NCLT Chandigarh (24.05.2022) in Mr. Sumat Gupta RP, M/s Vallabh Textiles Company Ltd. Vs. M/s Aggarsain Spinners Ltd. [IA No.342 of 2021, IA No.456 of 2021, IA No.154 of 2022 In CP(IB) No.391/Chd/Pb/2018] held that;
A perusal of the aforesaid provision reveals that proviso (1) to Section 30(4) requires that committee of creditors shall not approve a resolution plan where the Resolution Applicant is ineligible under Section 29A of the Code.
That before the resolution plan is submitted before the committee of creditors, it is the bound duty of the Resolution Professional to scrutinize that the resolution plan furnished by numerous applicants is complete in all aspects, before presenting it to the committee of creditors.
A ‘Resolution Professional’ is not required to take any decision but he is to confirm that the Resolution Plan does not violate any of the provisions of Law for the time being in force (including Section 29A of the Code).
Thus, suffice for this ‘Tribunal’ to pertinently point out that an ex-facie opinion is to be offered to the ‘committee of creditors’ by the ‘Resolution Professional’ that the law was violated.
It is also the duty of the ‘Resolution Professional’ to determine as to whether the eligibility criteria of the Resolution Applicant prescribed in Section 29-A of the Code are satisfied.
A bare perusal of Section 29A(f) reveals that Resolution Applicant shall not be eligible to submit a resolution plan if it is prohibited by SEBI from trading in securities or accessing the securities markets.
In these circumstances, when SEBI having no restrictions in delegation of its power and functions under Section 11(1) of the SEBI Act, then certainly there was no need to pass any independent order directly by SEBI debarring the resolution applicant from accessing the securities market.
More so Section 29A(f) of the Code does not provide for an order to be passed by SEBI prohibiting the resolution applicant from trading in securities or accessing the securities market. Admittedly, no such order was passed by SEBI expressly and it was also not required to be passed directly by SEBI when it has got ample open-ended powers to delegate its regulatory function to any other authority including BSE.
Secondly, it is settled law that the eligibility of resolution applicants is to be seen on the date of submission of the resolution plan and not thereafter.
The Adjudicating Authority while passing order under Section 31 can find out whether the Resolution Applicant fulfils the conditions under Section 30(2) which includes Section 30(2) (e) and in terms of Section 29A and can decide.
Excerpts of the order;
49. After hearing the parties and careful perusal of the facts and circumstances as well as law relied upon and cited by learned counsel for the parties, we are of the considered view that there are mainly three points for determination, which are as under:-
i) Whether the Resolution Professional is competent to adjudicate upon the eligibility of Successful Resolution Applicant under Section 29A(f) of the Code on asking of whistle blower when the Resolution Professional has already submitted the resolution plan for approval of committee of creditors?
ii) Whether successful resolution applicants, namely, M/s Aggarsain Spinners Limited and Mr. Ramesh Garg are eligible under Section 29A(f) of the Code?
iii) Whether the information received from SEBI by a third party under the RTI Act, 2006, filed in IA No.154/2022 is having some bearing upon the eligibility part of the successful resolution applicant?
