TMI Blog2020 (1) TMI 1215X X X X Extracts X X X X X X X X Extracts X X X X ..... tue of the 1st Proviso to Section 29A(c) itself gives an opportunity from coming out of the said disqualification of course prior to the filing of the Resolution Plan whereas in the latter case it is not so. Subsequent to the liquidation, the account of the Corporate Debtor in Liquidation presently cannot be considered as a Non-Performing Asset as the amount had been fully settled being owed to the Secured Financial Creditors at the time of Liquidation by the Promoters/ Propounders of the Scheme from their personal accounts. Further, in relation to the creditors presently be it Financial Creditors or Operational Creditor, as already noted above, the Scheme has been approved unanimously as per the Report of the Chairman appointed for the meetings. Looking at the Scheme per se the salient features of the Scheme have been brought about by the Liquidator in the Application filed at. In relation to the Scheme filed under Section 230 of the Companies Act, 2013 in connection with I B Code, 2016 proceedings, Section 29A of I B Code, 2016 is made applicable, however in the instant case, taking into consideration the settlement of Financial Creditor pre-liquidation and in the absence o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Private Limited seeking for the following reliefs:- a) The Scheme of Comprornise arrangement approved by the Equity Shareholders and the Creditors of the Company in Liquidation be approved so as to bind the Equity Shareholders and Creditors named therein; b) Pass such further or other orders that this Hon'ble Tribunal may deem fit and proper in the circumstances of the case and thus renderjustice. 2. Before considering the reliefs as prayed for by the Applicant/ Liquidator, it will be essential for this Tribunal to narrate the facts in brief which had made the Liquidator to file this Application seeking for the above noted reliefs. 3. As against the Corporate Debtor, based on the Petition filed by the Financial Creditor namely M/S. L T Finance Limited seeking for initiation of Corporate Insolvency Resolution Process (CIR Process) in CP/541/1B/CB/2017, this Tribunal vide Order dated 09.02.2018 had admitted the same, and as a consequence, initiated the CIR Process in relation to the Corporate Debtor. 4. In the absence of any Resolution Plan being put forth by the Resolution Professional appointed by this Tribunal as approved by the Committee of Creditors (COC) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved Miscellaneous Application in MA/ 793/2019 before this Tribunal seeking leave of this Tribunal to convene the meeting of the creditors and shareholders for consideration and approval of the Scheme as proposed by the Promoter of the Company in liquidation, and based on such Application, this Tribunal had ordered on 02.08.2019 to convene the meeting of the Equity Shareholders and Creditors of the Company in Liquidati.on. As per the said Order dated 02.08.2019, the meeting was fixed on 05.09.2019 appointing the Liquidator as the Chairman of the respective meeting for due compliance, and it is stated in the Application by the Liquidator that the meeting was convened on 05.09.2019 at Pluto Hall, First Floor, Hotel Suba Galaxy, N.S. Phadke Road, Off Western Express Highway, Andheri, (East) Mumbai. In the meeting, both the Equity Shareholders as well as the Creditors of the Company in Liquidation have unanimously approved the Scheme as proposed by the promoters of the Company subject to certain modifications suggested by the creditors and equity shareholders of the Company which has also been annexed as an annexure to this Application. 8. It is stated that the chairman's report ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vable and movable property or actionable claims of the 'Corporate Debtor'. 12. Since in the instant case it is pointed out by the Learned Liquidator that during the CIR Process of the Corporate Debtor, the disqualification as prescribed under Section 29 A of the I B Code, 2016 was suffered by the Promoter of the Company namely the proponent of the Scheme herein and now this Tribunal is required to take a decision on the basis of the above said decision of the Hon ble NCLAT in this regard. 13. However, the Learned Counsel appearing for the proponent of the Scheme submitted that the disqualification as prescribed under Section 29 A of the I B Code, 2016, may not be applicable in the instant case, as the amounts due to the Financial Creditors as reflected at the time of liquidation, has been fully settled and which has also been brought forth in the order of the Hon'ble NCLAT dated 07.03.2019 in relation to the Company under Liquidation filed by one of the shareholders of the Company. 14. In view of change in the legal position while the matter was pending before this Tribunal, an opportunity was given to both the parties to make their submissions in relation to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Anr., and on facts. While in Jindal Steel and Power Ltd. Vs. Arun Kumar Jagatramka Anr., the Learned Counsel for the Promoter submits that the Scheme was directly filed before NCLT, Kolkata by the proponent of the Scheme, but in the instant case the Scheme has been filed through Liquidator as contemplated under the provisions of Sections 230 to 232 of the Companies Act, 2013 and taking into consideration the decision of Hon'ble Supreme Court in M/S. Meghal Homes Pvt. Ltd. Vs. Shree Niwas Girni K.K. Samiti Ors. , in Appeal (Civil) 3179-3181/2005, while considering the erstwhile provisions of Section 391 read with Section 394A of the Companies Act, 1956, the Liquidator is well within the power to obtain a Scheme under relevant provisions either from the members or creditors of the Company in Liquidation, and in the said circumstance, the Scheme cannot be shut out from being considered by this Tribunal. 