Arcelormittal India Private Limited vs Satish Kumar Gupta & Ors.

Insolvency and Bankruptcy Code, 2016: s.29A(c) – It is important for the competent authority to see that persons, who are otherwise ineligible and hit by sub-clause (c), do not wriggle out of the proviso to sub-clause (c) by other means, so as to avoid the consequences of the proviso – For this purpose, despite the fact that the relevant time for the ineligibility under sub-clause (c) to attach is the time of submission of the resolution plan, antecedent facts reasonably proximate to this point of time can always be seen, to determine whether the persons referred to in s.29A are, in substance, seeking to avoid the consequences of the proviso to subclause (c) before submitting a resolution plan. Insolvency and Bankruptcy Code, 2016: s.29A – Point of time at which the disqualification in sub-clause (c) of s.29A will attach – Held: The stage of ineligibility attaches when the resolution plan is submitted by a resolution applicant – The date of commencement of the corporate insolvency resolution process is only relevant for the purpose of calculating whether one year has lapsed from the date of classification of a person as a non-performing asset. Insolvency and Bankruptcy Code, 2016: s.3(37) – By s.3(37) of the Code, words and expressions used but not defined in the Code but defined inter alia by the SEBI Act, 1992, and the Companies Act, 2013, shall have the meanings respectively assigned to them in those Acts – SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 – s.2(1)(q).

Doctrines/Principles: Doctrine of lifting veil – Held: The doctrine is applicable even to group companies, so that one is able to look at the economic entity of the group as a whole.

Words and phrases: Expression “acting jointly” – Meaning of in the context of s.29A of Insolvency and Bankruptcy Code, 2016. Disposing of the appeals, the Court

HELD: 1.1 Where a statute itself lifts the corporate veil, or where protection of public interest is of paramount importance, or where a company has been formed to evade obligations imposed by the law, the court will disregard the corporate veil. Further, this principle is applied even to group companies, so that one is able to look at the economic entity of the group as a whole. [Para 34] [427-F-G]

Faqir Chand Gulati v. Uppal Agencies Pvt. Ltd. & Anr. (2008) 10 SCC 345 : [2008] 10 SCR 697; Laurel

Energetics Private Limited v. Securities and Exchange Board of India, (2017) 8 SCC 541 : [2017] 5 SCR 1005 – held inapplicable.

1.2 The expression “acting jointly” in the opening sentence of Section 29A cannot be confused with “joint venture agreements”. All that is to be seen by the expression “acting jointly” is whether certain persons have got together and are acting “jointly” in the sense of acting together. If this is made out on the facts, no super added element of “joint venture” as is understood in law is to be seen. The other important phrase is “in concert”. By Section 3(37) of the Code, words and expressions used but not defined in the Code but defined inter alia by the SEBI Act, 1992, and the Companies Act, 2013, shall have the meanings respectively assigned to them in those Acts. In exercise of powers conferred by Sections 11 and 30 of the SEBI Act, 1992, the 2011 Takeover Regulations have been promulgated by SEBI. By Regulation 2(1)(q) of the 2011 Takeover Regulations, “persons acting in concert” is defined. Under sub-clause (2) of clause (q), a deeming fiction is enacted, by which a presumption is raised in the categories mentioned, that a person falling within one category is deemed to be acting in concert with another person mentioned in the same category, unless the contrary is established. The corporate veil is not merely torn but is left in tatters by subclauses (i) to (iv) of Regulation 2(1)(q)(2). Sub-clause (v) covers “immediate relatives” i.e., father and son, brothers, etc. Explanation to Regulation 2(1)(q)(2) defines “associate”, which subsumes not merely immediate relatives but other forms in which a person can be associated with another - which includes the form of trust, partnership firm and HUF. Wherever persons act jointly or in concert with the “person” who submits a resolution plan, all such persons are covered by Section 29A. [Paras 35, 38, 39] [427G-H; 428-A-C; 431-E; 433-D-F]

Technip SA v. SMS Holding (Pvt.) Ltd. & Ors. (2005) 5 SCC 465 : [2005] 1 Suppl. SCR 223; M/s. Daiichi Sankyo Company Ltd. v. Jayaram Chigurupati & Ors. (2010) 7 SCC 449 : [2010] 8 SCR 251 – relied on.

