2024 (10) TMI 16 - Tri - Companies Law

Sanction of scheme of compromise and arrangement filed under Section 230 of the Companies Act, 2013 - HELD THAT - The applicants have referred the scheme of arrangement which was filed by the CD under section 230 of Companies Act, 2013. The counsel representing the Financial Creditors had already opposed the issuance of notice in the Intervention Petitions filed by the applicants and pressed for the dismissal of the applications, arguing that there are no provisions in the Insolvency and Bankruptcy Code (IB Code) for intervention at the pre-admission stage. The submissions of the Financial Creditors were also recorded in the order dated 15.02.2024. Hence, the allottees/ Financial Creditors who had filed the main Company Petition cannot be directed to consider the scheme of Arrangement proposed by the Corporate Debtor. On an application filed under Section 7 of the IBC, 2016, this Adjudicating Authority merely has to ascertain existence of financial debt and its default. The issue of maintainability has already been concluded by Hon ble Supreme Court. The submissions of the applicants, asserting that the admission of the company petition would severely impact and prejudice the rights of the applicant, leading to the corporate death of the company, cannot be entertained because there are no provisions in the IB Code that provide for intervention by a third party, especially at this stage where arguments of the Financial Creditor have concluded, and arguments of the Corporate Debtor are in progress and soon to be concluded. Furthermore, this application is filed by companies holding units in the Corporate Debtor project, whereas the main company petition is filed by individual allottees whose interests will also be prejudiced if we entertain the present application because it will lead to unnecessary delay. The present application also appears to be similarly motivated, filed with the intention of delaying the proceedings which this Adjudicating Authority cannot entertain - petition dismissed.

Issues Involved:
1. Impleadment of Applicants in the main Company Petition.
2. Consideration of the scheme of compromise and arrangement under Section 230 of the Companies Act, 2013.
3. Delay in proceedings and objections to the intervention at the pre-admission stage.

Issue-wise Detailed Analysis:

1. Impleadment of Applicants in the main Company Petition:

The applicants in Ivn. P/11/2024 and Ivn. P/12/2024 sought to be impleaded in the main Company Petition (IB) 682/2021. They argued that they collectively held a significant number of units in the Festival City Project and that their interests would be directly affected by the outcome of the petition. The applicants contended that they were necessary and proper parties to the proceedings and that the initiation of the Corporate Insolvency Resolution Process (CIRP) would severely prejudice their interests. However, the Tribunal observed that similar applications had been dismissed previously and emphasized that the primary objective of the Insolvency and Bankruptcy Code (IBC) is the timely resolution of the CIRP process. The Tribunal concluded that the applicants' request for intervention could not be entertained at this stage as it would lead to unnecessary delays.

2. Consideration of the scheme of compromise and arrangement under Section 230 of the Companies Act, 2013:

The applicants also sought an opportunity for all allottees of the Project to consider a scheme of compromise and arrangement proposed by the Corporate Debtor under Section 230 of the Companies Act, 2013. They argued that a majority of the allottees should have the chance to evaluate the scheme before any adverse order is passed. The Tribunal noted that the Corporate Debtor had been filing applications to delay the proceedings and that the issue of maintainability had already been decided by higher courts. The Tribunal held that it could not direct the allottees/Financial Creditors who had filed the main Company Petition to consider the scheme proposed by the Corporate Debtor, as there were no provisions in the IB Code for such intervention at the pre-admission stage.

3. Delay in proceedings and objections to the intervention at the pre-admission stage:

The Tribunal observed that the Corporate Debtor had been attempting to delay the proceedings by filing multiple applications on various pretexts. The Financial Creditor strongly opposed the issuance of notice in the Intervention Petitions, arguing that there were no provisions in the IB Code for intervention at the pre-admission stage. The Tribunal emphasized that its role was to ascertain the existence of financial debt and its default in an application filed under Section 7 of the IBC, 2016. The Tribunal concluded that the present applications were filed with the intention of delaying the proceedings and could not be entertained, especially in light of the Supreme Court's directive to dispose of the main Company Petition expeditiously.

Conclusion:

The Tribunal dismissed both Intervention Petitions (Ivn. P/11/2024 and Ivn. P/12/2024) in limine, stating that the applications were motivated by an intention to delay the proceedings and that the applicants' requests could not be entertained at this stage. The Tribunal directed that a copy of the order be served to the parties concerned.

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