TaxTMI 
TaxTMI 
2021 (12) TMI 1430
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....u Jacob, Advocates. For the Applicant: Mr. Ashok Kumar Jain, Advocate in I.A. 2346 of 2021., Mr. Gaurav Pathak, Advocate in I.A. 2484 of 2021. For the Respondents: Mr. Sumesh Dhawan, Vatsala Kak, Mr. Swarnendu Chatterjee, Mr. Abhishek Swaroop, Mr. Naman Kamdar, Mr. Anupam Prakash, Ms. Geetika Mittal, Advocates for R-1. ,Mr. Sandeep Singhal, Ms. Anushree Kapadia, Ms. Priyanka Rathi, Advocates for R-2. For the Liquidator : Mr. Vijay Kumar Iyer, Advocate for Liquidator. JUDGEMENT [Per; Shreesha Merla, Member (T)] 1. These Appeals namely Company Appeal (AT) (Insolvency) No. 140 of 2021, preferred by 'Prakash Chandra Kapoor and Anr.' (the Erstwhile Director of the 'Corporate Debtor Company'), Company Appeal (AT) (Insolvency) No. 165 of 2021 preferred by 'M/s. PGI - GmbH - Playglobal International' (hereinafter referred to as M/s. PGI Global) and Company Appeal (AT) (Insolvency) No. 243 of 2021 preferred by 'Bhartiya Kamgar Sena Workmen Union of BDIL', challenge the Common Impugned Order dated 18.12.2020 in I.A. No. 3702 of 2019 in CP (IB) No. 292/(MB)/2017 passed by the Learned Adjudicating Authority (National Company Law Tribunal, Mumbai Bench, Special Bench, Court No....
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....view of Covid-19 pandemic, this Tribunal's work was closed. Subsequently vide a Notice dated 22.04.2020, the Principal Bench allowed this Tribunal to take urgent matters through video conferencing. 12. The matter came up for hearing on 22.06.2020 and this Authority gave a last chance to Seven Star Securities Private Limited to deposit the EMD. Learned Counsel for Seven Star Securities Private Limited submitted that due to Covid-19 pandemic, the Company was not in a position to arrange the funds but however assured to deposit Rs. 5 crores by 29.06.2020. The matter came up for hearing on 29.06.2020. The Counsel for Seven Star Securities Private Limited submitted that they had failed to comply with the Order dated 22.06.2020 and therefore in accordance with the said order, no further time was granted to deposit the EMD and the present Application was heard. 13. As the circumstances narrated supra would indicate, all possible steps have been taken to revive the Company and they have not yielded any fruitful result. The assets of the CD are lying idle and due to lack of business the CD, it has not been able to provide for its employees. That in turn has affect....
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....the Company could be present across the world and the publication of advertisement calling for EoI should have been published internationally'. • The Liquidator either turned a blind eye to the observations of the Adjudicating Authority for publication of advertisement internationally or deliberately did not do so to ensure that serious bids were not received. • The advertisement inviting EoI was made as unattractive as possible and did not refer to the huge value that the 'Corporate Debtor' brought to a prospective bidder. • The Liquidator did not follow the requirements of Schedule-I of the IBB (Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016). Liquidator was required to follow the regulations which envisaged preparation of a marketing strategy taking help of market professionals, preparing information sheets for the assets, liaisoning with the agents etc. None of this was done by the Liquidator. • The Impugned Order has signed the death warrant of the 'Corporate Debtor' considering the statements of the Liquidator as the gospel truth without taking into consideration that the Liquidator did not ....