# 50. At the outset, it is contended by learned counsel for the Resolution Applicants that applicant/Resolution Professional is blowing hot and cold in the same breath when he stated that while submitting the Resolution Plan to committee of creditors, eligibility of all the Resolution Applicants were verified from independent Chartered Accountants as part of his due diligence exercise under Regulation 30A (5) of the Regulations and on the other hand, he is alleging that Resolution Applicants have concealed the information about their ineligibility under Section 29A(f) of the Code as the said information was available on the website of BSE since 28.03.2018 when a notice was uploaded by BSE with names of the companies regarding action against the ELCs and its promoters/directors. The said information was in public domain, thus, according to the learned counsel for the Resolution Applicant, the applicant/Resolution Professional could have verified this fact from the website of BSE before forwarding the Resolution Plan to committee of creditors for approval. We find that this contention of learned counsel for the Resolution Applicant is not much convincing because if at all the said information was available on the website of BSE then being in public domain, it should have also been in the knowledge of Resolution Applicants but it is the stand of the Resolution Applicants that they came to know about the said information when it was pointed out by SBI that the name of the company and its promoters are in the banned list of promoters on 29.10.2020 and that they have been debarred from accessing the securities market for a period of 10 years. No doubt, the applicant/Resolution Professional has failed to perform his duty diligently as he has failed to verify this fact from the website of BSE at the time of submission of Resolution Plan, submitted by the Resolution Applicants. However, now the issue for consideration before this Bench is whether applicant/Resolution Professional is estopped by its own act and conduct from filing IA No.342 of 2022, challenging the eligibility of Resolution Applicants under Section 29A(f) of the Code. Chronologically, the Resolution Plan was submitted on 13.02.2020 by the Resolution Applicants to the Committee of Creditors and it was approved by the Committee of Creditors on 26.05.2020. However, according to learned counsel for the applicant/Resolution Professional, he received two identical complaints one from Mr. Sanjay Garg on whatsapp (Annexure A-1 to IA No.342 of 2021) and one from M/s Aayat Processors on his e-mail (Annexure A-2 to IA No.342 of 2021) pointing out that Resolution Applicants/respondents are ineligible under Section 29A(f) of the Code. Thereafter, he verified this fact from the website of BSE and found that the Resolution Applicants are restricted/barred from accessing the securities market with effect from 28.03.2018 for a period of 10 years.
# 51. In the circumstances, the applicant/Resolution Professional, being Officer appointed by this Bench for carrying out the resolution process, was duty bound to report this fact to this Bench as Resolution Plan which was duly approved by the Committee of Creditors under Section 30(4) had been filed by him before this Bench for approval under Section 31 of the Code. The Resolution Professional has not adjudicated upon the eligibility of the Resolution Applicants under Section 29A(f) of the Code, but has left this issue of eligibility of Resolution Applicants to be decided by this Bench. Thus, it cannot be said that the applicant/Resolution Professional has no locus standi or estoppel will operate against him or Resolution Professional was in connivance with the whistle blowers, for filing IA No.342 of 2021, questioning the eligibility of Resolution Applicants.
# 52. Now, coming to the second point of determination that whether the Successful Resolution Applicants, namely, M/s Aggarsain Spinners Limited and Mr. Ramesh Garg, are eligible under Section 29A(f) of the Code or not? It is contended by learned counsel for the applicant that Successful Resolution Applicants are debarred by SEBI from accessing the securities market at the time of submission as well as approval of the resolution plan by the committee of creditors, thus, were ineligible under Section 29A(f) of the Code.
# 53. Whenever a plan is submitted under Section 30(6) of the Code for approval of the resolution plan before the Adjudicating Authority then under Section 31 of the Code, the Adjudicating Authority has to satisfy itself that it meets the requirement as referred to under sub-section (2) of Section 30 of the Code. The relevant provisions of Section 31 of the Code are reproduced hereinbelow:-
“Approval of resolution plan.
31. (1) If the Adjudicating Authority is satisfied that the resolution plan as approved by the committee of creditors under sub-section (4) of section 30 meets the requirements as referred to in sub-section (2) of section 30, it shall by order approve the resolution plan which shall be binding on the corporate debtor and its employees, members, creditors, [including the Central Government, any State Government or any local authority to whom a debt in respect of the payment of dues arising under any law for the time being in force, such as authorities to whom statutory dues are owed,] guarantors and other stakeholders involved in the resolution plan. [Provided that the Adjudicating Authority shall, before passing an order for approval of resolution plan under this sub-section, satisfy that the resolution plan has provisions for its effective implementation.]
(2) Where the Adjudicating Authority is satisfied that the resolution plan does not confirm to the requirements referred to in sub-section (1), it may, by an order, reject the resolution plan.”
