had declared the promoters, Dr. Vijay Kant Dixit, Ms. Rita Dixit, and Ms. Vasudha Gaur Dixit, ineligible to submit a resolution plan under Section 29A(c), (e), (g), (i), and (j).
The NCLT had allowed Amrapali Fincap Ltd. to file additional documents alleging promoter disqualification, but rejected the promoters’ application to bring on record a clarificatory email issued by the MCA confirming the removal of their DIN disqualification under Section 164(2)of the Companies Act, 2013.
Aggrieved by this procedural disparity and the finding of ineligibility, the promoters and the Resolution Professional filed appeals before NCLAT.
The Bench, comprising Justice Ashok Bhushan (Chairperson) and Barun Mitra (Technical Member), observed that the NCLT’s reasoning that Amrapali’s additional documents were mere “judicial precedents” was factually incorrect, as they contained fresh factual allegations and new evidence that the promoters were never allowed to rebut.
The Bench emphasized that the MCA’s official email dated 07.03.2025 was a decisive statutory clarification confirming that the appellants were no longer disqualified directors. The NCLT’s rejection of this evidence, while relying on unverified submissions from a competing resolution applicant, amounted to gross procedural irregularity.
Crucially, the NCLAT held that the corporate debtor being an MSME invoked the benefit of Section 240A, which exempts MSME promoters from disqualification under certain clauses of Section 29A, including 29A(c) and 29A(h). The NCLT had failed to apply this statutory protection.
Resultantly, the Appellate Tribunal set aside the NCLT’s rejection of the promoters’ application and directed that the MCA clarification be placed on record. The Bench further held that the promoters were not disqualified under Section 29A.
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