2.1 The opening words of Section 29A state: “a person shall not be eligible to submit a resolution plan…”. It is therefore clear that the stage of ineligibility attaches when the resolution plan is submitted by a resolution applicant. The date of commencement of the corporate insolvency resolution process is only relevant for the purpose of calculating whether one year has lapsed from the date of classification of a person as a nonperforming asset. Further, the expression used is “has”, is in praesenti. This is to be contrasted with the expression “has been”, which is used in sub-clauses (d) and (g), which refers to an anterior point of time. [Para 43] [437-D-F]

2.2 The ingredients of sub-clause (c) are that, the ineligibility to submit a resolution plan attaches if any person, as is referred to in the opening lines of Section 29A, either itself has an account, or is a promoter of, or in the management or control of, a corporate debtor which has an account, which account has been classified as a non-performing asset, for a period of at least one year from the date of such classification till the date of commencement of the corporate insolvency resolution process. For the purpose of applying sub-clause (c), any one of three things, which are disjunctive, needs to be established. The expression “management” would refer to the de jure management of a corporate debtor. The de jure management of a corporate debtor would ordinarily vest in a Board of Directors, and would include, in accord with the definitions of “manager”, “managing director” and “officer” in Sections 2(53), 2(54) and 2(59) respectively of the Companies Act, 2013, the persons mentioned therein. The expression “control” is defined in Section 2(27) of the Companies Act, 2013. The expression “control” is defined in two parts. The first part refers to de jure control, which includes the right to appoint a majority of the directors of a company. The second part refers to de facto control. So long as a person or persons acting in concert, directly or indirectly, can positively influence, in any manner, management or policy decisions, they could be said to be “in control”. A management decision is a decision to be taken as to how the corporate body is to be run in its day to day affairs. A policy decision would be a decision that would be beyond running day to day affairs, i.e., long term decisions. So long as the management or policy decisions can be, or are in fact, taken by virtue of shareholding, management rights, shareholders agreements, voting agreements or otherwise, control can be said to exist. Thus, the expression “control”, in Section 29A(c), denotes only positive control, which means that the mere power to block special resolutions of a company cannot amount to control. “Control” here, as contrasted with “management”, means de facto control of actual management or policy decisions that can be or are in fact taken. [Para 44-48] [438-A-E]

M/s Subhkam Ventures (I) Private Limited v. The Securities and Exchange Board of India (Appeal No. 8 of 2009 decided on 15.1.2010) – relied on.

2.3 Section 29A(c) speaks of a corporate debtor “under the management or control of such person”. The expression “under” would seem to suggest positive or proactive control, as opposed to mere negative or reactive control. This becomes even clearer when sub-clause (g) of Section 29A is read, wherein the expression used is “in the management or control of a corporate debtor”. Under sub-clause (g), only a person who is in proactive or positive control of a corporate debtor can take the proactive decisions mentioned in sub-clause (g), such as, entering into preferential, undervalued, extortionate credit, or fraudulent transactions. It is thus clear that in the expression “management or control”, the two words take colour from each other, in which case the principle of noscitur a sociis must also be held to apply. Thus viewed, what is referred to in sub-clauses (c) and (g) is de jure or de facto proactive or positive control, and not mere negative control which may flow from an expansive reading of the definition of the word “control” contained in Section 2(27) of the Companies Act, 2013, which is inclusive and not exhaustive in nature. [Para 50] [440-F-H; 441-A]

Chintalapati Srinivasa Raju v. Securities and Exchange Board of India, (2018) 7 SCC 443; Securities and Exchange Board of India v. Kishore R. Ajmera (2016)

6 SCC 368 : [2016] 1 SCR 1118 – relied on.

2.4 Sub-clause (a) refers to a de jure position, namely, where a person is expressly named in a prospectus or identified by the company in an annual return as a promoter. Sub-clauses (b) and

