TaxTMI 
TaxTMI 
TaxTMI 
2025 (8) TMI 176
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....ugned order, which was passed by the Tribunal, in the proceedings being carried under Section 7 of the I & B Code, 2016, had ultimately determined that, the extension of time as prayed for, for the purposes of completing and operationalising the scheme of arrangement proposed and submitted on 25.01.2024 by M/s. Prakash Oil Depot under Section 230 of the Companies Act, 2013, to be read with Regulation 2B of the IBBI (Liquidation Process) Regulations, 2016, cannot be granted extension owing to the failure on part of the Appellant/Liquidator, to comply with the time stipulations as it has been prescribed for completing the scheme proposed under Section 230 of the Companies Act, 2013, to be read with Regulation 2(B) of the IBBI (Liquidation Process) Regulations, 2016. 2. For the aforesaid purpose, a reference to Regulation 2B of the IBBI (Liquidation Process) Regulations, 2016, becomes inevitable, which contemplates that, a scheme of compromise or an arrangement which is proposed to be made as per the provision contained under Section 230 of the Companies Act, 2013. has to be completed within a period of 90 days from the date of order of liquidation. This has been further qualified by....
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....he proposal of a scheme of Compromise/arrangement should have been preferred within 30 days from the date of the liquidation order, that is, 09.01.2023 (iii) Such scheme should have been approved within a period of 90 days, from the date of commencement of liquidation, (iv) The Ld. Adjudicating Authority, by a series of orders passed during the proceedings, have excluded certain periods have granted an exemption by for the purposes of determination of the period prescribed under Regulation 2B, which are detailed hereunder: - (a) Period from 09.01.2023 to 29.08.2023 by the order dated 29.08.2023. (b) The period from 29.08.2023 to 08.03.2024 by the order dated 08.03.2024. (c) Excluding the period from 08.03.2024 to 31.07.2024 by the order dated 31.07.2024. (v) Even though, the period from 09.01.2023 to 31.07.2024 stood excluded by the orders of Tribunal, the Appellants could not finalise and present the scheme of compromise/arrangement within 29.10.2024, that is, 90 days from 31.07.2024. (vi) Despite the averment of the Appellants that a cheque for an amount of Rs.4.30 crores has been submitted on 31.05.2024, towards Earnest Money Deposit, the liquidator filed applicati....
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.... for grant of extension of time on the grounds that submission of the scheme of arrangement/compromise under Section 230 of the Companies Act, 2013, before the Liquidator on 25.01.2024, by submitting a cheque for Rs. 4,30,00,000/- (Four Crores and Thirty Lakhs) dated 31.05.2024 towards the Earnest Money Deposit, that in itself would not suffice the purpose to establish any bonafides, pertaining to the delayed presentation of the scheme of arrangement under Section 230 of the Companies Act, 2013, because in the said application, there is no answer as to under what circumstances and for what valid reasons, the period from 31.05.2024 to 26.04.2025, could be excluded, more particularly when the process of obtaining the approval of the Financial Creditors was pursued at a very later stage, and the same was obtained from Indian Bank and Bank of Baroda only on 21.11.2024 and 22.04.2025 respectively. 6. The ultimate question, which falls for consideration before us is, as to whether the stipulation as prescribed by the provisions contained under Regulation 2B(1) of the of the Insolvency and Bankruptcy Board of India (IBBI) (Liquidation Process) Regulations, 2016, that the scheme of compro....
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....ter extensive deliberation and consequent modifications in the proposed scheme, so as to ensure successful implementation of the scheme. The enforcement of 90 days time limit as prescribed under Regulation 2(B) of the Insolvency and Bankruptcy Board of India (IBBI) (Liquidation Process) Regulations, 2016, without a proper appreciation of the circumstances when extensions had already been granted in three previous occasions and refusal to grant further extension as prayed for completing the scheme of arrangement does not appeal to be sustainable, that too when the finding, recorded by the Ld. Tribunal in the impugned order is not based upon a sound reasoning, as to why the extension as prayed for cannot be granted to meet the objectives of the code, even if it is sought for a fourth time when it is not restricted by law, and when it promises to cut short the litigation between the parties. 10. More particularly when the intention behind the application seeking extension of time, is to ensure completion of the scheme of arrangement, so as to meet the object of the I & B Code, 2016, and the Companies Act, the Tribunal ought to have taken into consideration, that the earlier extension....
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....f arrangement, has been quite elaborately considered in a judgment reported in 2019 SCC online and NCLAT 172, in the matter of Y. Shivram Prasad versus S. Dhanpal and others. While dealing with the aforesaid issue, the Principal Bench in its para 12, while drawing its inference from the earlier judgment as rendered in the matters of S. C. Sekaran Vs. Amit Gupta and its conjoined implication drawn from the judgment of the Swiss Ribbons Private Limited versus Union of India, has observed in paragraph 12, as to what was the Legislative intent to be met under Section 230 of the Companies Act, 2013, for the purposes of making of the arrangement by way of a scheme of a settlement for it to be enforced. The ultimate conclusion has been drawn by the Principal Bench in Para 17 of the said judgment holding thereof that, if for any reason the Liquidation process under Section 230 of the Companies Act, 2013, takes more time, the extension of the time period could still be extended thereof, where there is a chance of approval of arrangement of the scheme. Here too, the basic underlying principle is that the extension is for the purposes to meet the objective of the Act and the provisions contai....
