TMI Blog2021 (10) TMI 643X X X X Extracts X X X X X X X X Extracts X X X X ..... to bring a Resolution Plan for the Corporate Debtor resulting in Liquidation of Corporate Debtor. That as on date, there is a situation of a deadlock and no progress has been made by the Corporate Debtor in the last 2 years. That the Liquidator has neither been able to auction the assets of the Corporate Debtor nor it has placed the Scheme of the Corporate Debtor before the COC or the sole financial creditor SIDBI. The only route available to the Corporate Debtor to come out of the clutches of the Liquidation is via the Scheme of Compromise and Arrangement proposed under Section 230 of Companies Act, 2013 - Since the objective of the IBC is to prefer resolution over liquidation and maximisation of the value of assets of the Corporate Debtor at any stage, it would be in fitness of the scheme of IBC to make all possible efforts to revive the Corporate Debtor. The Liquidator is directed to place without further delay, the Scheme in accordance with Section 230 of the Companies Act, 2013 submitted by the Applicant, before the Creditors in compliance of the directions of the Hon'ble NCLAT - application allowed. - IA. 412/ND/2021 in Company Petition No. (IB)-575(ND)/2017 - - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this Adjudicating Authority. Sh. K.G. Somani (Respondent herein) was appointed as the Liquidator of the Corporate Debtor. 4. In support of its prayer at Serial No. 1, the Applicant has submitted the following that- (i) On 11.02.2019, the Applicant submitted before this Hon'ble Tribunal that he was willing to pay the entire amount claimed by the SIDBI, whereafter this Tribunal directed that the cut-off value would include the Claim amount and the CIRP costs amounting to a total of ₹ 30.1 Crore. (ii) SIDBI rejected the Applicant's proposal. Later, vide order dated 24.04.2019, this Adjudicating Authority observed that entering into a settlement with the Applicant was the COC's prerogative, and since the COC was not inclined to settle the matter with the Applicant, the Adjudicating Authority would not intervene. (iii) The Respondent failed to submit any resolution plan within the time frame stipulated for completion of the CIRP Process. It is further submitted that this Adjudicating Authority passed an order dated 31.05.2019 allowing Respondent's application for liquidation of the Corporate Debtor and thereby, appointing the Respondent as Liquidat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tor's property, the approximate proportionate value of the said property would come around ₹ 67.55 Crore, and further, upon including the value of construction on the said property, the value would be in excess of ₹ 77 Crore. (xi) Vide order dated 26.06.2020, this Tribunal dismissed the I.A. No. 2111 of 2020, observing that there is no reason for interfering with the auction process set in motion by the liquidator. (xii) Since the NCLAT was not functioning from 26.06.2020 to 03.07.2020 on account of Covid-19, the Applicant filed a Writ Petition before Hon'ble Delhi High Court, challenging the order dated 26.06.2020 passed by this Adjudicating Authority in I.A. No. 2111 of 2020, wherein the Hon'ble High Court directed the Liquidator not to proceed with the auction for 15 days. (xiii) The Respondent once again issued an advertisement for sale of the aforementioned property via an auction scheduled on 27.11.2020, at an inexplicably low price of ₹ 40 Crore. (xiv) Since the auction of the property of the Corporate Debtor was being done without consultation with any of the stakeholders, as provided for in the IBC (Liquidation) Regulations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... record, they shall not be able to ascertain the documents. It appears that the liquidator has not even procured the statement of account of the Corporate Debtor's bank. The same would have reflected and corroborated the transaction. As no cogent explanation is forthcoming, last opportunity is being given to the liquidator to file his reply justifying the grounds this claim is being rejected by him This clearly shows that the Liquidator, also being the erstwhile Resolution Professional has worked hand in glove with SIDBI, the Financial Creditor, and failed to faithfully discharge his duty as the custodian of the Corporate Debtor. (xix) Such conduct on the part of a Resolution Professional/Liquidator strikes at the root of the IBC, which was enacted to ensure that while the claims of creditors are paid, the Corporate Debtor survives and remains a going concern. In the present case, if the Respondent had followed the directions of the Hon'ble NCLAT and considered the Scheme of arrangement or settlement proposal offered by the Applicant herein, the Financial Creditor's dues would have been paid, and the Corporate Debtor would have survived to continue its busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le all dues with the Financial Creditor, SIDBI. (iv) The sequence of events below would give a clear picture of the conduct of the Applicant in the entire process since the liquidation was approved by the CoC/SIDBI. (v) It is averred by the Liquidator that: i) From the above it is evident that despite the order of the NCLAT dated 05.09.2019 containing a direction to submit and consider a proposal in 90 days from liquidation, the Applicant never filed a proposal. As late as 07.02.2020 this Hon'ble Tribunal noting the order of the Hon'ble NCLAT recorded that no proposal has been given by the Applicant. This conduct and material concealment by the Applicant itself bars him from any relief. The conduct of the Applicant and a lack of proposal was further reiterated in order dated 04.03.2020 where this Hon'ble Tribunal noted that only an OTS has been received