Resolution Professional has to confirm that Resolution Plan does not violate any provisions of law: NCLT

The Chandigarh Bench of the National Company Law Tribunal (NCLT) on Monday reiterated that a Resolution Professional is required to ensure that a Resolution Plan does not violate any existing provisions of law [Phoenix ARC Private Limited v. GPI Textiles Limited]..Referring to the National Company Appellate Tribunal (NCLAT) judgment in Canara Bank v. Ms Mamta Binani and Others, the Bench of Harnam Singh Thakur and Subrata Kumar Dash held, “A Resolution Professional is not required to take any decision, but he is to confirm that the Resolution Plan does not violate any of the provisions of Law for the time being in force (including Section 29A of the Code).”.The Tribunal was hearing an application challenging the approval of a Resolution Plan on the ground that the same was barred under Section 29A(f) of the Insolvency and Bankruptcy Code, 2016 (the Code).As per this provision, a person is not permitted to be a resolution applicant if he is prohibited by the Securities and Exchange Board of India (SEBI) from trading in securities or accessing the securities markets..The unsuccessful resolution applicant in this case pointed out that the successful resolution applicant (M/s Aggarsain Spinners Limited and Ramesh Kumar) was barred by SEBI from accessing the securities market for a period of 10 years, due to non-compliance of a SEBI circular. In addition, it was submitted that the Resolution Applicant at the time of filing the Resolution Plan filed a false affidavit stating his compliance with Section 29A of the Code. The Resolution Applicant claimed that he came to know about the SEBI notification from State Bank of India (SBI) only in December 2020, when the proposal for raising funds was submitted..The Bench held the Resolution Professional responsible for not diligently verifying the eligibility of the Resolution Applicant in question. It held,"It means that the said information was in public domain and it was incumbent upon the Resolution Professional before submitting the resolution plan to the committee of creditors that a Resolution Applicant was eligible under Section 29A(f) of the Code...If SBI has accessed this information from the BSE website, then certainly Resolution Professional could have also done so, if acted diligently. In these circumstances, it can be safely concluded that Resolution Professional has failed to discharge its duties diligently about verifying the eligibility of Resolution Applicant.".Another question before the Bench was whether the matter should be referred back to the Committee of Creditors (CoC) for determining the question of eligibility or whether the NCLT could decide the eligibility of the Resolution Applicant and reject the Resolution Plan submitted by the Resolution Applicant. Referring to a decision of the NCLAT, the Bench held,"...this Bench is competent to decide issue of ineligibility of Resolution Applicant at the time of submitting the Resolution Plan under Section 29A(f) of the Code as it has not been decided by the Committee of Creditors when the Resolution Plan was put before it by the Resolution Professional for approval."In order to avoid the liquidation of the corporate debtor, the Bench ordered that the period of the Corporate Insolvency Resolution Process (CIRP) be extended by 90 days for exploring the possibility of resolution of the corporate debtor. It thus referred the matter back to the CoC, which was directed to make another attempt for consideration of other resolution plans in accordance with law..Advocates Aalok Jagga, Pallavi Singh and APS Madaan appeared for the applicant. Advocates Atul Sood, Abhishek Anand, and Viren Sharma appeared for the respondents..[Read the order]