Tribunal confirms rejection of scheme extension request under Companies Act

The Tribunal upheld the Adjudicating Authority's decision to reject the extension of the timeline for submitting a scheme of arrangement under Section 230 of the Companies Act, 2013. The Appellant, an operational creditor, failed to provide convincing evidence of a formulated scheme ready for submission, and the 90-day period stipulated by Regulation 2-B of the Liquidation Process Regulations had expired. The appeal was dismissed, and no costs were awarded.

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Issues Involved:
1. Validity of the Adjudicating Authority's rejection of the extension of the timeline for submission of a scheme of arrangement.
2. Applicability of Section 230 of the Companies Act, 2013, and Regulation 2-B of the Liquidation Process Regulations, 2016.
3. The role and actions of the Liquidator in the liquidation process.

Summary:

1. Validity of the Adjudicating Authority's Rejection of the Extension:
The Appellant, an operational creditor, sought an extension of the timeline for submitting a scheme of arrangement under Section 230 of the Companies Act, 2013, which was rejected by the Adjudicating Authority. The Appellant argued that liquidation would mean the corporate debtor's certain death and cited judgments supporting the revival of the corporate debtor through a scheme of arrangement. However, the Adjudicating Authority found no convincing reason to extend the timeline as the Appellant did not show any concrete evidence of a formulated scheme ready for submission.

2. Applicability of Section 230 and Regulation 2-B:
Section 230 allows a scheme of compromise or arrangement for a company under liquidation to achieve its revival. Regulation 2-B of the Liquidation Process Regulations stipulates a 90-day period for submission and consideration of such a scheme. The Appellant argued that the timeline is directory and should not hinder the submission of a scheme. However, the Respondents clarified that the 90-day period started from the liquidation order date, not from the public notice date, and the Appellant misconstrued this.

3. Role and Actions of the Liquidator:
The Liquidator published an invitation for submission of a scheme and provided access to the Virtual Data Room (VDR) to the Appellant. However, the Appellant did not submit the scheme within the stipulated time and sought an extension. The Liquidator proceeded with the auction process as the Appellant failed to show any serious effort in formulating a scheme. The Tribunal noted that the Appellant did not approach secured creditors for consent or propose a scheme to the Liquidator or Stakeholders Consultation Committee, even after accessing the VDR.

Conclusion:
The Tribunal upheld the Adjudicating Authority's decision, stating that the Appellant did not show any proof of a ready scheme or serious efforts in its formulation. The request for an extension was unsupported by concrete action, and the 90-day timeline had expired. The appeal was dismissed with no order as to costs.

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