TaxTMI 
TaxTMI 
2021 (7) TMI 1093
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....Authority' (National Company Law Tribunal, Division Bench-1, Chennai) while passing the 'Impugned Order' dated 12.01.2021 in MA/32/2020 in CP/565/IB/2017 at paragraphs No.9 to 12 had observed the following: 9. "It is to be noted here that the above Order passed by this Tribunal was also confirmed by the Hon'ble NCLAT by its order dated 09.12.2020 passed in Muhamad Yavar Dala -Vs- Kavitha Surana, Liquidator of M/s. Forward Shoes (India) Pvt. Ltd. in Company Appeal (AT)(Insolvency) No. 384 of 2020 wherein the views taken by this Tribunal were affirmed and it was held that when Order of liquidation is passed it would amount to discharge of the officers/ employees/workmen of the Corporate Debtor, except when and to the extent of the business of the Corporate Debtor to be continued during the Liquidation Process by the Liquidator. Apart from this once CIRP is initiated under IBC, the management vests in IRP/RP and if Liquidation Order gets passed the Powers and Duties of the Liquidator as in Section 35 of IBC vest with Liquidator. Without liquidator taking steps, no such application to obtain Certificate of MSME could have been filed by the Appellant. Further, it went on to hol....
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....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:-- (f) subject to section 52, to sell the immovable and movable property and actionable claims of the corporate debtor in liquidation by public auction or private contract, with power to transfer such property to any person or body corporate, or to sell the same in parcels in such manner as may be specified: Provided that the liquidator shall not sell the immovable and movable property or actionable claims of corporate debtor in liquidation to any person who is not eligible to be a resolution applicant." 12. Fr....
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....s represented on behalf of the 'Appellant' that the 'Respondent' had commenced initiating the steps under Section 230 of the Companies Act, 2013, by making an advertisement on 14.07.2019, inviting 'Compromise Scheme Proposal' from the 'Members'/'Stakeholders' of the 'Corporate Debtor' Company. In the interregnum, the 'Appellant' (as a member of the 'Corporate Debtor') had placed a 'Compromise Proposal' in a 'sealed cover' addressed to the Respondent through Registered Post on 24.05.2019, before the Respondents advertisement, which was acknowledged by the Respondent. However, the Respondent, never raised any objection or require to resubmit the proposal. 7. According to the 'Appellant', the Respondent filed MA/32/2020 dated 10.12.2019 before the 'Adjudicating Authority', praying for issuance of an order to conduct a 'Committee of Creditor's meeting, to consider the said 'Compromise Proposal'. In fact, the 'Respondent'/'Liquidator', in regard to the eligibility criterion raised some irrelevant issues and both the Respondent/Liquidator and the 'Adjudicating Authority' interfered with the 'Authority' of the 'Committee of Creditors' and the Miscellaneous Application came to be dismis....
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....ptcy Code, when the compromise arrangement was made under Section 230 of the Code, moreover, the proviso to Section 2B of IBBI (LP) Regulations, 2016 ineligible criteria is not applicable to the 'Appellant'/Scheme Proponent. Besides these, the 'Adjudicating Authority' cannot travel beyond the purview of an 'Application' and pass an order outside the relief that was claimed by the 'Applicant' in a particular 'Miscellaneous Application'. 12. The Learned Counsel for the Appellant contends that the 'Liquidator' had obtained an 'Affidavit' from the 'Appellant' by exercising 'coercion' and the said act is in violation of law and further it is not necessary to conduct the meeting of the 'Committee of Creditors', as he prayed for. 13. The Learned Counsel for the Appellant points out that there is no 'Auction Proceeding' and that the 'Appellant' is not a Bidder and therefore, under Section 29A of the I & B Code, an 'Affidavit' is not necessary for the present case. Appellant's Citations: 14. (i) The Learned Counsel for the Appellant refers to the decision in State Bank of India v Electro Steels Limited [CA(IB) No.202 & 203/KB/2018, CP(IB)No. 361/KB/2017] wherein the 'Adjudicatin....
