Prohibition of IBC when the company is undergoing liquidation under the auspices of IBC.

Last updated: 09 April 2021

Save Share

Quick Summary

The Supreme Court has clarified that individuals ineligible to submit a resolution plan under Section 29A of the Insolvency and Bankruptcy Code (IBC), 2016, are also prohibited from proposing a compromise or arrangement scheme under Section 230 of the Companies Act, 2013. This ruling specifically addresses situations where a company is undergoing liquidation under the IBC.

Court :
Supreme Court of India

Brief :
By its judgment dated 24 October 2019, the National Company Law Appellate Tribunal held that a person who is ineligible under Section 29A of the Insolvency Bankruptcy Code, 2016 to submit a resolution plan, is also barred from proposing a scheme of compromise and arrangement under Section 230 of the Companies Act, 2013.

Citation :
Civil Appeal No. 9664 of 2019

IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE/ORIGINAL JURISDICTION

Civil Appeal No. 9664 of 2019

Arun Kumar Jagatramka .... Appellant

Versus

Jindal Steel and Power Ltd. & Anr. .... Respondents

With
Writ Petition (C) No. 269 of 2020
And With
Civil Appeal No. 2719 of 2020

J U D G M E N T

Dr Dhananjaya Y Chandrachud, J

This judgment has been divided into the following sections to facilitate analysis:

A Factual Background
A.1 Civil Appeal 9664 of 2019
A.2 Civil Appeal 2719 of 2020
A.3 Liquidation Process Regulations, 2016
A.4 Article 32 Petition

B Issues

C Submissions

D Analysis of the Legal Framework
D.1 Ineligibility during the resolution process and liquidation
D.2 Interplay : IBC liquidation and Section 230 of the Act of 2013
D.3 The ‘Clean Slate’
D.4 Constitutional Validity of Regulation 2B - Liquidation Process
Regulations

E Epilogue

F Conclusion

A Factual Background
A.1 Civil Appeal 9664 of 20191

1 By its judgment dated 24 October 2019, the National Company Law Appellate Tribunal held that a person who is ineligible under Section 29A of the Insolvency Bankruptcy Code, 2016 to submit a resolution plan, is also barred from proposing a scheme of compromise and arrangement under Section 230 of the Companies Act, 2013. The judgment was rendered in an appeal filed by Jindal Steel and Power Limited, an unsecured creditor of the corporate debtor, Gujarat NRE Coke Limited. The appeal was preferred against an order passed by the National Company Law Tribunal in an application9 under Sections 230 to 232 of the Act of 2013, preferred by Mr Arun Kumar Jagatramka, who is a promoter of GNCL. The NCLT had allowed the application and issued directions for convening a meeting of the shareholders and creditors. In its decision dated 24 October 2019, the NCLAT reversed this decision and allowed the appeal by JSPL. The decision of the NCLAT dated 24 October 2019 is challenged in the appeal before this Court.

To know more in details find the attachment file

FAQ :

The judgement clarifies whether a person barred from submitting a resolution plan under Section 29A of the IBC can still propose a scheme of compromise and arrangement under Section 230 of the Companies Act, 2013, especially when the company is in liquidation.

The appeal involved Arun Kumar Jagatramka as the appellant and Jindal Steel and Power Ltd. & Anr. as respondents. It concerned a ruling by the National Company Law Appellate Tribunal (NCLAT).

The NCLAT held that a person ineligible under Section 29A of the IBC to submit a resolution plan is also barred from proposing a scheme under Section 230 of the Companies Act, 2013.

Yes, the judgement specifically addresses the interplay between IBC liquidation and Section 230 of the Companies Act, 2013, confirming the prohibition for ineligible persons.