17. Secondly, it is highlighted by the Learned Counsel for the Promoters that by virtue of settlement with the secured creditors of the Company in Liquidation, the proponent of the Scheme are also subrogated to the rights of the Secured Creditors, who have been fully dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espective Counsel appearing for the Learned Liquidator and Learned Counsel for the proponent of the Scheme as well as the Learned Liquidator who was present in person. 22. This Tribunal is confronted by the decision as rendered by Hon ble NCLAT in Jindal Steel and Power Ltd, Vs. Arun Kumar Jagatramka Anr., as recently as on 24.10.2019, wherein the Hon ble Appellate Tribunal had unequivocally expressed that the Corporate Debtor even during the period of Liquidation is required to be saved from its own management meaning thereby the Promoters, who are ineligible under Section 29A of I B Code, 2016 during CIR Process and thereby not entitled to file an Application for Compromise or Arrangement. 23. Prior to the decision dated 24.10.2019, it must be noted that an Appeal was filed before Hon'ble NCLAT against the decision of this Tribunal, ordering Liquidation in MA/ 344/2018 dated 20.09.2018 by shareholders of the Company in Liquidation and the Hon ble NCLAT vide its Order dated 07.03.2019 taking note of the settlement of the amounts due to L T Finance Limited as well as ARCIL, had in effect allowed the Promoters of the Company to file the Scheme before the Liquidator and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an approved under this Code, then, the provisions of this clause shall not apply to such resolution applicant for a period of three years from the date of approval of such resolution plan by the Adjudicating Authority under this Code; (d) has been convicted for any offence punishable with imprisonment (i) for two years or more under any Act specified under the Twelfth Schedule; or (ii) for seven years or more under any law for the time being in force: Provided that this clause shall not apply to a person after the expiry of a period of two years from the date of his release from imprisonment: Provided further that this clause shall not apply in relation to a connected person referred to in clause(iii) of Explanation I]; (e) is disqualified to act as a director under the Companies Act, 2013 (18 of 2013): Provided that this clause shall not apply in relation to a connected person referred to in clause (iii) of Explanation (f) is prohibited by the Securities and Exchange Board of India from trading in securities or accessing the securities markets; (g) has been a promoter or in the management or control of a corporate debtor in which a preferential transacti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entity shall mean the following entities which meet such criteria or conditions as the Central Government may, in consultation with the financial sector regulator, notify in this behalf, namely: (a) a scheduled bank; (b) any entity regulated by a foreign central bank or a securities ma rket regulator or other financial sector regulator of a jurisdiction outside India which jurisdiction is compliant with the Financial Action Task Force Standards and is a signatory to the International Organisation Securities Commissions Multilateral Memorandum of Understanding; (c) any investment vehicle, registered foreign institutional investor, registered foreign portfolio investor or a foreign venture capital investor, where the terms shall have the meaning assigned to them in regulation 2 of the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017 made under the Foreign Exchange Management Act, 1999 (42 of 1 999); (d) an asset reconstruction company registered with the Reserve Bank of India under section 3 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed a guarantee in favour of a creditor in respect of a Corporate Debtor against which an application for insolvency resolution made by such creditor has been admitted under this Code 3 [and such guarantee has been invoked by the creditor and remains unpaid in full or art; (f) is prohibited by the Securities and Exchan e Board of India from trading in securities or accessing the securities markets; (g) has been a promoter or in the management or control of a corporate debtor in which a preferential transaction, undervalued transaction or fraudulent transaction has taken place and in respect of which an order has been made by the Adjudicating Authority under this Code: It should also to be noted that upon a query posed by this Tribunal as to whether the Resolution Professional appointed by this Tribunal or subsequently the Liquidator, has chosen to file any Application in relation to the preferential transactions, undervalued transactions, extortionate credit transactions or fraudulent transactions as covered under Sections 43, 45, 49 and 66 of the I B Code, 2016, attracting clause (g) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... structure Ltd 3,84,23,720 4 Viraj Engineers Contractors Pvt. Ltd 1,33,00,000 5 Dr. Meka Paparao 2,64,39,019 6 Hemanth Meka Rao 3,10,10,000 Total 22,94,59,345 Thus, it is evident that subsequent to the liquidation, the account of the Corporate Debtor in Liquidation presently cannot be considered as a Non-Performing Asset as the amount