TaxTMI 
TaxTMI 
2021 (4) TMI 732
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....nt claims that the Liquidator instead of reviving the Company through Settlement under Section 230 of the Companies Act, 2013 sought to close the business of the Company. The Liquidator issued Notice for sale of spare parts available with the Company at low price. E-Auction was proposed to be held on 16th August, 2019. The Appellant filed Application CA No. 620/2019 in CP No. 6/chd/CHD/2017 before the Adjudicating Authority (National Company Law Tribunal, Chandigarh Bench, Chandigarh) against said action and the Application came to be rejected by the Impugned Order dated 23rd August, 2019. The Appellant is taking exception to the Impugned Order passed claiming that the Liquidator did not take steps in terms of the Orders passed by National Company Law Appellate Tribunal in the matter of "S.C. Sekaran Vs. Amit Gupta and Ors.", Company Appeal (AT) (Ins.) No. 495-496 of 2018. It was also claimed that the sale of spare parts would lead to loss of substratum of the Company since the same were old. The Appellant is claiming that the Liquidator should have taken steps to sell the assets of the Corporate Debtor as a going concern. 3. When this Company Appeal (AT) (Ins.) No. 875 of 2019 wa....
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.... Company Law Tribunal, Chandigarh Bench, Chandigarh in C.A. No. 1118 of 2019. In Paragraphs 3 to 6 of that Impugned Order dated 28.11.2019 (challenged in Company Appeal (AT) No. 07 of 2020) the Ld. NCLT observed as under: "3. In the present case, the application for amalgamation, compromise and arrangement is filed by Shri Ashish Mohan Gupta, who has stated that he is the suspended member of the Board of Director-cum-Promoter/Shareholder of all the three companies (Page 40 of the application). Shri Ashish Mohan Gupta is ineligible under Section 29A of the Insolvency and Bankruptcy Code, 2016 (Code) to be a Resolution Applicant. Therefore, the present application for amalgamation, compromise and arrangement cannot be accepted. 4. Alternatively, the application deserves to be dismissed on the grounds discussed below. 5. We may add here that in para 4 of CA No. 1118 of 2019, it is stated that the process of execution of the amended Scheme of Amalgamation, Compromise and Arrangement involves re-calling of the liquidation order and subsequent thereto it is prayed that for the execution of the discharge of liabilities of all the three companies proposed to be done in a schedule m....
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....enefit of MSME Act, no certificate as such is required. Learned Counsel for the Appellant submits that even unregistered MSME is covered. It is submitted that what would be material is to consider the definition of Micro, Small and Medium Enterprises in the Act and the Balance Sheets of the Companies and then there can be finding as to the nature of the Enterprise. 6. Learned Counsel for the Respondent-Liquidator is submitting that all the three companies are under Liquidation and as regards the M/s. Hind Motors India Ltd. for which the present Insolvency Appeal is pending because of the Orders passed by this Tribunal dated 29th August, 2019 the matters are getting delayed. It is stated that stay is required to be vacated. 7. We have heard Learned Counsel for both sides and we have gone through both these Appeals. It appears strange but an Insolvency Appeal is required to be taken up with a Company Appeal. This is because of linking between the IBC and Section 230 of the Companies Act, 2013 brought about by earlier Judgments of this Tribunal. 8. With regard to Section 230 of the Companies Act, 2013 it would be appropriate to refer to recent Judgment in the matter of "Arun Kumar J....
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....uld not be under the Act of 2013 but the IBC itself. The Report notes thus: "4.6...However, the Committee was of the view that such a process for compromise or settlement need not be effected only through the schemes mechanism under the Companies Act, 2013, and felt that the liquidator could be given the power to effect a compromise or settlement with specific creditors with respect to their claims against the corporate debtor under the Code. 4.7 Given the incompatibility of schemes of arrangement and the liquidation process, the Committee recommended that recourse to Section 230 of the Companies Act, 2013 for effecting schemes of arrangement or compromise should not be available during liquidation of the corporate debtor under the Code. However, the Committee felt that an appropriate process to allow the liquidator to effect a compromise or settlement with specific creditors should be devised under the Code." (emphasis in original) 102. Due to the ambiguity in the application of the two frameworks, it became imperative that a clarification be issued in this regard. The introduction of the proviso to Regulation 2B was a step in this direction which sought to clarify the....
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....4. Once again, we must clarify that our observations here are not on the merits of the issue, which has not been challenged before us, but only limited to serve as guiding principles to the benches of NCLT and NCLAT adjudicating disputes under the IBC, going forward. F Conclusion 105. Based on the above analysis, we find that the prohibition placed by the Parliament in Section 29A and Section 35(1)(f) of the IBC must also attach itself to a scheme of compromise or arrangement under Section 230 of the Act of 2013, when the company is undergoing liquidation under the auspices of the IBC.As such, Regulation 2B of the Liquidation Process Regulations, specifically the proviso to Regulation 2B(1), is also constitutionally valid. For the above reasons, we have come to the conclusion that there is no merit in the appeals and the writ petition. The civil appeals and writ petition are accordingly dismissed." (Emphasis Supplied) Keeping the above observations of the Hon'ble Supreme Court in view, and the note of caution as recorded by the Hon'ble Supreme Court, in the present matters, we can see that considerable delay leading to erosion of Value is taking place because of effort t....
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....Act, 2013 under consideration. Moreover, as discussed above, the liquidation process was directed to be initiated vide order dated 12.09.2017. Therefore, one year 11 months have elapsed and sufficient time for steps in terms of Section 230 of the Companies Act, 2013 has already passed. 12. We may add here that as discussed above, the CIRP process in this case was initiated by order dated 09.03.2017 and the spare parts would relate to the period before of around 09.03.2017. Therefore, the spare parts being old, the applicant's contention that with the sale of the spare parts the substratum of the Corporate Debtor would be lost altogether cannot be accepted. 13. In view of the above discussion, the prayer made in the application for staying the process of e-auction which has already been taken place on 16.08.2019 is rejected. 14. CA No. 620/2019 is accordingly disposed of." 10. It is apparent that to get e-auction stayed, Appellant came up with proposals in the nature of Scheme of Compromise etc. This was not done at the nascent stage. The consequence is dragging of Liquidation proceedings. We have already noticed observations made by the Ld. NCLT while rejecting the schem....
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....ined only to a company in liquidation or to corporate debtor which is being wound up under Chapter III of the IBC. Obviously, therefore, the rigors of the IBC will not apply to proceedings under Section 230 of the Act of 2013 where the scheme of compromise or arrangement proposed is in relation to an entity which is not the subject of a proceeding under the IBC. But, when, as in the present case, the process of invoking the provisions of Section 230 of the Act of 2013 traces its origin or, as it may be described, the trigger to the liquidation proceedings which have been initiated under the IBC, it becomes necessary to read both sets of provisions in harmony. A harmonious construction between the two statutes would ensure that while on the one hand a scheme of compromise or arrangement under Section 230 is being pursued, this takes place in a manner which is consistent with the underlying principles of the IBC because the scheme is proposed in respect of an entity which is undergoing liquidation under Chapter III of the IBC. As such, the company has to be protected from its management and a corporate death. It would lead to a manifest absurdity if the very persons who are ineligibl....