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TMI Blog2024 (11) TMI 732X X X X Extracts X X X X X X X X Extracts X X X X ..... 2024, has been preferred by the Appellant being aggrieved against the Impugned Order of 19.07.2024, as it was rendered in IA(IBC)/416(CHE)/2024 in IBA/883/2019 of the NCLT, Chennai Bench. The consequential effect of the Impugned Order had resulted into the rejection of the application, thus preferred by the Appellant, whereby his prayer to declare the e-auction conducted on 31.01.2024 as null and void and to direct the 1st Respondent / Liquidator to consider the Scheme submitted by him was turned down, the decision of the Stakeholder Consultation Committee (SCC) to reject the said Scheme was affirmed on the grounds that it has been done on merits and with majority voting. B) The connected Company Appeal (AT) (CH) (INS) No. 306 / 2024, which has been preferred by the Appellant, seeks to challenge the Impugned Order of 19.07.2024, which has resulted into passing of an order on IA (IBC) / 420 (CHE) / 2024, as preferred in IBA / 883 / 2019, before the learned NCLT, Chennai Bench, in which the learned Adjudicating Authority allowed the application in IA (IBC) / 420 (CHE) / 2024 of the Liquidator / Respondent No. 1 and confirmed the sale of the Corporate Debtor, as a going concern in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n grounds of the value offered being lower than Liquidation Value, no clarity on source of funds and unwillingness to derail the auction process which was parallelly going on. The minority Shareholder filed an application in IA(IBC)/416(CHE)/2024, before Hon'ble NCLT to set aside the e-auction process and to direct the Liquidator to consider the Scheme submitted by him. It was rejected by the same order dated 19.07.2024. 6. The grievance of the Appellants in the instant Company Appeals, as against the two Impugned Orders which have been respectively rendered in the two Interlocutory Applications referred to hereinabove is that, in IA(IBC)/416(CHE)/2024 filed by him, the learned Adjudicating Authority rejected his prayer for consideration of the Scheme of Arrangements proposed by him under Section 230 of the Companies Act, 2013, without considering its merits and in IA(IBC)/420(CHE)/2024, it confirmed the sale of the Corporate Debtor as a going concern, despite several deficiencies in the auction process as required under law in the light of the provisions contained under IBBI (Liquidation Process) Regulations of 2016, particularly that as contained under Regulations 2B, 32(e), 32A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een called upon as per Rule 3 of the Company (Compromises, Arrangements and Amalgamations) Rules, 2016. 11. As against the aforesaid backdrop, the learned counsel for Respondent No. 1, who has filed his Counter Affidavit, has submitted that, as a consequence of the confirmation of the sale in an e-auction proceedings, the process under Regulation 32(e) & 32A of the IBBI (Liquidation Process) Regulations, 2016, has already been completed, and hence, there was no necessity at this stage for consideration of Scheme submitted by the Scheme Proponent, as contemplated under Section 230 of the Companies Act, 2013. 12. According to the contentions raised by Respondent No. 1, he intends to submit that since the process under Regulation 32(e) & 32A, contemplates sale of the Corporate Debtor, as a going concern, it meets the basic purpose and intention of the legislation and that the Scheme of Arrangement as contemplated under Section 230 of the Companies Act, 2013, which also targets the same, will not get a precedence over the process of sale of Corporate Debtor as a going concern, particularly when e-auction has already been concluded, i.e. on 31.01.2024. 13. Apart from the aforesaid, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t's case that, the order which was passed confirming the sale of the Corporate Debtor as a going concern was contrary to the provisions contained under Section 230 (1) of the Companies Act, 2013, and hence, the same deserves to be set aside and as a consequence thereto, the confirmation of sale to the Successful Bidder deserves to be quashed, and directions be issued to consider the Scheme of Arrangement, under Section 230 of the Companies Act, 2013. 20. The matter has extensively been dealt with by the learned Adjudicating Authority and after considering the rival contentions, the learned Adjudicating Authority has recorded its finding, qua the implications as argued pertaining to the proceedings of IA(IBC)/416(CHE)/2024, with regards to the Scheme of Arrangements, as it was filed by the appellant, which was placed on record, contending that the application for consideration of his Scheme ought not to have been rejected until and unless, the pre-conditions of such Sub Section (1) of Section 230 was complied with. 21. In order to deal with the aforesaid contentions raised by the learned counsel for the appellant, it becomes relevant to delve into the basic intention of the legisl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble, of the company by a registered valuer. (3) Where a meeting is proposed to be called in pursuance of an order of the Tribunal under subsection (1), a notice of such meeting shall be sent to all the creditors or class of creditors and to all the members or class of members and the debenture-holders of the company, individually at the address registered with the company which shall be accompanied by a statement disclosing the details of the compromise or arrangement, a copy of the valuation report, if any, and explaining their effect on creditors, key managerial