Ajay Agarwal & Anr vs Ashok Megnetic Ltd. & Ors

Ajay Agarwal & Anr. ...Appellants

Vs.

Ashok Magnetic Ltd. & Ors. ...Respondents

Company Appeal (AT) (Insolvency) No. 793 of 2018

IN THE MATTER OF:

Ajay Agarwal & Anr. ...Appellants

Vs.

Ashok Magnetic Ltd. & Ors. ...Respondents

Present: For Appellant: - Mr. Amit Sibal, Senior Advocate with

Mr. Rajesh Bohra and Mr. Aditya Narayan, Advocates.

For Respondents: - Mr. Avrojyoti Chatterjee, Mr. Rajiv S. Roy, Mr. Abhijit Roy and Ms. Jayasree Saha, Advocates.

Mr. V. Nagarajan, Liquidator.

O R D E R

22.02.2019─ The Appellants preferred these appeals against orders

both dated 9th November, 2018 passed by the Adjudicating Authority

(National Company Law Tribunal), Single Bench, Chennai, in MA No.

478/2018 and MA No. 163/2018. By one of the impugned orders, the

Adjudicating Authority accepted the stand taken by the 'Committee of

Company Appeal (AT) (Insolvency) Nos. 792 & 793 of 2018 2

Creditors' and thereby rejected the 'Resolution Plan' submitted by Mr.

Ajay Agarwal & Anr., members of the Board of Directors. In the other

order, the Adjudicating Authority ordered for liquidation of 'M/s. Ashok

Magnetics Limited'- ('Corporate Debtor').

2. Learned counsel appearing on behalf of the Appellant(s) submitted

that 'M/s. Ashok Magnetics Limited'- ('Corporate Debtor') being a Small

Scale Industry comes within the meaning of 'Micro, Small and Medium

Enterprises', therefore, its promoters cannot be held to be ineligible under

Section 29 A, for filing the 'Resolution Plan' in view of Section 240 A of

the 'I&B Code'.

3. It further submitted that the Adjudicating Authority while observed

that the 'Committee of Creditors' have not considered the 'Resolution

Plan' submitted by the Appellants, held that remand will be futile as the

plan cannot be considered. According to learned Senior Counsel, such

finding is erroneous.

4. Learned counsel appearing on behalf of the two of the members of

the 'Committee of Creditors' referred to the decision of the 'Committee of

Creditors' as held in its meeting on 18th September, 2018 at 3.00 PM to

suggest that the 'Resolution Plan' submitted by two Resolution

Applicants including the Appellants were considered and were voted

against by all members of the 'Committee of Creditors'. The relevant

portion of the decision of the 'Committee of Creditors' aforesaid reads as

follows:

Company Appeal (AT) (Insolvency) Nos. 792 & 793 of 2018 3

".... COC members along with the Resolution Professional

discussed about the resolution plan and the revised

offers given by the two resolution applicants and noted

the following:

a) Offers given by the two resolution applicants were

too low, considering the security available including

the non core assets, overall scenario and the factory

being operational and is a going concern.

b) Both the Resolution Applicants have not given due

or appropriate Enterprise value to the running

factory at Eripakkam, Pondicherry.

After discussion and deliberations RP put the two

resolution plans submitted by above two prospective

resolution applicants (Mr. Dorairaj Thillaraj and Mr. Ajay

Agarwal jointly with Mr. Ashok Agarwal) into vote.

Both the resolution plans were voted against by all COC

members and hence the RP declared that both the

Resolutions Plans were rejected."

5. Learned Senior Counsel appearing on behalf of the Appellants

submits that even during the period of liquidation, the liquidator should

ensure that the Company should remain the going concern and take

steps in terms of Section 230 of the Companies Act, 2013. Reliance has

Company Appeal (AT) (Insolvency) Nos. 792 & 793 of 2018 4

been placed on the decision of this Appellate Tribunal in "S.C. Sekaran

v. Amit Gupta & Ors.─ Company Appeal (AT) (Insolvency) No. 495 &

496 of 2018".

