2019 (11) TMI 1668 - Tri - Companies Law

Approval of Scheme of amalgamation - seeking directions regarding various meetings - HELD THAT - The remedy of Section 230 (2) (c) and Section 230 (2) (c) (iv), therefore, clearly show that a scheme of corporate debt restructuring is different from a scheme of corporate debt restructuring in which the corporate debt restructuring guidelines specified by the Reserve Bank of India are proposed to be adopted. Therefore, the contention of the learned counsel for the applicant-companies that a scheme of corporate debt restructuring is only one in which the restructuring is as per the guidelines specified by Reserve Bank of India, cannot be accepted. The schemes for restructuring are in no way merged with the Code. The provisions of Section 230 (2) (c) of the Companies Act, 2013 are, consequently, applicable in the present case. There is no averment that the conditions are satisfied in the present case. Application dismissed.

Summary

Issues:
1. Eligibility of the applicant under Section 29A of the Insolvency and Bankruptcy Code, 2016 for amalgamation, compromise, and arrangement.
2. Validity of the application for amalgamation, compromise, and arrangement.
3. Compliance with Section 230(2)(c) of the Companies Act, 2013 for corporate debt restructuring.

Issue 1:
The judgment addressed the eligibility of the applicant under Section 29A of the Insolvency and Bankruptcy Code, 2016 for the proposed amalgamation, compromise, and arrangement. The applicant, being a suspended member of the Board of Director and Promoter Director of the companies in liquidation, was found ineligible under Section 29A. The court highlighted that the application could not be accepted due to the applicant's status under the Code.

Issue 2:
The court considered the validity of the application for amalgamation, compromise, and arrangement. It was noted that the proposed scheme lacked economic rationale as it aimed to consolidate the assets and liabilities of the companies into the Transferee Company without ensuring the revival and rehabilitation of the companies in liquidation. The court emphasized that the scheme did not serve the purpose of merging a company in liquidation into a financially stable entity for rehabilitation.

Issue 3:
Regarding compliance with Section 230(2)(c) of the Companies Act, 2013 for corporate debt restructuring, the court analyzed the contentions made by the applicant companies. The court clarified that a scheme of corporate debt restructuring does not solely involve following the guidelines specified by the Reserve Bank of India, as contended by the applicant. The court emphasized that the provisions of Section 230(2)(c) apply, and the conditions for corporate debt restructuring were not met in the present case. Consequently, the court dismissed the application based on the grounds discussed related to Sections 230(2)(c) and 230(2)(c)(iv) of the Companies Act, 2013.

In conclusion, the court dismissed the applications (CA (CAA) No. 35/Chd/Chd/2019 and CA No. 1118/2019) based on the ineligibility of the applicant under Section 29A of the Insolvency and Bankruptcy Code, the lack of economic rationale in the proposed scheme for amalgamation, and the failure to comply with the provisions of Section 230(2)(c) of the Companies Act, 2013 for corporate debt restructuring.