Deepak Aggarwal vs Rabindra Kumar Mintri & Anr

[Arising out of Order dated 13.10.2023 passed by the Adjudicating Authority (National Company Law Tribunal), New Delhi Court-VI in IA No. 1078 of 2022 in CP IB No. 806/PB/2019]

In the matter of:

Deepak Aggarwal ....Appellant Vs. Rabindra Kumar Mintri & Anr. ...Respondents For Appellant: Mr. Gaurav Mitra, Mr. Karan Malhotra, Ms. Taniya Malhotra, Mr. Adit Singh, Advocates. For Respondents: Ms. Riya Thomas, Mr. Rachit Mittal, Advocates for RP. Ms. Eshna Kumar, Mr. Shubham Jaiswal, Advocates for Intervenor.

JUDGMENT

(16 January, 2024) th

Ashok Bhushan, J.

This Appeal, by Successful Resolution Applicant has been filed

challenging the order dated 13.10.2023 passed by the Adjudicating Authority

(National Company Law Tribunal) New Delhi Court-VI rejecting the IA

No.1078 of 2022 filed by the Resolution Professional seeking approval of the

Resolution Plan submitted by the Appellant.

2. Brief facts of the case necessary to be noticed for deciding the Appeal

are:-

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2.1. By order dated 11.10.2019 passed by the Adjudicating Authority,

Corporate Insolvency Resolution Process (CIRP) commenced against the

Corporate Debtor- 'MSA Developers Private Limited' on an application filed

under Section 7 by Ravinder Aggarwal and Ors. In the CIRP of the Corporate

Debtor, Form-G was published. In the 12th CoC meeting held on31.08.2021,

Resolution Plan submitted by the Appellant and one PRA- Consortium of

Yasmin Sabir Ali and Nayeem Abbas were put to vote. The plan submitted by

the Appellant was approved with vote share of 80.12% through e-voting. On

27.10.2021, an application was filed under Section 30(6) of the Code for

approval of the Resolution Plan. An addendum to the Resolution Plan was

voted upon by the CoC on instructions from the Adjudicating Authority in

which 79 votes in favour out of 80 votes were cast approving the addendum.

The Adjudicating Authority vide order dated 31.08.2023 sought certain

clarifications from the IRP and the Appellant on the eligibility of the Appellant

and Comfort Letter issued by Axis Bank filed by the Appellant. Appellant by

its Affidavit dated 12.09.2023 submitted its clarification in response to the

order dated 31.08.2023. The Adjudicating Authority vide order dated

13.10.2023 dismissed IA No. 1078/2022 holding the Appellant ineligible to

submit a Resolution Plan in view of he being disqualified to act as Director in

terms of the disqualification list of Registrar of Companies dated 15.09.2017.

IA filed by the Resolution Professional for approval of the Resolution Plan

hence rejected. Aggrieved by the said order, this Appeal has been filed.

3. In this Appeal on 31.10.2023, following interim order was passed:-

Company Appeal (AT) (Insolvency) No.1415 of 2023 3

"In the meantime, CoC may not proceed to take any decision regarding liquidation of the Corporate Debtor."

4. A short reply has been filed by the Resolution Professional. Two IAs

being IA No.5890 of 2023 by Yasmin Sabir Ali another IA No.100 of 2024 by

Ravinder Aggarwal have been filed seeking intervention in the matter.

5. We have heard Shri Gaurav Mitra, Learned Counsel for the Appellant,

Learned Counsel for the Resolution Professional and Learned Counsel

appearing for the Intervenors.

6. Shri Gaurav Mitra, Learned Counsel for the Appellant submits that the

Adjudicating Authority committed error in relying on list dated 15.09.2017

issued by the Registrar of Companies which contained list of disqualified

Directors under Section 164(2) of the Companies Act, 2013 whereas in Writ

Petition No. 8196 of 2021 filed by the Appellant before Delhi High Court, the

said list has already been set aside by the High Court by its judgment dated

29.09.2021, hence, ineligibility was no more inexistence. The order of the High

Court was placed before the Adjudicating Authority but the Adjudicating

Authority committed error in observing that the order of the Delhi High Court

does not say that list has been quashed retrospectively. It is submitted that

when the list has been quashed by the High Court, it means that it has never

been in existence. Thus, there is no ineligibility attached with the Appellant.

