On October 4, 2018, the Hon’ble Supreme Court of India passed a judgment in the matter of ArcelorMittal India Private Limited v. Satish Kumar Gupta (Civil Appeal Nos.9402 – 9405 /2018), interpreting Section 29A of the Insolvency and Bankruptcy Code, 2016.
Corporate Insolvency proceedings were initiated against Essar Steel India Limited (“ESIL”) pursuant to admission of a petition filed under Section 7 of the Insolvency and Bankruptcy Code, 2016 (“IBC”) before the National Company Law Tribunal, Ahmedabad Bench (“NCLT”). Consequently, the Interim Resolution Professional (Satish Kumar Gupta (“the Respondent”) in the above petition) was appointed and he called for resolution plan proposal from interested parties.
ArcelorMittal India Private Limited (“AMIPL”) and Numetal Limited (“Numetal”) submitted resolution plans. However, the Resolution Professional found AMIPL and Numetal to be ineligible under Section 29A of the IBC.
Section 29A was inserted in the IBC vide Amendment Act No.8 of 2018, on January 18, 2018. Section 29A (c) states that 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, inter alia, has an account, or an account of a corporate debtor under the management and 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, 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 non-performing asset accounts before submission of the resolution plan.
The Resolution Professional found AMIPL and Numetal to be ineligible in accordance with Section 29A for the following reasons:
AMIPL and Numetal filed applications before the NCLT challenging the Order of the Resolution Professional finding them ineligible. The NCLT observed that the Resolution Professional had passed the aforesaid order after consulting with legal advisors and, therefore, upheld the same. Thereafter, AMIPL and Numetal filed appeals before the NCLAT which were dismissed, and the issue came for consideration before the Supreme Court.
The Supreme Court (bench comprising of R.F. Nariman and Indu Malhotra, JJ.), in its judgment passed on October 4, 2018, held as follows:
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