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2019 (5) TMI 762 - AT - IBCEligibility in terms of Section 29A (c) (h) of Insolvency Bankruptcy Code, 2016 - HELD THAT - We are not inclined to grant any relief in this appeal nor intend to express any opinion with regard to delay in preferring the appeal. However, we are of the view that liquidator is required to act in accordance with decision of this Appellate Tribunal passed in Y. SHIVRAM PRASAD AND ASSET RECONSTRUCTION COMPANY (INDIA) LTD. VERSUS S. DHANAPAL ORS. AND SERVALAKSHMI PAPER LTD. ORS 2019 (5) TMI 386 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI , where it was held that the liquidator is required to act in terms of the directions of the Appellate Tribunal and take steps under Section 230 of the Companies Act. If the members or the Corporate Debtor or the creditors or a class of creditors like Financial Creditor or Operational Creditor approach the company through the liquidator for compromise or arrangement by making proposal of payment to all the creditor(s), the Liquidator on behalf of the company will move an application under Section 230 of the Companies Act, 2013 before the Adjudicating Authority i.e. National Company Law Tribunal, Chennai Bench. Appeal disposed off.
Issues Involved:
1. Ineligibility of the appellant under Section 29A (c) & (h) of the Insolvency & Bankruptcy Code (I&B Code), 2016. 2. Liquidation order and its implications. 3. Revival and continuation of the corporate debtor during the liquidation process. Detailed Analysis: 1. Ineligibility of the Appellant: The appellant, a Director/Shareholder of M/s. Senthil Papers and Boards Pvt. Ltd., challenged the order dated 12th February 2019, which rejected his application under Section 60(5) of the Insolvency & Bankruptcy Code, 2016. The rejection was based on the appellant's ineligibility under Section 29A (c) & (h) of the I&B Code. The Tribunal did not grant any relief regarding this appeal and did not express any opinion on the delay in filing the appeal. 2. Liquidation Order: The Tribunal noted that the Adjudicating Authority had also passed a liquidation order on the same day, i.e., 12th February 2019, which the appellant learned about later. The Tribunal emphasized that the liquidator must act according to the decision in Company Appeal (AT) (Insolvency) No. 224 of 2018 (Y. Shivram Prasad Vs. S. Dhanapal & Ors.) dated 27.2.2019. The Tribunal highlighted the Supreme Court’s stance that liquidation is a last resort and that the liquidator can sell the business of the corporate debtor as a going concern. 3. Revival and Continuation of the Corporate Debtor: The Tribunal underscored that the primary focus of the legislation is to ensure the revival and continuation of the corporate debtor. It referred to the Supreme Court's judgment in Swiss Ribbons Pvt. Ltd. & Anr. vs. Union of India & Ors., which emphasized protecting the corporate debtor from its own management and avoiding liquidation. The Tribunal mentioned that Section 230 of the Companies Act, 2013, allows for a compromise or arrangement with creditors or members. The liquidator is required to verify claims, take control of assets, and carry on the business of the corporate debtor for beneficial liquidation. The Tribunal outlined the steps to be taken during the liquidation process: - Attempt a compromise or arrangement with creditors or members under Section 230 of the Companies Act, 2013. - If the compromise or arrangement fails, the liquidator should sell the business of the corporate debtor as a going concern. - Liquidation should be the last resort, only if revival is not possible. The Tribunal allowed a 90-day period to take steps under Section 230, extendable if necessary. The Adjudicating Authority has the power to overrule objections if the arrangement or scheme is beneficial for the corporate debtor’s revival. The liquidator should constitute a Committee of Creditors to assess the viability of the scheme. The Tribunal emphasized that the scheme should ensure the maximization of the corporate debtor's assets and balance the interests of all stakeholders. The Tribunal concluded that the liquidator must act in accordance with these directions and take steps under Section 230. If approached by members or creditors for a compromise or arrangement, the liquidator should move an application under Section 230 before the National Company Law Tribunal. If revival fails, steps should be taken for an outright sale of the corporate debtor to enable the continuation of employment. Disposition: The appeal was disposed of with the aforementioned observations and directions.
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