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Insolvency and Bankruptcy Code, 2016--CIRP

Nominee Directors on Board of Company, Declared NPA : Whether Ineligible to File Resolution Plan in Light of Section 29A of I&B Code, 2016

Pragya Lalwani

Learned author in this article analyses eligibility of nominee directors on the Board of company, to show his expression of interest in the resolution plan, in light of section 29A(c) of the Code by way of passing through certain tests.

1. Facts of the relevant case

In Dorairaj Thillairaj & Anr. v. Ashok Magnetic Ltd. & Ors, Company Appeal (AT) (Insolvency) No. 791 Of 2018, dt. 4-1-2019, the nominee directors (Appellant) submitted a resolution plan in the Corporate Insolvency Resolution Process against the corporate debtor (i.e., Ashok Magnetics Ltd.), that was declared as NPA, which was rejected by the Committee of Creditors (CoC), and thereafter by the NCLT, Chennai Bench. Appeal against such order was filed before the NCLAT, Delhi Bench as to determination of eligibility of such nominee director.

Appellant contended that section 29A(c) does not disqualify a person on just being the part of the Board of Directors (BoD) of the corporate debtor, but if in control of the affairs of the company which is declared as NPA under the RBI guidelines or is the promoter of such company. Thus, disqualification would not apply to the appellant. Further, SBI and Federal Bank being members of the CoC submitted that the Director (whether it be nominee or paid), being the part of the Board of Directors of the company that was declared as NPA would attract the disqualification under section 29A. Also, even on financial matrix, the resolution plan submitted by the appellant was not found viable and feasible by the Committee.

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