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2022 (12) TMI 981 - AT - Companies LawIssuance of notice under Section 230(5) of the Companies Act - It is submitted that in view of the sole Financial Creditor having approved the scheme, there was no occasion for issuing any notice under Section 230(5) of the Companies Act and Adjudicating Authority had ample jurisdiction to dispense the notice under Section 230(9) of the Companies Act - HELD THAT - The sole Financial Creditor having approved the scheme, the condition as provided in Section 230(9) were clearly met and the Tribunal can very well dispense with the calling of a meeting of creditor or class of creditors. Present is a case where hundred per cent of the Financial Creditor has approved the scheme. The direction of the Tribunal needs to be set aside and the Adjudicating Authority is required to consider the dispensation of the second motion notice in view of the facts of the present case as per Section 230(9) of the Companies Act, 2013. Appeal disposed off.
Issues Involved:
- Appeal against the Order dated 09.11.2022 passed by the Adjudicating Authority - Prayers made in the Application 2308/ND/2022 - Challenge to the order directing the filing of a second motion application - Approval of the scheme under Section 230 of Companies Act, 2013 - Sole Financial Creditor's approval of the scheme - Dispensation of the notice under Section 230(9) of the Companies Act - Consideration of the scheme by the Adjudicating Authority - Interpretation of Sections 230(5) and 230(9) of the Companies Act Detailed Analysis: 1. The Appeal was filed against the Order dated 09.11.2022 passed by the Adjudicating Authority in response to Application 2308/ND/2022. The prayers in the application included dispensing with meetings of creditors and shareholders for scheme approval, approval of the scheme proposed by Mr. Rajnish Gupta, payment of Liquidator fee, and priority payment of Liquidation Costs as per the Insolvency and Bankruptcy Code 2016. 2. The Adjudicating Authority directed the filing of a second motion application for scheme approval, which was challenged in the Appeal. The Appellant argued that as the sole Financial Creditor, Small Industries Development Bank of India had approved the scheme, there was no need for a second motion under Section 230(5) of the Companies Act, and the notice could be dispensed with under Section 230(9). 3. The Financial Creditor, SIDBI, confirmed its approval of the scheme, stating that there was no requirement for a notice for the Second Motion. The Tribunal considered the submissions and the record, noting that the scheme was proposed by the Suspended Management and approved by SIDBI as the sole secured creditor. 4. Sections 230(5) and 230(9) of the Companies Act were examined. Section 230(9) allows the Tribunal to dispense with calling a meeting of creditors if at least ninety per cent in value agree to the scheme by way of affidavit. In this case, 100% approval was obtained from the Financial Creditor, meeting the conditions of Section 230(9). 5. The Tribunal concluded that the direction for a second motion notice needed to be set aside. The Adjudicating Authority was instructed to consider dispensing with the second motion notice in line with Section 230(9) of the Companies Act, given the approval of the scheme by the sole Financial Creditor. Consequently, the Appeal was disposed of accordingly.
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