Tribunal dismisses application for reconsideration of Scheme of Compromise under Companies Act

The Tribunal dismissed the application seeking reconsideration of a Scheme of Compromise and Arrangement under Section 230 of the Companies Act, 2013. Despite the impact of COVID-19 on the Company's operations and assets, the Tribunal emphasized its limited power to interfere with creditors' commercial decisions. The creditors had already rejected the revised scheme, indicating its lack of feasibility. The Tribunal highlighted its supervisory role and inability to compel creditors to reconsider schemes, ultimately leading to the dismissal of the application without costs awarded.

---

---

Issues:
1. Consideration of Scheme of Compromise and Arrangement under Section 230 of the Companies Act, 2013.
2. Direction to the liquidator regarding employee maintenance during liquidation.
3. Reconsideration of the scheme due to the impact of COVID-19 on the Company's operations and assets.

Analysis:
1. The application filed by the representatives of the employees of the Corporate Debtor sought directions to reconsider the Scheme of Compromise and Arrangement under Section 230 of the Companies Act, 2013. The applicants emphasized the need for creditors to re-examine the scheme in light of the ongoing COVID-19 crisis, which was adversely affecting the Company's operations and assets. The urgency of the matter led to the application being listed for a hearing promptly after serving notice to the liquidator and the financial creditor, State Bank of India (SBI).

2. The liquidator, in response to the notice, expressed his inability to continue the liquidation process due to a lack of funds. The financial creditor, represented by counsel, highlighted the impracticality of reviving the Company after more than two years of liquidation. The applicants' counsel requested an opportunity to present the scheme again to convince the creditors, citing the impact of COVID-19 on the Company's viability and the potential loss of jobs for employees. However, the liquidator pointed out the Company's pre-existing financial losses, exacerbated by the pandemic, making it unlikely for creditors to reconsider the scheme.

3. The Tribunal, after considering all submissions, concluded that the application was not viable for consideration. The Tribunal highlighted the limited power to interfere with creditors' commercial decisions regarding the approval of schemes. It was noted that despite the change in circumstances due to COVID-19, the creditors had already rejected the revised scheme, indicating a lack of feasibility in presenting a viable plan acceptable to creditors. The Tribunal emphasized the supervisory role of the Company Court and its inability to compel creditors to reconsider schemes. Ultimately, the application was dismissed, with no costs awarded, as it was deemed unworthy of further consideration given the circumstances and legal precedents.

In conclusion, the Tribunal's judgment emphasized the legal limitations on its authority to intervene in creditors' decisions regarding scheme approvals, especially in the context of ongoing liquidation proceedings and the impact of external factors like the COVID-19 pandemic on Company operations and viability.

---