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2020 (1) TMI 1523 - Tri - Insolvency and BankruptcyCondonation of delay of 35 days in filing the Application for extension of a period of 90 days from 01.10.2019 till 29.12.2019 - seeking to follow the entire process under Section 230 of the Companies Act, 2013 in respect of the Corporate Debtor - HELD THAT - Admittedly from the documents it is seen that the Scheme is proposed by the Ex - Directors and Promoters of the Corporate Debtor and the issue whether the Ex - Directors and Promoters who are ineligible under Sec. 29A of the IBC, 2016 are eligible to file an application for Compromise and Arrangement was a question which fell for consideration before the Hon'ble NCLAT in JINDAL STEEL AND POWER LTD. VERSUS ARUN KUMAR JAGATRAMKA 2020 (2) TMI 1130 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI - Learned Counsel for the Respondent, contradicting the submissions made by the Learned Counsel for the Liquidator has emphatically contended that the Corporate Debtor is an MSME and as such the ineligibility in relation to Section 29 A of the IBC, 2016 would have no bearing upon them by virtue of Section 240A of the IBC, 2016. This Tribunal is of the view that the Respondents are trying to deceive this Tribunal by claiming themselves as an MSME, so as to enable them to submit the Scheme before the Liquidator, which is nothing short of an abuse of process of IBC. The Scheme of Arrangement has been proposed by the Ex-Directors and Promoters of the Corporate Debtor, who are qualified, taking into consideration the provisions of Section 29A of IBC, 2016 - a creditor / member who is otherwise ineligible under Section 29A of the IBC, 2016 is not qualified to be a proposer of the Scheme. Application disposed off.
Issues:
1. Application for condonation of delay in filing for extension under Section 60(5) of the Insolvency and Bankruptcy Code, 2016. 2. Relief sought under Section 35(n) and 60(5) of the Insolvency and Bankruptcy Code, 2016 regarding conducting meetings of creditors and payment of expenses. 3. Eligibility of Ex-Directors and Promoters under Section 29A of the IBC, 2016 to submit a Scheme of Compromise or Arrangement under Section 230 of the Companies Act, 2013. Analysis: 1. The Liquidator filed an application seeking condonation of a 35-day delay in filing for an extension under Section 60(5) of the Insolvency and Bankruptcy Code, 2016. The Tribunal, considering the reasons provided, granted the condonation of delay. 2. The Liquidator filed another application under Section 35(n) and 60(5) of the Insolvency and Bankruptcy Code, 2016, seeking various reliefs related to conducting meetings of secured and unsecured creditors, payment of expenses, and liquidator's fees. The background involved the liquidation of a corporate debtor, Forward Shoes (India) Pvt. Ltd., after the failure of a resolution plan. The Tribunal noted the history of the case, including the appointment of the Liquidator and previous orders related to the liquidation process. The Liquidator sought to follow the process under Section 230 of the Companies Act, 2013 for the Corporate Debtor. However, issues arose when the Ex-Directors and Promoters of the Corporate Debtor submitted a Scheme without adhering to conditions, including the payment of the Liquidator's fees and the requirement of an Interest Free Deposit or Bank Guarantee. The Tribunal referred to relevant judgments and held that Ex-Directors and Promoters ineligible under Section 29A of the IBC, 2016, cannot propose a Scheme of Compromise or Arrangement under Section 230 of the Companies Act, 2013. Consequently, the Tribunal dismissed the application seeking reliefs related to the Scheme. 3. The core issue revolved around the eligibility of Ex-Directors and Promoters under Section 29A of the IBC, 2016 to submit a Scheme of Compromise or Arrangement under Section 230 of the Companies Act, 2013. The Tribunal analyzed relevant legal provisions, including judgments and the nature of the Corporate Debtor, to conclude that ineligible parties cannot propose such schemes. The Tribunal highlighted the importance of preventing abuse of the insolvency process and dismissed the application based on the ineligibility of the Ex-Directors and Promoters to propose the Scheme. The decision was in line with established legal principles and previous judgments, ensuring the integrity of the insolvency proceedings.
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