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....s contrary to the judgement of this Tribunal dated 14.05.2019 as it has directed piecemeal sale of the assets. • The Appellant is the bona fide investor and is willing to put down the Earnest Money Deposit within a period of 30 days from the date this Tribunal allows the Appeal. • Maximisation of the Assets of the 'Corporate Debtor' can be fulfilled only if the 'Corporate Debtor' is sold as a 'going concern'; that no prejudice would be caused to the stakeholders if the Appellant is allowed to provide the Earnest Money Deposited. • Because of the pandemic and the lockdown, the Appellant could not submit its bid and a mere procedural delay should not result in grave injustice and lead to Corporate Death of the Company and hence prays for M/s. PGI Global to be allowed to submit a scheme under Section 231 & 232 of the Companies Act 2013. • Learned Counsel relied on the following Judgements in support of their case:- • 'Y. Shivaram Prasad' Vs. 'S. Dhanpal & Ors.' 2019 SCC OnLine NCLAT 172 (Paragraphs 10-14). • 'Arun Kumar Jagatramka' Vs. 'Jindal Steel and Power Ltd. & Anr.' 2021 SCC OnLine SC 220 (Paragraphs 7....
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....it Rs.32 Crores/- on or before 23.12.2020 but the same was not considered. An Interlocutory Application was preferred by M/s. Skein Corp. India on 14.12.2020 placing on record its intent to submit the Resolution Plan but the same was not brought on record by the Liquidator when the hearing was held on 18.12.2020. • It is submitted that the value of the 'Corporate Debtor' has reduced drastically in a span of less than 6 months, eroding the value. Any further auction will reduce the value, leaving the Company to be sold at a scrap value. It was strenuously contended that the Liquidator and the 'Financial Creditor' were not working in the interest of the Company which provides employment for more than 850 employees,and hence prays for the proposal given by M/s. PGI Global also to be considered and also to direct that all wages and statutory dues including provident fund and gratuity since 2012 to be paid to the workers immediately. 6. I.A. 2346 of 2021: I.A. 2346 of 2021 has been filed by M/s. Goldman Securities Limited seeking impleadment as one of the Respondents in Company Appeal (AT) (Insolvency) No. 243 of 2021 (preferred by Workmen Union of the 'Corporate Debt....
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....ions given in the Order dated 14.05.2019, the Liquidator is taking measures in complying with the directions therein. • This Tribunal vide Order dated 14.05.2019 has directed to sell the 'Corporate Debtor' on the whole as a 'going concern basis' and hence Public Announcement was given inviting Expressions of Interest for participation by interested bidders. In addition to issuing Public Announcement, Liquidator has issued an invitation to each of the persons that have evinced an interest in submitting a 'Scheme' to participate in the aforementioned bidding process. It is submitted that a perusal of the said Public Notice, shows that the Liquidator is admitting to sell the 'Corporate Debtor' as a 'going concern' only. • In the seventh Meeting of the stakeholders of the 'Corporate Debtor', the Liquidator informed the stakeholders that the next steps and only if the Company cannot be sold as a 'going concern' as a whole, the next step would be shipyard wise sale for the various yards of the 'Corporate Debtor', the next subsequent step would be selling the Assets in parcels. Selling the 'Asset' as a piecemeal sale would be the last resort. • The p....
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.... • This Tribunal on 08.12.2020 directed the Adjudicating Authority, Mumbai to accord topmost priority to I.A. No.3702 of 2019 and passed an Order within a weeks' time, which itself shows the urgency accorded by this Tribunal to this matter and hence the allegations by the Directors, the Workmen and the Unsuccessful Applicant against the Liquidator, are all denied and it is prayed that their Appeals are dismissed with cost. 8. Submissions of the Learned Counsel appearing on behalf of Liquidator in I.A. 2346 of 2021: • This I.A. has been filed on 21.10.2021 during the stage of final arguments. • Learned Counsel for the Liquidator submitted that this I.A. is not maintainable as it is filed for impleadment and for consideration of the Applicant's bid under Rule 11 of NCLAT Rules, 2016, read with Section 31 of the Code. The entire process which deals with approval of Resolution Plan has no applicability in the Liquidation Process and the Applicant seeking consideration of its 'Terms of Acquisition' and offer akin to a Resolution Plan, at the stage of Liquidation Proceeding under Chapter 3 of the Code, is impermissible. • It is further....
