An opportunity to a Resolution Applicant should be provided if the Resolution Plan is rejected holding it as ineligible under Section 29A

The present appeal is filed by the Appellant against the Impugned Order dated 25th March 2021 passed by the NCLT, Hyderabad Bench, whereby the Adjudicating Authority directed the COC to consider ineligibility of 3rd Respondent under Section 29A of the Code.

The Learned Counsel for the Appellant submitted that the Appellant and the 3rd Respondent herein are Resolution Applicants for the Corporate Debtor, having submitted their Resolution Plans pursuant to the expression of interest issued by the Resolution Professional. While so, the promoters of the 3rd Respondent were found disqualified under Section 29A of the Code, on account of the Judgment of the Hon’ble NCLT, Hyderabad Bench, dated 18.08.2020.  Aggrieved by the said disqualification, the 3rd Respondent filed IA before the Adjudicating Authority. The Adjudicating Authority vide Impugned order dated 25.03.2021 directed the COC to take a call on the ineligibility of the 3rd Respondent under Section 29A (e)of the Code and also to consider the revised plan to be submitted by the 3rd Respondent.

The Learned Counsel for the Appellant contended that the Adjudicating Authority failed to appreciate the fact that the Committee of Creditors at no point in time objected to the decision of the Resolution Professional in holding that the 3rd Respondent is disqualified under Section 29A of the Code and submitted in their pleadings before the Adjudicating Authority that they would abide by the decision of the Adjudicating Authority with regard to the eligibility of the 3rd Respondent under Section 29A of the Code. The main grievance of the Appellant is that the COC has no power to consider the ineligibility of the 3rd Respondent under Section 29A. The Adjudicating Authority ought not to have directed the COC to consider the ineligibility.

NCLAT observes that the 3rd Respondent challenged the decision of the Resolution Professional rejecting its Plan for the reason that the 3rd Respondent is ineligible under Section 29A(e) of IBC. The Learned Adjudicating Authority taking into consideration the aspects, directed the COC to take a call whether applicant i.e. the 3rd Respondent herein is really ineligible under Section 29A(e) of IBC. The Adjudicating Authority kept open regarding the objections taken by the RP to be considered by the COC. This Tribunal is of the view that the Adjudicating Authority rightly considered keeping in mind the principles of natural justice to afford an opportunity to the person (legal entity) for reconsideration of the decision taken by the RP. One of the grievance of the 3rd Respondent is that the RP has not afforded any opportunity to cure the defect, however, the RP suo moto rejected the Application of the 3rd Respondent holding it as ineligible under Section 29A. In view of the reasons, the Learned Adjudicating Authority rightly directed the COC to consider the objections as taken by the RP. Further, the Learned Adjudicating Authority also directed the COC and RP to consider the revised Plan to be submitted by the 3rd Respondent. We do not find any infirmity or illegality in the order.

Case Reference: Everest Organics Ltd. Vs. Leesa Lifesciences Pvt. Ltd., Represented by its RP Mr. Jagadees Kumar Morri, Reported at (2022) ibclaw.in 13 NCLAT.