(c) speak of a de facto position. Under sub-clause (b), so long as a person has “control” over the affairs of a company, directly or indirectly, in any manner, he could be said to be a promoter of such company. Under sub-clause (c), such person need not be a member of the Board of Directors of a company, but can be a person who in fact advises, directs or instructs the Board to act. Under the proviso, only a person who acts in a professional capacity is excluded from the talons of sub-clause (c). Any person who wishes to submit a resolution plan, if he or it does so acting jointly, or in concert with other persons, which person or other persons happen to either manage or control or be promoters of a corporate debtor, who is classified as a non-performing asset and whose debts have not been paid off for a period of at least one year before commencement of the corporate insolvency resolution process, becomes ineligible to submit a resolution plan. The first proviso to sub-clause (c) makes it clear that the ineligibility can only be removed if the person submitting a resolution plan makes payment of all overdue amounts with interest thereon and charges relating to the non-performing asset in question before submission of a resolution plan. Any person who wishes to submit a resolution plan acting jointly or in concert with other persons, any of whom may either manage, control or be a promoter of a corporate debtor classified as a non-performing asset in the prescribed period must first pay off the debt of the said corporate debtor classified as a non-performing asset in order to become eligible under Section 29A(c). [Paras 53, 54] [442-A-G]

3.1 If a person has been a promoter, or in the management, or control, of a corporate debtor in which a preferential transaction, undervalued transaction, extortionate credit transaction or fraudulent transaction has taken place, and in respect of which an order has been made by the Adjudicating Authority under the Code, such person is ineligible to present a resolution plan under Section 29A(g). This ineligibility cannot be cured by paying off the debts of the corporate debtor. Therefore, it is only such persons who do not fall foul of subclause (g), who are eligible to submit resolution plans under subclause (c) of Section 29A, if they happen to be persons who were in the erstwhile management or control of the corporate debtor. [Para 56] [444-B-D]

3.2 It is important for the competent authority to see that persons, who are otherwise ineligible and hit by sub-clause (c), do not wriggle out of the proviso to sub-clause (c) by other means, so as to avoid the consequences of the proviso. For this purpose, despite the fact that the relevant time for the ineligibility under sub-clause (c) to attach is the time of submission of the resolution plan, antecedent facts reasonably proximate to this point of time can always be seen, to determine whether the persons referred to in Section 29A are, in substance, seeking to avoid the consequences of the proviso to sub-clause (c) before submitting a resolution plan. If it is shown, on facts, that, at a reasonably proximate point of time before the submission of the resolution plan, the affairs of the persons referred to in Section 29A are so arranged, as to avoid paying off the debts of the non-performing asset concerned, such persons must be held to be ineligible to submit a resolution plan, or otherwise both the purpose of the first proviso to sub-section (c) of Section 29A, as well as the larger objective sought to be achieved by the said sub-clause in public interest, will be defeated. [Para 57] [446-E-G] Madras Petrochem Ltd. and Anr. v. Board for Industrial and Financial Reconstruction and Ors., (2016) 4 SCC 1: [2016] 11 SCR 419; Innoventive Industries Ltd. v. ICICI Bank & Anr. (2018) 1 SCC 407 : [2017] 8

SCR 33; E.V. Mathai v. Subordinate Judge, Kottayam & Ors., (1969) 2 SCC 194 : [1970] 1 SCR 345 – relied on.

4.1 How the corporate insolvency resolution process is to work from the inception. Before admission of an application under Section 7 by a financial creditor, the Adjudicating Authority is, under Section 7(4), to first ascertain the existence of a default within 14 days of receipt of the application, as specified in Section 7(4). Upon satisfaction that such default has occurred, it may then admit such application, subject to rectification of defects, which the proviso in Section 7(5) says must be done within 7 days of receipt of such notice from the Adjudicating Authority by the applicant. The time frame within which ascertainment of default is to take place, as well as the time within which the defect is to be rectified are directory in nature, the reason being that the stage of these provisions is before admission of the application. The corporate insolvency resolution process commences from the date of admission of the application vide Section 7(6). Section 7(7) makes it incumbent upon the Adjudicating Authority to communicate the order accepting or rejecting the application to the financial creditor and the corporate debtor within a period of

7 days of such admission or rejection. [Para 69] [462-E-H] Surendra Trading Co. v. Juggilal Kamlapat Jute Mills Company Ltd. & Ors. (2017) 16 SCC 143 – relied on.