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....ved on 16.11.2021. During the course of arguments, Learned Counsel Mr. Sumesh Dhawan appearing for the Liquidator submitted that he has not received any copy of the I.A. and sought to file Reply but as sufficient time has lapsed, and the final arguments had concluded, an opportunity was given to file Written Submissions after a copy was served on him. 10. Submissions of the Learned Counsel appearing on behalf of Edelweiss Asset Reconstruction Company Limited/Financial Creditor: • Learned Counsel submitted that this Appeal is not maintainable as ex-promoter do not have any locus standi to file the Appeal as they are ineligible under Section 29(A) of the Code to submit scheme to acquire Assets of the 'Corporate Debtor' in liquidation. The Appellants have failed to establish any grounds as to how they are personally aggrieved by the Impugned Order. • The Public Announcement has been made inviting EoIs once again to sell the 'Corporate Debtor' as a whole, rendering the Appeal as infructuous. At the stakeholders Meeting on 22.01.2021 the liquidator informed that the first object would be to sell the 'Corporate Debtor'/its business as a whole and subsequently....
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....ations, 2016, as more than 270 days has passed, the Adjudicating Authority had passed the Order of Liquidation and this Tribunal found no ground to interfere with that Order and directed the Liquidator to ensure that the Company remains a 'going concern' and follow the directions of this Tribunal in 'Y Shivram' Vs. 'S. Dhanpal & Ors.' in Company Appeal (AT) (Insolvency) No. 224 of 2018. 13. Section 230 of the Companies Act, 2013 reads 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. ....
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....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 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 le....
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.... 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 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-b....
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.... whether the arrangement of Scheme is viable, feasible and having appropriate financial matrix. It will be open for the Adjudicating Authority as a Tribunal to approve the arrangement or Scheme in spite of some irrelevant objections as may be raised by one or other creditor or member keeping in mind the object of the Insolvency and Bankruptcy Code, 2016. 19. In view of the observations aforesaid, we hold that the liquidator is required to act in terms of the aforesaid directions of the Appellate Tribunal and take steps under Section 230 of the Companies Act. If the members or the 'Corporate Debtor' or the 'creditors' or a class of creditors like 'Financial Creditor' or 'Operational Creditor' approach the company through the liquidator for compromise or arrangement by making proposal of payment to all the creditor(s), the Liquidator on behalf of the company will move an application under Section 230 of the Companies Act, 2013 before the Adjudicating Authority i.e. National Company Law Tribunal, Chennai Bench, in terms of the observations as made in above. On failure, as observed above, steps should be taken for outright sale of the 'Corporate Debtor' so as to enable the emp....
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....g concern'. The Liquidator was also directed to ensure that there was some reasonable financial commitment to be taken in the favour of an EMD, from Rs.1 Crore/- to 2% of the 'Scheme' value. • 28.08.2019 SRDIPL sought extension of time till March 2020. The next date the Liquidator clarified that the details of the draft 'Scheme' were not clear and hence held the 'Scheme' to be ineligible. • 03.09.2019 A notice of extension was published on the official website of the 'Corporate Debtor' for submission of 'Scheme' on Compromise and Arrangement on or before 30.09.2019. It was intimated by the Liquidator that the last date for submission of 'Scheme' was 18.10.2019 and that the EMD was fixed to 2% of the 'Scheme' value. • 16.10.2019 The Liquidator clarified that no EMD was furnished, the proposal did not amount to a 'Scheme'. • 18.10.2019 A draft proposal was received from the Appellants/Directors without proof of compliance of eligibility criteria and without the EMD. • 25.10.2019 The final 'Scheme' was received from the Appellants/Directors again without the EMD and without other requisite documentation. • 2....
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....ry objection to the 'Scheme' put forth by the sister concern that EMD has not been submitted and the 'Scheme' was not compliant in terms of the EOI published. • 04.03.2020 On a request made by the sister concern, the Adjudicating Authority had given a last opportunity to pay the EMD in two trenches i.e. Rs.5 Crores on or before 20.03.2020 and Rs.20 Crores on or before 31.03.2020. 'The material on record establishes that SRDIPL has not paid any amount till this date'. • 14.04.2020 An email was sent to the Liquidator stating that additional time was required to pay the EMD amount due to the pandemic. It is seen from the record that though time was given from January 2020 to deposit the EMD amount, it was not made till April 2020 and therefore the question of pandemic being the sole reason for not making the deposit, does not hold any water. • 15.05.2020 An Additional Affidavit was filed by the Liquidator seeking urgent hearing of I.A.3702 of 2019. The sister concern Special Security Services, intervened on 22.06.2020 and sought further time to pay the EMD amount. The Adjudicating Authority granted Special Security Services, a w....