# 54. Similarly, relevant provisions for submission of resolution plan under Section 30 of the Code are reproduced hereinbelow for ready reference:-
“Section 30: Submission of resolution plan.
30. (1) A resolution applicant may submit a resolution plan along with an affidavit stating that he is eligible under section 29A to the resolution professional prepared on the basis of the information memorandum.
(2) The resolution professional shall examine each resolution plan received by him to confirm that each resolution plan—
(a) provides for the payment of insolvency resolution process costs in a manner specified by the Board in priority to the [payment] of other debts of the corporate debtor;
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(e) does not contravene any of the provisions of the law for the time being in force;
(f) conforms to such other requirements as may be specified by the Board.
Explanation. — For the purposes of clause (e), if any approval of shareholders is required under the Companies Act, 2013 (18 of 2013) or any other law for the time being in force for the implementation of actions under the resolution plan, such approval shall be deemed to have been given and it shall not be a contravention of that Act or law.
(3) The resolution professional shall present to the committee of creditors for its approval such resolution plans which confirm the conditions referred to in sub-section (2).
(4) The committee of creditors may approve a resolution plan by a vote of not less than [sixty-six] per cent. of voting share of the financial creditors, after considering its feasibility and viability, [the manner of distribution proposed, which may take into account the order of priority amongst creditors as laid down in sub-section (1) of section 53, including the priority and value of the security interest of a secured creditor] and such other requirements as may be specified by the Board:
Provided that the committee of creditors shall not approve a resolution plan, submitted before the commencement of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2017, where the resolution applicant is ineligible under section 29A and may require the resolution professional to invite a fresh resolution plan where no other resolution plan is available with it:
As per Section 30(1) of the Code in the case in hand an affidavit has been by the successful resolution applicants on 13.02.2020.
2. A perusal of the aforesaid provision reveals that proviso (1) to Section 30(4) requires that committee of creditors shall not approve a resolution plan where the Resolution Applicant is ineligible under Section 29A of the Code. Before submitting a plan before the committee of creditors, it is also incumbent upon the Resolution Professional to verify whether the Resolution Applicants are eligible under Section 29A of the Code. It has been held by the Hon’ble National Company Law Appellate Tribunal, Principal Bench, New Delhi in Canara Bank versus Ms. Mamta Binani and Others; (2022) ibclaw.in 01 NCLAT that before the resolution plan is submitted before the committee of creditors, it is the bound duty of the Resolution Professional to scrutinize that the resolution plan furnished by numerous applicants is complete in all aspects, before presenting it to the committee of creditors. A ‘Resolution Professional’ is not required to take any decision but he is to confirm that the Resolution Plan does not violate any of the provisions of Law for the time being in force (including Section 29A of the Code). Thus, suffice for this ‘Tribunal’ to pertinently point out that an ex-facie opinion is to be offered to the ‘committee of creditors’ by the ‘Resolution Professional’ that the law was violated. It is also the duty of the ‘Resolution Professional’ to determine as to whether the eligibility criteria of the Resolution Applicant prescribed in Section 29-A of the Code are satisfied. The Resolution Professional has to consider the objections brought to his notice prior to the submission of the Resolution Plan to the ‘Committee of Creditors’. As per Section 30(2) of the Code, the Resolution Professional has to examine each resolution plan received by him to confirm that the resolution plan provides for payment of Insolvency Resolution Process Costs, Payment of Debts of the Operational Creditors, management of the affairs of corporate debtor, the fulfilment and supervision of resolution plan, other requirement as may be specified by the Board and that it does not violate any of the provisions of the law for the time being in force.
# 55. For ready reference, relevant provisions of Section 29A of the Code is
reproduced as under:-
“Person not eligible to be resolution applicant.