4.2 The time limit for completion of the insolvency resolution process is laid down in Section 12. A period of 180 days from the date of admission of the application is given by Section 12(1). This is extendable by a maximum period of 90 days only if the Committee of Creditors, by a vote of 66%, votes to extend the said period, and only if the Adjudicating Authority is satisfied that such process cannot be completed within 180 days. The authority may then, by order, extend the duration of such process by a maximum period of 90 days. What is also of importance is the proviso to Section 12(3) which states that any extension of the period under Section 12 cannot be granted more than once. This has to be read with the third proviso to Section 30(4), which states that the maximum period of 30 days mentioned in the second proviso is allowable as the only exception to the extension of the aforesaid period not being granted more than once. Section 33 makes it clear that when either of these two contingencies occurs, the corporate debtor is required to be liquidated in the manner laid down in Chapter III. 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 Section 33, therefore, makes it clear that the periods previously mentioned are mandatory and cannot be extended. In fact, even the literal language of Section 12(1) makes it clear that the provision must read as being mandatory. The expression “shall be completed” is used. Further, sub-section (3) makes it clear that the duration of 180 days may be extended further “but not exceeding 90 days”, making it clear that a maximum of 270 days is laid down statutorily. Also, the proviso to Section 12 makes it clear that the extension “shall not be granted more than once”. [Paras 70, 71, 72] [463-A-C, E-G; 464-A]

4.3 Regulation 40A of the CIRP Regulations presents a model timeline of the corporate insolvency resolution process, on the basis that the time available is 180 days. It is of utmost importance for all authorities concerned to follow this model timeline as closely as possible. [Para 74] [466-F-G; 470-F]

4.4 It is settled law that a statute is designed to be workable, and the interpretation thereof should be designed to make it so workable. [Para 75] [470-G-H]

Commissioner of Income Tax, Delhi v. S. Teja Singh [1959] Supp. 1 SCR 394 – relied on.

4.5 Given the timeline, and given the fact that a resolution applicant has no vested right that his resolution plan be considered, it is clear that no challenge can be preferred to the Adjudicating Authority at this stage. A writ petition under Article

226 filed before a High Court would also be turned down on the ground that no right, much less a fundamental right, is affected at this stage. This is also made clear by the first proviso to Section 30(4), whereby a Resolution Professional may only invite fresh resolution plans if no other resolution plan has passed muster. However, a Resolution Professional is only to “examine” and “confirm” that each resolution plan conforms to what is provided by Section 30(2). The Resolution Professional is required to examine that the resolution plan submitted by various applicants is complete in all respects, before submitting it to the Committee of Creditors. The Resolution Professional is not required to take any decision, but merely to ensure that the resolution plans submitted are complete in all respects before they are placed before the Committee of Creditors, who may or may not approve it. The fact that the Resolution Professional is also to confirm that a resolution plan does not contravene any of the provisions of law for the time-being in force, including Section 29A of the Code, only means that his prima facie opinion is to be given to the Committee of Creditors that a law has or has not been contravened. Section 30(2)(e) does not empower the Resolution Professional to “decide” whether the resolution plan does or does not contravene the provisions of law. Thus, the importance of the Resolution Professional is to ensure that a resolution plan is complete in all respects, and to conduct a due diligence in order to report to the Committee of Creditors whether or not it is in order. Even though it is not necessary for the Resolution Professional to give reasons while submitting a resolution plan to the Committee of Creditors, it would be in the fitness of things if he appends the due diligence report carried out by him with respect to each of the resolution plans under consideration, and to state briefly as to why it does or does not conform to the law. [Paras 76-78] [471-F-H; 472-A-E; 473-D-E]

