Stock exchanges' NOC under Regulation 37(1)(2) LODR not required for revival schemes under Insolvency and Bankruptcy Code

NCLAT held that prior NOC from stock exchanges under Regulation 37(1)(2) of LODR is not required for schemes of arrangement for revival of companies undergoing liquidation under the Insolvency and Bankruptcy Code. The tribunal reasoned that SEBI's 2018 amendment exempting NOC requirements for resolution plans under Section 31 of the Code should extend to revival schemes, as these schemes are akin to resolution plans and serve similar purposes. The court emphasized that revival efforts benefit all stakeholders and that stock exchanges retain the right to object during NCLT proceedings. The appeal was allowed and the impugned order was set aside.

---

---

Issues Involved:
1. Applicability of Regulation 37(1) and (2) of the LODR to the Scheme submitted by the Liquidator under Section 230 of the Companies Act.
2. Applicability of Regulation 37(7) of the LODR to a Scheme for revival of a company in liquidation.
3. Requirement of a No-Objection Certificate (NOC) from the Bombay Stock Exchange (BSE) for the Scheme of Arrangement.

Issue-wise Detailed Analysis:

1. Applicability of Regulation 37(1) and (2) of the LODR to the Scheme submitted by the Liquidator under Section 230 of the Companies Act:

The Tribunal held that Regulation 37(1) and 37(2) of the LODR mandate a 'listed entity' or 'company' to obtain a NOC from the stock exchanges. However, in cases of companies in liquidation, the scheme of arrangement is filed by the liquidator, not the company. Section 230(1) of the Companies Act treats the liquidator as separate and distinct from the company. Therefore, the rigors of Regulation 37(1) and 37(2) of the LODR do not apply to the liquidator. The Tribunal emphasized that the liquidator is a separate category of person who can file a scheme before the NCLT, and thus, the liquidator is not bound by the requirements imposed on the company under Regulation 37(1) and 37(2).

2. Applicability of Regulation 37(7) of the LODR to a Scheme for revival of a company in liquidation:

The Tribunal noted that Regulation 37(7) of the LODR exempts the requirement of seeking a NOC from stock exchanges for restructuring proposals approved as part of a resolution plan by the NCLT under Section 31 of the Insolvency and Bankruptcy Code (IBC). The Tribunal held that a scheme of arrangement for revival of a company in liquidation is also a 'restructuring proposal' and contains similar attributes to a resolution plan under Section 31 of the IBC. Both modes of revival operate in a similar continuum and deserve equal treatment. Therefore, the exemption provided in Regulation 37(7) should also apply to schemes of arrangement submitted under Section 230 of the Companies Act read with Regulation 2-B of the Liquidation Process Regulations.

3. Requirement of a No-Objection Certificate (NOC) from the Bombay Stock Exchange (BSE) for the Scheme of Arrangement:

The Tribunal observed that under the Companies Act, there is no provision mandating companies to obtain a prior NOC from stock exchanges for a scheme of arrangement. Section 230(5) of the Companies Act only contemplates notice to the stock exchanges after the scheme has been filed with the Tribunal. The requirement of giving notice to the stock exchanges has been duly complied with by the liquidator. The Tribunal also referred to the judgment in Pentemedia Graphics Limited v. The Bombay Stock Exchange, which held that the requirement of a NOC from stock exchanges is not mandatory for the approval of a scheme and is only required for continued listing of the company. Therefore, the Tribunal concluded that there is no requirement for a prior NOC from the stock exchanges or SEBI before the scheme is filed before the NCLT.

Conclusion:

The Tribunal set aside the Impugned Order dated 04.04.2024 and held that a prior NOC from stock exchanges under Regulation 37(1) and (2) of the LODR is not required for schemes for the revival of companies undergoing liquidation under the IBC. The Tribunal also directed the NCLT to proceed with hearing the scheme on merits without insisting on a prior NOC from the stock exchanges and to dispose of the same expeditiously, preferably within four weeks. The appeal was allowed, and pending applications, if any, were closed.

---