Section 29A banning defaulted promoters from bidding in own company, not retrospective

Published in news-legal June 18 2018 0
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NCLT Mumbai allows Promoter (‘Resolution Applicant’), also the guarantor of a Corporate Debtor undergoing insolvency, to submit resolution plan, thereby holding the resolution plan to be eligible for due adjudication;

Notes that the Resolution Professional had invited ‘Expression of Interest’ as per due process of law, pursuant to which only the Promoter had submitted a resolution plan which was approved by a 100% Committee of Creditors (‘CoC’) vote; Observes that the petition for initiation of insolvency against Corporate Debtor u/s 10 of Insolvency and Bankruptcy Code, 2016 (‘IBC’) was admitted on Aug. 24, 2017, whereas the IBC (Amendment) Ordinance, 2017 was pronounced on Nov. 23, 2017; States that the moot question in the matter is, when the Resolution Applicant is related to the Promoter Directors of the Corporate Debtor, whether his resolution plan could be entertained/ admitted after introduction of Sec. 29A of the IBC, vide the IBC (Amendment) Act, 2018, which was effective from Nov. 23, 2017 (i.e. when Ordinance, 2017 was passed); Peruses Sec. 29A of IBC, which provides that a “connected person” shall not be eligible to submit a resolution plan, wherein “connected person” means any person who is Promoter/ is in the management of control of the Resolution Applicant; Examines precedents relating to the applicability of an amended legal provision,  and relies on a catena of SC judgments in this regard to state that “a cardinal principle of construction is that that every statute is prima facie prospective, unless it is expressly or by necessary implication made to have a retrospective operation“; Cites insolvency proceedings as “continuous proceedings connected like rings in a chain”, appreciates SC’s observation in one of the judgments that “once a game is started in a playground, it is unfair to alter the rule of the game once started, till it finishes. So one must not be allowed to change rules of the game in mid so as to get a desired result”; Thus refers to various provisions under the IBC, including Sec. 5, 7, 9, 10, 31 and 33 to demonstrate that insolvency proceedings entail a continuous process; Lastly records its satisfaction, for granting approval to the resolution plan, thus directs that the moratorium against the Corporate Debtor would henceforth cease to have effect:Mumbai NCLT
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