BANK OF BARODA & ANR versus MBL INFRASTRUCTURES LIMITED & ORS.

Citation: [2022] 12 S.C.R. 761 · Decided: 18-01-2022 · Supreme Court of India · Bench: SANJAY KISHAN KAUL · Disposal: Disposed off

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Judgment (excerpt)

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   [2022] 12 S.C.R. 761
761
BANK OF BARODA & ANR.
v.
MBL INFRASTRUCTURES LIMITED & ORS.
(Civil Appeal No. 8411 of 2019)
JANUARY 18, 2022
[SANJAY KISHAN KAUL AND M.M. SUNDRESH, JJ.]
Insolvency and Bankruptcy Code, 2016 – s.29A(h) (as
amended by the Act 26 of 2018) – Interpretation and scope of –
Held: s.29A(h) creates one more category of persons not being
eligible to be a resolution applicant – Other than the persons
mentioned thereunder, there may not be any disqualification – The
word “person” is of a wider import to include a promoter or a
director, as the case may be – The definition of “person” as
mentioned u/s.3(23) of the Code includes certain categories of
persons and thus, there is no such exclusion – It is merely illustrative/
inclusive in nature and therefore, the persons mentioned in s.29A
alone are ineligible to be resolution applicants – Once a person
executes a guarantee in favour of a creditor with respect to the
credit facilities availed by a corporate debtor, and in a case where
an application for insolvency resolution has been admitted, with
the further fact of the said guarantee having been invoked, the bar
qua eligibility would certainly come into play – What the provision
requires is a guarantee in favour of ‘a creditor’ – Once an application
for insolvency resolution is admitted on behalf of ‘a creditor’ then
the process would be one of rem, and therefore, all creditors of the
same class would have their respective rights at par with each other
– The word “such creditor” in s.29A(h) has to be interpreted to
mean similarly placed creditors after the application for insolvency
application is admitted by the adjudicating authority – As a result,
what is required to earn a disqualification under the said provision
is a mere existence of a personal guarantee that stands invoked by
a single creditor, notwithstanding the application being filed by any
other creditor seeking initiation of insolvency resolution process,
subject to further compliance of invocation of the said personal
guarantee by any other creditor – Ineligibility has to be seen from
the point of view of the resolution process – It can never be said
that there can be ineligibility qua one creditor as against others –
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SUPREME COURT REPORTS
[2022] 12 S.C.R.
The ineligibility is to the participation in the resolution process of
the corporate debtor – Exclusion is meant to facilitate a fair and
transparent process – The provision after the amendment speaks of
invocation by a creditor – The manner of invocation can never be a
factor for the adjudicating authority to adjudge, as against its
existence – Adequate importance will have to be given to the latter
part of the provision which also disqualifies a person whose liability
under the personal guarantee executed in favour of a creditor,
remains unpaid in full or in part for the amount due from him, upon
invocation – s.29A has a laudable object of protecting and balancing
the interest of the committee of creditors and the corporate debtor,
while shutting the doors to canvas the interests of others – It
consciously excludes certain categories of persons – s.29A(h)
foresees the creditors who are otherwise either already under the
insolvency resolution process or are entitled to go under it –
Interpretation of Statutes – Purposive Interpretation.
Insolvency and Bankruptcy Code, 2016 – Object of –
Discussed.
Insolvency and Bankruptcy Code, 2016 – s.29A – Objective
of – Discussed.
Insolvency and Bankruptcy Code, 2016 – s.29A(h) (as
amended by the Act 26 of 2018) – Date of reckoning – Whether the
date of submission of resolution plan or the date of adjudication by
the authority – Held: If there is a bar at the time of submission of
resolution plan by a resolution applicant, it is obviously not
maintainable – However, if the submission of the plan is maintainable
at the time at which it is filed, and thereafter, by the operation of the
law, a person becomes ineligible, which continues either till the
time of approval by the CoC, or adjudication by the authority, then
the subsequent amended provision would govern the question of
eligibility of resolution applicant to submit a resolution plan – If
there is ineligibility which in turn prohibits the other stakeholders
to proceed further and the amendment being in the nature of
providing a better process, and that too in the interest of the creditors
and the debtor, the same is required to be followed as against t

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