Arcelor Mittal India Private Limited vs. Satish Kumar Gupta & Ors. [LL 2021 SC 454]
Background and Context
This case arose in the context of the insolvency resolution process of Essar Steel India Limited (ESIL) under the Insolvency and Bankruptcy Code, 2016 (IBC).
Essar Steel was undergoing Corporate Insolvency Resolution Process (CIRP).
Two main bidders emerged for the resolution plan: Arcelor Mittal India Private Limited (AMIPL) and Numetal Ltd.
Both were initially disqualified under Section 29A of the IBC.
Section 29A prohibits certain persons or entities from submitting a resolution plan, especially those connected to the corporate debtor with non-performing assets (NPAs), to prevent misuse of the insolvency process.
The key question was whether AMIPL and Numetal were disqualified under Section 29A and at what stage such disqualification should be assessed.
Key Legal Issues
Timing of Disqualification under Section 29A
Role and Powers of the Resolution Professional (RP)
Interpretation of Section 29A(c) and Related Provisions
Use of Article 142 of the Constitution for Judicial Relief
Principle of “Piercing the Corporate Veil”
Final Outcome and Consequences
Detailed Explanation
1. Timing of Disqualification Under Section 29A
Section 29A(c) bars persons who are connected with the corporate debtor and have an NPA account from submitting a resolution plan.
The Supreme Court clarified that disqualification under Section 29A(c) applies at the time of submission of the resolution plan.
However, the Court also held that "antecedent facts reasonably proximate" to the date of submission can be considered to avoid parties circumventing the prohibition by making last-minute changes.
Case Law Reference:
K. Sashidhar vs. Indian Overseas Bank [(2019) 9 SCC 450] - This judgment clarified the scope of Section 29A and that disqualification applies at the time of submission.
This case further refined this principle by recognizing the relevance of proximate antecedent facts.
2. Role and Powers of the Resolution Professional (RP)
The Resolution Professional’s role is administrative and limited to verifying compliance with Section 30(2) of the IBC.
The RP must examine if the resolution plan satisfies conditions laid down by law but is not a judicial authority to decide merit or disqualification issues in depth.
The Committee of Creditors (CoC) has the commercial wisdom to accept or reject the resolution plans.
Case Law Reference:
Committee of Creditors of Essar Steel India Ltd. vs. Satish Kumar Gupta & Ors. [(2020) 8 SCC 531] - This judgment emphasized the administrative role of the RP and the primacy of the CoC’s decision.
3. Interpretation of Section 29A(c)
Section 29A(c) seeks to prevent persons connected with the corporate debtor who have defaulted in loan repayments (NPAs) from taking advantage of the CIRP.
The court held that if a bidder is connected to promoters or companies with NPAs, even if the bidder itself is not directly an NPA defaulter, it can be disqualified.
The “control” test includes de facto and de jure control over companies with NPAs.
Principle:
“Piercing the corporate veil” is used to identify true ownership or control behind corporate structures to prevent evasion of the law.
Case Law Reference:
Salomon v. Salomon & Co. Ltd. (1897) AC 22 - foundational principle of corporate personality.
K. K. Verma v. Union of India [(1994) 4 SCC 260] - discusses circumstances where the corporate veil can be pierced.
4. Use of Article 142 for Judicial Relief
Recognizing the exceptional circumstances, the Supreme Court used Article 142 of the Constitution to provide relief.
It gave AMIPL and Numetal a limited time window to clear their NPAs and submit fresh resolution plans.
This equitable relief was to avoid liquidation of the corporate debtor and promote resolution as per the IBC's objective.
Article 142 empowers the Supreme Court to pass any decree or order necessary for doing “complete justice.”
5. Final Outcome
AMIPL complied within the extended timeline by clearing NPAs and was allowed to submit a fresh resolution plan.
The CoC eventually approved AMIPL’s plan, leading to the revival of Essar Steel.
Numetal failed to meet the timeline and was thus disqualified.
Broader Legal Implications
The case strengthened the interpretation of Section 29A to ensure that promoters or connected persons with defaulted loans cannot misuse insolvency.
It reinforced the limited judicial interference in commercial decisions of the CoC.
It recognized the administrative and procedural roles of the RP, distinguishing them from adjudicatory functions.
The Court’s use of Article 142 demonstrated judicial pragmatism to balance strict legal interpretation with commercial realities.
Summary of Important Points
| Aspect | Legal Position/Outcome |
|---|---|
| Section 29A Disqualification | Applies at plan submission; antecedent facts matter |
| Role of RP | Administrative, limited to verification under Section 30(2) |
| CoC’s Role | Holds commercial wisdom, primary decision-making body |
| Corporate Veil Piercing | Used to detect true control to apply Section 29A |
| Article 142 Relief | Provided time to bidders to clear disqualifying NPAs |
| Final Resolution | AMIPL selected after clearing disqualifications |
Related Important Cases
Committee of Creditors of Essar Steel India Ltd. vs. Satish Kumar Gupta & Ors. [(2020) 8 SCC 531]
Emphasized CoC supremacy and clarified RP role.
K. Sashidhar vs. Indian Overseas Bank [(2019) 9 SCC 450]
Detailed interpretation of Section 29A and disqualification timing.
Swiss Ribbons Pvt. Ltd. & Anr. vs. Union of India & Ors. [(2019) 4 SCC 17]
Upheld constitutional validity of IBC and Sections including 29A.
Salomon v. Salomon & Co. Ltd. (1897) AC 22
Established principle of corporate personality and veil piercing.
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