R.F. Nariman, J. - (1.) The facts of the present case revolve around the ineligibility of resolution applicants to submit resolution plans after the introduction of Section 29A into the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as "the Code"), with effect from 23.11.2017.
(2.) On 2.8.2017, the Adjudicating Authority, being the NCLT, Ahmedabad Bench, passed an order under Section 7 of the Code at the behest of financial creditors, being the State Bank of India and the Standard Chartered Bank, admitting a petition filed under the Code for financial debts owed to them by the corporate debtor Essar Steel India Limited (hereinafter referred to as "ESIL"), in the sum of roughly Rs.45,000,00,00,000 (Rupees Forty Five Thousand Crores). Shri Satish Kumar Gupta was appointed as the Interim Resolution Professional and confirmed as such on 4.9.2017. Consequently, the Resolution Professional published an advertisement dated 6.10.2017, seeking expression of interest from potential resolution applicants who wished to submit resolution plans for the revival of ESIL. In terms of the advertisement, the last date for submission of an expression of interest was 23.10.2017. Pursuant to this advertisement, one 'ArcelorMittal India Private Limited' (hereinafter referred to as "AMIPL") submitted an expression of interest on 11.10.2017. An entity called Numetal Limited (hereinafter referred to as "Numetal"), also submitted an expression of interest on 20.10.2017. On 24.12.2017, the Resolution Professional published a 'request for proposal', in which it was stated that the last date for submission of resolution plans would be 29.1.2018. On a request made by the Committee of Creditors, the NCLT extended the duration of the corporate insolvency resolution process by 90 days beyond the initial period of 180 days, i.e., upto 29.4.2018. The Resolution Professional therefore issued the first addendum to the request for proposal, extending the date for submission of resolution plans to 12.2.2018. Given this, both AMIPL and Numetal submitted their resolution plans on this date. On 20.3.2018, apprehending that the Resolution Professional would recommend that it be declared ineligible, Numetal filed I.A. No. 98 of 2018 before the NCLT inter alia seeking that it be declared eligible as a resolution applicant. On 23.3.2018, however, the Resolution Professional found both AMIPL and Numetal to be ineligible under Section 29A. Insofar as AMIPL is concerned, the Resolution Professional found thus: "2. Please note that during the course of the evaluation of the Resolution Plan, I became aware of the fact that ArcelorMittal Netherlands B.V. (AM Netherlands) (which is mentioned as a 'connected person' of AM India in the Resolution Plan) has been disclosed as the 'promoter' of Uttam Galva Steels Limited (Uttam Galva) pursuant to which my Advisor had requested certain clarifications from AM India on 26 February 2018 (Request for Clarification 1) and on 14 March 2018 (Request for Clarification 2). Further to the responses received from AM India on 28 February 2018 and 17 March 2018 (collectively the AM India Responses) on the aforementioned requests for clarifications, I understand that: 2.1. AM Netherlands had acquired 29.05% of the shareholding in Uttam Galva in 2009 and has since been classified as a promoter of Uttam Galva; 2.2. AM Netherlands had entered into a 'co-promoter' agreement dated 4 September 2009 with the other promoters of Uttam Galva (Co-Promoter Agreement) under which AM Netherlands had various rights (including certain rights which can be considered as participative in nature and not merely protective); 2.3. Uttam Galva's account was classified as a 'nonperforming asset' (NPA) on 31 March 2016 by Canara Bank and Punjab National Bank (which classification has continued for more 1 year till 02 August 2017); 2.4. AM Netherlands has sold its shareholding in Uttam Galva to the other promoters of Uttam Galva on 7 February 2018; and 2.5. AM Netherlands has applied to the National Stock Exchange Limited and the BSE Limited, each on 8 February 2018 for declassification as a 'promoter' of Uttam Galva under Regulation 31A(2) of the Securities and Exchange Board of India 3. Further, as on the Plan Submission Date, AM Netherlands (had not obtained the Stock Exchange Approvals relating to declassification as a promoter of Uttam Galva and) continued to be classified as a promoter of Uttam Galva. 4. In light of the above, AM India is ineligible under the provisions of Section 29A(c) of the IBC and pursuant to paragraph 4.11.2(a) of the RPP, the Resolution Plan is hereby rejected and will not be placed before the Committee of Creditors."
(3.) Similarly, holding Numetal to be ineligible, the Resolution Professional, on the same date, found: "2.1. as on the date of submission of its expression of interest (EOI) on 20 October 2017 by Numetal, it relied on Essar Communications Limited (ECL), one of its shareholders to comply with the eligibility requirement relating to its 'tangible net worth' (TNW) (as stipulated in the section titled 'Eligibility Criteria' in the EOI); 2.2. as on the Plan Submission Date, Numetal relied on Crinium Bay, its shareholder to comply with the eligibility requirement relating to its TNW (as stipulated in Section 6.7 of the Resolution Plan); 2.3. Numetal was incorporated 7 days before submission of the EOI; and 2.4. Numetal is a newly incorporated joint venture between Aurora Enterprises Limited, Crinium Bay, Indo International Limited and Tyazhpromexport. 3. Since Numetal has at all stages relied on its shareholders to comply with the eligibility requirements relating to submission of a resolution plan in respect of ESIL, for the purposes of ensuring compliance with Section 29A of the Insolvency and Bankruptcy Code, 2016 (IBC), I have considered each of the shareholders of Numetal as joint venture partners to be acting jointly for the purposes of submission of the Resolution Plan. Whilst considering the eligibility of the shareholders of Numetal, since Aurora Enterprises Limited (AEL) is held completely by Rewant Ruia (through various companies and a trust), I have considered Rewant Ruia, Crinium Bay, Indo International Limited and Tyazhpromexport for scrutiny under Section 29A of the IBC. 4. Further, pursuant to Regulation 2(q) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (SAST Regulations), a person is deemed to acting in concert with amongst others, his (or her) 'immediate relatives', which term (as defined under Regulation 2(1) of the SAST Regulations) includes the father of such person. Therefore, in relation to the Resolution Plan in respect of ESIL (which contemplates the acquisition of ESIL by Numetal by way of a merger of ESIL with a wholly owned subsidiary of Numetal), Rewant Ruia is deemed to be acting in concert with his father Ravi Ruia. 5. Further, as on the Plan Submission Date: (a)* Ravi Ruia (who Rewant Ruia is deemed to be acting in concert with) was the promoter of ESIL whose account was classified as an NPA for more than 1 year, prior to the commencement of corporate-insolvency resolution process (CIRP) of ESIL on 2 August 2017; and (b) Ravi Ruia (who Rewant Ruia is deemed to be acting in concert with) has executed a guarantee in favour of SBI (for itself and a consortium of lenders) and the CIRP application filed by SBI has been admitted by the National Company Law Tribunal on 2 August 2017. 6. In light of the above, Rewant Ruia (who is acting jointly with the other shareholders of Numetal for the purposes of submission of the Resolution Plan) is ineligible under Section 29A of the IBC, specifically paragraphs (c) and (h) and accordingly, as on the Plan Submission Date, Numetal (which is nothing but an incorporated joint venture investment vehicle through which its shareholders are submitting the Resolution Plan) was not eligible under Section 29A of the IBC. 7. Accordingly and for the reasons set out in paragraphs 5 and 6 above, please note that pursuant to paragraph 4.11.2(a) of the RFP, the Resolution Plan is hereby rejected and will not be placed before the Committee of Creditors.";