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Retrospective Operation of S. 29A & OTS under IBC – Analysing Prospects

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– Megha Mittal

[resolution@vinodkothari.com]

The Hon’ble NCLAT vide its order Martin SK Golla v. Wig Associates, 2019[1] has set aside the order of the Adjudicating Authority which had accepted a one-time settlement-cum-resolution plan submitted by a connected person of Corporate Debtor, who later on, after the implementation of section 29A became ineligible to submit a plan. Hence, the question before the Hon’ble Tribunal was whether sec 29A of IBC will be applicable with retrospective effect in section 10 proceedings which were initiated prior to sec 29A came into force?

The Hon’ble NCLAT held that the reason that once CIRP is commenced, provisions as existing on the day of the petition would continue to apply even in the face of amendment brought about by way of 29A- cannot be maintained, and as such the one time settlement-cum-resolution plan, offered by the connected person of the Corporate Debtor cannot be considered good under law.

In this article, along with the issue of retrospective applicability of section 29A and its likely impact on the stakeholders, the Author also delves into the question whether a one-time settlement scheme could tantamount to a resolution plan under the Code.

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Out-and-Out Ouster of Ineligible Persons- Liquidation Amendment Regulations, 2020 enact Discussion Paper proposals

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-Megha Mittal

(resolution@vinodkothari.com) 

The Insolvency and Bankruptcy Board of India (“IBBI”/ “Board”) vide Notification No. IBBI/2019-20/GN/REG053, dated 06.01.2020, introduced the IBBI (Liquidation Process) (Amendment) Regulations, 2020 (“Amendment Regulations”) w.e.f. the same day.

In what seems to be an adaptation of the ideas proposed in the Discussion Paper dated 03.11.2019[1], the Amendment Regulations seem to have provided for  “out-and-out ouster” approach towards persons ineligible under section 29A of the Code, in liquidation processes too, thereby imbibing in the Liquidation Process Regulations, the orders of the Hon’ble National Company Law Appellate Tribunal (“NCLAT”) in Jindal Steel and Power Limited v. Arun Kumar Jagatramka & Gujarat NRE Coke Limited (Company Appeal (AT) No. 221 of 2018)[2] and State Bank of India v. Anuj Bajpai (Liquidator) (Company Appeal (AT) (Insolvency) No. 509 of 2019)[3]

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Schemes under Section 230 with a pinch of section 29A – Is it the final recipe?

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-Sikha Bansal (resolution@vinodkothari.com)

Note: This article is in continuation of/an addition to our earlier article wherein the author discussed various aspects pertaining to schemes of arrangement in liquidation under section 230 of the Companies Act, 2013 read with various provisions of the Insolvency and Bankruptcy Code, 2016. The author has described various factors and principles which the judiciary may consider while sanctioning a scheme of arrangement for companies in liquidation, how a scheme is different from a resolution plan or a going concern sale, what constitutes ‘class’ in the context, whether the waterfall under section 53 will apply to such schemes, etc. The author also pointed out the lack of clarity as to applicability or inapplicability of section 29A on such schemes. However, very recently, NCLAT has clarified that persons ineligible under section 29A are not qualified to propose a scheme during liquidation. This Part discusses this ruling and ponders upon some questions which still remain open-ended/unanswered.

The conundrum as to whether section 29A of the Insolvency and Bankruptcy Code, 2016 (‘Code’) will apply to schemes under section 230 of the Companies Act, 2013 (‘Companies Act’) has been put to rest, at least for the time being, by a recent ruling of the National Company Law Appellate Tribunal (‘NCLAT’). In  Jindal Steel and Power Limited v. Arun Kumar Jagatramka & Gujarat NRE Coke Limited (Company Appeal (AT) No. 221 of 2018), vide order dated 24.10.2019, NCLAT held, while a scheme under section 230 is maintainable for companies in liquidation under the Code, the same is not maintainable at the instance of a person ineligible under section 29A of the Code. The NCLAT relied on the observation of the Hon’ble Supreme Court in Swiss Ribbons Pvt. Ltd. & Anr. v. Union of India & Ors., WP No. 99 of 2018, 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.

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