personnel, promoters and non-promoter members, and the debenture-holders and the effect of the compromise or arrangement on any material interests of the directors of the company or the debenture trustees, and such other matters as may be prescribed: Provided that such notice and other documents shall also be placed on the website of the company, if any, and in case of a listed company, these documents shall be sent to the Securities and Exchange Board and stock exchange where the securities of the companies are listed, for placing on their website and shall also be published in newspapers in such manner as may be pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wing matters, namely:- (a) where the compromise or arrangement provides for conversion of preference shares into equity shares, such preference shareholders shall be given an option to either obtain arrears of dividend in cash or accept equity shares equal to the value of the dividend payable; (b) the protection of any class of creditors; (c) if the compromise or arrangement results in the variation of the shareholders' rights, it shall be given effect to under the provisions of section 48; (d) if the compromise or arrangement is agreed to by the creditors under sub-section (6), any proceedings pending before the Board for Industrial and Financial Reconstruction established under section 4 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986) shall abate; (e) such other matters including exit offer to dissenting shareholders, if any, as are in the opinion of the Tribunal necessary to effectively implement the terms of the compromise or arrangement: Provided that no compromise or arrangement shall be sanctioned by the Tribunal unless a certificate by the company's auditor has been filed with the Tribunal to the effect that the accounting treatme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ignificance of Section 230(1) in addressing the issue of insolvency / sickness has diminished. 23. We are of the view that, the follow up process which has been provided under Sub Section (1) of Section 230, would only be necessary to be complied with when the process of Compromise or Arrangement, as envisaged under the Companies Act, 2013, becomes necessary and needs to be carried out. But, that would be only in a situation, when there is a failure on the part of the Liquidator in his attempt to sustain the functioning of the Corporate Debtor as a going concern, as sufficient provisions have been provided under the I & B Code, 2016, and the IBBI (Liquidation Process) Regulations, 2016. Further, Regulation 2B under the Liquidation Regulations provides for Compromise / Arrangement within a limit of 90 days from the date of Order of Liquidation. The intent behind such provision is to give a chance for Compromise / Arrangement, before resorting to competitive bidding process for sale of the Corporate Debtor in the manner laid down in Regulation 32 of the said Regulations. In that light, it is only one more instrument in the hand of the Liquidator to keep the Company under Liquidation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the tight-time frame of I & B Code, 2016. On the other hand, the sale of the Corporate Debtor as a going concern under Section 32(e) & 32A is more transparent and effective; therefore, the sale of the Corporate Debtor as a going concern will have precedence, rather than resorting to the Scheme of Compromise under Section 230 (1) of the Companies Act, 2013. 25. More important and relevant for the purposes of the instant case, would be the provisions contained under Regulation 32A, which provides for that, where the Committee of Creditors, has recommended the sale of the Corporate Debtor, under Clause (e) or (f) of the Regulation 32 or where the Liquidator is of the opinion that the sale of the Corporate Debtor under 32(e) or 32(f) will maximize the value of the Corporate Debtor, he shall endeavour to sell under such clauses. Accordingly, while taking action under Chapter 6 of Liquidation Process Regulations, dealing with realizations of assets of the Corporate Debtor, selling the Corporate Debtor as a going concern, will have to be the first priority for the Liquidator, in order to meet the objective of the I & B Code, 2016, i.e. the Corporate Debtor is to be kept, as a going conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oncern. The said interpretation of Section 230 of the Companies Act as being attempted by the Appellant is not acceptable by this Tribunal. 28. In relation to the prayers made in IA(IBC)/420(CHE)/2024, the learned Adjudicating Authority, has observed that the aspect of confirmation of sale of the Corporate Debtor, as a going concern to the Successful Bidder as required under Regulation 32(e) to be read with Regulation 32A, meets the objective of the Code, that the Successful Bidder i.e. Mr. Virendra Jain & Mr. Ankit Jain, were determined as to be the Highest Bidder and the amount of Bid Price, submitted by them being Rs.487 Crores is much higher than the Reserve Price of Rs.457 Crores, which was fixed by the Liquidator and that, there was no apparent or legal error committed as such, calling for any interference. 29. Thus, ultimately based upon the aforesaid finding and analysis, which has been made by the learned Adjudicating Authority, the two applications as preferred therein by the appellant, and which are the subject matter for consideration independently in these two Appeals, had rightly been rejected by the learned Adjudicating Authority. 30. As far as the objection raise ..... X X X X Extracts X X X X X X X X Extracts X X X X
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