“29A. 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-
XXXX
(f) is prohibited by the Securities and Exchange Board of India from trading in securities or accessing the securities markets;
XXXX
A bare perusal of Section 29A(f) reveals that Resolution Applicant shall not be eligible to submit a resolution plan if it is prohibited by SEBI from trading in securities or accessing the securities markets. Now the next question that arises is whether an express order of prohibition is required to be passed by SEBI directly or otherwise. To answer this question, we have to go through Circulars dated 10.10.2016 and 01.08.2017 vis-à-vis Section 11 of the SEBI Act. Circular No.SEBI/HO/MRD/DSA/CIR/P/2017/92 dated 01.08.2017 includes the contents contained in Circular No.SEBI/HO/MRD/DSA/CIR/P/2016/110 dated 10.10.2016. For ready reference, relevant portion of circular dated 01.08.2017 is reproduced hereinunder:-
“Sub: Action against Exclusively Listed Companies and its Promoters/Directors pending Exit Offer to the Shareholders
1. xx xx xx xx
2. The aforesaid circular dated October 10, 2016 stipulated the following action against such ELCs, which remain non-compliant with the above timelines:
a. The company, its directors, its promoters and the companies which are promoted by any of them shall not directly or indirectly associate with the securities market or seek listing for any equity shares for a period of ten years from the exit from the DB.
b. Freezing of shares of the promoters/directors.
c. List of the directors, promoters etc. of all non-compliant companies as available from the details of the company with NSE/BSE shall be disseminated on SEBI website and shall also be shared with other related agencies.
d. Attachment of bank accounts/other assets of promoters/directors of the companies so as to compensate the investors.
3. xx xx xx xx
a. xx xx xx
b. The non-compliant Exclusively Listed Companies, its directors, its promoters and the companies which are promoted by any of them shall not be eligible to access the securities market for the purposes of raising capital till the promoters of such non-compliant Exclusively
Listed Companies provide an exit option to the public shareholders in compliance with SEBI circular dated October 10, 2016, as certified by the concerned Designated Stock Exchanges.
c. xx xx xx
4. xx xx xx xx
5. The concerned Designated Stock Exchanges and Depositories shall coordinate with each other and ensure compliance of these requirements.
6. SEBI may also take any other appropriate action(s) against the promoters/directors of Exclusively Listed Companies for non-compliance with SEBI circular dated October 10, 2016
7. This circular is issued in exercise of powers conferred under Section 11(1) and 11(2)(j) of the Securities and Exchange Board of India Act, 1992, to protect the interests of investors in securities and to promote the development of, and to regulate the securities market. This circular is available on SEBI website at www.sebi.gov.in.”
It is explicit from the contents of both these aforementioned circulars issued by SEBI that there was delegation of its regulatory functions to concerned designated stock exchanges and these circulars have been issued in exercise of powers conferred under Section 11(1) and 11(2) (j) of the SEBI Act to protect the interests of investors in securities and to promote the development of and to regulate the securities market.
3. Although, it is argued by learned counsel for the successful resolution applicants that no order/direction was passed by SEBI, so that the above said circulars are enforceable by BSE, yet this contention of learned counsel for the successful resolution applicants is not tenable because so far as the scope of Section 11 of SEBI Act is concerned, SEBI has got open ended terms having no limits to delegate its functions to protect the interest of investors of securities. It is clear from Clause 6 of Circular dated 01.08.2017 that SEBI may also take any other appropriate actions(s) against the promoters/directors of Exclusively Listed Companies for non-compliance with SEBI circular dated 10.10.2016. It means that if any other action except mentioned in these circulars was to be taken by the SEBI then certainly a due procedure had to be followed by SEBI under its quasi-judicial function but this power of restraining the non-compliant ELC not to access the securities market for a period of 10 years, has already been delegated under Section 11 of the SEBI Act. For ready reference, Section 11 of the SEBI Act is reproduced hereinbelow:-
Functions of Board.
11. (1) Subject to the provisions of this Act, it shall be the duty of the Board to protect the interests of investors in securities and to promote the development of, and to regulate the securities market, by such measures as it thinks fit.
