9911796707
TMI Blog2022 (9) TMI 1070X X X X Extracts X X X X X X X X Extracts X X X X ..... or as per the available records. As provided for under Regulation 31A(3) of the Liquidation Regulations, the Liquidator, to facilitate the class of Shareholders to nominate the representatives sent emails to all the five Shareholders on 06.02.2021. Admittedly, the first Respondent has been nominated as a representative by three of the five Shareholders, including himself having a combined shareholding of 24.99%. The other two Shareholders having 75.01% combined shareholding have not nominated the Appellant as their nominated representative and in fact did not nominate anyone. Therefore, the Liquidator rejected the nomination of the first Respondent on the ground that the nomination was not made unanimously by all the Shareholders. The Adjudicating Authority has rightly held that the nomination of the first Respondent as the representative of the Shareholders cannot be rejected by the Liquidator simply on the ground that the said nomination was not made unanimously by all the Shareholders and has further held that as the first Respondent was nominated by or i.e., the 3 out of 5 Shareholders, the question of applicability of the provisions under Regulation 31A(4) does not arise. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e SCC as representative of the Shareholders, the Liquidator has overlooked the fact that out of the 5 Shareholders of the Corporate Debtor , 3 Shareholders including Mr. Vivek Shukla, the Respondent herein have nominated the Respondent in terms of Regulation 31A(3) of the Insolvency and Bankruptcy Board of India (Liquidation Process), Regulations, 2016, as the representative of the Shareholders which is a clear majority of 60%. Ignoring the majority nomination the Liquidator included the Appellant herein as the representative of the Shareholders ignoring the factum of cross conflict of interest between the Appellant herein with the Corporate Debtor on account of pending Arbitration Proceedings before the Singapore International Arbitration Centre in Arbitration No. ARB 105/2019/ARK. It was stated that the Appellant herein is an entity hostile to the interest of the Corporate Debtor and that it has given up its rights and interest as a Shareholder of the Corporate Debtor and therefore cannot be allowed to be a representative of the Shareholders during the Liquidation process. 4. The Adjudicating Authority while allowing the Application observed as follows: 24. That fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on behalf of the Appellant: Learned Counsel for the Appellant submitted that the existence of dispute between the Corporate Debtor and its majority Shareholder cannot be a basis to prevent a Stakeholder from exercising its right to be included in the SCC under the Liquidation Regulations. It is submitted that the Liquidator in his capacity as a Resolution Professional of the Corporate Debtor has filed an Application under Section 19(2) Section 19(3) of the Insolvency and Bankruptcy Code, 2016, (hereinafter referred to as The Code ) against the suspended Board of Directors of the Corporate Debtor which includes Mr. Vivek Shukla/the first Respondent after avoidance of transactions under Section 43 and Section 44 of the Code seeking avoidance and reversal of the preferential transactions. It is summitted that an Application alleging mismanagement and siphoning off funds by those in charge of Management and Affairs of the Corporate Debtor was also filed by one of the Shareholders of the Corporate Debtor before the Adjudicating Authority. It is argued that if the rationale used by the first Respondent to allege that the Appellant is conflicted to be incl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmed the first Respondent that the Appellant too would be a Member of the SCC, subsequent to which, the first Respondent raised his objections which were rejected by the Liquidator on 20.02.2021. It is contended that the decision of the Liquidator in the SCC is bad as it includes an erroneous interpretation of Regulation 31A of the Liquidation Process Regulations, Regulation 31A(4) cannot be applied in the present case as three Shareholders have nominated the first Respondent whereas the Appellant did not vote during the said nomination process. It is submitted that Regulation 31A(4) and Regulation 31A(1) have been amended with effect from 30.09.2021 and that the Impugned Order has been passed on exactly the same principles as that of the amendment. 7. Submissions of the Learned Counsel appearing on behalf of the second Respondent: Learned Counsel appearing for the Liquidator contended that the Liquidator had sent Email to all the five Shareholders to the names were appearing as Shareholders in the records of the Corporate Debtor and had sought the nomination for including the representative of the category of Shareholder . None of the five Shareholders hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orate Debtor is detailed as hereunder to examine the effect of Regulation 31A of the Liquidation Process Regulations: S. No. Name of Shareholders Number % 1 Vivek Shukla 404716 8.33 2 Anant Kumar Choudhary 404705 8.33 3 Pravin Chand Rai 404706 8.33 4 Rajiv Kathuria 225000 4.63 5 SBS Logistics Holdings Singapore Pte. Ltd. 3417723 70.37 Total Shares 4856850 100 9. It is the case of the Appellant that Regulation 31A(3) of the Liquidation Regulations provides that a Liquidator may facilitate the Stakeholders of each class to nominate their representatives for inclusion in the SCC while Regulation 31A(4) of the Liquidation Regulation provides the con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31A(4) did not require the Appellant to be present and voting and therefore the Appellant abstained from casting it s vote. 11. Regulation 31A(1) of the Liquidation Process Regulations, as it stood, at the time when the matter was pending before the Hon ble NCLT, is reproduced hereunder for the sake of convenience: (1) The liquidator shall constitute a consultation committee within sixty days from the liquidation commencement date, based on the list of stakeholders prepared under regulation 31, to advise him on the matters relating to sale under regulation 32. 12. For the sake of completion, Regulation 31A(1) of the Liquidation Process Regulations amended with effect from 30.09.2021 vide the Insolvency and Bankruptcy Board of India (Liquidation Process) (Second Amendment) Regulations, 2021 reads as under: (1) The liquidator shall constitute a consultation committee within sixty days from the liquidation commencement date, based on the list of stakeholders prepared under regulation 31, to advise him on matters relating to (a) appointment of professionals and their remuneration under regulation 7; (b) sale under regulation 32, including manner of sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passed. It is also brought to our notice that the Second Respondent/Liquidator was also the RP in that Petition. It is strenuously contended that it would be highly prejudicial to the interest of the Corporate Debtor if the Appellant, an adversary of the Corporate Debtor , be allowed to participate in the SCC as the representative of the Shareholders of the Corporate Debtor , merely on the basis that it holds the highest percentage of the shares of the Corporate Debtor . It is also submitted that it is only because of the abrupt exit of the Appellant from the Corporate Debtor Company in violation of the Shareholder Agreement that led to the Insolvency and now Liquidation of the Corporate Debtor . 17. A perusal of the material on record shows that as none of the Shareholders have filed their claims before the Liquidator, in terms of Regulation 20 of the Liquidation Regulations, their names do not appear in the list of Stakeholders prepared in terms of Regulation 31 of the Liquidation Regulations. The Liquidator constituted SCC in terms of the Regulation 31A based on the Shareholding pattern of the Corporate Debtor as per the available records. As provided for under Reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.99% of the Shareholders nominated their representatives and the majority Shareholder did not represent or nominate, cannot be sustained as if this view is taken then it would amount to taking the value of the Shareholding as the prescribed criteria for nomination which is not provided for under Regulation 31A(3). If this stand of the Liquidator is accepted then in every case only the majority Shareholder would be automatically nominated, which is not the scope objective of the Code. We are also conscious of the ongoing Arbitration Proceedings at the Singapore International Arbitration Centre between the Corporate Debtor and the Appellant herein and also that an entity of the Appellant group had chosen to file an Application seeking to initiate CIRP against the very same Corporate Debtor . 19. The Adjudicating Authority has rightly held that the nomination of the first Respondent as the representative of the Shareholders cannot be rejected by the Liquidator simply on the ground that the said nomination was not made unanimously by all the Shareholders and has further held that as the first Respondent was nominated by or i.e., the 3 out of 5 Shareholders, the question of ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