It is submitted that insofar as comfort letter issued by the Axis Bank is

concerned, the said is not relied in the Resolution Plan and Appellant has

already submitted in its clarification Affidavit that the Appellant does not rely

Company Appeal (AT) (Insolvency) No.1415 of 2023 4

on the said comfort letter issued by the Axis Bank in support of the Resolution

Plan. It is submitted that the CoC having already approved the plan by 80.12%

majority, the CoC found Appellant's eligibility to submit a plan. It is submitted

that Section 164(2)(i) was inserted in the Companies Act w.e.f. 02.11.2018

providing that a person shall not be eligible for appointment of director of the

company if he has not complied with the provisions of Section 165(1). It is

submitted that there shall be no disqualification prior to 02.11.2018. It is

submitted that in the project of homebuyers, in view of the rejection of the

Application of the Resolution Professional, apart from the Appellant,

homebuyers are also suffering.

7. Learned Counsel for the Resolution Professional submitted that the

Resolution Professional after examining the eligibility of the Appellant to

submit a plan has submitted the plan before the CoC. In the CoC meeting,

Resolution Plan of both Appellant as well as Consortium of Yasmin Sabir Ali

and Nayeem Abbas were put to vote wherein the Resolution Plan of the

Appellant was approved by voting share of 80.12% of the CoC and the

application was filed seeking approval of the plan. The Adjudicating Authority

sought clarification vide its order dated 31.08.2023 which clarification was

submitted by an affidavit. Resolution Professional supports the eligibility of

the Appellant to submit a Resolution Plan.

8. Learned Counsel for the Intervenor in IA No.5890 of 2023 submits that

the Appellant is not eligible to submit a Resolution Plan since at the time when

Resolution Plan was submitted, order of the Delhi High Court had not been

passed. Order of the Delhi High Court having been passed subsequently, there

Company Appeal (AT) (Insolvency) No.1415 of 2023 5

was ineligibility in the Appellant to submit the Resolution Plan. It is submitted

that the Adjudicating Authority has rightly declared the Appellant as

ineligible. Applicant submits that the Applicant shall be affected by the result

of the Appeal, hence, he may be permitted to intervene in the matter.

9. Learned Counsel for the Intervenor in IA No.100 of 2024 submits that

the Appellant is not eligible as he being disqualified to submit a plan on the

date when plan was submitted. It is submitted that the subsequent judgment

of the Delhi High Court dated 29.09.2021 shall not cure the ineligibility of the

Appellant on the date when plan was submitted. It is submitted that the

Appellant has filed a letter from the Axis Bank stating that the Axis Bank is

ready to infuse amount of Rs.10 Crores which letter was forged and

fabricated. The Appellant having relied on letter of Axis Bank, is not eligible

to submit a Resolution Plan. It is submitted that the Appellant has not even

disclosed in the Resolution Plan that he is included in the list published by

the Ministry of Corporate Affairs as disqualified Director. He further submits

that the Appellant is not a person of impeccable integrity and is not a fit

person to submit a Resolution Plan. Judgment of the Delhi High Court dated

29.09.2021 cannot retrospectively remove the disqualification of the

Appellant.

10. We have considered the submissions of the Counsel for the parties and

perused the record.