5.1 A Resolution Professional has presented a resolution plan to the Committee of Creditors for its approval, but the Committee of Creditors does not approve such plan after considering its feasibility and viability, as the requisite vote of not less than 66% of the voting share of the financial creditors is not obtained. The first proviso to Section 30(4) furnishes the answer, which is that all that can happen at this stage is to require the Resolution Professional to invite a fresh resolution plan within the time limits specified where no other resolution plan is available with him. It is clear that at this stage again no application before the Adjudicating Authority could be entertained as there is no vested right or fundamental right in the resolution applicant to have its resolution plan approved, and as no adjudication has yet taken place. It is the Committee of Creditors which will approve or disapprove a resolution plan, given the statutory parameters of Section 30. [Paras 79, 80] [473-E-H; 474-A]

5.2 Regulation 39 of CIRP Regulations shows that the disapproval of the Committee of Creditors on the ground that the resolution plan violates the provisions of any law, including the ground that a resolution plan is ineligible under Section 29A, is not final. The Adjudicating Authority, acting quasi-judicially, can determine whether the resolution plan is violative of the provisions of any law, including Section 29A of the Code, after hearing arguments from the resolution applicant as well as the Committee of Creditors, after which an appeal can be preferred from the decision of the Adjudicating Authority to the Appellate Authority under Section 61. If, on the other hand, a resolution plan has been approved by the Committee of Creditors, and has passed muster before the Adjudicating Authority, this determination can be challenged before the Appellate Authority under Section 61, and may further be challenged before the Supreme Court under Section 62, if there is a question of law arising out of such order, within the time specified in Section 62. Section 64 also makes it clear that the timelines that are to be adhered to by the NCLT and NCLAT are of great importance, and that reasons must be recorded by either the NCLT or NCLAT if the matter is not disposed of within the time limit specified. Section 60(5), when it speaks of the NCLT having jurisdiction to entertain or dispose of any application or proceeding by or against the corporate debtor or corporate person, does not invest the NCLT with the jurisdiction to interfere at an applicant’s behest at a stage before the quasi-judicial determination made by the Adjudicating Authority. [Paras 80, 81] [474-C-G]

Lachmeshwar Prasad Shukul & Ors. v. Keshwar Lal Chaudhuri & Ors. AIR 1941 FC 5; Jang Singh v. Brijlal & Ors. [1964] 2 SCR 146; A.S. Antulay v. R.S. Nayak & Ors. [1988] Supp. 1 SCR – relied on.

6.1 Facts of this case: Numetal was incorporated in Mauritius on 13.10.2017, expressly for the purpose of submission of a resolution plan qua the corporate debtor, i.e., ESIL. Two other companies, viz., AHL and AEL, were also incorporated on the same day in Mauritius. The son of the promoter of ESIL held the entire share capital of AHL, which in turn held the entire shareholding of AEL, which in turn held the entire share capital of Numetal. At this stage there can be no doubt whatsoever that the son of the promoter, would be deemed to be a person acting in concert with the corporate debtor, being covered by Regulation 2(1)(q)(v) of the 2011 Takeover Regulations. On 18.10.2017, AEL transferred its shareholding of 26.1% in Numetal to a group company, viz., ECL. This group company was ultimately owned by ‘Virgo Trust’ and ‘Triton Trust’, the beneficiaries of which are companies owned by the promoter of ESIL, his brother and their immediate family members. The very next day, the son of promoter of ESIL settled an irrevocable and discretionary trust, viz., the ‘Crescent Trust’, and settled the entire share capital of AHL into the Trust, at a par value of USD 10,000. The beneficiaries of this Trust were general charities, as well as entitles owned by the brother of promoter of the corporate debtor, and entities owned by son of promoter. [Paras 84-86] [476-C-F; 477-C-D]

6.2 On 20.11.2017, the son of the promoter of ESIL settled ‘Prisma Trust’, another irrevocable and discretionary trust, whose beneficiaries are “general charities” and one ‘Solis Enterprises Limited’, a company incorporated in Bermuda, whose share capital is held by the son of promoter of ESIL. Numetal by a response dated 30.3.2018, admitted that while the trust deed relating to Prisma Trust allowed the trustee to benefit any English or Bermuda charity, “no particular charity is named at this stage”. The Trustee of AEL is one ‘Rhone Trustee’, Singapore. The son of promoter of ESIL was the ultimate natural person who held the beneficial interest in AEL through Prisma Trust, through Solis Enterprises Limited. This emerged from Section 6.7 of the resolution plan submitted by Numetal to the Resolution Professional. The Resolution Professional, after looking at this affidavit of Prisma Trust, correctly noted that statements of such a nature would not have been made by a truly independent trustee of a discretionary trust, which demonstrated that the trustee was under the complete control of the son of promoter of ESIL. This in turn indicated that Prisma Trust was one more smokescreen in the chain of control, which would conceal the fact that the actual control over AEL is by none other than the son of the promoter. [Paras 87, 88] [477-D-F; 478--B-C]

