TMI Blog2021 (7) TMI 1093X X X X Extracts X X X X X X X X Extracts X X X X ..... n Applicant as they are not mentioned in Clause (H) of Section 25(2) of the Code. The restriction under Section 29A of the Code shall apply when an ineligible person or any other person acting jointly with such person submits a Resolution Plan . The restriction shall also apply if such person is a connected person to a Resolution Applicant as defined in explanation to Section 29A of the Code - The term connected persons as defined in explanation means, any person who is the promoter or in the management or control of the Resolution Applicant or any person who shall be the Promoter or in management or control of the business of the Corporate Debtor during the implementation of Resolution Plan or the holding Company, subsidiary Company, Associate Company or related party of a person referred to in clauses (i) (ii) of Section 29A of the Code. Any person who is either promoter or in the management or control of the business of the Corporate Debtor is ineligible by default under the I B Code. The Provisions of Section 29A of the Code came into force from 23.11.2017 and further that the requirements of Section 29A of the Code applies to CIRPs initiated after 23.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ire facts and circumstances of the present case, this Tribunal comes to an inescapable conclusion that the Adjudicating Authority in the Impugned Order came to the right conclusion that the scheme was proposed by the Ex-directors and promoters of Corporate Debtor and further that a Creditor / Member who is ineligible under Section 29A of the I B Code, 2016 was disqualified to be a proponent of the scheme as per Section 230 of the Companies Act, 2013, which requires no interference in the hands of this Tribunal sitting in Appeal . The Appeal is devoid of merits - Appeal dismissed. - Company Appeal (AT) (CH) (INS) No. 07 of 2021 - - - Dated:- 26-7-2021 - [Justice Venugopal M] Member (Judicial) And [V. P. Singh] Member (Technical) For the Appellant : P. James Victor Rajkumar, Advocate For the Respondent : Mr. B. Ramana Kumar, Advocate For Liquidator : Mr. G. V. Ravikumar, (Liquidator) (appearing in person) JUDGMENT (VIRTUAL MODE) Venugopal M (J) Background: 1. The Appellants have projected the present Appeal as an affected person being dissatisfied with the order dated 12.01.2021 in MA/32/2020 in CP/565/IB/2017 filed by the Respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould not apply to them because they have submitted the Scheme as per the directions given by Hon ble NCLAT dated 26.02.2019. The said statement made by the Scheme proponents is required to be brushed aside in view of the fact that when similar sought of an Application was filed under Section 230 of Companies Act, 2013 by the Ex- promoters and Directors of the Corporate Debtor, the Hon ble NCLAT in the matter of Jindal Steel and Power Limited -Vs- Arun Kumar Jagatramka , in Company Appeal (AT) No. 221 of 2018 in para 9, 10, 11 and 12 has held as follows; 9. The next question arises for consideration is as to whether 1st Respondent-Arun Kumar Jagatramka (Promoter), can be said to be ineligible under Section 29A of the I B Code and can ask for Financial Scheme of Comprise and Arrangement for itself in terms of Section 230 and 232 of the Companies Act of the I B Code. 10. As noticed above, the Hon ble Supreme court in Swiss Ribbons Pvt. Ltd. Anr. Vs. Union of India Ors. Writ Petition (Civil) No.99 of 2019 held that the primary focus of the legislation is to ensure revival and continuation of the corporate debtor by protecting the corporate debtor from its own manageme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... application without cost. 3. Questioning the validity, propriety, correctness and the legality of the Impugned Order dated 12.01.2021 passed by the Adjudicating Authority (National Company Law Tribunal, Division Bench-1, Chennai) in MA/32/2020 in CP/565/IB/2017, the Learned Counsel for the Appellant scheme proponent submits that the Appellant is a Promoter / Director as well as Member holding 96% shares in M/s.Air Carnival Private Limited (which is under Liquidation ) and that the Respondent was appointed as the Liquidator on 20.12.2018. Appellant s Submissions: 4. The Learned Counsel for the Appellant brings to the notice of this Tribunal that as against the Liquidation Order , another member and two other stakeholders had jointly preferred an Appeal before this Appellate Tribunal in CA(AT)(INS) No.191-193 of 2019 and further that the Appellate Tribunal through an Order dated 26.02.2019 had directed the Liquidator to take steps under Section 230 of the Companies Act. 5. As against the said Judgment of this Appellate Tribunal , the Respondent filed a Civil Appeal Nos.5115 to 5117 of 2019 before