2019 (2) TMI 1964 - AT - Companies Law

Appeals Disposed with Directions on Corporate Debtor Liquidation and Compliance

The appeals were disposed of with directions emphasizing adherence to legal provisions and the Tribunal's directives for the resolution or liquidation of ... Eligibility for filing Resolution Plan - Committee of Creditors have considered the Resolution Plan submitted by the Appellants, or not - HELD THAT:- In the present case, as this Appellate Tribunal find that the Committee of Creditors have voted against the Resolution Plan having found it not feasible and viable, this Appellate Tribunal is not deciding the first issue whether Board of Directors of ‘M/s. Ashok Magnetics Limited’- (Corporate Debtor) or any of its members are ineligible in terms of Section 29A or not and whether the said provision will be applicable to the promoter(s) of the ‘M/s. Ashok Magnetics Limited’. Further, this Appellate Tribunal do not agree with the observations made by the Adjudicating Authority that even if the case has not been considered on merit, remand will be futile. If a case is not considered by the ‘Committee of Creditors’ in accordance with law, it is the duty of the Adjudicating Authority to remand the matter to the ‘Committee of Creditors’ for reconsideration - However, as this Appellate Tribunal has observed that the ‘Committee of Creditors’ considered the matter and voted against the ‘Resolution Plan’, this Appellate Tribunal is not inclined to remand the matter to the ‘Committee of Creditors’. The liquidator is directed to act in accordance with law - Appeal disposed off. Issues:1. Rejection of Resolution Plan by Adjudicating Authority2. Eligibility of promoters under Section 29A of I&B Code3. Consideration of Resolution Plan by Committee of Creditors4. Liquidation of Corporate Debtor5. Duties of Liquidator in ensuring going concern status6. Compromise, Arrangements, and Amalgamations under Section 230 of Companies Act, 2013Analysis:1. The appeals were filed against the Adjudicating Authority's orders dated 9th November, 2018, where one order rejected the Resolution Plan submitted by certain directors, and the other ordered the liquidation of the Corporate Debtor, 'M/s. Ashok Magnetics Limited'. The Appellants argued that the Corporate Debtor falls under 'Micro, Small and Medium Enterprises', making its promoters eligible to file a Resolution Plan under Section 240A of the I&B Code.2. The issue of promoters' eligibility under Section 29A of the I&B Code was raised. The Appellate Tribunal did not decide on this matter as the Committee of Creditors had already voted against the Resolution Plan, deeming it unfeasible. The Tribunal did not delve into whether the Board of Directors or its members were ineligible under Section 29A.3. The Adjudicating Authority's observation that remand would be futile if the Resolution Plan was not considered on merit was challenged. The Appellate Tribunal disagreed, stating that if a plan is not considered lawfully, it should be remanded for reconsideration. However, as the Committee of Creditors had already voted against the Plan, the Tribunal declined to remand the matter.4. The Liquidator, representing the Resolution Professional, assured compliance with the Tribunal's directives in a previous case, 'S.C. Sekaran v. Amit Gupta & Ors.', emphasizing the need to maintain the Corporate Debtor as a going concern during liquidation. The Liquidator agreed to move an application under Section 230 of the Companies Act, 2013 if any Compromise or Arrangements were proposed.5. Citing the 'S.C. Sekaran' case, the Appellate Tribunal directed the Liquidator to act in accordance with the law, verifying creditors' claims, managing assets, and considering Compromise or Arrangements under Section 230. The Tribunal emphasized the importance of balancing the interests of creditors and maximizing the Corporate Debtor's assets.6. The Appellants and the Liquidator were directed to follow the Tribunal's directives for any Compromise or Arrangements under Section 230. If a viable scheme is proposed, an application should be made to the National Company Law Tribunal. Otherwise, the Liquidator must ensure the sale of the Corporate Debtor as a going concern, prioritizing the interests of employees.In conclusion, the appeals were disposed of with the outlined observations and directions, emphasizing adherence to legal provisions and the Tribunal's directives for the resolution or liquidation of the Corporate Debtor.