6.3 One day later on 22.11.2017, the trustees of the Prisma Trust acquired 100% of the shareholding of AHL for a par value of approximately USD 10,000 from the trustees of the Crescent Trust. On this very date, merely one day before the Ordinance bringing into force Section 29A was promulgated, ECL transferred its shareholding of 26.1% of the share capital of Numetal to Crinium Bay, an indirect wholly owned subsidiary of VTB Bank, whose shares in turn are held by the Russian Government. AEL also transferred shares representing 13.9% of the share capital of Numetal to Crinium Bay, thus making Crinium Bay’s total holding in Numetal 40%. On the same date, AEL also transferred shares representing 25.1% of the share capital of Numetal to Indo, and also transferred shares representing 9.9% of the share capital of Numetal to TPE. These transfers were likely to have taken place between 10.2.2018 and 12.2.2018. At the time of submission of its first Resolution Plan dated 12.2.2018, the shareholding of Numetal was as follows: Crinium Bay: 40% Indo : 25.1% TPE: 9.9% AEL: 25%. As of this date, the son of promoter, who is the ultimate beneficiary in the chain of control of the trusts which in turn controlled AEL, was very much on the scene, holding through AEL 25% of the shareholding of Numetal. [Paras 89-90] [478-D-H]

7.1 One other extremely important fact is that the earnest money in the form of Rs. 500 crores, credited to the account of the corporate debtor, was provided to Numetal by AEL as a shareholder of the resolution applicant, viz. Numetal. This earnest money deposit of Rs.500 crores made by AEL continued to remain with the Resolution Professional till date, despite the fact that, by the time the second resolution plan was submitted by Numetal on 2.4.2018, AEL had exited as a shareholder of Numetal. Under clause 4.4.4 of the request for proposal for submission of resolution plans for ESIL, the earnest money deposit stands to be forfeited if any condition thereof is breached or the qualifications of the potential resolution applicant are found to be untrue. [Para 91] [479-A-C]

7.2 Clause 6.7 of Numetal’s resolution plan stipulated that it satisfied the minimum tangible net worth requirement, as set out under the request for proposal, because Crinium Bay held 40% of the shareholding of Numetal, and that VTB Bank, Crinium Bay’s holding company had sufficient net worth, as on 31.12.2016, to comply with the requirement under the request for proposal. The excerpted portions of Numetal’s resolution plan make it clear that, since Numetal itself was a newly incorporated entity, with no financial or experience credentials of its own, it therefore relied entirely on the credentials of each of its constituent shareholders. This shows that Numetal itself revealed in its resolution plan that its corporate veil should be lifted, for without lifting this veil, none of the parameters of the request for proposal could have been met by Numetal itself. It is thus clear that the four shareholders of Numetal were persons “acting jointly” within the meaning of Section 29A. This being the case, it is clear that the argument that VTB Bank is a “connected person”, being ineligible under sub-clause (j), would have to be rejected, as VTB Bank is itself, through its wholly owned subsidiary of Crinium Bay, a person acting jointly with the three other shareholders of Numetal, and would, therefore, fall within the first part of Section 29A itself. This being so, it cannot be said that VTB Bank is a person “connected to” any one of the persons acting jointly, as it is itself a person acting jointly, and therefore covered by the first part of Section 29A. [Paras 92, 93] [481-C-D; 482-B-D]