(2) Without prejudice to the generality of the foregoing provisions, the measures referred to therein may provide for—
(a) regulating the business in stock exchanges and any other securities markets;
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(2A) Without prejudice to the provisions contained in sub-section (2),the Board may take measures to undertake inspection of any book, or register, or other document or record of any listed public company or a public company (not being intermediaries referred to in section 12) which intends to get its securities listed on any recognised stock exchange where the Board has reasonable grounds to believe that such company has been indulging in insider trading or fraudulent and unfair trade practices relating to securities market.
# 56. Learned counsel for the Resolution Professional has rightly placed reliance upon judgment dated 31.08.2012 passed by the Hon’ble Supreme Court in Sahara India Real Estate Corporation Limited (supra), wherein it is held as under:-
“The reason for the instant inference is, that sub-section (2) does not curtail the powers and functions vested with the SEBI under subsection (1) of section 11 of the SEBI Act as subsection (2) aforementioned commences with the words “Without prejudice to the generality of the foregoing provisions…”. This expression obviously preserves, the power vested in the SEBI under sub-section (1) of section 11 of the SEBI Act, to protect the interest of investors in securities and to promote the development and to regulate the securities market “by such measures as it thinks fit”. Furthermore, sub-section (2) of section 11 of the SEBI Act, after making a reference to the measures generally referred to in sub-section (1) empowers/authorizes that SEBI “may provide for” a series of measures, which are delineated in clauses (a) to (m) thereof (of subsection (2) of section 11 of the SEBI Act). The use of the words “may provide for” besides indicating the discretion vested in the SEBI, demonstrates that, the measures depicted in clauses (a) to (m) are illustrative and not exhaustive, more so, because subclause (2) of section 11 of the SEBI Act does not dilute the power vested in the SEBI under sub-section (1) thereof. While interpreting sub-section (1) of section 11 of the SEBI Act, it has already been concluded hereinabove, that the measures to be adopted by the SEBI in carrying out its obligations are couched in open-ended terms having no prearranged limits, to the discretion of the SEBI. Likewise, sub-sections (2A) and (4) of section 11 of the SEBI Act, commence with the words “without prejudice to the provisions contained in sub-section (2)”. This establishes the legislative intent i.e., that sub-section (2A) and (4) are subservient to sub-section (2) of section 11. But it has already been concluded above, that sub-section (2) is subservient to sub-section (1) of section 11. Therefore both sub-sections (2A) and (4) will inferentially be subservient to sub-section (1) of section 11 of the SEBI Act. Therefore, the obligation cast on SEBI, to protect the interest of investors in securities, to promote the development of the securities market, and to regulate the securities market “ by such measure as it thinks fit”, remains undiluted even by sub-sections (2A) and (4) of Section 11 of the SEBI Act.”
Therefore, it can be safely said that notice dated 28.03.2018 issued by the BSE informing the action against ELCs, who are non-compliant of SEBI Circulars dated 10.10.2016 and 01.08.2017, is under the delegated powers of SEBI, under Section 11 of the SEBI Act.
# 57. In these circumstances, when SEBI having no restrictions in delegation of its power and functions under Section 11(1) of the SEBI Act, then certainly there was no need to pass any independent order directly by SEBI debarring the resolution applicant from accessing the securities market. More so Section 29A(f) of the Code does not provide for an order to be passed by SEBI prohibiting the resolution applicant from trading in securities or accessing the securities market. Admittedly, no such order was passed by SEBI expressly and it was also not required to be passed directly by SEBI when it has got ample open-ended powers to delegate its regulatory function to any other authority including BSE.