11. The Resolution Plan was submitted by the Appellant after issuance of

Form G on 18.01.2021 which plan submitted by the Appellant came to be

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considered in the CoC meeting held on 31.08.2021 and was approved by vote

share of 80.12% in the e-voting held between 03.09.2021 to 06.09.2021. The

Adjudicating Authority has rejected the application filed by the Resolution

Professional for approval of the Resolution Plan on the ground that the name

of the Appellant is listed in the list of disqualified directors published on

15.09.2017 by the RoC who are disqualified from being directors from

01.11.2016 to 31.10.2021. Resolution Plan was submitted by the Appellant

on 20.03.2021. The list published by the RoC was quashed by the Delhi High

Court on 29.09.2021. The Adjudicating Authority held that "The order of the

Hon'ble High Court of Delhi does not anywhere state that the list has been

quashed retrospectively". The Adjudicating Authority held that on the date of

submission of the plan, Successful Resolution Applicant was disqualified as

Director.

12. We need to first consider the above grounds of disqualification given by

the Adjudicating Authority for rejecting the application filed by the Resolution

Professional for approval of the Resolution Plan.

13. Section 164(1) of the Companies Act, 2013 provides for

'disqualifications for appointment of director'. Section 164(1)(i) which is

relevant for the present case is as follows:-

"164. Disqualifications for appointment of director.-- (1) A person shall not be eligible for appointment as a director of a company, if --

*** *** *** (i) he has not complied with the provisions of sub-section (1) of section 165."

Company Appeal (AT) (Insolvency) No.1415 of 2023 7

14. Section 164(1)(i) was inserted by Act 22 of 2019 w.e.f. 02.11.2018. The

Adjudicating Authority has noticed in the impugned order that the name of

the Appellant is mentioned in the list issued by the RoC on 15.09.2017. In

List dated 15.09.2017 the name of the Appellant was mentioned as

disqualified director.

15. Learned Counsel for the Appellant has placed reliance on the judgment

of the Delhi High Court in Writ Petition No.10180 of 2021- "Deepak

Aggarwal vs. Union of India, Through Secretary & Anr.". The Writ

Petition of Deepak Aggarwal was decided by a bunch of other Writ Petition

being Writ Petition (C) No. 11066 of 2021- "Jitendra Kumar Sarangi vs.

Union of India and Anr." by judgment and order dated 29.09.2021. Writ

Petition was filed seeking quashing of lists of disqualified directors published

between the years 2017-2018 due to non-filing of annual returns and

financial statements for three consecutive years by the Companies. Learned

Single Judge after hearing, by the judgment dated 29.09.2021 allowed the

WPs and quashed the lists of disqualified directors. Paragraph 6 of the

judgment is as follows:-

"6. For the aforesaid reasons, the writ petitions are entitled to succeed and are, accordingly, allowed. The impugned list of disqualified directors, insofar as it relates to the petitioners herein, are quashed. The respondents are directed to reactivate the Director Identification Number ("DIN") and the Digital Signature Certificate ("DSC") of the

Company Appeal (AT) (Insolvency) No.1415 of 2023 8

petitioners within a period of three weeks from today."

16. Now the question to be considered is as to whether in view of the

judgment of the Delhi High Court dated 29.09.2021 quashing the list whether

eligibility on the basis of the list dated 15.09.2017 shall still attached on the

Appellant. The order of the Delhi High Court dated 29.09.2021 was placed

before the Adjudicating Authority. The Adjudicating Authority, however, has

made following observations with regard to judgment of the Delhi High Court:-

"The SRA has given the clarification that since the Hon'ble Delhi High Court quashed the disqualification list dated 15.09.2017 by its order dated 29.09.2021, the notification of the list is to be considered still born in law and treated as invalid from the beginning. The order of the Hon'ble High Court of Delhi does not anywhere state that the list has been quashed retrospectively. However, we find no reason to go into the question of judicial precedence in this respect, since the law (IBC) unequivocally mandates under section 29A(e) as under: -

29A. Persons not eligible to be resolution applicant. - 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-

....

e) is disqualified to act as a director under the Companies Act, 2013;

Company Appeal (AT) (Insolvency) No.1415 of 2023 9

On the date of submission of the resolution plan by the SRA, the disqualification list of ROC of 15.09.2017 had not been rescinded and therefore was effective. The Resolution Plan and the SRA cannot be treated as distinct from each other and must be dealt with in conjunction. We are, therefore, of the view that this Resolution Plan failed this basic test as its resolution applicant could not have submitted a resolution plan on that date."

