2022 (3) TMI 947 - Tri - Insolvency and Bankruptcy

Rejection of Scheme of Arrangement/Compromise - HELD THAT - The Scheme submitted by the Applicant in the present case was already considered by one of the major stakeholders in respect of the Corporate Debtor viz. Maximus ARC Limited and the same was rejected. Further, in any case in the stakeholders Consultation Committee held on 17.11.2020, the Stakeholders have decided to go for e-auction of the sale of the assets of the Corporate Debtor and has categorically stated that Liquidator need not wait for any Schemes since it would delay the completion of the Liquidation Process. The Liquidator was right in rejecting the Scheme of Compromise propounded by the Applicant - petition dismissed.

Summary

Issues:
1. Application under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 seeking relief regarding rejection of Scheme of Arrangement/Compromise.
2. Consideration of Scheme of Arrangement/Compromise by the Liquidator.
3. Rejection of Scheme and auctioning of assets of the Corporate Debtor.
4. Stakeholders' consultation and decision on the Scheme.
5. Reasons for rejection of the Scheme by a major stakeholder.
6. Dismissal of the Application by the Tribunal.

Analysis:
1. The Applicant filed an Application under Section 60(5) of the Insolvency and Bankruptcy Code, 2016, seeking to set aside the rejection of the Scheme of Arrangement/Compromise dated 31.12.2020 by the 2nd Respondent. The Applicant sought directions to receive and file the Scheme, emphasizing their interest in the revival of the Corporate Debtor.

2. The Applicant's Senior Counsel argued that the rejection was unjust as the Scheme was submitted within the 90-day period from the date of liquidation. The Counsel highlighted the impact of the pandemic on their ability to present the Scheme timely and criticized the decision to auction the assets separately, hindering the revival objective of the IBC, 2016.

3. The Liquidator, represented by the Respondent, justified the rejection citing reasons such as the non-feasibility of the proposed Scheme, lack of provisions for essential payments, and doubts on the investors' financial capabilities and expertise in the relevant field. A major stakeholder also expressed objections to the Scheme, emphasizing its non-serious nature and potential harm to their interests.

4. The Stakeholders Consultation Committee meeting revealed that stakeholders, including a major one, had decided in favor of e-auctioning the assets rather than waiting for new Schemes to avoid delays in the liquidation process. The Tribunal considered these factors and the rejection reasons, concluding that the Liquidator's decision to reject the Scheme was justified.

5. The Tribunal dismissed the Application, noting that the rejection was appropriate based on the stakeholders' decisions, the major stakeholder's objections, and the non-feasibility of the proposed Scheme. The Tribunal found in favor of the Liquidator's actions, emphasizing the need to proceed with the liquidation process efficiently.