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....ss of the 'Corporate Debtor' as a 'going concern'. 17. The Liquidator has filed in his reply the emails sent to each of the persons who have evinced an interest in submitting a scheme to participate in the bidding process. Keeping in view all the aforenoted reasons we are of the considered opinion that the contention of the Appellants herein that the Liquidator did not give sufficient publicity internationally and therefore Prospective Global Buyers could not participate in the bidding process, is untenable. At the cost of repetition, even the website of the 'Corporate Debtor' had all the details of the bidding process including the extension of timelines from time to time. 18. Further, the aforenoted sequence of events clearly shows that all requisites steps were followed in terms of the Order of this Tribunal dated 14.05.2019 but no compliant scheme under Section 230 of the Companies Act, 2013, was received within the time frame of 6 months as stipulated under the Liquidation Regulations. Therefore, the contention of the Appellant/Directors that the Liquidator did not take any steps as directed by this Tribunal, is unsustainable. The Public Announcement issued post 18.12.20....
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....he 'Corporate Debtor' as a 'going concern' in this Liquidation Process. 24. The term 'Going Concern' is well understood in legal parlance. The jurisprudence in this regard is fairly well developed out of the Erstwhile Liquidation regime under the Companies Act, 1956. The Insolvency Law Committee in its Report dated 26.03.2016 noted that:- "The phrase as a going concern implies that the CD would be functional as it would have been prior to initiation of CIRP, other than the restrictions put by the code. It may not, therefore, be defined. However, it may be explained that going concern means all such assets and the liabilities, which constitute an integral business or the CD, that must be transferred together, and the consideration must be for the business or the CD." (Emphasis Supplied) 25. Transfer of the Company under Liquidation on 'going concern' basis is not a new concept and it was first noticed by Hon'ble Chief Justice Marten of Bombay High Court in 1930, when he noted as follows:- ".... Thus as stated in Palmer, Edn.13, Part 2, p.376: "But it often happens that the business of the company is its most valuable asset, and in such a cas....
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....- The liquidator may sell - (a) an asset on a standalone basis; (b) the assets in a slump sale; (c) a set of assets collectively; (d) the assets in parcels; (e) the corporate debtor as a going concern; or (f) the business(s) of the corporate debtor as a going concern: Provided that where an asset is subject to security interest, it shall not be sold under any of the clauses (a) to (f) unless the security interest therein has been relinquished to the liquidation estate. 32-A. Sale as a going concern. - (1) Where the committee of creditors has recommended sale under clause (e) to (f) of regulation 32 or where the liquidator is of the opinion that sale under clause (e) or (f) of regulation 32 shall maximise the value of the corporate debtor, he shall endeavour to first sell under the said clauses. (2) For the purpose of the sale under sub-regulation (1), the group of assets and liabilities of the corporate debtor, as identified by the committee of creditors under sub-regulation (2) of regulation 39-C of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regu....
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....ct to the liability as if such instruments were drawn, accepted, made or endorsed by or on behalf of the corporate debtor in the ordinary course of its business; (h) to take out, in his official name, letter of administration to any deceased contributory and to do in his official name any other act necessary for obtaining payment of any money due and payable from a contributory or his estate which cannot be ordinarily done in the name of the corporate debtor, and in all such cases, the money due and payable shall, for the purpose of enabling the liquidator to take out the letter of administration or recover the money, be deemed to be due to the liquidator himself; (i) to obtain any professional assistance from any person or appoint any professional, in discharge of his duties, obligations and responsibilities; (j) to invite and settle claims of creditors and claimants and distribute proceeds in accordance with the provisions of this Code; (k) to institute or defend any suit, prosecution or other legal proceedings, civil or criminal, in the name of on behalf of the corporate debtor; (l) to investigate the financial affairs of the corporat....