17. When by order of the High Court a list is quashed, it has to be treated

that the list never existed and its ill effects cannot be attached on the

Appellant especially on the date when the order has been passed by the

Adjudicating Authority i.e. 13.10.2023. The view of the Adjudicating Authority

that the order of the High Court does not say that the list has been quashed

retrospectively is not a correct observation. When the list has been quashed,

it is quashed in its entirety from very inception. List cannot survive after its

quashing by the High Court for any purpose. We, thus, are of the view that

the disqualification of the Appellant held on the said basis is unfounded. The

order of the Delhi High Court dated 29.09.2021 has already quashed the list

in which name of the Appellant was included as disqualified director. After its

quashing, it ceases to exist and cannot be relied for any purpose.

18. Much emphasis has been placed by the Counsel for the intervenors on

the ground that the comfort letter issued by Axis Bank which was submitted

by the Appellant was a forged letter, hence, the Appellant's Resolution Plan

ought to have been rejected. The Adjudicating Authority has considered the

Company Appeal (AT) (Insolvency) No.1415 of 2023 10

said objection raised on the basis of comfort letter in paragraph 7(b) of the

judgment, which is as follows:-

"(b) The SRA has submitted a comfort letter purportedly issued by Axis Bank in which Axis Bank has agreed to provide credit facility of Rs. 10 crores to SRA. This letter is on record. Axis Bank has categorically denied issuing any such letter. In his clarification, SRA has stated he has received the copy of the Comfort Letter from one of the officials of the Axis Bank over WhatsApp. Therefore, the Deponent believed that the letter to be genuine as it was coming from an official source and thus there was no reason for the SRA to doubt the authenticity of the letter because it was received from one of the officials of the bank and thus it was forwarded along with the draft Resolution Plan without making it as attachment or referring to it in the Resolution Plan. Even though the SRA has not relied on this letter in the Resolution Plan and has not made it a part of the Resolution Plan, the authenticity of the comfort letter being denied by Axis Bank creates doubts about the bonafide of the SRA since he was to be the beneficiary of the said letter."

19. The Adjudicating Authority has held that the Successful Resolution

Applicant has not relied on the letter in the Resolution Plan and has not made

it as a part of the Resolution Plan. The Adjudicating Authority by the order

dated 31.08.2023 asked the Successful Resolution Applicant to clarify

following:-

"3. The Successful Resolution Applicant (SRA) stated that the Axis Bank comfort letter (in which there is an

Company Appeal (AT) (Insolvency) No.1415 of 2023 11

in-principal approval of Rs. 10 Cr. in favour of SRA and which has been categorically denied by Axis Bank) was not made part of the Resolution Plan then why did he submit this document which has been alleged to be forged."

20. The Appellant in response to the order dated 31.08.2023 filed an

Affidavit containing clarifications as per the direction of the Adjudicating

Authority dated 31.08.2023. With regard to Point No.3 in paragraph 4,

following has been stated by the Successful Resolution Applicant:-

"4. Clarification regarding Point No. 3

a. The Deponent during the stage of discussion with RP/COC had submitted the draft attachment of Resolution Plan, and along with that sent as a separate attachment the Comfort Letter voluntarily [although there was no need to provide the same] in good faith and with good intention without any intent of taking undue advantage of the said Comfort Letter as received from the responsible official of the Bank. It was forwarded as attachment on 'as is' basis. in the same form and manner as received from the bank official. It is submitted that there is no reason for the Deponent to doubt the authenticity of the letter because it was received from the official of the bank and thus it was forwarded along with the draft Resolution Plan without making it as attachment or referring it in Resolution Plan.

