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2023 (7) TMI 313 - AT - Insolvency and BankruptcyLiquidation of Corporate debtor - Rejection of application seeking extension of timeline as mentioned in the Invitation for Submission of Scheme - case of appellant is that Appellant has finalised a scheme of arrangement, but did not submit it since he had not been able to obtain an extension of the deadline - HELD THAT - Admittedly, the order for liquidation of the corporate debtor was passed by the Adjudicating Authority on 7.10.2022. It is also noted that section 230 of the Companies Act, 2013 allows a scheme of compromise or arrangement to be proposed in respect of a corporate debtor under liquidation to achieve its revival as a going concern. Further Regulation 2-B of the Liquidation Process Regulations, 2016 stipulates a time period of ninety days for submission and final consideration of such a scheme of compromise or arrangement. The possibility of revival of a corporate debtor under liquidation has been considered as a valid mode of revival and during liquidation process, a scheme of compromise or arrangement in terms of section 230 of The Companies Act, 2013 is a distinct and clear possibility. It is also observed in para 68 of the Arun Kumar Jagatramka 2021 (3) TMI 611 - SUPREME COURT judgment that an amendment was made on 25.7.2019 to the Liquidation Process Regulations, 2016 by the Insolvency and Bankruptcy Board of India to refer and include a process envisaged under section 230 of the Companies Act, 2013 as a valid method of revival of the corporate debtor during liquidation. As the various actions of the Appellant show, it is noted that by 4.1.2023, the Appellant had neither proposed a scheme of compromise and arrangement to the Liquidator or Stakeholders Consultation Committee or the secured creditors of the corporate debtor, and even after it was allowed to access the VDR on 19.1.2023 it did not show any concrete evidence for formulation such a scheme and its presentation to the Liquidator. The reasons given by the Appellant that it was waiting for a decision in IA No. 122/2023, which was filed for seeking extension of the deadline given in public notice dated 26.10.2022 to propose such a scheme are not convincing as merely filing of IA 122/2013 in no way stopped it from proposing a clear scheme of arrangement - there are no reason or logic as to why the Appellant did not approach the secured creditors to obtain their consent of the 75% threshold as required under section 230(2)(b) of The Companies Act if it was in possession of such a scheme. It is not clear as to why he did not propose a scheme to the Liquidator or the Stakeholders Consultation Committee. The Appellant has not shown any proof of a scheme of compromise and arrangement that is formulated and ready, and proposed for consideration nor has the Appellant obtained the consent of 75% of the secured creditors of the corporate debtor in support of such a scheme. Merely seeking an extension of the timeline without showing any evidence of sincere and serious efforts in preparation and formulation of such a scheme clearly shows that the request for extension of timeline is not supported by concrete action. In view of the fact that the 90 days timeline prescribed under the Regulation 2-B of the Liquidation Process Regulations, 2016 had expired on 4.1.2023 and no evidence about readiness of the scheme was shown, it is opined that the Adjudicating Authority has not committed any error in passing the Impugned Order. Appeal dismissed.
Issues Involved:
1. Validity of the Adjudicating Authority's rejection of the extension of the timeline for submission of a scheme of arrangement. 2. Applicability of Section 230 of the Companies Act, 2013, and Regulation 2-B of the Liquidation Process Regulations, 2016. 3. The role and actions of the Liquidator in the liquidation process. Summary: 1. Validity of the Adjudicating Authority's Rejection of the Extension: The Appellant, an operational creditor, sought an extension of the timeline for submitting a scheme of arrangement under Section 230 of the Companies Act, 2013, which was rejected by the Adjudicating Authority. The Appellant argued that liquidation would mean the corporate debtor's certain death and cited judgments supporting the revival of the corporate debtor through a scheme of arrangement. However, the Adjudicating Authority found no convincing reason to extend the timeline as the Appellant did not show any concrete evidence of a formulated scheme ready for submission. 2. Applicability of Section 230 and Regulation 2-B: Section 230 allows a scheme of compromise or arrangement for a company under liquidation to achieve its revival. Regulation 2-B of the Liquidation Process Regulations stipulates a 90-day period for submission and consideration of such a scheme. The Appellant argued that the timeline is directory and should not hinder the submission of a scheme. However, the Respondents clarified that the 90-day period started from the liquidation order date, not from the public notice date, and the Appellant misconstrued this. 3. Role and Actions of the Liquidator: The Liquidator published an invitation for submission of a scheme and provided access to the Virtual Data Room (VDR) to the Appellant. However, the Appellant did not submit the scheme within the stipulated time and sought an extension. The Liquidator proceeded with the auction process as the Appellant failed to show any serious effort in formulating a scheme. The Tribunal noted that the Appellant did not approach secured creditors for consent or propose a scheme to the Liquidator or Stakeholders Consultation Committee, even after accessing the VDR. Conclusion: The Tribunal upheld the Adjudicating Authority's decision, stating that the Appellant did not show any proof of a ready scheme or serious efforts in its formulation. The request for an extension was unsupported by concrete action, and the 90-day timeline had expired. The appeal was dismissed with no order as to costs.
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