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2020 (1) TMI 1215
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....e essential for this Tribunal to narrate the facts in brief which had made the Liquidator to file this Application seeking for the above noted reliefs. 3. As against the Corporate Debtor, based on the Petition filed by the Financial Creditor namely M/S. L & T Finance Limited seeking for initiation of Corporate Insolvency Resolution Process (CIR Process) in CP/541/1B/CB/2017, this Tribunal vide Order dated 09.02.2018 had admitted the same, and as a consequence, initiated the CIR Process in relation to the Corporate Debtor. 4. In the absence of any Resolution Plan being put forth by the Resolution Professional appointed by this Tribunal as approved by the Committee of Creditors (COC) of the Corporate Debtor, and in the alternative, the COC having passed a Resolution for Liquidation of the Corporate Debtor in the meeting of the COC held on 27007.2018, pursuant to which MA/ 344/2018 was filed by the Resolution Professional before this Tribunal seeking for the liquidation of the Corporate Debtor, the same was ordered on 20.09.2018. However, aggrieved by the said Order of Liquidation passed by this Tribunal, a Company Appeal (AT) (Insolvency) No. 118/2018 was filed before the Hon&#....
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....he Liquidator as the Chairman of the respective meeting for due compliance, and it is stated in the Application by the Liquidator that the meeting was convened on 05.09.2019 at Pluto Hall, First Floor, Hotel Suba Galaxy, N.S. Phadke Road, Off Western Express Highway, Andheri, (East) Mumbai. In the meeting, both the Equity Shareholders as well as the Creditors of the Company in Liquidation have unanimously approved the Scheme as proposed by the promoters of the Company subject to certain modifications suggested by the creditors and equity shareholders of the Company which has also been annexed as an annexure to this Application. 8. It is stated that the chairman's report has been filed before this Tribunal on 12th September, 2019 along with annexure including scrutinizers report as well as rectifications/ modifications as suggested in the Scheme approved by the Equity Shareholders and the Creditors, and subsequently, this Application in CA/ 1026/ CAA/ 2019 had been moved and this Tribunal has directed as evident from the record of proceedings vide its Order dated 25.10.2019 to cause notice to be issued to the statutory and regulatory authorities as well as cause publication i....
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....ard. 13. However, the Learned Counsel appearing for the proponent of the Scheme submitted that the disqualification as prescribed under Section 29 A of the I&B Code, 2016, may not be applicable in the instant case, as the amounts due to the Financial Creditors as reflected at the time of liquidation, has been fully settled and which has also been brought forth in the order of the Hon'ble NCLAT dated 07.03.2019 in relation to the Company under Liquidation filed by one of the shareholders of the Company. 14. In view of change in the legal position while the matter was pending before this Tribunal, an opportunity was given to both the parties to make their submissions in relation to the disqualification taking into consideration that the Financial Creditors of the company as on the date of liquidation having been fully settled by the Corporate Debtor which has not been disputed by the Liquidator, and this Tribunal has fixed the date of hearing as 05.12.2019 for the said purpose. 15. The detailed oral submissions of the Learned Counsel appearing for the Liquidator as well as Learned Counsel for the proponent of the Scheme were heard. The Learned Counsel for the Liquidator ....
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.... Girni K.K. Samiti & Ors. , in Appeal (Civil) 3179-3181/2005, while considering the erstwhile provisions of Section 391 read with Section 394A of the Companies Act, 1956, the Liquidator is well within the power to obtain a Scheme under relevant provisions either from the members or creditors of the Company in Liquidation, and in the said circumstance, the Scheme cannot be shut out from being considered by this Tribunal. 17. Secondly, it is highlighted by the Learned Counsel for the Promoters that by virtue of settlement with the secured creditors of the Company in Liquidation, the proponent of the Scheme are also subrogated to the rights of the Secured Creditors, who have been fully discharged to their satisfaction. Thus, not only as the proponent of the Scheme in the capacity of the Promoters of the Company in liquidation but also in the capacity of Creditors of the Company as well in Liquidation have they filed the Scheme, and in the said circumstance, in the instant case, they are wearing dual hats one as a member and another as creditor of the Company in Liquidation. 18. Thirdly, it is highlighted by the Learned Counsel for the proponent of the Scheme that having discharg....
