Imp. Rulings; Related Party - Connected Party.

 Imp. Rulings; Related Party - Connected Party.

Index;

1. Supreme Court (2023.09.06) In Eva Agro Feeds Pvt. Ltd. Vs. Punjab National Bank and Anr. [Civil Appeal No.7906 of 2021, 2023INSC809]

2. Supreme Court (2019.01.25) in Swiss Ribbons Private Limited & Anr. Vs Union of India and Ors. [Writ Petition (CIVIL) No. 99 of 2018] 

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1. Supreme Court (2023.09.06) In Eva Agro Feeds Pvt. Ltd. Vs. Punjab National Bank and Anr. [Civil Appeal No.7906 of 2021, 2023INSC809] held that;

• 47.1. After a careful analysis, this Court opined that the expressions ‘related party’ and ‘relative’ contained in the definition sections must be read noscitur a sociis with the categories of person mentioned in Explanation I. So read, it would include only persons who are connected with the business activity of the resolution applicant. This Court further clarified that the expression ‘connected person’ would also cover a person who is in management or control of the business of the corporate debtor during the implementation of a resolution plan.

• 48.1. . . . . . . It was clarified that the opening words of Section 29(A) stating “a person shall not be eligible to submit a resolution plan…..” clearly indicates that the stage of ineligibility attaches when the resolution plan is submitted by the resolution applicant; thus the disqualification applies in praesenti. . . . .

• # 50. From the above, it is clearly manifest that the disqualification sought to be attached to the appellant is without any substance as the related party had ceased to be in the helm of affairs of the corporate debtor more than a decade ago. He was not in charge of the company or an influential member of the company i.e., the corporate debtor when the appellant had made its bid pursuant to the auction sale notice.

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2. Supreme Court (2019.01.25) in Swiss Ribbons Private Limited & Anr. Vs Union of India and Ors. [Writ Petition (CIVIL) No. 99 of 2018] held that;

• # 75. We are of the view that persons who act jointly or in concert with others are connected with the business activity of the resolution applicant. Similarly, all the categories of persons mentioned in Section 5(24-A) show that such persons must be “connected” with the resolution applicant within the meaning of Section 29-A(j). This being the case, the said categories of persons who are collectively mentioned under the caption “relative” obviously need to have a connection with the business activity of the resolution applicant. In the absence of showing that such person is “connected” with the business of the activity of the resolution applicant, such person cannot possibly be disqualified under Section 29-A(j). All the categories in Section 29-A(j) deal with persons, natural as well as artificial, who are connected with the business activity of the resolution applicant. The expression “related party”, therefore, and “relative” contained in the definition sections must be read noscitur a sociis with the categories of persons mentioned in Explanation I, and so read, would include only persons who are connected with the business activity of the resolution applicant.

• # 76. An argument was also made that the expression “connected person” in Explanation I, clause (ii) to Section 29-A(j) cannot possibly refer to a person who may be in management or control of the business of the corporate debtor in future. This would be arbitrary as the explanation would then apply to an indeterminate person. This contention also needs to be repelled as Explanation I seeks to make it clear that if a person is otherwise covered as a “connected person”, this provision would also cover a person who is in management or control of the business of the corporate debtor during the implementation of a resolution plan. Therefore, any such person is not indeterminate at all, but is a person who is in the saddle of the business of the corporate debtor either at an anterior point of time or even during implementation of the resolution plan. This disposes of all the contentions raising questions as to the constitutional validity of Section 29- A(j).

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