had been fully settled being owed to the Secured Financial Creditors at the time of Liquidation by the Promoters/ Propounders of the Scheme from their personal accounts. Further, in relation to the creditors presently be it Financial Creditors or Operational Creditor, as already noted above, the Scheme has been approved unanimously as per the Report of the Chairman appointed for the meetings. Looking at the Scheme per se the salient features of the Scheme have been brought about by the Liquidator in the Application filed at Paragraph 14 of the Application: a) The total liability of the Company in Liquidat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 28. Be that as it may, in so far as the present Application is concerned, the decision which is required to be made as already pointed out in the earlier portion of the Order is with respect to competency of the promoter of the Company in Liquidation to propound a Scheme under Sections 230 to 232 of the Companies Act, 2013. Applying the principles, as delineated by Hon ble Supreme Court in ARCELORMITTAL INDIA PRIVATE LIMITED VS. SATISH KUMAR GUPTA ors. , in Civil Appeal Nos. 9402 to 9405/2018, the Hon'ble Supreme Court has chosen to interpret Section 29 A (c) as follows:- Para 54. The interpretation of Section 29A(c) now becomes clear. Any person who wishes to submit a resolution Ian i he or it does so actin jointly, or in concert with other persons, which person or other persons happen to either manage or control or be promoters of a corporate debtor, who is classified as a non-performing asset and whose debts have not been paid off for a period or at least one year before commencement of the corporate insolvency resolution process, becomes ineligible to submit a resolution plan. This provision therefore ensures that if a person wishes to submit a resolution plan, and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would be accepted, as this would narrow the pool of resolution applicants to nil, and therefore stultify the object sought to be achieved by the proviso to Section 29A(c). First, it is clear that there may be persons who may submit resolution plans, either by themselves, or in concert, or jointly with other persons who do not have debts which are declared as NPAs. Also, it is very difficult to say that in no circumstance whatsoever would a person submitting a resolution plan pay off the NPA dues of another person, with whom it is acting in concert or jointly. The dues may be such that it may be worth the while of the person, together with the persons with whom he is acting in concert or jointly, to first pay off the dues of the concerned corporate debtor whose account has been declared to be an NPA, as such dues may be negligible when compared with the gaining of control of the corporate debtor that is sought to be run as a going concern as per a resolution plan submitted. It is, therefore, impossible to say that the plain, literal, meaning of the language used by the proviso leads to absurdity or hardship. This interpretation is also in line with the object sought to be achieved, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Companies Act, 2013 presented to the Liquidator, consequent to the directions of the Hon'ble NCLAT in Company Appeal (AT) (Insolvency) No. 696 of 2018 dated 07.03.2019 and which Scheme had been brought forth by the Liquidator without in any way attributing, more particularly amenable to any provision attracting mens rea or criminal intent on the part of the Promoters as specified in Section 29 A which disqualifies them while submitting the Resolution Plan or the Scheme as the case may be. 30. At this stage, in view of the background situation delineated as above and in light of the same, the provisions of Section 12 A of the Code, 2016 in relation to withdrawal of a Petition based on the approval of 90% of the COC and under the circumstances the applicability of Section 29A of I B Code, 2016 is also required to be noted, all of course during the CIR Process pending. While interpreting Section 12 A of I B Code, 2016 in the light of Section 29A of Code, 2016 and answering the appeal in Company Appeal (AT) (Insolvency) No. 612 of 2019 vide Order dated 28.08.2019 in the matter of Andhra Bank -Vs- Sterling Biotech Ltd. (through Liquidator) Ors. , wherein the question which w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the Proponents of the Scheme, that while presenting the Scheme to the Liquidator as per the leeway provided by the Hon ble NCLAT that they did not suffer any of the disqualifications as provided under Section 29A of Code, 2016 and the sanction is subject to the submission of the affidavit as directed above within a week from the date of this order and the Liquidator after application of his mind in relation to the contents of the affidavit and the veracity of the statements made therein filing a report before this Tribunal within a period of one week thereafter. In relation to statutory authorities to whom notice was ordered to be issued, save Income Tax whose observations have already been extracted in paragraphs supra none of the other authorities have responded. Taking into consideration the decision rendered by the Hon'ble NCLAT while approving the Resolution Plan in relation to Vardhaman Industries Ltd. in Company Appeal (AT) (Insolvency) No. 467 of 2019 vide its Judgment saving the right of the Income Tax and also in terms of the Judgment cited by the revenue of the Hon ble Supreme Court in Marshall Sons Co (supra) and in accordance with both the above Judgments the ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