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.... its own management meaning thereby the Promoters, who are ineligible under Section 29A of I&B Code, 2016 during CIR Process and thereby not entitled to file an Application for Compromise or Arrangement. 23. Prior to the decision dated 24.10.2019, it must be noted that an Appeal was filed before Hon'ble NCLAT against the decision of this Tribunal, ordering Liquidation in MA/ 344/2018 dated 20.09.2018 by shareholders of the Company in Liquidation and the Hon'ble NCLAT vide its Order dated 07.03.2019 taking note of the settlement of the amounts due to L&T Finance Limited as well as ARCIL, had in effect allowed the Promoters of the Company to file the Scheme before the Liquidator and the Liquidator to proceed in terms of Y. Shivram Prasad's case. 24. In this connection, looking to the provisions of Section 29A of I&B Code, 2016, which is extracted below for ready reference:- "29A. Persons not eligible to be resolution applicant. A person shall not be eligible to submit a resolution plan, if such person, or any other person acting jointly or in concert with such person- (a) is an undischarged insolvent; (b) is a wilful defaulter in acco....
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....y law for the time being in force: Provided that this clause shall not apply to a person after the expiry of a period of two years from the date of his release from imprisonment: Provided further that this clause shall not apply in relation to a connected person referred to in clause(iii) of Explanation I]; (e) is disqualified to act as a director under the Companies Act, 2013 (18 of 2013): Provided that this clause shall not apply in relation to a connected person referred to in clause (iii) of Explanation (f) is prohibited by the Securities and Exchange Board of India from trading in securities or accessing the securities markets; (g) has been a promoter or in the management or control of a corporate debtor in which a preferential transaction, undervalued transaction, extortionate credit transaction or fraudulent transaction has taken place and in respect of which an order has been made by the Adjudicating Authority under this Code: Provided that this clause shall not apply if a preferential transaction, undervalued transaction, extortionate credit transaction or fraudulent transaction has taken place prior to the acq....
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....r financial sector regulator of a jurisdiction outside India which jurisdiction is compliant with the Financial Action Task Force Standards and is a signatory to the International Organisation Securities Commissions Multilateral Memorandum of Understanding; (c) any investment vehicle, registered foreign institutional investor, registered foreign portfolio investor or a foreign venture capital investor, where the terms shall have the meaning assigned to them in regulation 2 of the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017 made under the Foreign Exchange Management Act, 1999 (42 of 1 999); (d) an asset reconstruction company registered with the Reserve Bank of India under section 3 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002); (e) an Alternate Investment Fund registered with Securities and Exchange Board of India; (f) such categories ofpersons as may be notified by the Central Govemment. ' 25. As can be seen from the above provisions of Section 29A, the Section yield itself to be bifurcated into t....
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....s been a promoter or in the management or control of a corporate debtor in which a preferential transaction, undervalued transaction or fraudulent transaction has taken place and in respect of which an order has been made by the Adjudicating Authority under this Code: It should also to be noted that upon a query posed by this Tribunal as to whether the Resolution Professional appointed by this Tribunal or subsequently the Liquidator, has chosen to file any Application in relation to the preferential transactions, undervalued transactions, extortionate credit transactions or fraudulent transactions as covered under Sections 43, 45, 49 and 66 of the I&B Code, 2016, attracting clause (g) of the Section 29A, the answer to the said query by the Learned Liquidator was in the negative. In relation to disqualification specified under Section 29A(j) and Section 29A(i) being dependant on the earlier provisions, namely Section 29A(a) to 29A(h) the same is not reflected in the table, specifically. 26. The Learned Liquidator has also not filed any report in relation to the disability which is being suffered and it is also not pointed out by him of any specific provisions under S....