6. It is further submitted that the Compromise, Arrangements and

Amalgamations can be proposed between the Company and its members

or any class of them in terms of Section 230 (1) (b).

7. Mr. V. Nagarajan, the 'Resolution Professional' (now Liquidator)

appears in person and submits that he will act in accordance with the

decision of this Appellate Tribunal in "S.C. Sekaran v. Amit Gupta &

Ors." (Supra) and if any Compromise or Arrangements is made between

the creditors or the members or class of them, then application under

Section 230 of the Companies Act, 2013 will be moved before the National

Company Law Tribunal.

8. Heard learned counsel for the parties and perused the record.

9. In the present case, as this Appellate Tribunal find that the

'Committee of Creditors' have voted against the 'Resolution Plan' having

found it not feasible and viable, this Appellate Tribunal is not deciding

the first issue whether Board of Directors of 'M/s. Ashok Magnetics

Limited'- ('Corporate Debtor') or any of its members are ineligible in terms

of Section 29A or not and whether the said provision will be applicable to

the promoter(s) of the 'M/s. Ashok Magnetics Limited'.

Company Appeal (AT) (Insolvency) Nos. 792 & 793 of 2018 5

10. Further, this Appellate Tribunal do not agree with the observations

made by the Adjudicating Authority that even if the case has not been

considered on merit, remand will be futile. If a case is not considered by

the 'Committee of Creditors' in accordance with law, it is the duty of the

Adjudicating Authority to remand the matter to the 'Committee of

Creditors' for reconsideration. However, as this Appellate Tribunal has

observed that the 'Committee of Creditors' considered the matter and

voted against the 'Resolution Plan', this Appellate Tribunal is not inclined

to remand the matter to the 'Committee of Creditors'.

11. In "S.C. Sekaran v. Amit Gupta & Ors." (Supra), this Appellate

Tribunal having gone to the relevant provisions including Section 230 of

the Companies Act, 2013 observed and directed the liquidator to proceed

in accordance with law and observed 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

Company Appeal (AT) (Insolvency) Nos. 792 & 793 of 2018 6

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 the sale of company's assets wholly and

thereafter, if not possible to sell the company in part and

in accordance with law.

9. The 'Liquidator' if initiates, will complete the process

under Section 230 of the Companies Act within 90 days.

For the purpose of counting the period of liquidation, the

pendency of the appeal(s) preferred by the 'Eight

Finance Pvt. Ltd.' that is from 12th July, 2018 and till

date should be excluded. In the circumstances, while we

are not inclined to interfere with the impugned order(s)

both dated 25th June, 2018 direct the Liquidator to act

in accordance with law and as observe above.

Company Appeal (AT) (Insolvency) Nos. 792 & 793 of 2018 7

Both the appeal(s) stand disposed of with the

aforesaid observations and directions. No costs."

12. In view of the aforesaid decision and stand taken by the Appellants

and the liquidator, the liquidator is directed to act in accordance with law

and observations of this Appellate Tribunal in "S.C. Sekaran v. Amit

Gupta & Ors." (Supra). It will be open to the members of 'M/s. Ashok

Magnetics Limited' or the creditors to contact the liquidator for

Compromise or Arrangements in terms of Section 230. If it is found that

the scheme is viable, feasible and maximise the assets of the 'Corporate

Debtor' and balance the creditors, the liquidator will move application

under Section 230 before the National Company Law Tribunal for

appropriate order and directions. On failure, the liquidator will ensure to

sell the 'Corporate Debtor' as a going concern in its totality, taking into

consideration the interest of the employees of the 'Corporate Debtor'.

13. Both the appeals stand disposed of with aforesaid observations and

directions. No cost.

(Justice S.J. Mukhopadhaya) Chairperson

Ar/uk

Company Appeal (AT) (Insolvency) Nos. 792 & 793 of 2018