the Hon ble Supreme Court of India which up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al as per I B Code. 10. The Learned Counsel for the Appellant comes out with an argument that Section 29(A) of the Insolvency and Bankruptcy Code is inapplicable to the Appellant and indeed, Section 29(A) of the Code was amended with retrospective effect from 23.11.2017. However, the CIRP had commenced on 02.11.2017 and therefore, the ingredients of Section 29(A) of the Code are not applicable. Added further, even the second condition of Section 29(A)(C) of the Code is not satisfied and as such, this Provision is not applicable to the Appellant / Compromise Scheme Proponent . The other contention put forward by the Learned Counsel for the Appellant is that as per notification No. IBBI/2019-20/GN/REG053, dated 06.01.2020, w.e.f. 06.01.2020, a proviso was inserted into Section 2B of IBBI(LP) Regulations, 2016 (a person who is not eligible under the IBC to submit a Resolution Plan for Insolvency Resolution of the Corporate Debtor, shall not be a party in any manner to such compromise or arrangement and this is applicable only after 06.01.2020. But the Appellant had furnished his Compromise Proposal on 24.05.2019, which fact was concealed by the Liquidator before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esolution plans are opened and placed before the CoC as per section 30(5). At this stage (at the time of opening the proposal cover), they may point out whether one or other resolution applicant is ineligible in terms of section 29A or not. GIST OF COUNTER OF THE RESPONDENT/LIQUIDATOR: 15. According to the Respondent/Liquidator one Murali Sundaram an employee of M/s. Air Carnival Private Limited (under Liquidation ) had filed an application under Section 9 of the Insolvency and Bankruptcy Code and that the CIRP was allowed on 02.11.2017. Furthermore, in the CoC Meeting that took place on 02.05.2018, to liquidate the Corporate Debtor because of the fact that the operation of the Airlines had stopped on 09.04.2017 and that the sole Aircraft of the Corporate Debtor was taken away by the Lessor. Besides this, there was no license to run the aircraft. Therefore, the Committee of Creditors felt that a possibility of any Resolution Plan was remote because of the reason that there was no aircraft and license to run the aircraft. In short, the Committee of Creditors took a pragmatic view for liquidation of Corporate Debtor . 16. It is represented on behalf of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent is that the Respondent/Liquidator cannot be pressurized by the Promoter and in fact, the Respondent/Liquidator could not act upon the compromise proposal , till the completion of the Appeal preferred before the Hon ble Supreme Court. The public announcement was issued by the Liquidator by commencing the procedure, in terms of the directions issued by the Appellate Authority . In this connection, the Respondent/Liquidator in its counter before this Tribunal has averred that Section 29(A) of the Insolvency and Bankruptcy Code was amended that retrospective effect from 23.11.2017 and that the Compromise Proposal was given on 24.05.2019 by the Promoter . Indeed, the decision of the Tribunal was taken on 12.01.2021, which is subsequent to the date of amendment of Section 29(A) of the Code. 20. Added further, the Promoter is ineligible to file a Compromise Proposal by means of an amendment of Section 29(A) of the Code and that the account was declared as non-performing asset as on 29.06.2017 and that the CIRP took place on 02.11.2017. Even before the commencement of CIRP the account was declared as non-performing asset and that the Respondent/Liquidator had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sell (a) the assets in a slump sale; (b) a set of assets collectively, or (d) the assets in parcel and this Regulation applies only for the realization of the assets of the Corporate Debtor and not for a compromise proposal . 23. In the present case, there is no such compromise failure, when the Respondent projected the Miscellaneous Application before the Adjudicating Authority . As a matter of fact, the Appellant had sent his scheme of arrangement on 24.05.2019 along with required enclosures. As on the date of placing the compromise scheme, the Promoter is eligible as per the Code as well as under IBBI Regulations. 