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2021 (7) TMI 1093 - AT - Insolvency and BankruptcyCompromise and Arrangement - taking back the immovable and movable property or actionable claims of the Corporate Debtor - affected person or not - compromise failure or not - promoters can act as resolution applicant or not - HELD THAT - In the present case, the Liquidator is playing the role of a Resolution Professional , since the compromise proposal is placed before him, which is equivalent to a Resolution Plan . Further the Resolution Applicants are entitled to be present when the Resolution Plans are opened and placed before the Committee of Creditors as per Scton 30(5) of the Code. At this juncture, they may point out whether one or other Resolution Applicant is ineligible in terms of Section 29(A) of the Code or not. As per the preamended definition Section 29A of the I B Code, the Promoters could be the Resolution Applicant(s) per contra, under the new definition Promoters are not included in the definition of Resolution Applicant as they are not mentioned in Clause (H) of Section 25(2) of the Code. The restriction under Section 29A of the Code shall apply when an ineligible person or any other person acting jointly with such person submits a Resolution Plan . The restriction shall also apply if such person is a connected person to a Resolution Applicant as defined in explanation to Section 29A of the Code - The term connected persons as defined in explanation means, any person who is the promoter or in the management or control of the Resolution Applicant or any person who shall be the Promoter or in management or control of the business of the Corporate Debtor during the implementation of Resolution Plan or the holding Company, subsidiary Company, Associate Company or related party of a person referred to in clauses (i) (ii) of Section 29A of the Code. Any person who is either promoter or in the management or control of the business of the Corporate Debtor is ineligible by default under the I B Code. The Provisions of Section 29A of the Code came into force from 23.11.2017 and further that the requirements of Section 29A of the Code applies to CIRPs initiated after 23.11.2017. Assessment - HELD THAT - Since the Liquidation order was passed on 20.12.2018 in MA/646/2018 by the Adjudicating Authority and that the Resolution Professional Mr. G.V. Ravikumar was appointed as Liquidator ( Respondent in the instant Appeal ). Added further the Compromise Proposal was given on 24.09.2019 by the Promoter and in reality, the Section 29A of the Code was amended with a retrospective effect from 23.11.2017 and in view of the fact that the retrospective amendment to Section 29A of the Code applies to the Promoter(s) , they are ineligible to project a compromise proposal / arrangement for taking back the immovable and movable properties or actionable claims of the Corporate Debtor in the considered opinion of this Tribunal . Liquidator - HELD THAT - It is to be remembered that Section 34 of the I B Code, 2016 deals with Appointment of Liquidator and fee to be paid . Section 34(2) of the Code enjoins that on the appointment of a Liquidator , under this Section all powers of the Board of Directors , Key Managerial Personal and the partners of Corporate Debtor as the case may be, shall cease to have effect and shall be vested in the Liquidator . Liquidator s Position - HELD THAT - Without the Respondent / Liquidator taking necessary steps, no such application to secure a MSME Certificate was to be filed and suffice it for this Tribunal to point out that in the instant Case , the proponents of the scheme obtaining a MSME Registration Certificate on 03.10.2020 without the knowledge of the Liquidator and either ignoring or brushing aside him are clearly unsustainable in the eye of Law - the Liquidator is required to adhere to the procedure prescribed under the Code and before taking steps to sell the Corporate Debtor s Assets (Company) he will take necessary steps as per Section 230 of the Companies Act and that the Adjudicating Authority if situation so warrants is to pass appropriate orders. Before approval of an arrangement or scheme, the Adjudicating Authority by following the principles can allow the Liquidator to form the Committee of Creditors for its opinion to find out whether the arrangement of scheme is viable/feasible one and having correct financial matrix. On a careful consideration of respective contentions and on overall assessment of the whole gamut of the entire facts and circumstances of the present case, this Tribunal comes to an inescapable conclusion that the Adjudicating Authority in the Impugned Order came to the right conclusion that the scheme was proposed by the Ex-directors and promoters of Corporate Debtor and further that a Creditor / Member who is ineligible under Section 29A of the I B Code, 2016 was disqualified to be a proponent of the scheme as per Section 230 of the Companies Act, 2013, which requires no interference in the hands of this Tribunal sitting in Appeal . The Appeal is devoid of merits - Appeal dismissed.
Issues Involved:
1. Validity of the MSME Registration Certificate obtained by the Scheme Proponents. 2. Applicability of Section 29A of the Insolvency and Bankruptcy Code (IBC), 2016 to the Scheme Proponents. 3. Authority of the Liquidator and the Adjudicating Authority in the context of the Compromise Proposal under Section 230 of the Companies Act, 2013. Issue-wise Detailed Analysis: 1. Validity of the MSME Registration Certificate: The Adjudicating Authority observed that the MSME Registration Certificate obtained by the Scheme Proponents on 03.10.2020 was done without the knowledge or involvement of the Liquidator. This action was deemed illegal as it bypassed the Liquidator's authority. The Tribunal referenced the case of Muhamad Yavar Dala v. Kavitha Surana, where obtaining such a certificate without the Liquidator's involvement was held illegal. Thus, the MSME Registration Certificate obtained by the Scheme Proponents was invalid. 2. Applicability of Section 29A of the IBC, 2016: The Adjudicating Authority held that the Scheme Proponents, being Ex-directors and Promoters of the Corporate Debtor, were ineligible under Section 29A of the IBC, 2016. This section disqualifies certain individuals from submitting a resolution plan, including those who are promoters of the corporate debtor. The Tribunal cited the case of Jindal Steel and Power Limited v. Arun Kumar Jagatramka, where it was established that promoters ineligible under Section 29A cannot file for Compromise and Arrangement under Section 230 of the Companies Act. The Tribunal affirmed that the Scheme Proponents were disqualified under Section 29A and thus could not propose a scheme under Section 230. 3. Authority of the Liquidator and Adjudicating Authority: The Tribunal noted that the Liquidator is empowered to take necessary steps under Section 230 of the Companies Act, 2013, including calling for a meeting of creditors. The Liquidator had filed MA/32/2020 to conduct such a meeting. However, the Adjudicating Authority dismissed the application, emphasizing that the Scheme Proponents were ineligible under Section 29A of the IBC. The Tribunal supported the Liquidator's authority to seek an affidavit from the Scheme Proponents confirming their eligibility under Section 29A, as directed by the Adjudicating Authority. The Tribunal also noted that the Liquidator must adhere to the procedure prescribed under the IBC and the Companies Act before taking steps to sell the Corporate Debtor's assets. Conclusion: The Tribunal concluded that the Adjudicating Authority rightly dismissed the Scheme Proponents' application, as they were ineligible under Section 29A of the IBC. The Liquidator's actions were found to be in accordance with the law, and the MSME Registration Certificate obtained by the Scheme Proponents was invalid. The appeal was dismissed, and the Tribunal upheld the Adjudicating Authority's order.
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