TaxTMI 
TaxTMI 
2020 (2) TMI 1130
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.... steps for Financial Scheme of Compromise and Arrangement between Applicant - Arun Kumar Jagatramka (Promoter) and the Company ('Corporate Debtor') through the 'Liquidator', after holding the debts of shareholders, creditors etc. in terms of Section 230 of the Companies Act. 2. The Appellant has challenged the same on following grounds:- (i) Whether in a liquidation proceeding under Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the 'I&B Code') the Scheme for Compromise and Arrangement can be made in terms of Sections 230 to 232 of the Companies Act? (ii) If so permissible, whether the Promoter is eligible to file application for Compromise and Arrangement, while he is ineligible under Section 29A of the I&B Code to submit a 'Resolution Plan'? 3. Gujarat NRE Coke Limited ('Corporate Debtor'/ 'Corporate Applicant') moved an application under Section 7 of the I&B Code before the Adjudicating Authority (National Company Law Tribunal), Kolkata for initiation of 'Corporate Insolvency Resolution Process' on account of various defaults committed by it. It was admitted by the Adjudicating Auth....
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..... The Hon'ble Supreme Court in 'Swiss Ribbons Pvt. Ltd. & Anr. v. Union of India & Ors. - Writ Petition (Civil) No. 99 of 2018' by its judgment dated 25th January, 2019, observed as follows: "11. .........What is interesting to note is that the Preamble does not, in any manner, refer to liquidation, which is only availed of as a last resort if there is either no resolution plan or the resolution plans submitted are not up to the mark. Even in liquidation, the liquidator can sell the business of the corporate debtor as a going concern. [See ArcelorMittal (supra) at paragraph 83, footnote 3]. (Emphasis added) 12. It can thus be seen that the primary focus of the legislation is to ensure revival and continuation of the corporate debtor by protecting the corporate debtor from its own management and from a corporate death by liquidation. The Code is thus a beneficial legislation which puts the corporate debtor back on its feet, not being a mere recovery legislation for creditors. The interests of the corporate debtor have, therefore, been bifurcated and separated from that of its promoters /those who are in management. Thus, the resolution....
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....ompromise or arrangement with the creditors and members as contemplated by section 391 of the Act or any of the contributories or creditors also can come forward with such an application." 7B. Section 391 of the Companies Act, 1956 has since been replaced by section 230 of the Companies Act, 2013, which is as follows: "230. Power to compromise or make arrangements with creditors and members (1) Where a compromise or arrangement is proposed- (a) between a company and its creditors or any class of them; or (b) between a company and its members or any class of them, the Tribunal may, on the application of the company or of any creditor or member of the company, or in the case of a company which is being wound up, of the liquidator appointed under this Act or under the Insolvency and Bankruptcy Code, 2016 as the case may be, order a meeting of the creditors or class of creditors, or of the members or class of members, as the case may be, to be called, held and conducted in such manner as the Tribunal directs. Explanation.- For the purposes of this sub- section, arrangement includes a reorganisation of the company's shar....
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....website of the company, if any, and in case of a listed company, these documents shall be sent to the Securities and Exchange Board and stock exchange where the securities of the companies are listed, for placing on their website and shall also be published in newspapers in such manner as may be prescribed: Provided further that where the notice for the meeting is also issued by way of an advertisement, it shall indicate the time within which copies of the compromise or arrangement shall be made available to the concerned persons free of charge from the registered office of the company. (4) A notice under sub-section (3) shall provide that the persons to whom the notice is sent may vote in the meeting either themselves or through proxies or by postal ballot to the adoption of the compromise or arrangement within one month from the date of receipt of such notice: Provided that any objection to the compromise or arrangement shall be made only by persons holding not less than ten per cent. of the shareholding or having outstanding debt amounting to not less than five per cent. of the total outstanding debt as per the latest audited financial statement. ....
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....pecial Provisions) Act, 1985 shall abate; (e) such other matters including exit offer to dissenting shareholders, if any, as are in the opinion of the Tribunal necessary to effectively implement the terms of the compromise or arrangement: Provided that no compromise or arrangement shall be sanctioned by the Tribunal unless a certificate by the company's auditor has been filed with the Tribunal to the effect that the accounting treatment, if any, proposed in the scheme of compromise or arrangement is in conformity with the accounting standards prescribed under section 133. (8) The order of the Tribunal shall be filed with the Registrar by the company within a period of thirty days of the receipt of the order. (9) The Tribunal may dispense with calling of a meeting of creditor or class of creditors where such creditors or class of creditors, having at least ninety per cent. value, agree and confirm, by way of affidavit, to the scheme of compromise or arrangement. (10) No compromise or arrangement in respect of any buy-back of securities under this section shall be sanctioned by the Tribunal unless such buy-back is in accordance with th....
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....angement with the creditors, or class of creditors or members or class of members in terms of Section 230 of the Companies Act, 2013. ii. On failure, the liquidator is required to take step to sell the business of the 'Corporate Debtor' as going concern in its totality along with the employees. 14. The last stage will be death of the 'Corporate Debtor' by liquidation, which should be avoided. 15. Learned counsel appearing on behalf of the Appellant (Promoter) submitted that the provisions under Section 230 may not be completed within 90 days, as observed in "S.C. Sekaran v. Amit Gupta & Ors." (Supra). 16. It is further submitted that there will be objections by some of the creditors or members who may not allow the Tribunal to pass appropriate order under section 230 of the Companies Act, 2013. 17. Normally, the total period for liquidation is to be completed preferably within two years. Therefore, in "S.C. Sekaran v. Amit Gupta & Ors." (Supra), this Appellate Tribunal allowed 90 days' time to take steps under section 230 of the Companies Act, 2013. In case, for any reason the liquidation process under section 230 tak....
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....s noticed above, the Hon'ble Supreme Court in Swiss Ribbons (P.) Ltd. v. Union of India [2019] 101 taxmann.com 389/152 SCL 365 held that the 'primary focus of the legislation is to ensure revival and continuation of the corporate debtor by protecting the corporate debtor from its own management and from a corporate death by liquidation'. 11. The aforesaid judgment makes it clear that even during the period of Liquidation, for the purpose of Sections 230 to 232 of the Companies Act, the 'Corporate Debtor' is to be saved from its own management, meaning thereby the Promoters, who are ineligible under section 29A, are not entitled to file application for Compromise and Arrangement in their favour under section 230 to 232 of the Companies Act. Proviso to section 35(f) prohibits the Liquidator to sell the immovable and movable property or actionable claims of the 'Corporate Debtor' in Liquidation to any person who is not eligible to be a Resolution Applicant, quoted below: - "35. Powers and duties of Liquidator.-(1) Subject to the directions of the Adjudicating Authority, the liquidator shall have the following powers and duties, namely:-- **&n....