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Practising Chartered Accountants Eligible To Submit Resolution Plans Under IBC: NCLAT Delhi
The , has settled a significant question under the , holding that a practising Chartered Accountant cannot be treated as ineligible to submit a merely by virtue of being a Chartered Accountant. The Bench, comprising Judicial Member Justice Mohammad Faiz Alam Khan and Technical Member Arun Baroka, dismissed two separate appeals filed by suspended directors of , affirming the approval of a submitted by Suraj Garg.
Background of the Case
Satellite Cables Pvt. Ltd. was admitted into Corporate Insolvency Resolution Process (CIRP) on , following a petition by under . The Resolution Professional (RP), Abhimanyu Mittal, invited expressions of interest and received three resolution plans. After a detailed evaluation and a hybrid challenge among prospective resolution applicants, the approved Suraj Garg's plan with a 100% voting share at its 11th meeting on . The RP then filed an application for approval of the plan, which was allowed by the , on . Suspended directors Vinay Gupta and Niharika Goel challenged this order before the NCLAT.
Key Grounds Raised by the Appellants
Vinay Gupta contended that he was denied because the RP did not provide him with a copy of the before the plan-approval hearing, preventing him from filing objections. Niharika Goel raised several substantive issues: she argued that Suraj Garg, being a practising Chartered Accountant, was ineligible to submit a under the ; that a proposal accepted by the sole financial creditor, , was not disclosed to the CoC; that the CoC ignored a higher bid of ₹6 crore from Anuj Goyal and approved a lower bid of ₹5.85 crore; that the made no provision for government dues of ₹17.47 crore confirmed by the ; and that the RP conducted the CIRP in a non-transparent manner.
Defence by the Resolution Professional and ICAI
The RP submitted that he had conducted the CIRP in accordance with the Code, including issuing Form G, evaluating eligibility, conducting due diligence, and placing all plans before the CoC. He argued that the of the CoC is paramount and that there is no statutory bar against a practising Chartered Accountant acting as a resolution applicant. The clarified that a practising Chartered Accountant is permitted to be a resolution applicant under the IBC, provided they do not act as a whole-time director. It noted that the Code of Ethics allows members in practice to become directors (not managing or whole-time) and there is no express prohibition on submitting a .
Court's Analysis and Findings
On the issue of , the NCLAT observed that while suspended directors are entitled to participate in CoC meetings and receive relevant documents, the appellant failed to demonstrate any specific prejudice caused by the non-supply of the . The court noted that the suspended directors were aware of the proceedings and had not furnished a confidentiality undertaking, which was a prerequisite for sharing the plan. It held, “A challenge under Section 61 cannot succeed merely by establishing a procedural objection. The Appellant must show that the alleged irregularity has materially affected the approval of the or has resulted in violation of a substantive requirement of the Code.”
Regarding the eligibility of the resolution applicant, the NCLAT categorically stated that does not list practising Chartered Accountants as ineligible. The court further noted that the SRA, Suraj Garg, had been inducted as a non-executive director in the newly constituted board, which is permissible under the Chartered Accountants Act. It held, “A practising Chartered Accountant is not, merely by virtue of being a practising Chartered Accountant, included in the disqualifications enumerated in Section 29A.”
On the OTS proposal, the NCLAT found that no application for withdrawal of the CIRP under Section 12A had been filed with the requisite 90% voting approval. The court observed, “A settlement proposal between the parties, therefore, cannot by itself nullify the CIRP or prevent the CoC from considering Resolution Plans.” The OTS was also withdrawn by the financial creditor.
Addressing the challenge regarding the acceptance of a lower bid, the NCLAT reiterated that the of the CoC is not subject to . It noted that the CoC considered the feasibility, viability, and implementation capability of the plans, and that the unsuccessful bidder himself had not challenged the approval. The court held, “The of the CoC in accepting the SRA's plan (100% vote) is not justiciable.”
On the issue of government dues, the NCLAT distinguished the 's judgment in , observing that it was confined to statutes creating a first-charge in favour of the tax authority. The court relied on the subsequent amendment to , which clarifies that a created merely by operation of law does not constitute a . It held, “This overrules the Rainbow Papers position and ensures cannot claim .” The court also noted that in , the held that claims not included in an approved stand extinguished.
Finally, the court found no material irregularity in the conduct of the RP. It noted that all prescribed stages of CIRP were followed, and the RP had placed all revised plans before the CoC. The allegations regarding the suspension of a director of the IPE firm were not particularized.
Decision and Imposition of Costs
The NCLAT dismissed both appeals, affirming the NCLT order approving the . The court held that the completed resolution process cannot be reopened merely because suspended directors disagree with the CoC's commercial decision. Imposing costs of ₹1 lakh each on Vinay Gupta and Niharika Goel, the court observed that the appellants had been abusing the process of law and causing hindrance to the insolvency resolution. The court also noted that the had been fully implemented, with assets handed over to the SRA and the monitoring committee at the stage of dissolution.
Key Observations
- “A challenge under Section 61 cannot succeed merely by establishing a procedural objection.”
- “A practising Chartered Accountant is not, merely by virtue of being a practising Chartered Accountant, included in the disqualifications enumerated in Section 29A.”
- “A settlement proposal between the parties, therefore, cannot by itself nullify the CIRP or prevent the CoC from considering Resolution Plans.”
- “The of the CoC in accepting the SRA's plan (100% vote) is not justiciable.”
- “This overrules the Rainbow Papers position and ensures cannot claim .”
The judgment reinforces the primacy of the CoC's commercial decision and clarifies that eligibility under the IBC is governed solely by Section 29A, not by professional regulations under other statutes. It also underscores the need for suspended directors to demonstrate actual prejudice when alleging procedural violations.
