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2021 (10) TMI 643 - Tri - Insolvency and BankruptcyLiquidation of Corporate Debtor - timeline prescribed in the liquidation proceedings or not - Section 60(5) of IBC, 2016 read with Rule 11 of NCLT Rules 2016 - HELD THAT - The IBC does not prescribe any such timeline as prescribed in the Regulations for submission of the Scheme. However, the judgement in the case of Y. Shivram vs. S. Dhanpal Ors. 2019 (5) TMI 386 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI allows the Adjudicating Authority (Tribunal) to extend the period/timeline if there is a chance of approval of arrangement of the scheme. Thus, it could be inferred that the timeline prescribed in the Liquidation regulations is directory in nature. That in the instant case, the OTS proposals made by Applicant were rejected by SIDBI. However, the Scheme proposed by the Applicant on 19.06.2020 has neither been placed by the Liquidator before the COC nor has been considered by the sole financial creditor, SIDBI - It is also a fact that the Liquidator, who was also the RP, had failed to bring a Resolution Plan for the Corporate Debtor resulting in Liquidation of Corporate Debtor. That as on date, there is a situation of a deadlock and no progress has been made by the Corporate Debtor in the last 2 years. That the Liquidator has neither been able to auction the assets of the Corporate Debtor nor it has placed the Scheme of the Corporate Debtor before the COC or the sole financial creditor SIDBI. The only route available to the Corporate Debtor to come out of the clutches of the Liquidation is via the Scheme of Compromise and Arrangement proposed under Section 230 of Companies Act, 2013 - Since the objective of the IBC is to prefer resolution over liquidation and maximisation of the value of assets of the Corporate Debtor at any stage, it would be in fitness of the scheme of IBC to make all possible efforts to revive the Corporate Debtor. The Liquidator is directed to place without further delay, the Scheme in accordance with Section 230 of the Companies Act, 2013 submitted by the Applicant, before the Creditors in compliance of the directions of the Hon'ble NCLAT - application allowed.
Issues Involved:
1. Compliance with NCLAT order dated 05.09.2019. 2. Auction of the Corporate Debtor's property. 3. Fixing the reserve price for the auction. 4. Consideration of the Scheme of Arrangement proposed by the Applicant. Detailed Analysis: 1. Compliance with NCLAT Order Dated 05.09.2019: The Applicant sought to direct the Respondent to abide by the NCLAT order dated 05.09.2019, which allowed the Applicant to propose a Scheme of Arrangement under Section 230 of the Companies Act, 2013. The NCLAT order mandated the Liquidator to consider the scheme objectively and impartially. The Tribunal noted that the Liquidator failed to consider the Scheme proposed by the Applicant on 19.06.2020, citing the expiry of the 90-day period prescribed by the NCLAT in SC Sekaran and Y. Shivram's case. However, the Tribunal observed that the timeline prescribed in the Liquidation regulations is directory in nature, and the Adjudicating Authority can extend the period if there is a chance of approval of the scheme. 2. Auction of the Corporate Debtor's Property: The Applicant initially sought to restrain the Respondent from proceeding with the auction of the Corporate Debtor's property. However, this prayer was not pressed during the hearing. The Tribunal noted that the Liquidator had made multiple attempts to auction the property, but these attempts were unsuccessful. The Tribunal emphasized that the objective of the IBC is to prefer resolution over liquidation and maximize the value of the Corporate Debtor's assets. 3. Fixing the Reserve Price for the Auction: The Applicant contended that the reserve price fixed for the auction was much lower than the fair market value of the property. The Tribunal noted that the reserve price of ?46 Crore was significantly lower than the fair market value of approximately ?94 Crore. The Liquidator had reduced the reserve price to ?37.50 Crore, which was less than half of the fair market value. The Tribunal highlighted that the auction of the Corporate Debtor's assets at such a low price goes against the objective of the IBC, which aims for the maximization of the assets of the Corporate Debtor. 4. Consideration of the Scheme of Arrangement Proposed by the Applicant: The Tribunal observed that the Scheme proposed by the Applicant on 19.06.2020 was not placed before the CoC or considered by the sole financial creditor, SIDBI. The Liquidator argued that the scheme was submitted after the expiry of the 90-day period and that the Applicant's conduct and lack of a concrete proposal barred him from any relief. The Tribunal noted that the IBC does not prescribe any timeline for submitting the Scheme and that the Adjudicating Authority can extend the period if there is a chance of approval. The Tribunal emphasized that the Scheme should be considered on merits by the Creditors. Conclusion: The Tribunal allowed the Application and directed the Liquidator to place the Scheme proposed by the Applicant before the Creditors without further delay. The Liquidator was ordered to file a status report within 30 days, and the reasons for any rejection of the scheme on merits were to be recorded in writing. The Liquidator was also directed to maintain the status quo with respect to the assets of the Corporate Debtor until a decision on the Scheme was taken by the Creditors.
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