The Hon’ble NCLAT held that since the Corporate Debtor has already been dissolved, the present appeal, against the order passed by NCLT by which an IA filed by the Appellant under Section 60(5) r/w Section 73 of the IBC has been dismissed, has become infructuous.
Hon’ble NCLAT held that:
(i) The sale of the Corporate Debtor as a going concern under Section 32(e) & 32A is more transparent and effective; therefore, the sale of the Corporate Debtor as a going concern will have precedence, rather than resorting to the Scheme of Compromise under Section 230 (1) of the Companies Act, 2013.
(ii) While taking action under Chapter 6 of Liquidation Process Regulations, dealing with realizations of assets of the Corporate Debtor, selling the Corporate Debtor as a going concern, will have to be the first priority for the Liquidator, in order to meet the objective of the I & B Code, 2016, i.e. the Corporate Debtor is to be kept, as a going concern after resolution of the insolvency.
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Hon’ble NCLAT held that:
(i) The CoC exist till continuation of the CIRP and after the Order passed under Section 33 for Liquidation, the CoC does not continues so as to take a decision for withdrawal of an Application under Sections 7, 9 & 10.
(ii) In the Liquidation Process, Compromise or Arrangement is contemplated as per Regulation 2B which clearly negates the submission of the Appellant that withdrawal is permissible only under Section 12A.
(iii) In view of the clear Statutory Scheme as delineated by 12A, Section 33 and Regulation 2B of the Liquidation Regulation, the Hon’ble Bench is of the view that during Liquidation period, an Application under Section 12A is not permissible.
(iv) The Hon’ble NCLAT also does not subscribe to the observation made in V. Navaneetha Krishnan v. Central Bank of India, Coimbatore and Anr. (2018) ibclaw.in 298 NCLAT that even during Liquidation period, any person can make an Application under 12A.
Hon’ble NCLAT held that:
(i) Under the Companies Act, there is no requirement for prior NOC from the stock exchanges or SEBI before the Scheme is filed before the NCLT.
(ii) Section 230(1) of the Companies Act does not consider the liquidator to be the same as the company, hence the rigors of Regulation 37(1) and 37(2) of LODR shall not apply.
(iii) A scheme of arrangement for revival of a company in liquidation is also a ‘restructuring proposal’.
(iv) Whatever benefits and rigors that applies to a resolution plan under Section 31 of the Code must equally apply to a scheme of arrangement submitted under Section 230 of the Companies Act read with Regulation 2B of the Liquidation Process Regulations. Both these modes of revival operate in a similar continuum.
(v) Prior NOC from stock exchanges under Regulation 37(1)(2) of the LODR is not required for schemes for revival of companies undergoing liquidation under the Code.
(vi) Alternatively, the clarification introduced by way of Regulation 37(7) of the LODR for restructuring proposals also applies to Scheme by the liquidator under Section 230 of the Code, which is in similar continuum as a restructuring proposal by way of a resolution plan under Section 31 of the Code.
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In this landmark decision, Hon’ble NCLAT holds that:
(i) The requirement of Regulation 35 of the liquidation process Regulations is a separate one from the process mentioned under Section 230 of the Companies Act, 2013 and Section 230 of the Companies Act, 2013 which envisages one valuer cannot be the basis to by pass the Regulation 35 of liquidation process Regulations.
(ii) Section 230 of the Companies Act, 2013 is quite broader and wider in its purview and the Code, 2016
(iii) Merely because in respect of the title of the property, if a Corporate Debtor has no valid or any marketable title, ipso facto, the value of the property cannot be described as Zero. The Registered Valuers are to value the property.
(iv) The Sharing of the Valuation Reports with the Potential Resolution Applicants by the Liquidator is quite contrary to the Regulation 34(4) of the Liquidation Process Regulations.
In this case, the pointed allegation made against the petitioner (Insolvency Professional) in the show cause notice issued by IBBI is that the petitioner while discharging his responsibilities under Sec. 230 of the Companies Act, he shared the details of the valuation report of the assets of the company with all the scheme proponents, as a result of which all of them quoted the same price.
Hon’ble Madras High Court while dismissing writ petition filed against IBBI show cause notice, held that:
(i) Liquidation of a Corporate Debtor is not alien to the scheme of IBC.
(ii) Merely because Insolvency Professional was directed to perform a role by NCLT, it does not prima facie entertain an idea that he ceases to be governed by IBC, and Regulations framed thereunder.
(iii) When the Insovlency Professional ceases to be a Resolution Professional, and starts wearing the cap of a liquidator, the role of IIIP of ICAI vis-a-vis its member ceases
(iv) This petition is dismissed, and the petitioner will have all the liberty to put forth his entire line of defence disciplinary enquiry, which needless to say includes all that the grounds on the basis of which he has now challenged the show cause notice.