# 58. It is worthwhile to note that there are admissions on the part of resolution applicants about the prohibition by SEBI in the information memorandum dated 04.11.2020 submitted to MSEI under the heading prescribed “prohibition by SEBI”, it is admitted by Resolution Applicants that there was prohibition by SEBI debarring the Resolution Applicants from accessing the capital market/securities for a period of 10 years. However, later on a reference has been made to BSE by the resolution applicants that it has been inadvertently mentioned but this reference on the part of the Resolution Applicants is of no consequence because firstly, the same was filed during the course of hearing the arguments in this case and, the same has been made to fill up the lacuna in the case of resolution applicant. Secondly, there is no provision under the law that the information memorandum dated 04.11.2020 submitted by the resolution applicants with MSEI, which has been uploaded, intimated and its benefits have also been taken by the resolution applicants then such clarification is tenable at this juncture stating that ‘Prohibition by SEBI’ is written inadvertently in the information memorandum. Similarly, when Resolution Applicants were debarred by the notification of BSE dated 28.03.2018 then on representation by the Resolution Applicants to BSE, it was mentioned that names of the Resolution Applicants have been shown in the debarred entity list of SEBI, Later on, vide its internal communication dated 16.02.2021, BSE reversed and revoked the debarred status w.e.f. 16.02.2021 and not retrospectively. It means that Resolution Applicants were not eligible under Section 29A(f) of the Code on 13.02.2020, which was the last date of submission of the resolution plan. Consequently, it was debarred by BSE on the delegated power of SEBI to access the securities market. In view of the above admissions on behalf of the Resolution Applicants would attract the doctrine of estoppel against them to say that there was no prohibition by or on behalf of SEBI.
# 59. Although, it is argued by learned counsel for the resolution applicants that BSE did not have any delegation of power of SEBI to pass any order of prohibition but this contention of learned counsel for the Resolution Applicants does not hold the water because as already discussed hereinbefore that to carry out its obligations, SEBI has wide powers to delegate its function under Section 11(1) of the SEBI Act to protect the interest of investors in securities market and to regulate the securities market by such measures as it thinks fit. Although it is the contention of learned counsel for the Resolution applicants that prior show cause notice and due procedure could have been followed by SEBI before prohibiting the Resolution Applicants from accessing the securities market, yet this contention of learned counsel for the Resolution Applicants is again not plausible because it was not a case of adjudicatory or quasi-judicial powers of SEBI, but it was only a case of delegation of administrative power to the BSE to regulate the securities market. Thus, no individual or specific order was required to be passed in each and every case by SEBI. The authorities of National Depositories Ltd. Versus Securities and Exchange Board of India (supra) and Province of Bombay versus Kushaldar S. Advani (supra) relied upon by the learned counsel for the Resolution Applicant are not applicable to the facts and circumstances of the case in hand. Thus, the circular vide which SEBI informed to the BSE to ensure the compliance of the directions passed by the SEBI, Resolution Applicants were non-compliant of the direction given by SEBI, therefore, it was rightly and legally barred by BSE from accessing the securities market.
# 60. It may be further noted that according to the applicant, it had come to know on 29.12.2020 from SBI when a proposal for raising fund was submitted that promoters and directors of the resolution applicants are in debarred list of BSE from accessing the capital market for 10 years. Then a representation dated 28.01.2021 was made to BSE, upon which BSE revoked its recommendation on 16.02.2021 regarding the restraint status of resolution applicant. Thus, the resolution applicants were not a non-compliant of the circular issued by BSE, however, this contention of the Resolution Applicants is devoid of any legal force because firstly its admission on their part that Resolution Applicants were in the debarred list of BSE from accessing the securities market for 10 years. Secondly, it is settled law that the eligibility of resolution applicants is to be seen on the date of submission of the resolution plan and not thereafter. In the case in hand, the last date for submission of the resolution plan was 13.02.2020 and admittedly, on that date resolution applicants were ineligible under Section 29A(f) of the Code. Thus, it can be safely concluded that under the SEBI Act, it enjoins two types of powers first is quasi-judicial power and second is regulatory power. So far as quasi-judicial powers of SEBI are concerned, a due process of law is to be adopted by SEBI before passing any order of punishment or penalty, but in the case in hand, it is the open-ended regulatory power of SEBI, which has been delegated to BSE, vide which Resolution Applicants have been debarred to access the capital market for 10 years. Thus, it
can be safely held in unequivocal terms that Resolution Applicants were ineligible under Section 29A(f) of the Code and deemed to be prohibited by SEBI from trading the securities or accessing the securities market.
