2022 (10) TMI 1182 - AT - Insolvency and Bankruptcy

Appellate Tribunal grants MSME Debtor liberty to propose compromise scheme under Companies Act

Bharat Sharma, Resolution Applicant Versus Reshma Mittal, RP (Now Liquidator) & Anr

The Appellate Tribunal granted the appellant, representing the MSME Corporate Debtor, liberty to submit a compromise/arrangement scheme under Section 230 ... Auction proceedings - Rejection of application seeking direction to Respondent-Resolution Professional to convene the meeting of the Committee of Creditors to place the Resolution Plan for consideration - case of appellant is that the Appellant ought to have been given opportunity to submit a scheme of compromise/arrangement but the Liquidator proceeded for auction without giving any opportunity - HELD THAT:- In the facts of the present case, the ends of justice will be served in giving liberty to the Appellant to submit a scheme of compromise/arrangement as contemplated under Section 230 of the Companies Act to the Liquidator within one month from today as well as to the Financial Creditors for their approval as contemplated under Section 230 of the Companies Act. Let entire process be completed within three months’ period as has been allowed under Regulation 2B of the IBBI (Liquidation Process) Regulations, 2016 from today. The Liquidator who has already issued notice fixing Auction on 10th November, 2022, shall differ the proposed auction. It will be open for the Liquidator to proceed with the Auction further, if any, only after completion of the process under Regulation 2B of the IBBI (Liquidation Process) Regulations, 2016 after period of 3 months. Appeal disposed off. Issues:Challenge to NCLT Order - Rejection of Application for Creditors' Meeting - Liquidation Process - Opportunity for MSME Corporate Debtor - Scheme of Compromise/Arrangement - Auction Process - Liberty to Submit Scheme - Completion Timeline - Auction PostponementAnalysis:The appeal challenges the National Company Law Tribunal's order rejecting the application for convening a meeting of the Committee of Creditors to consider a resolution plan submitted jointly by the appellant and another party. The resolution plan, though approved, was not implemented and was canceled. The Adjudicating Authority noted that any viable plan can be considered before liquidation. The Monitoring Committee's resolution for liquidation on 29th May 2021 was not disclosed earlier. The liquidation application was subsequently allowed, leading to the current dispute.The appellant, representing the MSME Corporate Debtor, argued for the opportunity to present the resolution plan, which was denied. Additionally, it was contended that the appellant should have been allowed to submit a compromise/arrangement scheme under Regulation 2B of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016. On the other hand, the Liquidator opposed, citing the failure of plan implementation and the necessity for liquidation, which was directed by the impugned order. An auction notice had already been issued with several applicants submitting their Earnest Money Deposit (EMD).After hearing both parties, the Appellate Tribunal decided to grant the appellant liberty to submit a scheme of compromise/arrangement under Section 230 of the Companies Act to the Liquidator and Financial Creditors within one month. The entire process, including approval, was to be completed within three months as per Regulation 2B of the IBBI (Liquidation Process) Regulations, 2016. The Liquidator was instructed to postpone the scheduled auction on 10th November 2022 and could only proceed with it after the completion of the regulatory process post three months from the current date. The appeal was disposed of with these directions.