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....ies were in the name of 'Promoter'/'Director' Mr. S. I. Nathan were shown in the Audited Financial Statement of the 'Corporate Debtor', in the case of the meeting, Promoter Mr. S. I. Nathan had asked the 'Committee of Creditors' meeting to consider the properties which are in his name to be considered as property of the 'Corporate Debtor'. Indeed, the Respondent filed MA 646 of 2018 before the 'Tribunal' that a 'Resolution' passed in the 'Committee of Creditors' meeting for Liquidation of the 'Corporate Debtor' before the 'Adjudicating Authority' and that a Liquidation Order was passed on 20.12.2018. 17. It is the stand of the Respondent/Liquidator that the Promoters projected an 'Appeal' before the 'Appellate Tribunal' against the order of Liquidation passed by the 'Adjudicating Authority'. In fact, the 'Appellate Tribunal' on 26.02.2019 had uphold the order of Liquidation and had instructed the 'Liquidator' to take steps under Section 230 of the Companies Act, failing which steps were to be taken for the outright sale of the 'Corporate Debtor'. An appeal was filed before the Hon'ble Supreme Court dated 16.04.2019 against the Judgment of the 'Appellate Tribunal' and that the Ho....
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....: "As it is required, let the same be obtained from the proponents of the Scheme taking into consideration the representation made by the Learned Counsel for the Liquidator for the Liquidator as well as considering the decisions of the Hon'ble NCLAT in the matter of M/s.Jindal Steel & Power Ltd- Vs-ArunkumarJagatrmba(Gujarat NRE Cake Ltd) in CA(AT)No.221 of2018, let an affidavit be filed by the proponents of the Scheme as submitted by the proponents within a period of ten days from today." The Respondent/Liquidator in the Counter has referred to the Judgment of the Hon'ble Supreme Court in Arun Kumar Jagatramka V Jindal Steel and Power Ltd. Vide Civil Appeal No.9664 of 2019 that Writ Petition No.(C) No.269 of 2020 and With Civil Appeal No.2719 of 2020 dated 15.03.2021 wherein it was observed that the Promoters are not empowered to submit 'Compromise Proposal' under Section 230 of the Companies Act, 2013 and under Section 29(A) of the Code. 21. It is projected on the side of the Respondent/Liquidator that the 'Suspended Directors' had obtained an MSME Certificate dated 03.10.2020 in an illegal and clandestine fashion, which is void abinitio and deserves to be ignored.....
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...., 2016 with effect from 15.11.2016, can make an application under this provision alone with a prayer to conduct the CoC meeting. However, the 'Respondent'/'Liquidator' and the 'Adjudicating Authority' had not followed the said procedure in the 'instant Case'. 26. Section 30 (2) (e) of the I & B Code does not empower the 'Resolution Professional' to determine whether the 'Resolution Plan' does or does not violate the Provisions of Law. The 'Adjudicating Authority' can decide whether the 'Resolution Plan' is in breach of any Provision of Law (including Section 29(A) of the Code) after hearing 'Arguments' from the 'Resolution Applicant' as well as the 'Committee of Creditors', after which an 'Appeal' can be filed from the decision of the 'Adjudicating Authority' to the 'Appellate Authority' under Section 61 of the Code. 27. In State Bank of India v Electro Steels Ltd. (vide CA (IB) No.202 & 203/KB/2018 CP(IB) No.361/KB/2017, the 'Adjudicating Authority' opined that it cannot make a decision to hold that the 'Resolution Applicants' are eligible or ineligible and the objections would be considered by the 'Committee of Creditors' for an independent decision as regards the applicati....