# 61. Although, it is argued by learned counsel for the Resolution Applicants that impugned circular does not even use the word ‘prohibition’ and under Section 11(4) of the SEBI Act, used words ‘prohibition’ and ‘restraint’ distinctively yet this contention of learned counsel is not plausible because both these words can be used interchangeably being synonyms. The word ‘prohibit’ and ‘restraint’ as per legal glossary issued by Ministry of Law Justice and Company Affairs, available at link https://legislative.gov.in/legal-glossayry, prohibitory order is an order which operates in restraining a party from doing an act which if done will result in irreparable injury to the other side. Moreover, as per Black’s Law Dictionary the words ‘prohibition’ and ‘restrain’ are being used interchangeably.
# 62. Now coming to the third point of determination, whether the information received from SEBI by the third party under the RTI Act, filed in IA No.154 of 2022 is having some bearing upon the eligibility part of successful resolution applicants. At the outset, it is pertinent to mention that the said information was never sought by resolution applicants for clarification under the RTI Act. Secondly, this information has come into picture after the arguments were completed and orders were reserved. In the present case, the said application has been moved by one of the prospective investors Ms. Priyanka Sharma under the RTI Act before SEBI regarding administrative circulars dated 10.10.2016, 01.08.2017 as to whether SEBI prohibited/debarred any company, its promoters or directors under the same. It has been clarified by SEBI and shown correctly that it has not passed any order debarring or prohibiting any company or its promoters/directors under the said circulars. As discussed above, while taking into consideration the point of eligibility of Resolution Applicants at the time of submitting the resolution plan, it is evident that no such order was ever passed by SEBI at any point of time on the basis of such circulars. The said order could have been passed under the quasi-judicial powers of the SEBI, but so far as regulatory functions of SEBI is concerned, the said power stands delegated to BSE as so clarified by SEBI in its reply to the application under the RTI Act that SEBI by circular dated 01.08.2017, inter alia, states that the concerned stock exchange and depositories shall coordinate with each other and ensure compliance with the circular requirement. Therefore, it can be said that under the quasi-judicial function of SEBI, no such order was passed but under the regulatory functions, this power was delegated to the stock exchange to pass the appropriate order debarring the defaulter/non-compliant of the said circular issued by SEBI.
# 63. In these circumstances, the said information shared by SEBI under the RTI Act has got no bearing on the eligibility criterion of the Resolution Applicants at the time of submission of resolution plan.
# 64. Before parting with this judgment, a pertinent question crops up whether the Resolution Professional has discharged his duty diligently about verifying the eligibility of resolution applicants before submission of resolution plan to committee of creditors for discussion and approval.
# 65. As already discussed hereinbefore, while referring to the decision of Hon’ble NCLAT, Principal Bench, New Delhi in Canara Bank’s case (supra), it is the bounded duty of the Resolution Professional to scrutinize the resolution plan furnished by numerous applicants is complete in all aspects, before presenting it to the committee of creditors. A Resolution Professional is not required to take any decision, but he is to confirm that the Resolution Plan does not violate any of the provisions of Law for the time being in force (including Section 29A of the Code). Elaborating further the role of Resolution Professional, it is worthwhile to note that admittedly the restraint order of BSE debarring the resolution applicant from accessing the securities market for 10 years was in the public domain w.e.f. 28.03.2018 i.e. date of notification of BSE. It is stated by learned counsel for the Resolution Applicants that he came to know about the said notification on 29.12.2020 from SBI when proposal for raising funds was submitted that promoters and directors of the Resolution Applicant are in debarred list of BSE from accessing capital market for 10 years. It means that the said information was in public domain and it was incumbent upon the Resolution Professional before submitting the resolution plan to the committee of creditors that a Resolution Applicant was eligible under Section 29A(f) of the Code as per its affidavit filed with the resolution plan under Section 30(1) of the Code. Admittedly, the Resolution Applicant is an ELC and the data related to the said company was available on the website of BSE. There is no averment and evidence placed on record on behalf of the Resolution Professional that before submitting the resolution plan to committee of creditors for approval, he had verified the antecedents of the resolution applicants from the websites of SEBI and BSE. If SBI has accessed this information from the BSE website, then certainly Resolution Professional could have also done so, if acted diligently. In these circumstances, it can be safely concluded that Resolution Professional has failed to discharge its duties diligently about verifying the eligibility of Resolution Applicant.
