ARUN KUMAR JAGATRAMKA versus JINDAL STEEL AND POWER LTD. & ANR.

Citation: [2021] 3 S.C.R. 114 · Decided: 15-03-2021 · Supreme Court of India · Bench: D.Y. CHANDRACHUD · Disposal: Dismissed

Cited by 4 judgment(s) · cites 10 · see the full citation network in Lexace

Judgment (excerpt)

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SUPREME COURT REPORTS
[2021] 3 S.C.R.
   [2021] 3 S.C.R. 114
114
ARUN KUMAR JAGATRAMKA
v.
JINDAL STEEL AND POWER LTD. & ANR.
(Civil Appeal No. 9664 of 2019)
MARCH 15, 2021
[DR. DHANANJAYA Y CHANDRACHUD AND
M. R. SHAH, JJ.]
Insolvency and Bankruptcy Code, 2016:
s. 29A – Person not eligible to be resolution applicant –
Eligibility of promoter to file application for compromise and
arrangement, while he is ineligible u/s. 29A to submit ‘Resolution
Plan’ – On facts, application by GNCL, corporate debtor for
initiating the Corporate Insolvency Resolution Process admitted and
the appellant-promoter of GNCL submitted a resolution plan for
GNCL – However, due to insertion of s. 29A, which disqualifies a
person from being a resolution applicant if they have been a promoter
or in the management or control of a corporate debtor, appellant
became ineligible to submit a resolution plan – No resolution plan
approved by the CoC and in absence thereof, the order of liquidation
by NCLT – During the pendency of the appeal before NCLAT,
application u/ss. 230 to 232 of the Act of 2013 by appellant-promoter
of GNCL before the NCLT proposing a scheme for compromise and
arrangement between the erstwhile promoters and creditors and
the same was allowed – Appeal thereagainst by respondent-
unsecured creditor of the corporate debtor – NCLAT holding that
promoters ineligible u/s. 29A to submit a resolution plan, also barred
from proposing a scheme of compromise and arrangement u/s.230
of the Act of 2013 – On appeal, held: Prohibition placed by the
Parliament in s. 29A and s. 35(1)(f) must also attach itself to a
scheme of compromise or arrangement u/s. 230 of the 2013 Act,
when the company is undergoing liquidation under the auspices of
the IBC – As such, Reg 2B, specifically the proviso to Reg 2B(1), is
also constitutionally valid – Even in the absence of the Reg 2B, a
person ineligible u/s. 29A read with s. 35(1)(f) is not permitted to
propose a scheme for revival u/s. 230, in the case of a company
which is undergoing a liquidation under the IBC – In the case of a
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company undergoing liquidation under the IBC, a scheme of
compromise or arrangement proposed u/s. 230 is a facet of the
liquidation process – Object of the scheme of compromise or
arrangement is to revive the company – Same rationale which
permeates the resolution process u/s. 29A permeates the liquidation
process u/s. 35(1)(f) – Insolvency and Bankruptcy Board of India
(Liquidation Process) Regulations, 2016 – Reg 2B – Companies
Act, 2013 – ss. 230 to 232.
Enactment of – Salutary objectives of good corporate
governance and respect for and adherence to the rule of law; and
re-organization and resolution of insolvencies under – Held: Can
be achieved if the integrity of the resolution process is placed at the
forefront – Purposive interpretation is required by the courts, while
infusing meaning and content to its provisions, to ensure that the
problems which beset the earlier regime do not enter through the
backdoor through disingenuous stratagems.
s. 29A – Person not eligible to be resolution applicant –
Purpose of the ineligibility under – Held: Is to achieve a sustainable
revival and to ensure that a person who is the cause of the problem
either by a design or a default cannot be a part of the process of
solution – s. 29A encompasses not only conduct in relation to the
corporate debtor but in relation to other companies as well.
ss. 29A, 35(1)(f) – Interplay between the proposal of a scheme
of compromise and arrangement u/s.230 of the Act of 2013 and
liquidation proceedings initiated under IBC – Held: s. 230 of the
Act of 2013 is wider in its ambit – It is not confined only to a company
in liquidation or to corporate debtor which is being wound up under
Chapter III of the IBC – Thus, the rigors of the IBC will not apply to
proceedings u/s. 230 of the Act of 2013 where the scheme of
compromise or arrangement proposed is in relation to an entity which
is not the subject of a proceeding under the IBC – However, where
s. 230 of the Act of 2013 traces its origin to the liquidation
proceedings initiated under IBC, harmonious construction is needed
between the two statutes which would ensure that a scheme of
compromise or arrangement u/s. 230 is being pursued, in a manner
consistent with the underlying principles of the IBC – It would lead
to a manifest absurdity if the very persons who are ineligible for
submitting a resolution plan, participating

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