AI Drafter 
TaxTMI 
TaxTMI 
2024 (8) TMI 998
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....4 passed by the Ld.National Company Law Tribunal, Mumbai in CP(CAA)/189(MB)2023 in CA(CAA)/109(MB)/2023. The said application was filed by Respondent No.1/Liquidator of Birla Cotsyn India Ltd for approval of the Scheme of Arrangement for the revival of the Corporate Debtor under section 230 read with Section 66 of the Companies Act, 2013 and Regulation 2-B of the IBBI (Liquidation Process) Regulations 2016 (hereinafter referred as "Liquidation Process Regulations"). 2. In the said Application, vide the Impugned Order dated 04.04.2024, the Ld NCLT has held it is mandatory for the Liquidator to seek No-Objection Certificate for the Scheme from Respondent No. 2 / Bombay Stock Exchange under Regulation 37 of the SEBI (Listing Obligation and Disclosure Requirements), Regulations, 2015 ("LODR"), and accordingly directed the Respondent No.1 to seek NoC from BSE before the approval of the Scheme by the Ld. NCLT. 3. Thus the broad question of law to be addressed in the present Appeal is whether Regulation 37(1) and (2) of the LODR would apply to the Scheme submitted by the Liquidator under Section 230 of the Companies Act read Regulation 2B of the Liquidation Process Regulations, and ....
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.... to restructuring process as envisaged under Section 31 of the IBC. He also argued once the legal provisions contain some prohibition it cannot be ignored by the Court and the Court should not read between lines and is expected to interpret a statute only when it is ambiguous and Court cannot add or substract words to a Statute or read something into it which is not there and also cannot recast and re-write a legislation per Nasiruddin and others Vs Sita Ram Agarwal (2003) 2 Supreme Court Cases 577. The Ld. Counsel for BSE also relied upon Regulation 5 and 11 of the LODR to say there exists an obligation upon the Liquidator to obtain an NOC from BSE before filing the first motion. 6. Learned counsel for the Liquidator (R1) stated he supports the appellant, and as Corporate Debtor is under liquidation, there are no shareholders in the Company. 7. Heard. 8. Under the Companies Act, admittedly, there is no provision mandating companies to obtain a prior NOC from stock exchanges for Scheme of Arrangement. In this context, at the outset, reference may be made to the following sub-sections (1), (2), (3) and (5) of Section 230 of the Companies Act which are reproduced hereinbelow....
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....ered valuer. (3) Where a meeting is proposed to be called in pursuance of an order of the Tribunal under sub-section (1), a notice of such meeting shall be sent to all the creditors or class of 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: [...] (5) A notice under sub-section (3) along with all the documents in such form as may be prescribed shall also be sent to the Central Government, the income tax authorities, the Reserve Bank of India, the Securities and Exchange Board, the Registrar, the respective stock exchanges, the Official Liquidator, the Competition Commission of India established under sub-section (1)....
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....ctions 391-394 and 101 of the Companies Act, 1956 or under Sections 230-234 and Section 66 of Companies Act, 2013, whichever applicable, along with a non-refundable fee as specified in Schedule XI, with the stock exchange(s) for obtaining the No-objection letter, before filing such scheme with any Court or Tribunal, in terms of requirements specified by the Board or stock exchange(s) from time to time. (2) The listed entity shall not file any scheme of arrangement under sections 391-394 and 101 of the Companies Act, 1956 or under Sections 230-234 and Section 66 of Companies Act, 2013 ,whichever applicable, with any Court or Tribunal unless it has obtained the No-objection letter from the stock exchange(s). (Emphasis Supplied) 13. On a plain reading of Regulation 37(1) and 37(2), it becomes clear that Regulation 37(1) mandates the 'listed entity' i.e. the 'company' must apply for the NOC from the stock exchanges. Similarly, Regulation 37(2) imposes a prohibition on the 'listed entity' / 'company' from filing any scheme for approval without the NOC from stock exchanges. 14. Now in cases of companies in liquidation, a scheme of arrangement is not filed by the 'company' ....
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....the Liquidator to obtain a NOC in respect of a scheme of arrangement and the said Regulation deals with merits of the Scheme to ensure the same does not violate any provision of the Securities Laws. 18. So far as phrase relied upon by the learned counsel for the BSE viz. listed company "involved in a scheme of arrangement" in Regulation 37(1) of LODR, we may say the Regulation cannot be interpreted by selectively referring to a particular phrase without considering the context which it deals. Regulation 37(1) of the LODR refers to obligation of a listed entity. As earlier noted there are four categories of persons who may apply for approval of scheme of arrangement, including creditor or a member of the company. Section 230(1) treats the Liquidator as a separate and distinct category. Suppose scheme is filed through the creditor, can he be made bound by the rigours of Regulation 37(1) & (2). The answer would be no. 19. Now we come to applicability of Regulation 37(7) to find out if the requirement for prior NOC does not apply only to 'restructuring proposals' approved as part of a resolution plan by the NCLT under section 31 of the Code. Pertinently, a scheme of arrangement f....
