Voting on Schemes A and B for Approval by Stakeholders Committee under Companies Act, 2013

The Tribunal directed both schemes, Scheme A and Scheme B, to be resubmitted with modifications for voting by the Stakeholders Committee. The scheme receiving the highest affirmative votes would be approved, following the principles of the Companies Act, 2013. In case of a tie, additional voting among creditors would be conducted. The decision-making process aimed to address the interests of all stakeholders and comply with the objectives of the IBC, 2016. The liquidator was instructed to seek further guidance from the Tribunal as needed.

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Issues Involved:
1. Dispensation of meetings of unsecured creditors and shareholders.
2. Approval of Scheme A or Scheme B.
3. Liquidation costs and their payment.
4. Role and decision-making authority of the liquidator versus the Committee of Creditors (CoC).
5. Constitution and role of the Stakeholders Committee.
6. Comparative analysis and evaluation of Scheme A and Scheme B.
7. Voting process and approval mechanism for the schemes.

Issue-wise Detailed Analysis:

1. Dispensation of Meetings:
The liquidator sought orders to dispense with the holding of meetings of unsecured creditors and shareholders for the approval of the scheme. The Tribunal noted that the liquidator did not seek dispensation for secured creditors' meetings. Given the CoC's favorable opinion on Scheme B, the liquidator argued that convening such meetings could be avoided to save time.

2. Approval of Scheme A or Scheme B:
Two schemes were proposed: Scheme A by M/s. Seshasayee Paper and Boards Ltd. (SPBL) and Scheme B by M/s. Sun Paper Mill Ltd. (SPML). The liquidator preferred Scheme A, citing asset maximization and liquidation cost coverage, while the CoC favored Scheme B due to quicker and unconditional disbursal of funds.

3. Liquidation Costs:
The liquidator emphasized that Scheme A provided full coverage for liquidation costs, including his fees, whereas Scheme B did not fully cover these costs. SPML later committed to covering all liquidation costs as per law.

4. Role and Decision-making Authority:
The liquidator argued that his decision should prevail over the CoC's opinion in liquidation matters, citing Section 35(2) of the IBC, 2016. However, the Tribunal found a paradox in the liquidator presenting both schemes for approval despite preferring Scheme A.

5. Constitution and Role of the Stakeholders Committee:
The Tribunal directed the liquidator to constitute a Stakeholders Committee as per Regulation 31A of the Liquidation Process Regulations, 2016. This committee would include authorized representatives of unsecured creditors, operational creditors, and shareholders, along with individual secured creditors.

6. Comparative Analysis of Schemes:
- Scheme A (SPBL): Proposed amalgamation with SPBL, addressing excessive debt and losses, and offering comprehensive settlement amounts. SPBL demonstrated financial capability and experience in turning around sick units.
- Scheme B (SPML): Proposed compromise/arrangement with creditors, focusing on quick revival and continuity of business. SPML committed to paying secured creditors immediately upon scheme approval and demonstrated financial feasibility.

7. Voting Process and Approval Mechanism:
The Tribunal directed both schemes to be resubmitted with modifications and upward revisions, if any, and placed before the Stakeholders Committee for voting. The voting process would follow the principles of Section 230 of the Companies Act, 2013, and the scheme receiving the highest affirmative votes would be approved. In case of a tie, additional voting would be conducted among creditors to break the tie.

Conclusion:
The Tribunal emphasized the need for a dynamic and pragmatic approach to resolve the issues, keeping in mind the objectives of the IBC, 2016, and the interests of all stakeholders. Both schemes were to be resubmitted and voted upon by the Stakeholders Committee, with the scheme receiving the requisite majority to be placed before the Tribunal for final approval. The application was disposed of with directions for the liquidator to approach the Tribunal for any further clarifications or directions.

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