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TMI Blog2021 (4) TMI 732X X X X Extracts X X X X X X X X Extracts X X X X ..... m Industry. We however find that the caution recorded by the Hon ble Supreme Court is important. We have noticed the worry recorded of Insolvency Law Committee. We can see the effect of our intervention in importing Section 230 of Companies Act, into Liquidation stages under IBC. There are simply delays. In the present matter, we need not decide the question of Section 29A of IBC. Alternatively, even if the said Section was to be considered, although the Learned Counsel for the Appellant is arguing that this Court should record finding on Micro, Small and Medium Enterprises on the basis of definition in the MSME Act, and records of the three Companies, we decline to go into those details in the absence of memorandum under MSME Act. When we find that it is not necessary for us to pursue Section 230 of the Companies Act at the stage of Liquidation, the same not being part of Procedure of IBC when the Corporate Debtor is in Liquidation, both the Appeals must fail, not having substance in the contentions raised - the appeal also needs to be dismissed as the Appellant is pushing forward a scheme of amalgamation compromise and arrangement for three companies which are already in L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, 2019. Post the case for Admission (After Notice) on 25th September, 2019. Until further orders, the impugned order dated 23rd August, 2019 shall remain stayed. In the meantime, the Liquidator will ensure that the company remains a going concern but not to sell or transfer or alienate moveable or immoveable property of the Corporate Debtor nor create any third party encumbrance and thereby will not part with the assets of the Corporate Debtor . He will collate the claims in terms of Section 35 and act as per Sections 37, 38, 39 and 40 of the I B Code and will follow the decision of this Appellate Tribunal in Y. Shivram Prasad vs. S. Dhanpal Ors. Company Appeal (AT)(Insolvency) No. 224 of 2018 etc. disposed of on 27th February, 2019 based on the earlier decision of this Appellate Tribunal in S.C. Sekaran v. Amit Gupta Ors.─ Company Appeal (AT) (Insolvency) Nos. 495 496 of 2018 . If any sale has taken place, the Liquidator will not confirm the same and the sale proceeds should be kept in separate interest bearing account. 4. The grievance of the Appellant is that in spite of such order passed by this Tribunal the Liquidator has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sferor Company-I, has held the applicant ineligible as the Company is under liquidation and has submitted in this regard that once the said company is ordered to be out of liquidation, the State Bank of India shall be approached again for appropriate OTS. The re-call of the liquidation order can only be possible, when the amended Scheme of Amalgamation, Compromise and Arrangement is brought into effect. The re-calling of the liquidation order before becoming into effect of the Scheme would not be warranted by law. 6. Normally, a Scheme under Sections 230-232 of the Companies Act, 2013 involves the company under liquidation being merged into a healthy company having positive net worth. The Company in liquidation is rehabilitated and put on the course of being a profit making concern. The present amended Scheme involving amalgamation of Transferor Company-I and Transferor Company- II into Transferee Company is stated to be made to cause the net effect that the assets and liabilities of all the three companies be consolidated in the Transferee Company (para 2 of CA No. 1118 of 2019). Therefore, there is no economic rationale in the Amended Scheme and the aim of revival and rehab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C Online SC 220. The Hon ble Supreme Court of India in Paragraph 99 to 105 in the said Judgment observed as under: 99. In paragraph 24 of our judgment, we noted the two issues which had been framed by the NCLAT in the impugned judgment in the first of the appeals. The first issue was Whether in a liquidation proceeding under [IBC] the Scheme for Compromise and Arrangement can be made in terms of Sections 230 to 232 of the [Act of 2013] . While we noted in paragraph 25, that no challenge has been made by the appellant in regard to the finding of the NCLAT on this issue, it is imperative for us to make some remarks in relation to this issue and the larger issue of judicial intervention by the NCLT and NCLAT while adjudicating disputes under the IBC. 100. To begin with, we would like to take note of the observations made by the Insolvency Law Committee in its Report of February 2020. The Committee began by acknowledging that the floating of schemes of compromise or arrangement under Sections 230 to 232 of the Act, even for companies undergoing liquidation, was not part of the framework under the IBC. This, the Committee noted, had led to a multiplicity of issues including, but n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intendment. 