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2022 (12) TMI 477 - AT - Insolvency and BankruptcySanction of scheme of compromise and arrangement under section 230 of the Companies Act, 2013 - HELD THAT - It is clearly established that the Adjudicating Authority provided reasonable and sufficient opportunity to the Appellant to submit a credible scheme of compromise and arrangement, and the fact that the scheme so presented by the Appellant was prima-facie found to inflate the total payments by provisioning payments to creditors who are either related to the corporate debtor or for such creditors who had not filed legitimate claims in the liquidation process and thus, the proposed payments were in effect not of greater value than the amount being offered by the successful bidder in the e-auction. The Adjudicating Authority has not committed any error in disposing of the IA 154/2022 by the Impugned Order allowing the Liquidator to proceed with the e-auction and not allowing any more time for consideration of the scheme proposed under section 230 of the Companies Act, 2013 - the Adjudicating Authority has not erred in passing the Impugned Order. Appeal dismissed.
Issues Involved:
1. Validity of the Liquidator's actions during the liquidation process. 2. Timeliness and legitimacy of the Appellant's scheme of compromise and arrangement. 3. Allegations of collusion and confidentiality breaches by the Appellant. 4. Compliance with the Insolvency and Bankruptcy Code (IBC) and Companies Act provisions. 5. Evaluation of the scheme of compromise and arrangement proposed by the Appellant. 6. Adjudicating Authority's decision to allow the continuation of the e-auction process. Issue-Wise Detailed Analysis: 1. Validity of the Liquidator's Actions During the Liquidation Process: The Appellant argued that the Liquidator failed to provide necessary information timely and continued with the auction process despite the Appellant's intention to submit a scheme of compromise and arrangement. The Liquidator, however, contended that he acted in accordance with the law and the directions of the Adjudicating Authority, providing all necessary information and proceeding with the auction due to the Appellant's delay. 2. Timeliness and Legitimacy of the Appellant's Scheme of Compromise and Arrangement: The Appellant claimed that despite genuine efforts to submit a scheme, delays were caused by the Liquidator's actions. The scheme was eventually submitted after the stipulated period, leading to the filing of IA No. 154/2022 for staying the auction. The Adjudicating Authority found that the Appellant failed to submit the scheme within the three-week period granted, and thus, the Liquidator was justified in continuing with the auction process. 3. Allegations of Collusion and Confidentiality Breaches by the Appellant: The Liquidator alleged that the Appellant, through Mr. Rakesh Kumar Agarwal, acted in collusion with the erstwhile management of the corporate debtor and breached confidentiality agreements. The Adjudicating Authority noted that the Appellant shared confidential information with unrelated parties, supporting the Liquidator's claims of collusion. 4. Compliance with the Insolvency and Bankruptcy Code (IBC) and Companies Act Provisions: The Appellant's scheme was scrutinized for compliance with IBC and Companies Act provisions. The Liquidator and Respondent No. 2 argued that the scheme was not genuine and aimed at derailing the liquidation process. The Adjudicating Authority and the Tribunal emphasized that the scheme should not be used as a backdoor entry for the erstwhile management, referencing the Supreme Court judgment in Arun Kumar Jagatramka vs. Jindal Steel and Power Limited. 5. Evaluation of the Scheme of Compromise and Arrangement Proposed by the Appellant: The Tribunal examined the scheme's provisions, noting that it included payments to creditors whose claims were not admitted during the CIRP and related parties of the corporate debtor. The scheme's financial viability and the Appellant's seriousness in proposing a credible scheme were questioned. The Tribunal found that the scheme did not offer better value than the successful bid in the e-auction. 6. Adjudicating Authority's Decision to Allow the Continuation of the E-Auction Process: The Adjudicating Authority decided to proceed with the e-auction, emphasizing the need to maximize the value of the corporate debtor's assets. The Tribunal upheld this decision, noting that the Appellant was given sufficient opportunity to submit the scheme but failed to do so within the stipulated time. The Tribunal concluded that the Adjudicating Authority's decision was fair and in accordance with the law. Conclusion: The appeal was dismissed, and the Tribunal affirmed the Adjudicating Authority's decision to allow the continuation of the e-auction process. The Tribunal found no error in the Adjudicating Authority's order and emphasized the importance of adhering to the timelines and provisions of the IBC and Companies Act. The Appellant's scheme was deemed not credible, and the Liquidator's actions were upheld as appropriate and lawful.
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