2024 TaxPub(CL) 157 (NCLAT-
Chny)
COMPANIES ACT, 2013
Section
230
IBBI
(Liquidation Process) Regulations, 2016 - Regulation 2B
The compromise scheme of the company in liquidation should be considered
by the liquidator where it can restructure the debt.
|
Compromise scheme - Rejection of
restructuring scheme - Whether such act of liquidator was in violation of
section 230 - Allowability thereof
The appellant submitted a compromise scheme to
the liquidator for restructuring of the debt of the corporate debtor which was
stated to have been rejected by the Stakeholders Consultation Committee. The
respondent had violated section 230(1) as he did not present the scheme
proposed by the Appellant before the SCC, therefore, the appellant could not
persuade the SCC in respect of the scheme submitted Held: It was
viewed that while disposing of this appeal, as per the agreement between the
parties, that the scheme propounded by the appellant, in terms of section 230
of the Act, should be presented before the SCC. The meeting should be convened
by the liquidator by giving time, date and place to the parties concerned and
in that meeting the scheme should be considered by the SCC a decision should be
taken in accordance with law.
REFERRED :
FAVOUR : Appeal disposed of.
A.Y. :
IN THE NCLAT, CHENNAI BENCH
RAKESH KUMAR JAIN, JUDICIAL
MEMBER & SHREESHA MERLA, TECHNICAL MEMBER
Sanjeev Mitla v.
Madhusudhan Rao Gonugunta & Anr.
Company Appeal (AT)
(CH) (Ins) No. 387 of 2023 (IA No. 1176 of 2023)
29 November, 2023
Appellant by: S. Rajagopalan, Advocate
Respondent by: Vivek Reddy, Senior Advocate for Mumaneni Vazra Laxmi, for Caveator
(Virtual Mode)
Rakesh Kumar Jain, J.
(Oral)
This appeal is directed against
the Order, dated 8-9-2023 by which an application filed by the appellant
under section 60 (5) of the Insolvency and Bankruptcy Code, 2016 (for short
'Code') read with Rule 11 of NCLT Rules, 2016 (Rules) against the liquidator of
the Corporate Debtor that the Appellant, being a shareholder, submitted a
scheme of compromise of the Corporate Debtor under section 230 of the Companies
Act, 2013 (for short 'the act') read with Regulation 2B of IBBI (Liquidation
Process) Regulations, 2016 (Regulation) but the same was rejected by the liquidator.
Shorn of unnecessary details,
the appellant submitted a compromise scheme to the liquidator for restructuring
of the debt of the corporate debtor which is stated to have been rejected by
the Stakeholders Consultation Committee (SCC) by 97% vote because the scheme
submitted by the Appellant was to the tune of Rs. 90 Crores in comparison to
the reserve price of Rs. 155 Crores set by the SCC for auction of the Corporate
Debtor as a going concern.
Counsel for the Appellant has
submitted that the Respondent (liquidator) has violated section 230(1) as he
did not present the scheme proposed by the Appellant before the SCC, therefore,
the appellant could not persuade the SCC in respect of the scheme submitted. In
this regard he has also relied upon a decision of the NCLAT rendered the case
of 'Ramesh Kumar Chaudhary & Ors. v. Anju Agarwal & Ors.'
reported as (2022) 171 SCC Online 655 : 2022 TaxPub(CL) 1434 (NCLAT-Del).
On the other hand, Counsel for
the Respondent has referred to paragraph 3 of the 5th SCC meeting which is
reproduced as under :--
'3. To Discuss
on the two compromise or arrangement schemes received from two stakeholders and
apply for extension of the period if required;
The Liquidator
circulated the two Compromise or Arrangement proposals received to all the SCC
members and Liquidator informed that the as per the Regulation 2B of IBBI
(Liquidation) Regulations, 2016, Compromise or arrangement proposal under
section 230 of the Companies Act, 2013 should be completed within 90 days. The
Liquidation commencement date is 18-4-2023 for the Corporate Debtor and the
period completed by 16-7-2023 itself but both the applicants sent the proposal
in email with CC to lenders on 13-7-2023 (86th Day only) without the supporting
documents including no notarized affidavit under section 29A. Mr. Arun Kumar
Agarwal has sent few supporting documents on 24-7-2023 without notarized
affidavit under section 29A and another Applicant, i.e., Mr. Sanjeev Mitla has
sent few supporting documents on 27-7-2023 @ 9.19 PM. Mr. Sanjeev Mitla has not
submitted proposal and any original documents till date. Both the Applicants
have not submitted the EMD of 15% by way of DD in the name Corporate Debtor (requested
by the Liquidator) towards as per the Sub Regulation 3 of Regulation 2B of the
INSOLVENCY AND BANKRUPTCY BOARD OF INDIA (LIQUIDATION PROCESS) REGULATIONS,
2016 dated 25-7-2019 and also prove the real intention towards their proposals.