103. At this juncture, it is important to remember that the explicit recognition of the schemes under Section 230 into the liquidation process under the IBC was through the judicial intervention of the NCLAT in Y Shivram Prasad (supra). Since the efficacy of this arrangement is not challenged before us in this case, we cannot comment on its merits. However, we do take this opportunity to offer a note of caution for the NCLT and NCLAT, functioning as the Adjudicatory Authority and Appellate Authority under the IBC respectively, from judicially interfering in the framework envisaged under the IBC. As we have noted earlier in the judgment, the IBC was introduced in order to overhaul the insolvency and bankruptcy regime in India. As such, it is a carefully considered and well thought out piece of legislation which sought to shed away the practices of the past. The legislature has also been working hard to ensure that the efficacy of this legislation remains robust by constantly amending it based on its experience. Consequently, the need for judicial intervention or innovation from the NCLT and NCLAT should be kept at its bare minimum and should not disturb the founda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 06/Chd/CHD/2017, the Adjudicating Authority observed in Impugned Order Paragraph 9 to 14 as under: 9. We have carefully considered the application and the submissions of the learned counsel for the applicant and have also examined the records. 10. The proposal of scheme of compromise, arrangement and amalgamation under Section 230 and 232 of the Companies Act, 2013 is not at a nascent stage. The Application made to Union Bank of India is an offer for settlement of the outstanding dues of Union Bank of India under the Centenary Settlement Scheme for all the three companies. There is no averment that any proposal for Corporate Debt Restructuring has been made or is under consideration by Union Bank of India. The payment scheme to the depositors is in existence since 2017. As regards the other unsecured creditors including SIDBI/its assignee, there is no reference that any proposal for any debt restructuring is even under discussion with them. In fact, in Para No. 14 of the application, the applicant himself has stated that his efforts in settling the dues of Union Bank of India under the Centenary Settlement Scheme and making regular payments to the depositors under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amalgamation proposed involves recalling of Liquidation Orders and discharging of all liabilities of the three companies and other benefits, without infusing additional funds. We have also noticed above the observations of the Adjudicating Authority where in spite of passing of time of more than one year eleven months earlier there were no steps in terms of Section 230 of the Companies Act, 2013. Hon ble Supreme Court in the matter of Arun Kumar Jagatramka (Supra) in Para 72 observed as under: 72. Now, there is no reference in the body of the IBC to a scheme of compromise or arrangement under Section 230 of the Act of 2013. Sub-section (1) of Section 230 was however amended with effect from 15 November 2016 so as to allow for a scheme of compromise or arrangement being proposed on the application of a liquidator who has been appointed under the provisions of the IBC. The substratum of the submission of Mr. Sandeep Bajaj, learned Counsel for the appellants, is that Section 230 is not regulated by the IBC but is a provision independent of it, though after the amendment of Sub-section (1), a compromise or arrangement can be proposed by the liquidator appointed under the IBC. Ali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as a going concern , are somehow permitted to propose a compromise or arrangement under Section 230 of the Act of 2013 12. Keeping the above observations of the Hon ble Supreme Court in view and the note of caution in Para 103 of Judgment of Hon ble Supreme Court in the matter of Arun Kumar Jagatramka (Supra) when present matter is appreciated it is apparent that the Appellant and the management concerned who brought about the situation where the three companies are in Liquidation is trying to take over coming up with the scheme where there is no infusion of additional funds and the liabilities are sought to be discharged in the name of amalgamation. It is not in tune with expectations of a Resolution Plan under IBC. 13. At the time of arguments, now effort is being made to take benefit of Section 240A of IBC calling upon this Tribunal to go into the definitions of Micro, Small and Medium Enterprise and hold the Company to be Micro or Medium Industry. We however find that the caution recorded by the Hon ble Supreme Court is important. We have noticed the worry recorded of Insolvency Law Committee. We can see the effect of our intervention in importing Section 230 of Compa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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