ArcelorMittal India Pvt. Ltd. v. Satish Kumar Gupta (2018)

Section 29A is the gate through which a resolution applicant must pass, and it is written in language — connected person, acting jointly or in concert, control — that invites evasion through corporate structures. ArcelorMittal is the decision that tells you how to read it: as a de facto provision, not a de jure one. The same judgment fixes three further points that recur throughout Unit 2: the mandatory character of the s. 12 timeline, the limits of the resolution professional's role under s. 30(2)(e), and the reach of the non obstante clause in s. 60(5).

The appeals arose out of a corporate insolvency resolution process in which the eligibility of competing resolution applicants under s. 29A was disputed. The contest was whether persons standing behind an applicant, through holdings and arrangements rather than through direct ownership, were caught by the disqualification. The Court's answer required it to decide how the section is to be construed before any question of eligibility on the facts could be reached.

• Section 29A is a de facto as opposed to a de jure position of the persons mentioned in it. It is a typical see-through provision, so that one can see the persons who are actually in control, whether jointly or in concert. A purposeful and contextual interpretation of s. 29A is imperative, in order to pierce the corporate veil and find out who are the real individuals or entities acting jointly or in concert for the submission of a resolution plan.
• Timelines. Section 12, construed in the light of the object sought to be achieved by the Code and in the light of the consequence provided by s. 33, makes it clear that the periods mentioned are mandatory and cannot be extended. The model timeline in the process regulations is of utmost importance and is to be followed as closely as possible. Section 64 reinforces that timelines are to be adhered to.
• Role of the resolution professional. Section 30(2)(e) does not empower the resolution professional to decide whether a resolution plan contravenes the provisions of law. It is the committee of creditors which will approve or disapprove a resolution plan, given the statutory parameters of s. 30.
• No vested right in an applicant. There is no vested right or fundamental right in a resolution applicant to have its resolution plan approved.
• Jurisdiction. The non obstante clause in s. 60(5) is designed to ensure that the Tribunal alone has jurisdiction over applications and proceedings by or against a corporate debtor covered by the Code, making it clear that no other forum has jurisdiction to entertain or dispose of such applications or proceedings.

The interpretation of s. 29A follows from the mischief it addresses. The purpose of the disqualification is to keep out of the bidding those whose conduct or connection makes it inappropriate that they should take back the business. A person intent on evading it will not hold the disqualifying interest in his own name; he will hold it through a chain. If the section were read de jure, by asking only who is the registered owner, it would be defeated in the first week of its life. Reading it de facto, as a see-through provision, matches the language of control and acting jointly or in concert to its object, and licenses the Court to look behind the corporate form.

The timeline holding rests on the consequence provision. Section 33 requires liquidation when the process is not completed in time. A period whose expiry carries a mandatory consequence cannot be directory; the consequence is what makes it mandatory.

The holding on s. 30(2)(e) reflects the Code's allocation of functions, which is the organising idea of the whole unit. The professional administers and certifies; the committee exercises commercial judgment; the Tribunal applies the statutory checklist. A professional who ruled on legality would be exercising an adjudicatory power the Code did not give him.

1. Any s. 29A problem should open with the de facto / see-through characterisation, then apply purposeful and contextual interpretation to the facts, then identify the real controller.
2. On timelines, link s. 12 to s. 33: the mandatory character comes from the consequence.
3. On the resolution professional, use s. 30(2)(e) as the boundary marker, and pair it with the proposition that the professional's powers are administrative.
4. On jurisdiction, cite the s. 60(5) holding, but note that it has been read down in later decisions which confine the Tribunal to disputes arising from the insolvency itself. See the cases on the institutional framework in Unit 4.
5. What it does not decide. It does not decide that every promoter is disqualified; the small-enterprise relaxation in s. 240A takes clauses (c) and (h) of s. 29A out of the way for micro, small and medium enterprises.

Several of the provisions discussed have since been amended. Section 30(2) has been restructured, with a new clause dealing separately with payment to financial creditors who do not vote in favour of the plan, and s. 30(4) now requires the committee of creditors to record reasons for its approval. Section 31 has been given a new proviso permitting the Adjudicating Authority, on the resolution professional's application with the approval of sixty-six per cent. of the voting share, to approve implementation of the plan first and the manner of distribution afterwards, and a thirty-day outer limit for orders under s. 31. Section 61 now requires the Appellate Tribunal to dispose of an appeal within three months, and a new s. 64A imposes a penalty of not less than one lakh rupees, extending to two crore rupees, for initiating a frivolous or vexatious proceeding under Part II.