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....en he considers it necessary and shall convene a meeting of the consultation committee when a request is received from at least fifty-one percent of representatives in the consultation committee. (7) The liquidator shall chair the meetings of consultation committee and record deliberations of the meeting. (8) The liquidator shall place the recommendation of committee of creditors made under sub-regulation (1) of regulation 39C of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, before the consultation committee for its information. (9) The consultation committee shall advise the liquidator, by a vote of not less than sixty-six percent of the representatives of the consultation committee, present and voting. (10) The advice of the consultation committee shall not be binding on the liquidator: Provided that where the liquidator takes a decision different from the advice given by the consultation committee, he shall record the reasons for the same in writing.] (Emphasis Supplied) 29. It is submitted by the Financial Creditor M/s. Edelweiss that in the 14th meet....
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....ted the proposal of the Applicant. 32. "47. [Model time-line for liquidation process. The following Table presents a model timeline of liquidation process of a corporate debtor from the liquidation commencement date, assuming that the process does not include compromise or arrangement under section 230 of the Companies Act, 2013 (18 of 2013) or sale under regulation 32-A: Model Timeline for Liquidation Process Sl. No. Section/ Regulation Description Norm Latest Time-line (Days) (1) (2) (3) (4) (5) 1 Section 33 and 34 Commencement of liquidation and appointment of liquidator LCD 0 = T 2 Section 33 (1) (b) (ii)/Reg. 12 (1, 2, 3) Public announcement in Form B Within 5 days of appointment of liquidator. T + 5 3 Reg. 35 (2) Appointment of registered valuers Within 7 days of LCD T + 7 4 [Section 38 (1), Reg. 17, 18, 19, 20 and 21A] Submission of claims; Within 7 days of LCD T + 7 Intimation of decision on relinquishment of security interest Within 30 days of LCD T + 30 5 Section 38 (5) Withdrawal/ modification of claim Within 14 days of submission of claim T + 44 6 ....
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....provide balance sale consideration Within 90 days of the date of invitation to provide the balance amount.] [AA: Adjudicating Authority, LCD: Liquidation Commencement Date, SCC: Stakeholders' Consultation Committee]] (Emphasis in bold supplied) 47-A. Exclusion of period of lockdown.-Subject to the provisions of the Code, the period of lockdown imposed by the Central Government in the wake of Covid-19 outbreak shall not be counted for the purposes of computation of the time-line for any task that could not be completed due to such lockdown, in relation to any liquidation process.]" 33. The aforenoted timelines under Regulation 47 for Liquidation Process, are directory. Procedural law should not be construed as an obstruction but as an aid to Justice. Extension of time under Liquidation may be allowed only on the satisfaction that there exists exceptional circumstances. The Hon'ble Supreme Court in 'Smt. Rani Kusum' Vs. 'Smt. Kanchan Devi', reported in (2005) 6 SCC 705 concurring with the ratio laid down in 'Kailash' Vs. 'Nanhku and Ors.' (2005) 4 SCC 480 held as follows: "10. All the rules of procedure are the handmaid of justice. The la....
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.... the Companies Act, 2013, but despite several efforts, the same did not materialize. • The Counsel for the Liquidator submitted that he is still on Stage II of Regulation 32-A and seeks to sell the Company as a 'going concern' in compliance of the Orders of this Tribunal. • M/s. Edelweiss/'Financial Creditor' constituting 83% of the CoC seek that the proposal given by M/s. Pyrotech be placed before the Stakeholders Committee for deliberations and further negotiations. • Section 35(1)(e) of the code provides for carrying on the business of the 'Corporate Debtor' for its 'Beneficial Liquidation' as the Liquidator considers necessary. • Regulation 47 deals with only model timelines which are directory and not mandatory. • Regulation 47-A specifies that the time lost during lockdown may not be included in this period. • Keeping in view that the last two Meetings took place as recently as on 12.11.2021 and on 25.11.2021 and the auction on 24.11.2021, we are of the considered view that a total period of six weeks finally be given to the Liquidator to put forward the proposals, as per Regulation 31-A of the Inso....