which has been rejected and in these circumstances Liquidation must proceed. (vi) The only 'proposal' or 'scheme' submitted by the Applicant was on 19.06.2020 and during the submission of the scheme, a similar application IA 2111/2020 was pending before this Hon&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 016, Regulation 2B(1) (w.e.f. 25.07.2019) and proviso to Rule 2B was inserted vide amendment dated 06.01.2020, prior to the section 230 Scheme was submitted, which bars the Applicant from submitting a scheme under section 230. The rule 2B(1) and the proviso thereto state as below: 2B. Compromise or arrangement. (1) Where a compromise or arrangement is proposed under section 230 of the Companies Act, 2013, it shall be completed within ninety days of the order of liquidation under sub-sections (1) and (4) of section 33. Provided that a person, who is not eligible under the Code 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. Therefore, the Liquidator has followed the provisions of law in dealing with the scheme submitted after the expiry of 90 days and after multiple extensions that were granted to the Applicant. (ix) Prior to June 2020, the only offer that was made by the applicant was the offer of OTS, which was duly rejected by the sole financial creditor including the one as recently as on 01.02.2021. In the absence of the consent of the Sole Financial Cre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... moving an appropriate application before the Tribunal under S. 230 CA 2013. The Section clearly states that the company, or any of the creditors or members of the company may approach the tribunal for an order to conduct a meeting. However, the basic threshold requirement has not been met, that of the creditors agreeing to the scheme and in the absence of the same, an application under S. 230 CA 2013 cannot be moved or be maintainable. It is the submission of the Liquidator that he has proceeded in accordance with provisions of law. The present 'scheme' cannot be treated as a scheme under the provisions of CA 2013 as it has no details as to the funding and availability of funds. Further, even if funds are available, a pre-requisite of the scheme under S. 230 CA 2013 is that 75% of the secured creditors agree to the scheme. In the present case, there is only one creditor with 100% share and the said creditor, SIDBI has rejected the 'scheme' earlier given in the form of 'OTS' on multiple occasions. Therefore, as far as the 'scheme' is concerned, nothing remains. (xiii) Notwithstanding anything to the contrary, the Applicant is at liberty to show h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... romise/arrangement from the Ex-director, pursuant to the order of NCLAT and therefore there was no delay from side of Ex-Director. (iii) From any angle, the timeline is not mandatory but directory as even in the matter of Y. Shivram vs. S. Dhanpal, the Hon'ble NCLAT has observed that: In case, for any reason the liquidation process u/s. 230 takes more time, it is open to the AA to extend the period, if there is chance of the approval of arrangement of Scheme 7. After hearing submissions of both the parties and perusing application, documents and written submissions placed on record, this Bench notes that before approaching the Hon'ble NCLAT, the Promoters of the Corporate Debtor had made an attempt to settle the matter. That the order dated 11.02.2019 passed by this authority records that the Corporate Debtor is ready and willing to pay the entire admitted claim to SIDBI. However, next order dated 24.04.2019 records that ...even though the corporate debtor is ready and willing to liquidate all outstanding dues, the same is not acceptable to them..... (SIDBI), the sole member of CoC. 8. That the Applicant has made prayer for considering the Scheme in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d already passed on the date when the liberty was granted by the Hon'ble NCLAT to the Applicant to submit the Scheme under Section 230. 11. That in the same order, the Hon'ble NCLAT has also held that the Liquidator shall follow the procedure laid down under Y. Shivram vs. S. Dhanpal Ors. Company Appeal (AT) (Insolvency) No. 224 of 2018 dated 27.02.2019 case. Therefore, it is necessary to visit the Judgement dated 27.02.2019 in Y. Shivram vs. S. Dhanpal Ors. Company Appeal (AT) (Insolvency) No. 224 of 2018, wherein the following is observed with regard to timeline for taking steps under Section 230 of the Companies Act, 2013. 17. Normally, the total period for liquidation is to be completed preferably within two years. Therefore, in S.C. Sekaran v. Amit Gupta Ors. (Supra), this Appellate Tribunal allowed 90 days' time to take steps under Section 230 of the Companies Act, 2013. In case, for any reason the liquidation process under Section 230 takes more time, it is open to the Adjudicating Authority (Tribunal) to extend the period if there is a chance of approval of arrangement of the scheme. 12. Here, we observe that the IBC does not prescribe any s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, 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 of a company in liquidation, only the Official Liquidator could propose a compromise or arrangement with the creditors and members as contemplated by Section 391 of the Act or any of the contributories or creditors also can come forward with such an application. 16. Further, the Hon'ble Supreme Court in the matter of Swiss Ribbons Pvt. Ltd. Anr. Vs. Union of India Ors. in Writ Petition (Civil) No. 99 of 2018' dated 25th January, 2019, has also observed that: 11. .........What is interesting to note is that the Preamble does not, in any manner, r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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