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....provisions of Section 230 of the Act of 2013 in the IBC, a decision was rendered by the NCLAT on 27 February 2019 in Y Shivram Prasad v. S Dhanapal. NCLAT in the course of its decision observed that during the liquidation process the steps which are required to be taken by the liquidator include a compromise or arrangement in terms of Section 230 of the Act of 2013, so as to ensure the revival and continuance of the corporate debtor by protecting it from its management and from "a death by liquidation". The decision by NCLAT took note of the fact that while passing the order under Section 230, the Adjudicating Authority would perform a dual role: one as the Adjudicating Authority in the matter of liquidation under the IBC and the other as a Tribunal for passing an order under Section 230 of the Act of 2013. Following the decision of NCLAT, an amendment was made on 25 July 2019 to the Liquidation Process Regulations by the IBBI so as to refer to the process envisaged under Section 230 of the Act of 2013. 69. The statutory scheme underlying the IBC and the legislative history of its linkage with Section 230 of the Act of 2013, in the context of a company which is in liquidat....
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.... 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 ineligible for submitting a resolution plan, participating in the sale of assets of the company in liquidation or participating in the sale of the corporate debtor as a 'going concern', are somehow permitted to propose a compromise or arrangement under Section 230 of the Act of 2013. 71. [...] 72. An argument has also been advanced by the appellants and the petitioners that attaching the ineligibilities under Section 29A and Section 35(1)(f) of the IBC to a scheme of compromise and arrangement under Section 230 of the Act of 2013 would be violative of Article 14 of the Constitution as the appellant would be "deemed ineligible" to submit a proposal under Section 230 of the Act of 2013. We find no merit in this contention. As....
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....before sale of assets of the company as a going concern / in parts. Paragraph 8 is relevant and holds as follows : 8. In view of the provision of Section 230 and the decision of the Hon'ble Supreme Court in 'Meghal Homes Pvt. Ltd.' and 'Swiss Ribbons Pvt. Ltd.', we direct the 'Liquidator' to proceed in accordance with law. He will verify claims of all the creditors; take into custody and control of all the assets, property, effects and actionable claims of the 'corporate debtor', carry on the business of the 'corporate debtor' for its beneficial liquidation etc. as prescribed under Section 35 of the I&B Code. The Liquidator will access information under Section 33 and will consolidate the claim under Section 38 and after verification of claim in terms of Section 39 will either admit or reject the claim, as required under Section 40. Before taking steps to sell the assets of the 'corporate debtor(s)' (companies herein), the Liquidator will take steps in terms of Section 230 of the Companies Act, 2013. The Adjudicating Authority, if so required, will pass appropriate order. Only on failure of revival, the Adjudicating Authority and the Liquidator will first proceed with ....
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....nder that Act prior to the approval of such resolution plan by the committee of creditors." 29. In fact, even though the proviso to Section 31(4) of the Code requires prior approval of the Competition Commission in cases of 'combinations', this Tribunal has even read that provision as directory and not mandatory in Soneko Marketing v. Girish Sriram Juneja in Company Appeal (AT) (Ins.) No. 807 of 2023. 30. Considering the aforesaid situation, if Regulation 37 is considered to impose a mandatory requirement for prior NOC from stock exchanges for a scheme for revival of a company in liquidation also, it would conflict with the strict timelines provided under the Code and the Liquidation Process Regulations. In case of any such conflict, the provisions of the Code must prevail given the non-obstante clause contained in Section 238 of the Code. 31. It is also relevant to note Regulation 37(7) of LODR must be given a purposive interpretation. The strict literal interpretation of Regulation 37(7) must give way to a dynamic interpretation that achieves the objective of the sub-regulation i.e. to facilitate the modes of revival with an objective of preventing civil death of the com....
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.... to a scheme of arrangement for revival of a company in liquidation. 35. The scheme in question in the present matter is akin to a Resolution Plan under Section 31 of the Code and it complies with the requirement of Resolution Plan under Section 30(2) of the Code and Regulation 37 and 38 of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. The scheme contemplates full payment of CIRP and liquidation cost, dues of workmen, payment of settlement value to creditors, extinguishment of all liabilities filed or not filed/admitted or not admitted, ouster of the erstwhile promoters, inducting of the acquirers as new promoters, constitution of monitoring committee, payment of EMD and performance security etc. If a restrictive literal interpretation of Regulation 37(7) of LODR is accepted then the same will lead to manifest absurdity in as much as while the Resolution Plan and the Scheme seek to achieve the same objective i.e. to prevent civil death of the company, and are also similar in form, the mode of revival by way of Scheme of Arrangement under liquidation would be more onerous than a Resolution Plan under Section 31 of the Code. The interpretation argued b....