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TaxTMI 
TaxTMI 
TaxTMI 
2019 (5) TMI 1969
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....lution Plan' submitted by 'Edelweiss Asset Reconstruction Company Ltd.' duly approved by the 'Committee of Creditors' by a vote share of 94.3%. The Adjudicating Authority (National Company Law Tribunal), Mumbai Bench, Mumbai, by impugned order dated 14th January, 2019 rejected the plan and ordered for liquidation under Section 33 read with Regulation 32(b) & (e) of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016, relevant portion of which reads as follows: "ORDER 100 We direct that the Corporate Debtor be liquidated as per provisions of Regulation 32(b) & (e) of the IBBI (Liquidation Process) Regulations, 2016 which provides for assets in a slump sale, the corporate debtor as a going concern, in the manner as laid down in Chapter III under Part II of IBC, 2016. 101 However, considering the national importance attached to product line of the company, the customers explicitly Ministry of Defence, Indian Coastguard, Customs etc, order book size, advances paid by various Government Departments, the work in progress stalled at various stages of production and huge number of workforce (around 850 employees) we direct that the Liquidator shall end....
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....um value to the assets of the company which may be in the interest of the company and its employee. 109 Since this liquidation order has been passed, no suit or other legal proceeding shall be instituted by or against the Corporate Debtor without prior approval of this Adjudicating Authority save and except as mentioned in sub-section 6 of Section 33 of the IBC. 110 Moratorium declared vide Order dated 06.06.2017 in CP No.292/2017 shall cease to exist. 111 Since the corporate debtor is a listed company, a copy of this order be served upon SEBI for initiating appropriate action as deemed fit. 112 Accordingly, the MA 170/2018 in CP 292/2017 is hereby disposed of and all connected MA 334, 473, 584/2018 & MA 377, 425, 501, 565, 602, 549/2017 and IA 334, 420/2018 & INVP 21/018 are also hereby disposed of with a direction that the aggrieved person if any may make a claim with the Liquidator. 113 The registry is directed to communicate this order to RP, RA and all concerned parties immediately even by way of e-mail." 2. The Appellant, Shareholder has challenged the order on the ground that liquidation order has been passed with "material irregularity" due to fraud committed by ....
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....o safeguard their interest. 10. Learned counsel appearing on behalf of 2nd Respondent- 'Edelweiss Asset Reconstruction Company Ltd.' submitted that they are no more interested in pursuing the 'Resolution Plan'. 11. The Adjudicating Authority considered the 'Resolution Plan' as was approved by the 'Committee of Creditors' and on close scrutiny observed: "46. On a close scrutiny of the Resolution Plan of EARC, it appears that the plan provides for generation of income from its ongoing operations, from the ' existing liquid investment, existing cash balance, release of margin money, receipt from debtors, sale of Kolkata Yard, sale of Andheri Office & other identified assets, sale of scrap, sale of land etc. and no upfront money is brought in by the Resolution Applicant. 47. It is provided in the plan that after approval of the plan, the company seeks to cancel the. Defence order and further relief has been sought regarding the release of margin money and Bank Guarantee in favour of the company. Resolution Applicant is not infusing any cash in the company, but Resolution Applicant's investment is only by way of refund of SBI margin money, by the sale of Kolkata Yard, the ....
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....t the liquidator to ensure that the company remains a going concern and certain other direction has been issued. In addition to such direction, we also direct the liquidator to follow the decision and direction of this Appellate Tribunal in "Y. Shivram Prasad Vs. S. Dhanapal & Ors. ─ Company Appeal (AT) (Insolvency) No. 224 of 2018 etc." wherein this Appellate Tribunal by its judgment dated 27th February, 2019 observed and held as follows: "12. The aforesaid issue fell for consideration before this Appellate Tribunal in "S.C. Sekaran v. Amit Gupta & Ors.─ Company Appeal (AT) (Insolvency) Nos. 495 & 496 of 2018" wherein this Appellate Tribunal having noticed the decision of the Hon'ble Supreme Court in "Swiss Ribbon Pvt. Ltd. & Anr. v. Union of India & Ors. (Supra) and "Meghal Homes Pvt. Ltd." observed and held: "5. We have heard the learned counsel for the parties and perused the record. The Hon'ble Supreme Court in 'Swiss Ribbons Pvt. Ltd. & Anr. vs. 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, ref....
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....es not appear to be necessary to restrict the scope of that provision considering the purpose for which it is enacted, namely, the revival of a company including a company that is liable to be wound up or is being wound up and normally, the attempt must be to ensure that rather than dissolving a company it is allowed to revive. Moreover, Section 391(1)(b) gives a right to the liquidator in the case of a company which is being wound up, to propose a compromise or arrangement with creditors and members indicating that the provision would apply even in a case where an order of winding up has been made and a liquidator had been appointed. Equally, it does not appear to be necessary to go elaborately into the question whether in the case of a company in liquidation, only the Official Liquidator could propose a compromise 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." 7. 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....
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....creditors and to all the members or class of members and the debenture-holders of the company, individually at the address registered with the company which shall be accompanied by a statement disclosing the details of the compromise or arrangement, a copy of the valuation report, if any, and explaining their effect on creditors, key managerial personnel, promoters and non-promoter members, and the debenture-holders and the effect of the compromise or arrangement on any material interests of the directors of the company or the debenture trustees, and such other matters as may be prescribed: Provided that such notice and other documents shall also be placed on the 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 concer....
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.... shareholders shall be given an option to either obtain arrears of dividend in cash or accept equity shares equal to the value of the dividend payable; (b) the protection of any class of creditors; (c) if the compromise or arrangement results in the variation of the shareholders' rights, it shall be given effect to under the provisions of section 48; (d) if the compromise or arrangement is agreed to by the creditors under sub-section (6), any proceedings pending before the Board for Industrial and Financial Reconstruction established under section 4 of the Sick Industrial Companies (Special 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 ....
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....with the sale of company's assets wholly and thereafter, if not possible to sell the company in part and in accordance with law." 13. Therefore, it is clear that during the liquidation process, step required to be taken for its revival and continuance of the 'Corporate Debtor' by protecting the 'Corporate Debtor' from its management and from a death by liquidation. Thus, the steps which are required to be taken are as follows: i. By compromise or arrangement 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 ....