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

Last updated: 09 April 2021

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.

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