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TMI BlogCOMPROMISE OR ARRANGEMENT IN LIQUIDATION PROCEEDINGSX X X X Extracts X X X X X X X X Extracts X X X X ..... COMPROMISE OR ARRANGEMENT IN LIQUIDATION PROCEEDINGS X X X X Extracts X X X X X X X X Extracts X X X X ..... ile the liquidation application is pending. This signifies that even after a liquidation application is filed, efforts to resolve the situation through a more amicable settlement are still encouraged. Regulation 39BA of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 ('Regulations' for short) provides for assessment of compromise or arrangement. Regulation 39BA (1) provides that while deciding to liquidate the corporate debtor under section 33, the committee shall examine whether to explore compromise or arrangement as referred to under sub -regulation (1) of regulation 2B of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulation, 2016 and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e resolution professional shall submit the committee's recommendation to the Adjudicating Authority while filing application under section 33. Regulation 39BA (2) provides that where a recommendation has been made under sub-regulation (1), the resolution professional and the committee shall keep exploring the possibility of compromise or arrangement during the period the application to liquidate the corporate debtor is pending before the Adjudicating Authority. Regulation 2B of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 provides for the procedure for compromise or arrangement. The Regulation provides that where a compromise or arrangement is proposed under section 230 of the Companies Act, 2013, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall be completed within 90 days of the order of liquidation under section 33. 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. the liquidator shall file the proposal of compromise or arrangement only in cases where such recommendation has been made by the committee under regulation 39BA of the Regulations. The liquidator shall not file such proposal after expiry of thirty days from the liquidation commencement date. The time taken on compromise or arrangement, not exceeding 90 days, shall not be included in the liquidation period. Any cost incurred by the liquidator in relation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to compromise or arrangement shall be borne by the corporate debtor, where such compromise or arrangement is sanctioned by the Tribunal under sub-section (6) of section 230. Such cost shall be borne by the parties who proposed compromise or arrangement, where such compromise or arrangement is not sanctioned by the Tribunal under sub-section (6) of section 230. In SHAHID ALI VERSUS KULDEEP VERMA & ORS. - 2025 (5) TMI 940 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI - LB, the National Company Law Appellate Tribunal ('NCLAT' for short) held that even after the initiation of liquidation proceedings by the liquidator the liquidator may consider the compromise or arrangement. In the above said case, the Central Bank of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India initiated corporate insolvency resolution process against Sasa Musa Sagar Works Private Limited under section 7 of the Code. The application was admitted by the Adjudicating Authority on 09.03.2021. The total admitted claim is Rs.137.60 crores and the liquidation value is Rs.105.35 crores. After submission of Form G, the suspended directors (appellant) submitted a resolution plan. The appellant was selected as the successful resolution applicant of consortium of the appellant. The appellant was asked to improve the financial proposals. The appellants gave two addendum to their original resolution plan. The Committee of Creditors did not accept the resolution plan of the appellant and decided to liquidate the corporate debtor. The Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... solution Professional filed an interim application before the Adjudicating Authority with the prayer for liquidation of corporate debtor. The Adjudicating Authority allowed the said application and ordered for the liquidation of the corporate debtor. The appellant also filed an interim application before the Adjudicating Authority with the prayer to direct the Committee of Creditors to reconsider their resolution plan. The financial creditor filed an interim application before the Adjudicating Authority with the prayer to dismiss the application filed by the appellant. The Adjudicating Authority dismissed the said application filed by the appellant. Against this order the appellant filed appeal before the National Company Law Appellate Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal ('NCLAT' for short). The same was dismissed by NCLAT as barred by limitation. The liquidator went for e-auction of the properties of the corporate debtor but no bid has been received in response to the e-auction. Against the order of the Adjudicating Authority admitting the liquidation proceedings and the order against non-consideration of their resolution plan, the appellants filed the present appeals before NCLAT. The appellants contended before the NCLAT that the appellants submitted two addendums with the increase in financial value to the extent of Rs.89 crores. The Adjudicating Authority directed the Committee of Creditors to reconsider the plan but it was not considered. The liquidator contended that the Adjudicating Authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y considered all aspects and rightly considered and allowed to liquidation. The NCLAT considered the submissions of the parties. The NCLAT observed that the Committee of Creditors, considering all aspects of the matter and passed resolution for liquidation. Therefore, the NCLAT held that there is no ground to interfere with the findings of the Committee of Creditors. The appellant lastly submitted before NCLAT that he may be allowed to submit a scheme of amalgamation under Regulation 2B of the liquidation regulations. Since the appellant is an MSME the appellant may be allowed for the scheme of amalgamation. The liquidator contended that there is no recommendation under Regulation 39BA of the Insolvency and Bankruptcy Board of India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 ('Regulations' for short) Section 39BA of the Regulations provides for the assessment of compromise or arrangement. Section 39BA (1) of the Regulations provides that while deciding to liquidate the corporate debtor under section 33, the committee shall examine whether to explore compromise or arrangement as referred to under sub-regulation (1) of regulation 2B of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulation, 2016 and the resolution professional shall submit the committee's recommendation to the Adjudicating Authority while filing application under section 33. Regulation 39BA (2) provides that where a recommendation has been made under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-regulation (1), the resolution professional and the committee shall keep exploring the possibility of compromise or arrangement during the period the application to liquidate the corporate debtor is pending before the Adjudicating Authority. The NCLAT observed that in this case there is no recommendation made under Regulation 39BA. However, NCLAT was of the view that the second proviso to Regulation 2(B) (1) cannot control the proviso under Regulation 2(B) (1) which requires to give a reasonable opportunity for the scheme under Section 230 of the Companies Act, 2013. The NCLAT was of the view that the appellant is entitled to submit a scheme or arrangement under Regulation 2B. The NCLAT directed the appellant to submit the scheme on or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before 20.05.2025. The liquidator, on receipt of such scheme, is directed to take further steps in this regard. 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