24. It is the plea of the Appellant that the Respondent had admitted that the Bank account was declared as NPA on 29.06.2017 and that the CIRP commenced on 02.11.2017, viz. before the Amendment . By referring to Section 29A of the I B Code, the Appellant has taken a stand that there are two conditions which are to be both fulfilled (i) classified as NPA (ii) a period of one year had lapsed from NPA till CIRP and further it is the plea of the Appellant that there was no lapse of one year i.e. CIRP had commenced within four months from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the liquidator should act in terms of the aforesaid directions of the Appellate tribunal and take steps under Section 230 of the Companies Act. If the members of the Corporate Debtor or the Creditors approach 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 National Company Law Tribunal, in terms of the observations as made in SC Sekaran (supra) and this cannot be construed as specific direction to accept the proposal of the Corporate Debtor nor it confers any special rights or privileges to the Corporate Debtor / Promoters over the law in force which is applicable to all. 30. According to the Learned Counsel for the Respondent/Liquidator, it is the duty of the Respondent/Liquidator to provide equal opportunity to all the stakeholders under Section 230 of the Companies Act, 2013 and therefore, a public announcement for inviting compromise/arrangements from any or all of the stakeholders was given on 14.07.2019, in terms of the ingredients of the Insolvency and Bankruptcy Code. 31. The L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ebtor in Liquidation as per schedule. (iii) Passing of such an order(s) as the Tribunal may deem fit in terms of Section 230(3) of the Companies Act for causation of Notice of Meeting. 35. It is the crystalline stand of the Appellant before this Tribunal , that Section 29A of the I B Code was amended with retroactive effect from 23.11.2017. However, the CIRP had commenced on 02.11.2017, before the amendment. As such Section 29A of the I B Code is not applicable to the Appellant . Moreover, the second condition of the Section 29(A)(C) of the Code is not satisfied. 36. The other plea of the Appellant is that to the Section 2B IBBI (Liquidation Process) Regulations, 2016 a proviso was inserted dated 06.01.2020 vide Notification No.IBBI/2019-20/GN/REG053 (w.e.f.06.01.2020) and in the present case, the Appellant submitted his compromise proposal on 24.05.2019. Furthermore, the Tribunal can decide whether the Resolution Plan is in breach of violation of any law (including Section 29A of the Code) only after hearing the arguments from the Proponent / Resolution Applicant as well as the Committee of Creditors . Besides this, the Respondent / Liquidator had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... powers and is to see that the proposed scheme of Compromise and arrangement is not to be in breach of any provision of Law and especially, the same is not contrary to public policy . The fact of the matter is that a Tribunal can scan the scheme from the Judicial perspective. Any compromise or arrangement approved by majority of creditors will be binding on all the Creditors, only if the said compromise or arrangement is sanctioned by the Court / Tribunal . 42. Be it noted, that in Law, after the Liquidation Order , the Committee of Creditors cannot come together as a Body . It cannot be lost sight of the fact that the Corporate Debtor in the present case is under Liquidation . Section 30(2) pertains to Resolution Plan in the Corporate Insolvency Resolution Process . In this connection, it is pertinent for this Tribunal to make a significant mention that the Respondent / Liquidator has taken a emphatic stand that the Appellant / Proponent of the Scheme by paying only 50% of the whole claim had ventured to take custody of all the properties which is impermissible in law. 43. Any person who is either promoter or in the management or control of the bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rderly completion of the Liquidation Section 35 of the I B Code is meant for. When the Liquidator is appointed he shall hold the Liquidation Estate as a fiduciary for the benefit of all Creditors . Further, Liquidator is empowered to take necessary steps by applying to the Adjudicating Authority to obtain necessary orders or directions that may be necessary for the Liquidation of the Corporate Debtor and to report the progress of the Liquidation Process in a manner as may be specified by the Board . He may also take all such actions, steps, etc. that may be necessary for Liquidation , Distribution of Assets and in discharge of his duties and obligations and functions as Liquidator . The Liquidator will verify claims of all Creditors , take into custody and control of assets, property effects and actionable claims of the Corporate Debtor , carry on the business of Corporate Debtor for its beneficial Liquidation, etc. as specified under Section 35 of the Code. In short, without the Respondent / Liquidator taking necessary steps, no such application to secure a MSME Certificate was to be filed and suffice it for this Tribunal to point out that in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
