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2019 (9) TMI 590

..... n Y. SHIVRAM PRASAD AND ASSET RECONSTRUCTION COMPANY (INDIA) LTD. VERSUS S. DHANAPAL & ORS. AND SERVALAKSHMI PAPER LTD. & ORS[2019 (5) TMI 386 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI] where it was held that The liquidator is required to act in terms of the aforesaid directions of the Appellate Tribunal and take steps under Section 230 of the Companies Act. If the members or the ‘Corporate Debtor’ or the ‘creditors’ or a class of creditors like ‘Financial Creditor’ or ‘Operational Creditor’ approach the company through the liquidator for compromise or arrangement by making proposal of payment to all the creditor(s), the Liquidator on behalf of the company will move an application under Section 230 of the Companies Act, 2013 before the Adjudicating Authority i.e. National Company Law Tribunal, Chennai Bench. We direct the Liquidator to follow the provisions of Sections 35,37,38, 39 and 40 of the ‘I&B’ Code and decide the claim. Thereafter, it will ensure that instead of liquidating the assets of the ‘Corporate Debtor’ steps are taken for Arrangement / Scheme to frame u/s 230 of the Compan .....

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..... passed and in absence of any valid Resolution Plan, order of liquidation has been passed on 28.02.2018. We are not inclined to interfere with the impugned order dated 23rd August, 2017. 4. In the other appeal Company Appeal (AT) (Insolvency)No. 117 of 2018, the same Appellant has challenged the order of liquidation dated 28.02.2018. 5. Learned counsel for the Appellant submitted that the Appellant / Promoter intended to settle the matter and Arrangement / Scheme in terms of Section 230 of the Companies Act, 2013. However, the Liquidator is not accepting the same nor decided the claim of each of the creditors. However, that cannot be a ground to interfere with the order of liquidation passed on 28.02.2018. 7. Similar issue fell for consideration before this Appellate Tribunal Y. Shivram Prasad Vs. S. Dhanapal & Ors., wherein this Appellate Tribunal held and directed as follows:- 12. The aforesaid issue fell for consideration before this Appellate Tribunal in S.C. Sekaran v. Amit Gupta & Ors.─ Company Appeal (AT) (Insolvency) Nos. 495 & 496 of 2018 wherein this Appellate Tribunal having noticed the decision of the Hon ble Supreme Court in Swiss Ribbon Pvt. Ltd. & .....

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..... - (2007) 7 SCC 753 the Hon ble Supreme Court observed and held as follows: 33. The argument that Section 391 would not apply to a company which has already been ordered to be wound up, cannot be accepted in view of the language of Section 391(1) of the Act, which speaks of a company which is being wound up. If we substitute the definition in Section 390(a) of the Act, this would mean a company liable to be wound up and which is being wound up. It also does not appear to be necessary to restrict the scope of that provision considering the purpose for which it is enacted, namely, the revival of a company including a company that is liable to be wound up or is being wound up and normally, the attempt must be to ensure that rather than dissolving a company it is allowed to revive. Moreover, Section 391(1)(b) gives a right to the liquidator in the case of a company which is being wound up, to propose a compromise or arrangement with creditors and members indicating that the provision would apply even in a case where an order of winding up has been made and a liquidator had been appointed. Equally, it does not appear to be necessary to go elaborately into the question whether in the case .....

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..... nes specified by the Reserve Bank of India, a statement to that effect; and (v) a valuation report in respect of the shares and the property and all assets, tangible and intangible, movable and immovable, of the company by a registered valuer. (3) Where a meeting is proposed to be called in pursuance of an order of the Tribunal under sub-section (1), a notice of such meeting shall be sent to all the creditors or class of creditors and to all the members or class of members and the debenture-holders of the company, individually at the address registered with the company which shall be accompanied by a statement disclosing the details of the compromise or arrangement, a copy of the valuation report, if any, and explaining their effect on creditors, key managerial personnel, promoters and non-promoter members, and the debenture-holders and the effect of the compromise or arrangement on any material interests of the directors of the company or the debenture trustees, and such other matters as may be prescribed: Provided that such notice and other documents shall also be placed on the website of the company, if any, and in case of a listed company, these documents shall be sent to the S .....

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..... being wound up, on the liquidator appointed under this Act or under the Insolvency and Bankruptcy Code, 2016, as the case may be, and the contributories of the company. (7) An order made by the Tribunal under sub-section (6) shall provide for all or any of the following matters, namely:- (a) where the compromise or arrangement provides for conversion of preference shares into equity shares, such preference shareholders shall be given an option to either obtain arrears of dividend in cash or accept equity shares equal to the value of the dividend payable; (b) the protection of any class of creditors; (c) if the compromise or arrangement results in the variation of the shareholders rights, it shall be given effect to under the provisions of section 48; (d) if the compromise or arrangement is agreed to by the creditors under sub-section (6), any proceedings pending before the Board for Industrial and Financial Reconstruction established under section 4 of the Sick Industrial Companies (Special Provisions) Act, 1985 shall abate; (e) such other matters including exit offer to dissenting shareholders, if any, as are in the opinion of the Tribunal necessary to effectively implement the te .....

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..... ect the claim, as required under Section 40. Before taking steps to sell the assets of the corporate debtor(s) (companies herein), the Liquidator will take steps in terms of Section 230 of the Companies Act, 2013. The Adjudicating Authority, if so required, will pass appropriate order. Only on failure of revival, the Adjudicating Authority and the Liquidator will first proceed with the sale of company s assets wholly and thereafter, if not possible to sell the company in part and in accordance with law. 13. Therefore, it is clear that during the liquidation process, step required to be taken for its revival and continuance of the Corporate Debtor by protecting the Corporate Debtor from its management and from a death by liquidation. Thus, the steps which are required to be taken are as follows: i. By compromise or arrangement with the creditors, or class of creditors or members or class of members in terms of Section 230 of the Companies Act, 2013. ii. On failure, the liquidator is required to take step to sell the business of the Corporate Debtor as going concern in its totality along with the employees. 14. The last stage will be death of the Corporate Debtor by liquidation, whic .....

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..... ct of the Insolvency and Bankruptcy Code, 2016. 19. In view of the observations aforesaid, we hold that the liquidator is required to act in terms of the aforesaid directions of the Appellate Tribunal and take steps under Section 230 of the Companies Act. If the members or the Corporate Debtor or the creditors or a class of creditors like Financial Creditor or Operational Creditor approach the company through the liquidator for compromise or arrangement by making proposal of payment to all the creditor(s), the Liquidator on behalf of the company will move an application under Section 230 of the Companies Act, 2013 before the Adjudicating Authority i.e. National Company Law Tribunal, Chennai Bench, in terms of the observations as made in above. On failure, as observed above, steps should be taken for outright sale of the Corporate Debtor so as to enable the employees to continue. 8. In view of the aforesaid position as explained by this Appellate Tribunal, we direct the Liquidator to follow the provisions of Sections 35,37,38, 39 and 40 of the I&B Code and decide the claim. Thereafter, it will ensure that instead of liquidating the assets of the Corporate Debtor steps are taken .....

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