7.3 On 29.3.2018, AEL transferred its 25% shareholding in Numetal to the other three constituent shareholders, thereby leaving its shareholding in Numetal as ‘Nil’. In response to the Resolution Professional’s invitation, the second Resolution Plan, therefore, submitted by Numetal on 2.4.2018, did not have AEL as a constituent of Numetal; instead, Crinium Bay continued with 40% of the shareholding of Numetal, with TPE’s holding now augmented to 29.5% and Indo’s to 34.1%. Given the fact that the son of promoter is a person deemed to be acting in concert with his father (who was a promoter of the corporate debtor ESIL), there is no doubt whatsoever that Section 29A(c) would be attracted as on the date of submission of the first resolution plan, viz. 12.2.2018, as AEL was held by Prisma Trust, whose ultimate beneficiary is son of promoter himself. This would show that the NPA declared over a year before the date of commencement of the corporate resolution process of ESIL (i.e. in 2015) would render Numetal ineligible to submit a resolution plan. The only manner in which Numetal could successfully present a resolution plan would be to first pay off the debts of ESIL, as well as those of such other corporate debtors of the Ruia group of companies, which were declared as NPAs prior to the aforesaid period of one year, before submitting its resolution plan. However, if the date of the second resolution plan is to be seen, son of promoter of the corporate debtor ESIL appears to have disappeared from the scene altogether, as the three entities left are stated to be independent entities in the form of two Russian entities and one UAE entity. Viewed on 2.4.2018, therefore, it could not be said that son of promoter of the corporate debtor ESIL had disappeared from the scene altogether, so as to obviate the application of Section 29A(c). This is for two reasons. First, Rs.500 crores that was deposited towards submission of earnest money continued to remain deposited by AEL even post 2.4.2018, showing thereby that son of promoter of the corporate debtor ESIL continued to be present, insofar as Numetal’s second resolution plan was concerned. Further, having regard to the reasonably proximate state of affairs before submission of the resolution plan on 2.4.2018, beginning with Numetal’s initial corporate structure, and continuing with the changes made till date, it is evident that, the object of all the transactions that have taken place after Section 29A came into force on 23.11.2017 was undoubtedly to avoid the application of Section 29A(c), including its proviso. Therefore, whether the first or second resolution plan is taken into account, both would clearly be hit by Section 29A(c), as the looming presence of son of promoter of the corporate debtor ESIL was found all along, from the date of incorporation of Numetal, till the date of submission of the second resolution plan. [Paras 94, 95] [482-E-H; 483-A-E]

8.1 The ultimate shareholder of the resolution applicant, viz. AMIPL, is directly the ultimate shareholder of AMNLBV as well, which is an L.N. Mittal Group Company. When the corporate veil of the various companies is pierced, both AMIPL and AMNLBV are found to be managed and controlled by Shri L.N. Mittal, and are therefore persons deemed to be acting in concert as per Regulation 2(1)(q)(2)(i) of the 2011 Takeover Regulations. That AMNLBV is a promoter of Uttam Galva is clear from the aforementioned facts, being expressly stated as such in Uttam Galva’s annual returns. The reasonably proximate facts prior to the submission of both resolution plans by AMIPL would show that there is no doubt whatsoever that AMNLBV’s shares in Uttam Galva were sold only in order to get out of the ineligibility mentioned by Section 29A(c), and consequently the proviso thereto. The fact that the lenders with whom AMNLBV had a Non Disposal Undertaking have not yet moved any forum for a declaration that the sale of the shares, being without their consent, is non est, does not absolve AMNLBV from having failed to first obtain their consent before selling off its shares in Uttam Galva. Such sale is directly contrary to the Non Disposal Undertaking given to the lenders. Quite apart from this, it is also clear that shares worth Rs.19.50 each were sold at a distress value of Re.1 each, so as to overcome the provisions of Section 29A(c) and the proviso thereto. It is clear therefore that the Uttam Galva transaction clearly renders AMIPL ineligible under Section 29A(c) of the Code. [Para 109] [491-G-H; 492-A-D]