Mr. Arun Kumar Agarwal and his wife presented before SCC members and briefed
their proposal to all the SCC members and Mr. Arun Kumar Agarwal informed to
all the SCC members that they are ready to offer consolidated total
consideration of Rs.123 Crores (which included some of the items which do not
constitute the liquidation cost or share of FCs/OCs/W&E) and all SCC
members noted the same. All the SCC lenders had separate deliberations on both
the proposals, reasons for failure of OTS proposal given to the promoters and
number of the years lost in recovery due to the failure of none payment of OTS
proposal given during the CIR process, possibility of recovery in the public E
auction, present increase of land prices in Telangana, Liquidation Value
mentioned in the Liquidation Order, the possibility of payment of Rs. 123
Crores where the same applicant already unable to pay even very lesser OTS
amount of Rs. 86 Crores, etc., and informed that they will communicate their
decision on this agenda item by considering next agenda item and few SSC
members requested for voting by email and requested to time till 5-8-2023 and
Liquidator agreed for the same.
More than
required Majority of the SCC members have accepted to fix the reserve price for
Rs. 155 Crores and this Agenda item not considered and Liquidator rejected the
above two proposals.'
Counsel for the Respondent has
then referred to paragraph 20 and 21 of the impugned order which are also
reproduced as under :--
'20. About the
case of Ramesh Kumar Choudhary & Ors. cited on behalf of the
Applicant, learned Counsel firstly distinguished it on facts. He pointed out
that in that case, value of the proposed compromise scheme was of Rs. 45.21
crores compared to the reserve price of Rs. 45 crores set by SCC, as seen from
para 4 of that order. In the present case, he continued, that the compromise
scheme proposed by the applicant is of only Rs. 90 crores in comparison to the
reserve price of Rs. 155 crores set by the SCC for auction of the Corporate
Debtor as a going concern. He then referred to para 27 of the order of Hon'ble
NCLAT, where it was held that '...the Scheme under section 230... ought to have
consent of not less than 75% of the Secured Creditors, and an affidavit to that
effect ought to accompany with the scheme' and stated that this deficiency
alone rendered the compromise scheme proposed by the Applicant as a
non-starter. He cited another judgment of Hon'ble NCLAT in the case of Harish
Sharma to support his claim further.
21. We have
given anxious consideration to the arguments put forth by both sides. In our
considered opinion, the Applicant's prayer to grant ad-interim stay on the
E-Auction is not warranted, as we find that his prayer to convene meeting of
SCC members to take decision on the compromise scheme was already answered on
28-7-2023. In that meeting, the SCC not only considered but (as revealed from
the minutes of that meeting) decidedly rejected the proposed compromise scheme
offering only Rs. 90 crores against the outstanding debt of Rs. 469.84 crores
and went in for auction of the corporate debtor as a going concern for the
reserved price of Rs. 155 crores.'
Counsel for the Respondent has
also submitted that the order of liquidation dated 18-4-2023 was subject matter
of an appeal before this Tribunal in CA (AT) (Ins) No. 109 of 2023 which
was further taken up to the Hon'ble Supreme Court in Civil Appeal No. 5031
of 2023 in which the following order was passed :--
'We do not
find any good grounds and reasons to interfere with the impugned judgment and
hence, the appeal is dismissed.
However, we
clarify that the impugned judgment/order and the dismissal of the present
appeal would not come in the way of M/s. Cantors Fitzgerald from applying and
submitting Expression of Interest in terms of sale Notice, dated 6-8-2023.
Pending
application(s), if any, shall stand disposed of.'
It is thus submitted that
already decision has been taken by the SCC by not less than 97% vote share that
the proposal submitted by the appellant is not viable and has been rejected.
However, Counsel for the
Appellant has submitted that though the proposal has been rejected by more than
75% vote share by the SCC but the fact remains that the proposal made by the
Appellant was never put before the SCC in his presence. This fact is not denied
by the Respondent after taking instructions from the liquidator.
In view thereof, we are of the
considered opinion that it would be just an expedient if the proposed scheme
propounded by the appellant is put before the SCC in his presence on which the
SCC may take a decision.
After hearing the matter for
some time, we put this question to the Counsel for the Respondent, who asked
for a pass over in order to seek instructions from the liquidator and after
taking the instructions he has submitted that the proposed scheme of the
appellant may be put to the SCC on 1-12-2023 which shall be considered by the
SCC on that day and take the decision accordingly. Counsel for the Appellant
has not shown any averseness to this proposal made by the Counsel for the
Respondent. As a result, thereof, while disposing of this appeal, we direct, as
per the agreement between the parties, that the scheme propounded by the
appellant, in terms of the section 230 of the Act, shall be presented before
the SCC on 1-12-2023, the meeting shall be convened by the liquidator on
1-12-2023 by giving time, date and place to the parties concerned and in that
meeting the scheme shall be considered by the SCC a decision shall be taken in
accordance with law.
With these observations, the
present appeal is hereby disposed of.
It is made clear that the order
passed by us today shall not come in the way of auction which is fixed for
16-12-2023.