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....pplication: a) The total liability of the Company in Liquidation to the tune of Rs. 3031 lakhs, (excluding liquidator's fee) which will be settled by paying 100% of their dues amount in periodical manner as detailed in the Scheme approved by the Creditors; b) The secured Financial Creditor shall be paid 100% of the Liability as per the Agreement entered into by the Principal Borrower with the Company in Liquidation; c) The unsecured Financial Creditors shall be paid 100% of the liability to them in a phased manner ranging from 7 months to 67 months from the date of approval of the Scheme by the Hon'ble NCLT; d) The Operational Creditors shall be paid 100% of the liability within 6 months commencing from the 2nd month from the date of approval of the Scheme; e) The 100% of the Statutory due to Sales Tax Department (now GST) shall be paid within 2 years time by utilizing the benefits of the Schemes introduced by the Authority concerned; f) To ensure the proper implementation of the Scheme approved in the meeting of Creditors, the promoters of the Scheme shall infuse a sum of Rs. 3,50,00,000/- into the company in Liquidatio....
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.... This provision therefore ensures that if a person wishes to submit a resolution plan, and if such person or any person acting jointly or any person in concert with such person, happens to either manage, control, or be promoter of a corporate debtor declared as a non-performing asset one year before the corporate insolvency resolution process begins, is ineligible to submit a resolution plan. The first proviso to sub-clause (c) makes it clear that the ineligibility can only be removed if the person submitting a resolution plan makes payment of att overdue amounts with interest thereon and charges relating to the non-performing asset in question before submission of a resolution plan. The position in law is thus clear. Any person who wishes to submit a resolution plan acting jointly or in concert with other persons, any of whom may either manage, control or be a promoter of a corporate debtor classified as a non-performing asset in the period abovementioned, must first pay off the debt of the said corporate debtor classified as a non-performing asset in order to become eligible under Section 29A(c). Para 55. However, Messrs Salve and Singhvi have argued that the expression ....
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.... absurdity or hardship. This interpretation is also in line with the object sought to be achieved, namely, that other corporate debtors who are declared as NPAs, whose debts may never be cleared in full, are required to be cleared as a condition precedent to submission of a resolution plan under the Code. In order, therefore, to make the statute "workable", as is suggested by Messrs Salve and Singhvi, we cannot disregard the plain language of the proviso and substitute words which would have the opposite effect. Para 56. Since Section 29A(c) is a see-through provision, great care must be taken to ensure that persons who are in charge of the corporate debtor [pr whom such resolution plan is made, do not come back in some other Lonn to regain control of the company without first paying off its debts. The Code has bifurcated such persons into two groups, as a perusal of sub-clauses (c) and (g) of Section 29A shows. If a person has been a promoter, or in the management, or control, of a corporate debtor in which a preferential transaction, undervalued transaction, extortionate credit transaction or fraudulent transaction has taken place, and in respect of which an order has be....
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....ter of Andhra Bank -Vs- Sterling Biotech Ltd. (through Liquidator) & Ors. , wherein the question which was raised was to the following effect, namely:- "The question arises for consideration in these appeals is whether Section 29A of the 'I&B Code' is applicable to the applicant, if he intends to withdraw the petition under Section 7 or 9, if the Committee of Crediton Approves a proposal with 90 0% voting share, in terms of Section 12A" Which was answered to the following effect as seen in Para 12 to the following effect, namely:- "From Section 12A and the decision of the Hon'ble Supreme Court in 'Swiss Ribbons Pvt. Ltd. & Anr. (supra), it is clear that the Promoters / Shareholders are entitled to settle the matter in terrns of Section 12A and in such case, it is always open to an applicant to withdraw the application under Section 9 of the 'I&B Code' on the basis of which the 'Corporate Insolvency Resolution Process' was initiated. " 31. However, in relation to the Scheme filed under Section 230 of the Companies Act, 2013 in connection with I&B Code, 2016 proceedings, Section 29A of I&B Code, 2016 is made applicable, however in t....