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....aim as per Section 230 of the Companies Act, 2013. 32. The Learned Counsel for the 'Respondent'/'Liquidator' comes out with a plea that the 'Appellant' wanted to take custody of all the properties and business by paying only 50% of the total claim which is against law. Moreover, it is the version of the Respondent that the Promoters should not enter into the 'Corporate Debtor' through 'backdoors'. Also, that in the instant Case, 'Promoter' has managed to obtain a MSME Certificate on their own without the knowledge of the 'Respondent'/'Liquidator' and the same is an illegal one. DISCUSSIONS : 33. At the outset, this 'Tribunal' points out It comes to be known that the 'Respondent'/'Liquidator' /'Applicant' had preferred MA/32/2020 in CP/565/2017 before the 'Adjudicating Authority' (National Company Law Tribunal, Chennai) wherein, on 02.11.2017, the 'Insolvency Application was allowed Exparte'. Further, in MA/646/2018 in CP/567/2017 (filed by the 'Resolution Professional') the 'Adjudicating Authority' appointed the 'Resolution Professional' Mr.G.V.Ravikumar) as 'Company Liquidator'. However, the 'Appellate Tribunal' on 26.02.2019 had varied the order of the 'Adjudicating Auth....
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....e 'Corporate Debtor'/M/s. Air Carnival Pvt. Ltd. As a matter of fact, the order of 'Liquidation' was passed on 20.12.2018 and that the date of compromise as per Section 230 of the Companies Act was on 25.05.2019. To put it precisely, only after the 'Liquidation Order', the 'Compromise Proposal' was given. 38. As per the preamended definition Section 29A of the I & B Code, the 'Promoters' could be the 'Resolution Applicant(s)' per contra, under the new definition 'Promoters' are not included in the definition of 'Resolution Applicant' as they are not mentioned in Clause (H) of Section 25(2) of the Code. The restriction under Section 29A of the Code shall apply when an ineligible person or any other person acting jointly with such person submits a 'Resolution Plan'. The restriction shall also apply if such person is a connected person to a 'Resolution Applicant' as defined in explanation to Section 29A of the Code. 39. In fact, the list of persons who are ineligible to submit 'Resolution Plan' is an exhaustive one and among other things covers an undischarged insolvent, a wilful defaulter, any person having non-performing loan as per 'Reserve Bank of India' guidelines, a person....
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....s of Section 29A of the Code applies to 'CIRPs' initiated after 23.11.2017. IBBI (LP) Regulation: 44. It is useful to point out that 2(B)(1) of 'Insolvency and Bankruptcy Board of India' (Liquidation Process) Regulations, 2016 'Compromise or arrangement' enjoins that "where a compromise or arrangement is proposed under section 230 of the Companies Act, 2013 (18 of 2013), it shall be completed within ninety days of the order of liquidation under sub-sections (1) and (4) of section 33; [Provided that a person, who is not eligible under the Code to submit a resolution plan for insolvency resolution of the corporate debtor, shall not be a party in any manner to such compromise or arrangement]." Besides this, the stock reality is that the I&B Code 2016, is meant that 'defaulting promoters' of their Companies can be displaced. Assessment: 45. As far as the present case is concerned, since the 'Liquidation' order was passed on 20.12.2018 in MA/646/2018 by the 'Adjudicating Authority' and that the 'Resolution Professional' Mr. G.V. Ravikumar was appointed as 'Liquidator' ('Respondent' in the 'instant Appeal'). Added further the 'Compromise Proposal' was giv....
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....clearly unsustainable in the eye of Law. 48. To put it succinctly, the 'Liquidator' is required to adhere to the procedure prescribed under the Code and before taking steps to sell the 'Corporate Debtor's Assets' (Company) he will take necessary steps as per Section 230 of the Companies Act and that the 'Adjudicating Authority' if situation so warrants is to pass appropriate orders. Before approval of an arrangement or scheme, the 'Adjudicating Authority' by following the principles can allow the 'Liquidator' to form the 'Committee of Creditors' for its opinion to find out whether the arrangement of scheme is viable/feasible one and having correct financial matrix. 49. In the event of failure of revival, it is open to the 'Adjudicating Authority' and the 'Liquidator' firstly to proceed with the sale of Company's assets in entirety and thereafter, if not possible, to sell the Company in part and of course, in the manner known to Law. If the 'Liquidator' initiates necessary action, he will complete the process as per Section 230 of the Companies Act, 2013, within 90 days. 50. Dealing with the stand of the 'Appellant' that the 'Liquidator' cannot seek an 'Affidavit' under Sec....