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AI Drafter - (New and Powerful) ✕ Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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Issues: (i) Whether a scheme of compromise or arrangement under Section 230 of the Companies Act, 2013 had precedence over sale of the corporate debtor as a going concern under the liquidation regulations. (ii) Whether the e-auction and confirmation of sale of the corporate debtor as a going concern were liable to be set aside for the alleged procedural irregularities.
Issue (i): Whether a scheme of compromise or arrangement under Section 230 of the Companies Act, 2013 had precedence over sale of the corporate debtor as a going concern under the liquidation regulations.
Analysis: Section 230 was held to be a pre-IBC mechanism that continues to operate within the liquidation framework, but only as a part of the liquidation process and not as a superior route overriding sale as a going concern. Regulation 2B was treated as enabling a limited opportunity for compromise or arrangement within liquidation, while Regulation 32(e) and Regulation 32A were treated as the primary and more effective route for realisation where the corporate debtor can be preserved as a going concern. The scheme offered by the appellant was also considered belated and had already been examined and rejected in the liquidation process.
Conclusion: The scheme under Section 230 did not have precedence over the sale of the corporate debtor as a going concern, and the appellant's challenge on this ground failed.
Issue (ii): Whether the e-auction and confirmation of sale of the corporate debtor as a going concern were liable to be set aside for the alleged procedural irregularities.
Analysis: The sale process was found to have culminated in a successful bid above the reserve price, with the highest bidder duly issued the letter of intent and the sale confirmed by the adjudicating authority. The alleged irregularities were treated as minor or inadvertent and not shown to have caused substantial prejudice or defeated the object of the liquidation process. The tribunal also accepted that the successful bidder was already operating the corporate debtor as a going concern, making interference unwarranted.
Conclusion: The e-auction and confirmation of sale were upheld, and no ground was made out to invalidate the process.
Final Conclusion: The liquidation sale as a going concern was sustained, the competing scheme-based challenge was rejected, and the connected appeals failed in entirety.
Ratio Decidendi: In liquidation, a scheme under Section 230 of the Companies Act, 2013 is only an enabling route within the liquidation framework and does not override a duly conducted sale of the corporate debtor as a going concern under the IBBI liquidation regulations.
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