# 66. The last question for determination before this Bench is whether the matter be referred back to the committee of creditors for determining the question of eligibility or this Bench may decide the eligibility of the Resolution Applicant and reject the resolution plan submitted by the Resolution Applicant being ineligible under Section 29A(f) of the Code. This question has been dealt with by the Hon’ble NCLAT in JSW Steel Ltd. versus Mahender Kumar Khandelwal and Others; [2020] ibclaw.in 217 NCLAT, wherein the Hon’ble NCLAT has dealt with the issue as to who are the Competent Authorities to decide ineligibility of the Resolution Applicant under Section 29A? The Hon’ble NCLAT has held that:-
a. The Resolution Professional in terms of Section 30(1) is to find out whether such statement has been made or not;
b. The Committee of Creditors is empowered to decide whether the Resolution Applicant is ineligible in terms of Section 29A;
c. The Adjudicating Authority while passing order under Section 31 can find out whether the Resolution Applicant fulfils the conditions under Section 30(2) which includes Section 30(2) (e) and in terms of Section 29A and can decide.
Thus, from the careful perusal of the said finding of the Hon’ble NCLAT, this Bench is competent to decide issue of ineligibility of Resolution Applicants at the time of submitting the Resolution Plan under Section 29A(f) of the Code as it has not been decided by the Committee of Creditors when the Resolution Plan was put before it by the Resolution Professional for approval.
# 67. To sum up in the light of discussions foregoing and reasons assigned hereinbefore Resolution Applicants are declared ineligible under Section 29A(f) of the Code at the time of submission of the resolution plan and resolution plan submitted by the Resolution Applicants stands rejected, vide separate order of even date passed in IA No.458 of 2020. Consequently, to avoid the liquidation of the corporate debtor, period of Corporate Insolvency Resolution Process is extended by 90 days for exploring the possibility of resolution of the corporate debtor. Accordingly, matter is referred back to Committee of Creditors, which is ordered to be reinstated and revived to make another attempt for consideration of other resolution plans in accordance with law.
# 68. So far as the prayer of applicant/Resolution Professional to take action for filing false affidavit under Section 30(1) of the Code stating compliance of Section 29A and forfeiture of performance security; forfeiture of EMD and direction against respondents to deposit back EMD of Rs,15,00,000/-, imposing penalty of Rs.2 Crores under Section 235A, direction for prosecution against the respondents is concerned, it is the case of resolution applicants/respondents that they had received this information of debarring them from accessing the securities market from SBI on 29.02.2020, then it cannot be said that they had deliberately concealed this information while submitting the resolution plan and filing of affidavit under Section 30(1) of the Code. If this allegation is imputed upon the Resolution Applicants that the said information was available on the website of BSE and was in public domain then certainly this imputation would also be equally applicable to the applicant/Resolution Professional as he could have also accessed the information from the website of BSE if SBI could have accessed it. Be that as it may, this prayer of applicant/Resolution Professional cannot be allowed and is hereby declined. Thus, IA No.342 of 2021 is allowed and disposed of accordingly. IA No.456 of 2021 for impleadment as party in IA No.342/2021 is dismissed, however, alternative prayer of the applicant is allowed for extending the CIRP period by 90 days and reinstatement of committee of creditors as ordered above. Consequently, IA No.154 of 2022 stands dismissed.
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