Tribunal Approves Compromise Scheme, Liquidator to Verify Promoters' Eligibility

The Tribunal sanctioned the Scheme of Compromise and Arrangement, subject to the promoters confirming their eligibility under Section 29A of the I&B Code, 2016. The Liquidator was tasked with verifying this confirmation. The rights of the Income Tax Authority were preserved, and the application was approved.

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Issues Involved:
1. Approval of the Scheme of Compromise and Arrangement.
2. Competency of the Promoters under Section 29A of the I&B Code, 2016.
3. Settlement of Financial Creditors and impact on the Scheme.
4. Liquidation costs and Liquidator fees.
5. Rights of the Income Tax Authority.

Detailed Analysis:

1. Approval of the Scheme of Compromise and Arrangement:
The Liquidator filed an application seeking approval for a Scheme of Compromise and Arrangement that had been approved by the equity shareholders and creditors of the company in liquidation. The Tribunal considered the facts leading to the application, including the initiation of the Corporate Insolvency Resolution Process (CIRP) and the subsequent liquidation order. The Scheme proposed by the promoters aimed to settle all classes of creditors, including financial, operational, secured, unsecured, statutory, and workmen creditors, upon confirmation of the Scheme.

2. Competency of the Promoters under Section 29A of the I&B Code, 2016:
A significant issue was whether the promoters, who were disqualified under Section 29A during the CIRP, could propose a Scheme of Compromise and Arrangement. The Tribunal noted the judgment in Jindal Steel and Power Ltd. Vs. Arun Kumar Jagatramka & Anr., which stated that promoters ineligible under Section 29A cannot make an application for compromise and arrangement. However, the promoters argued that their disqualification should not apply as they had settled the financial creditors' dues. The Tribunal gave both parties an opportunity to make submissions regarding the disqualification.

3. Settlement of Financial Creditors and impact on the Scheme:
The promoters had fully settled the secured financial creditors' dues, which was acknowledged by the Tribunal. The Tribunal noted that the promoters had stepped into the shoes of the secured creditors and proposed to settle other creditors fully. The Tribunal considered whether the disqualification under Section 29A(c) was cured by the settlement and whether the promoters could propose the Scheme. The Tribunal concluded that since the promoters had settled the secured creditors' dues and did not suffer from other disqualifications under Section 29A, they should not be penalized.

4. Liquidation costs and Liquidator fees:
The Liquidator raised concerns about the Scheme's provision for liquidation costs and fees, which were not specifically quantified. The Tribunal noted that a separate application had been filed for the fixation of liquidation costs and fees, which would be dealt with separately.

5. Rights of the Income Tax Authority:
The Income Tax Authority filed a memo reserving its rights to challenge the Scheme if it was found to be a device to evade taxes. The Tribunal preserved the rights of the Income Tax Authority in accordance with the Supreme Court's judgment in Marshall Sons & Co. India Ltd. Vs. Income Tax Officer.

Conclusion:
The Tribunal sanctioned the Scheme of Compromise and Arrangement, subject to the promoters submitting an affidavit confirming they did not suffer from disqualifications under Section 29A of the I&B Code, 2016. The Liquidator was directed to verify the affidavit and file a report. The rights of the Income Tax Authority were preserved. The application was accordingly ordered.

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