8.2 Insofar as the transaction with regard to KSS Petron is concerned, the facts are that on 3.3.2011, Fraseli, an entity registered and incorporated in Luxemburg, which is managed and controlled by Shri L.N. Mittal, held 32.22% of the shareholding of KSS Global, a company domiciled in the Netherlands. On 19.5.2011, by a Shareholders Agreement entered into between KSS Holding, KSS Infra EALQ, Fraseli and KSS Global, the first three companies were each given a right to appoint an equal number of directors on the board of directors of KSS Global, which in turn held 100% of the share capital of KSS Petron, a company incorporated in India. Fraseli was also granted affirmative voting rights on decisions regarding certain specified matters, both at the board and the shareholder level, in respect of KSS Global and all companies controlled by it, which would include KSS Petron. As has been stated hereinabove, KSS Petron was declared as an NPA on 30.9.2015. As in the case of Uttam Galva, Fraseli divested its shareholding in KSS Petron on 9.2.2018, i.e., only three days before AMIPL submitted its first resolution plan. On the same day, the directors nominated by Shri L.N. Mittal, through Fraseli, resigned from the board of KSS Global. [Para 110] [492-E-H]

8.3 There can be no doubt whatsoever that Fraseli, being a company managed and controlled by Shri L.N. Mittal, holding one third of the shares in KSS Global, which in turn held 100% of the share capital in KSS Petron, was in joint control of KSS Petron, if the corporate veil of all these companies is disregarded. Further, the Shareholders Agreement of 19.5.2011 makes it clear that the joint control of KSS Global would be between three entities, viz., KSS Holding, KSS Infra EALQ and Fraseli, each of whom had the right to appoint an equal number of directors on the board of directors of KSS Global. Not only this, but Fraseli was also granted affirmative voting rights as aforementioned, on certain important specified matters. There would be no doubt whatsoever that, just before presentation of the resolution plan of 12.2.2018, AMIPL would be hit by Section 29A(c), as a group company of Shri L.N. Mittal exercised positive control, by its shareholding, right to appoint directors and affirmative voting rights, over KSS Global, which in turn held 100% shareholding in KSS Petron. Again, as in the case of Uttam Galva, there can be no doubt whatsoever that the sale of Fraseli’s shareholding in KSS Global, together with the resignation of the Mittal directors from the board of directors of KSS Global, is a transaction reasonably proximate to the date of submission of the resolution plan by AMIPL, undertaken with the sole object of avoiding the consequence mentioned in the proviso to Section 29A(c). Having regard to the law laid down in this judgment, it is, therefore, clear that AMIPL is ineligible under Section 29A(c) of the Code, on this account as well. [Para 111] [493-A-E]

8.4 Since it is clear that both sets of resolution plans that were submitted to the Resolution Professional, even on 2.4.2018, are hit by Section 29A(c), and since the proviso to Section 29A(c) will not apply as the corporate debtors related to AMIPL and Numetal have not paid off their respective NPAs, ordinarily, these appeals would have been disposed of by merely declaring both resolution applicants to be ineligible under Section 29A(c). In order to do complete justice under Article 142 of the Constitution of India, one more opportunity is given to both resolution applicants to pay off the NPAs of their related corporate debtors within a period of two weeks from the date of receipt of this judgment, in accordance with the proviso to Section 29A(c). If such payments are made within the said period, both resolution applicants can resubmit their resolution plans dated 2.4.2018 to the Committee of Creditors, who are then given a period of 8 weeks from this date, to accept, by the requisite majority, the best amongst the plans submitted, including the resolution plan submitted by Vedanta. In the event that no plan is found worthy of acceptance by the requisite majority of the Committee of Creditors, the corporate debtor, i.e. ESIL, shall go into liquidation. [Para 113] [493-H; 494-A-E]

Ms. Eera Through Dr. Manjula Krippendorf v. State (Govt. of NCT of Delhi) & Anr. (2017) 15 SCC 133 : [2017] 7 SCR 924; Salomon v. A Salomon and Co. Ltd. [1897] AC 22; Life Insurance Corporation of India v. Escorts Ltd. & Ors., (1986) 1 SCC 264 : [1985] 3 Suppl. SCR 909; Union of India v. ABN Amro Bank and others (2013) 16 SCC 490; Balwant Rai Saluja & Anr. etc. etc. v. Air India Ltd. & Ors., (2014) 9 SCC 407; Delhi Development Authority v. Skipper Construction

Company (P) Ltd. & Another, (1996) 4 SCC 622 : [1996]

2 Suppl. SCR 295 – referred to.