2020 (6) TMI 808 - Tri - Insolvency and Bankruptcy

Seeking reconsideration of Scheme of Compromise and Arrangement under Section 230 of the Companies Act,2013, proposed by the shareholders along with the TEV Study - direction in the interim to the liquidator not to discharge or dismiss any employee and maintain their employment - HELD THAT - As rightly pointed out by the Ld.counsel for the creditors a scheme would have been passed and accepted within 90 days of the order of liquidation as per Regulation 2-B of the IBBI ( Liquidation Process) Regulations, 2016. After a lapse of 2 years even in the midst of the Novel Corona Pandemic, it appears to me that allowing this application will not any way help the applicants to present a techno economically viable plan as mandated by the creditors. Since the power of the tribunal is limited and this Tribunal has no power to interfere with the commercial wisdom of the creditors to approve or not to approve the scheme, the submission on the side of the applicant, cannot be accepted, extending sympathy upon them. The law is settled as to the power of the tribunal in regards issuing direction to the creditors to reconsider a scheme like the scheme in hand. Law is settled that the Company Court's jurisdiction is peripheral and supervisory and not appellate. This application is not worth consideration. Accordingly liable to be dismissed.

Summary

Issues:
1. Consideration of Scheme of Compromise and Arrangement under Section 230 of the Companies Act, 2013.
2. Direction to the liquidator regarding employee maintenance during liquidation.
3. Reconsideration of the scheme due to the impact of COVID-19 on the Company's operations and assets.

Analysis:
1. The application filed by the representatives of the employees of the Corporate Debtor sought directions to reconsider the Scheme of Compromise and Arrangement under Section 230 of the Companies Act, 2013. The applicants emphasized the need for creditors to re-examine the scheme in light of the ongoing COVID-19 crisis, which was adversely affecting the Company's operations and assets. The urgency of the matter led to the application being listed for a hearing promptly after serving notice to the liquidator and the financial creditor, State Bank of India (SBI).

2. The liquidator, in response to the notice, expressed his inability to continue the liquidation process due to a lack of funds. The financial creditor, represented by counsel, highlighted the impracticality of reviving the Company after more than two years of liquidation. The applicants' counsel requested an opportunity to present the scheme again to convince the creditors, citing the impact of COVID-19 on the Company's viability and the potential loss of jobs for employees. However, the liquidator pointed out the Company's pre-existing financial losses, exacerbated by the pandemic, making it unlikely for creditors to reconsider the scheme.

3. The Tribunal, after considering all submissions, concluded that the application was not viable for consideration. The Tribunal highlighted the limited power to interfere with creditors' commercial decisions regarding the approval of schemes. It was noted that despite the change in circumstances due to COVID-19, the creditors had already rejected the revised scheme, indicating a lack of feasibility in presenting a viable plan acceptable to creditors. The Tribunal emphasized the supervisory role of the Company Court and its inability to compel creditors to reconsider schemes. Ultimately, the application was dismissed, with no costs awarded, as it was deemed unworthy of further consideration given the circumstances and legal precedents.

In conclusion, the Tribunal's judgment emphasized the legal limitations on its authority to intervene in creditors' decisions regarding scheme approvals, especially in the context of ongoing liquidation proceedings and the impact of external factors like the COVID-19 pandemic on Company operations and viability.