b. The Deponent has not relied on the contents of the said document in the Resolution Plan. The Resolution Plan is not based on the Comfort Letter nor it is

Company Appeal (AT) (Insolvency) No.1415 of 2023 12

dependent in any manner on the Comfort Letter [including for the purposes of marshalling of financial resources]. It was not made a part of the final signed copy of the Resolution Plan. No reliance whatsoever was placed on the said Comfort Letter, it is only an incidental/ miscellaneous document which was submitted at the discussion stage to the RP. As per the understanding of Deponent, even the CoC evaluated and voted the Resolution Plan without giving any weightage to the comfort letter.

c. The Deponent has received in principal approval from SWAMIH INVESTMENT FUND 1 (sponsored by Government of India with SBICAP Ventures Ltd. as Investment Manager) Fund for sum of Rs. 141.20Cr after pursuing the credentials as submitted by the Deponent to the said fund. A copy of the said sanction in enclosed herewith for the court records."

21. When we look into the clarification given by the Successful Resolution

Applicant, the Successful Resolution Applicant has submitted that the

comfort letter has not been made part of the final Resolution Plan and no

reliance has been placed and further it was stated that the Successful

Resolution Applicant has received principal approval from Swamih

Investment Fund 1. The CoC has approved the Resolution Plan and the

comfort letter which according to the Appellant was received from an official

of the Bank was found not have been issued by the Bank subsequently having

been not relied in the Resolution Plan, we are of the view that on this ground

the Resolution Plan cannot be rejected. Further, the Adjudicating Authority

Company Appeal (AT) (Insolvency) No.1415 of 2023 13

has not rejected the plan on the said ground and rejection of the application

was on the ground that the Appellant was disqualified on the date of

submission of the plan in view of the list issued by the RoC dated 15.09.2017.

22. Learned Counsel for the Appellant has submitted that both the

Intervenors i.e. Prospective Resolution Applicants as well as the Homebuyers

has filed application before the Adjudicating Authority for declaring the

Appellant ineligible, being IA No. 4224 of 2021 filed by Yasmin Sabir Ali which

has been rejected by the Adjudicating Authority on 13.10.2023. Similarly,

another IA No. 4480 of 2021 was filed by Mr. Ravinder Aggarwal and other

homebuyers seeking declaration that the Appellant is ineligible, which

application has already been dismissed by order dated 13.10.2023.

Applications filed by the Intervenors having been dismissed by order of the

same date, it is not open for the Intervenors to oppose the approval of the

Resolution Plan. Their objection to the Resolution Plan has already been

rejected by the Adjudicating Authority. The Intervenors have advanced

submission regarding ineligibility of the Appellant on the aforesaid two

grounds which we have already noticed and considered. We, thus, are of the

view that on the submissions made on behalf of the intervenors the Appellant

cannot be held to be ineligible. Once we have found that the Appellant is

eligible to submit a plan and the Resolution Plan has been approved by the

CoC, commercial decision of the CoC has to be given paramount importance

and the approval of the Resolution Plan can be interfered only when a ground

is made out that the plan is in violation of Section 30(2) of the IBC. There is

no allegation that the resolution plan is not in compliance of Section 30(2).

Company Appeal (AT) (Insolvency) No.1415 of 2023 14

23. In view of the foregoing discussions, we are of the view that the order

impugned passed by the Adjudicating Authority is unsustainable. In result,

the order dated 13.10.2023 is set aside. IA No.1078 of 2022 filed by the

Resolution Professional for seeking approval of the Resolution Plan is revived

before the Adjudicating Authority which is to be heard and decided in

accordance with law. Resolution Plan of the Corporate Debtor having been

approved in September 2021, we request the Adjudicating Authority to

dispose of the application at an early date.

24. The Appeal is disposed of accordingly.

[Justice Ashok Bhushan] Chairperson

[Barun Mitra] Member (Technical)

[Arun Baroka] Member (Technical)

New Delhi Anjali

Company Appeal (AT) (Insolvency) No.1415 of 2023