2019 (12) TMI 1650 - AT - Insolvency and Bankruptcy

Tribunal Upholds Appeal, Stresses Company Revival Over Liquidation

Kshitiz Gupta (Liquidator in the matter of Abhishek Corporation Ltd.) Versus Asset Reconstruction Company (India) Limited and Ors.

The Tribunal condoned a six-day delay in filing the appeal and upheld the exclusion of only 100 out of 129 days during liquidation. Emphasizing the ... Exclusion of period of 100 days only with effect from 1st May, 2019 to 9th August, 2019, i.e., the date of pendency of the proceedings before the National Company Law Tribunal and the Hon’ble Supreme Court - HELD THAT:- In the case of Y. SHIVRAM PRASAD AND ASSET RECONSTRUCTION COMPANY (INDIA) LTD. VERSUS S. DHANAPAL & ORS. AND SERVALAKSHMI PAPER LTD. & ORS [2019 (5) TMI 386 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI], this Appellate Tribunal observed and held that As the liquidation so taken up under the ‘I&B Code’, the arrangement of scheme should be in consonance with the statement and object of the ‘I&B Code’. Meaning thereby, the scheme must ensure maximisation of the assets of the ‘Corporate Debtor’ and balance the stakeholders such as, the ‘Financial Creditors’, ‘Operational Creditors’, ‘Secured Creditors’ and ‘Unsecured Creditors’ without any discrimination. Before approval of an arrangement or Scheme, the Adjudicating Authority (National Company Law Tribunal) should follow the same principle and should allow the ‘Liquidator’ to constitute a ‘Committee of Creditors’ for its opinion to find out whether the arrangement of Scheme is viable, feasible and having appropriate financial matrix. It will be open for the Adjudicating Authority as a Tribunal to approve the arrangement or Scheme in spite of some irrelevant objections as may be raised by one or other creditor or member keeping in mind the object of the Insolvency and Bankruptcy Code, 2016. The ‘Liquidator’ to first act in accordance with the decision in Y. Shivram Prasad by following the procedure of Sections 230-232 of the Companies Act, 2013. It is noticed that for the purpose of proceedings under Sections 230 to 232 of the Companies Act, 2013, it is open to the Adjudicating Authority to grant more than 90 days of period - for completion of the ‘Liquidation Process’, average two years’ time has been granted. The sale of assets can be done only if the ‘Liquidator’ fails to revive the Company by pursuing the proceedings under Section 230 vis-à-vis 232 of the Companies Act, 2013 as a going concern. Appeal disposed off. Issues Involved:1. Condonation of delay in filing the appeal.2. Exclusion of time period during liquidation.3. Process and steps to be taken by the Liquidator during liquidation.4. Revival of the Corporate Debtor under Sections 230-232 of the Companies Act, 2013.Detailed Analysis:1. Condonation of Delay in Filing the Appeal:The Tribunal condoned the delay of six days in preferring the appeal, stating, 'Having heard learned counsel for the appellant and being satisfied with the grounds, the delay of six days in preferring the appeal is condoned.' This was followed by the disposal of Interlocutory Application No.3935 of 2019.2. Exclusion of Time Period During Liquidation:The appeal was filed against the order of the Adjudicating Authority (NCLT), which excluded only 100 days out of the requested 129 days during the liquidation process. The Tribunal noted, 'We find no reason to interfere with the impugned order dated 14th October, 2019.' The appellant's argument for an additional 29 days due to the previous Liquidator's inaction was dismissed, as it was not considered a valid ground for exclusion.3. Process and Steps to be Taken by the Liquidator During Liquidation:The Tribunal emphasized that during liquidation, the Liquidator must ensure the company remains a going concern and take steps for its revival. Citing previous cases, it was noted, 'During the liquidation stage, ‘Liquidator’ required to take steps to ensure that the company remains a going concern and instead of liquidation and for revival of the ‘Corporate Debtor’ by taking certain measures.' The Tribunal reiterated the Supreme Court’s stance that liquidation should be a last resort and highlighted the Liquidator's duties under Section 35 of the I&B Code, including verifying claims, taking control of assets, and carrying on the business for beneficial liquidation.4. Revival of the Corporate Debtor under Sections 230-232 of the Companies Act, 2013:The Tribunal directed the Liquidator to follow the procedure under Sections 230-232 of the Companies Act, 2013, for the revival of the Corporate Debtor. It was noted, 'The Liquidator will take steps in terms of Section 230 of the Companies Act, 2013.' The Tribunal acknowledged that the process might take more than 90 days and allowed for an extension if there was a chance of approval of the arrangement or scheme. The Tribunal also instructed the Adjudicating Authority to play a dual role in overseeing liquidation and passing orders under Section 230, ensuring the scheme maximizes the Corporate Debtor's assets and balances stakeholders' interests. It was emphasized that the Liquidator should first attempt revival through compromise or arrangement with creditors before proceeding with asset sales.Conclusion:The appeal was disposed of with directions for the Liquidator to act in accordance with the decision in Y. Shivram Prasad by following the procedure of Sections 230-232 of the Companies Act, 2013, and to attempt the revival of the Corporate Debtor as a going concern before proceeding with the sale of assets.