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....rium imposed by section 14 is in the interest of the corporate debtor itself, thereby preserving the assets of the corporate debtor during the resolution process. The timelines within which the resolution process is to take place again protects the corporate debtor's assets from further dilution, and also protects all its creditors and workers by seeing that the resolution process goes through as fast as possible so that another management can, through its entrepreneurial skills, resuscitate the corporate debtor to achieve all these ends.' In ArcelorMittal India P. Ltd. v. Satish Kumar Gupta (2018) 211 Comp Cas 369, 464 (SC), at paragraph 83, footnote 3 is mentioned. The hon'ble Supreme Court noticed that: 'Regulation 32 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016, states that the liquidator may also sell the corporate debtor as a going concern.' In Meghal Homes P. Ltd. v. Shree Niwas Girni K.K. Samiti (2007) 139 Comp Cas 418 (SC) ; (2007) 7 SCC 753, the hon'ble Supreme Court observed and held as follows (page 434 of 139 Comp Cas): 'The argument that section 391 would not apply to a company which has al....
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...., or by both of those methods. (2) The company or any other person, by whom an application is made under sub-section (1), shall disclose to the Tribunal by affidavit- (a) all material facts relating to the company, such as the latest financial position of the company, the latest auditor's report on the accounts of the company and the pendency of any investigation or proceedings against the company ; (b) reduction of share capital of the company, if any, included in the compromise or arrangement; any scheme of corporate debt restructuring consented to by not less than seventy-five per cent. of the secured creditors in value, including- (i) a creditor's responsibility statement in the prescribed form ; (ii) safeguards for the protection of other secured and unsecured creditors ; (iii) report by the auditor that the fund requirements of the company after the corporate debt restructuring as approved shall conform to the liquidity test based upon the estimates provided to them by the Board ; (iv) where the company proposes to adopt the corporate debt restructuring guidelines specified by the Reserve Bank of India, a statement to that effect ; and (v) a valuation ....
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....nd Exchange Board, the Registrar, the respective stock exchanges, the official liquidator, the Competition Commission of India established under subsection (1) of section 7 of the Competition Act, 2002 (12 of 2003), if necessary, and such other sectoral regulators or authorities which are likely to be affected by the compromise or arrangement and shall require that representations, if any, to be made by them shall be made within a period of thirty days from the date of receipt of such notice, failing which, it shall be presumed that they have no representations to make on the proposals. (6) Where, at a meeting held in pursuance of sub- section (1), majority of persons representing three-fourths in value of the creditors, or class of creditors or members or class of members, as the case may be, voting in person or by proxy or by postal ballot, agree to any compromise or arrangement and if such compromise or arrangement is sanctioned by the Tribunal by an order, the same shall be binding on the company, all the creditors, or class of creditors or members or class of members, as the case may be, or, in case of a company being wound up, on the liquidator appointed under this Act or u....
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....oard. (12) An aggrieved party may make an application to the Tribunal in the event of any grievances with respect to the takeover offer of companies other than listed companies in such manner as may be prescribed and the Tribunal may, on application, pass such order as it may deem fit. Explanation.-For the removal of doubts, it is hereby declared that the provisions of section 66 shall not apply to the reduction of share capital effected in pursuance of the order of the Tribunal under this section.' In view of the provision of section 230 and the decisions of the hon'ble Supreme Court in Meghal Homes P. Ltd. v. Shree Niwas Girni K.K. Samiti (2007) 139 Comp Cas 418 (SC) ; (2007) 7 SCC 753 and Swiss Ribbons P. Ltd. v. Union of India [2019] 213 Comp Cas 198 (SC), 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 and B Code. The liquidator will access inf....
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....time, date and place to the parties concerned and in that meeting the scheme shall be considered by the SCC a decision shall be taken in accordance with law." 14. In view of the ratio, that has been laid down by the various judgments settled by NCLAT, it could very well be established and concluded, that since the statute doesn't create any specific bar under law from seeking an extension of time for enforcement of the scheme of arrangement, the decision to grant such extensions, if it facilitates the enforcement of the scheme, ought to be made permissible, because the provision under Regulation 2(B) of the Insolvency and Bankruptcy Board of India (IBBI) (Liquidation Process) Regulations, 2016, has been held to be directory in nature and not mandatory. At this juncture, it will be always the commercial wisdom of the parties, which has to come into play, in order to take a decision, after considering the viability, benefits and the propriety of the scheme by the requisite majority regarding grant of an extension of time. Though this Appellate Tribunal at this point of time may not have that equivalent powers to manually scrutinize the viability of the scheme, it has to give due....
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....cheme of compromise/arrangement to its logical conclusion to shorten the litigation and to revive the Corporate Debtor. In the instant case, the approval of the scheme of compromise/arrangement by a requisite majority of the Stakeholders Consultation Committee, doesn't suffer from any absolute legal disability in proceeding to enforce the scheme even beyond the prescribed time period. 17. The Hon'ble Apex Court, in judgment reported in 2021, volume 7, SCC, page 474, Arun Kumar Jagatramka versus Jindal Steel and Power Limited and Another, while considering the implications of Regulation 2B of the Insolvency and Bankruptcy Board of India (IBBI) (Liquidation Process) Regulations, 2016, in form of the restrictions imposed in the enforcement of the scheme of arrangement, has observed in paragraph 69, that the statutory scheme underlying I & B Code and its linkage with Section 230 of the Companies Act has important consequences in the process of liquidation and that the liquidator appointed under the Code is to attempt the revival of the Corporate Debtor so as to save it from Corporate death and that the scheme, once approved and sanctioned by the Ld. Tribunal becomes binding on the....