Liquidation compromise timelines are directory, requiring section 230 schemes to be placed before creditors for merits-based consideration.

In liquidation, the ninety-day timeline in Regulation 2B(1) for proposing a compromise or arrangement under section 230 of the Companies Act, 2013 was treated as directory, not mandatory. The Code does not impose a rigid statutory deadline for submitting such a scheme, and where the proposal has not yet been considered on merits, the liquidator must place it before the creditors for substantive consideration. Because repeated sale attempts had not produced a successful outcome, the resolution and value-maximisation objectives required the scheme to be examined without delay, and the delay-based objection was rejected.

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Issues: Whether the timeline for proposing a compromise or arrangement under section 230 of the Companies Act, 2013 during liquidation is mandatory or directory, and whether the liquidator must place the proposed scheme before the creditors for consideration on merits.

Analysis: The liquidator's reliance on the ninety-day period under Regulation 2B(1) of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 was examined in the light of the scheme of the Insolvency and Bankruptcy Code, 2016 and the directions permitting recourse to section 230 of the Companies Act, 2013. It was found that the Code does not prescribe a rigid statutory timeline for submission of a scheme, and that the regulatory timeline is directory in nature. Since the scheme submitted by the applicant had not been considered on merits by the creditors, and liquidation had not resulted in a successful sale despite repeated attempts, the objective of resolution and value maximisation required that the scheme be placed before the creditors without delay.

Conclusion: The objection based on delay was rejected, and the liquidator was required to place the section 230 scheme before the creditors for consideration on merits.

Final Conclusion: The application succeeded, and liquidation was kept in abeyance to the extent necessary to enable consideration of the proposed compromise or arrangement in accordance with law.

Ratio Decidendi: In liquidation proceedings, the regulatory period for initiating or processing a compromise or arrangement under section 230 is directory, not mandatory, where a viable scheme may advance the Code's objective of resolution and value maximisation.

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