First Step Ventures Ltd vs Frontier Lifeline Pvt Ltd & Ors

First Step Ventures Ltd. ...Appellant

Vs.

Frontier Lifeline Pvt. Ltd. & Ors. ...Respondents

Present: For Appellant: - Mr. Alok Dhir, Ms. Varsha Banerjee and Mr. Akshat Singh, Advocates.

O R D E R

17.07.2019─ The 'Corporate Insolvency Resolution Process' was

initiated against 'Frontier Lifeline Private Limited'- ('Corporate Debtor') in

which the Appellant- 'First Step Ventures Limited' filed a 'Resolution

Plan'. However, the 'Committee of Creditors' would not consider the

'Resolution Plan' due to completion of the 'Corporate Insolvency

Resolution Process' period of 270 days. At that stage, the 'Resolution

Professional' of 'Frontier Lifeline Private Limited' filed application under

Section 60(5) of the Insolvency and Bankruptcy Code, 2016 ("I&B Code"

for short) for exclusion of 43 days from 29th April, 2019 to 10th June,

2019 on the basis of the decision of the 'Committee of Creditors'.

2. However, it was not allowed by the Adjudicating Authority (National

Company Law Tribunal), Division Bench, Chennai, by impugned order

dated 18th June, 2019 with following observations:

Contd/-.....

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"Therefore, we are of the view that it is a fit case for

liquidation on two grounds- (i) CIRP Period of 270

days is over (ii) even in the event of liquidation is

ordered, it is still open to the Liquidator to sell the

Corporate Debtor as a going-concern. Normally, the

Resolution Plan is viable if the Resolution Plan Value

is more than Liquidation Value, in this case, one-

Plan is not approved by the CoC till date, two- the

Resolution Plan value is far below to the liquidation

value, three- not taking a decision by the CoC

without any reason will not become a reason for

exclusion of the time period. Besides this, CoC has

not even passed a resolution seeking exclusion or

extension of time as prayed by the Resolution

Professional.

On these ground, the application for

exclusion is hereby dismissed leaving it open to the

Resolution Professional to take appropriate action in

accordance with law."

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3. Learned counsel appearing on behalf of the Appellant- 'Resolution

Applicant' submitted that the Adjudicating Authority has wrongly held

that the 'Committee of Creditors had not passed resolution seeking

exclusion of the period as prayed for by the 'Resolution Professional'.

4. Referring to the opening second paragraph of the impugned order,

it was submitted that the Adjudicating Authority noticed that the

'Committee of Creditors' asked the 'Resolution Professional' to request for

exclusion of the period and to take a call over the 'Resolution Plan'

submitted by the Appellant.

5. It is submitted that the Adjudicating Authority while granted 90

days' extension by order dated 20th February, 2019, it was given effect

from 29th January, 2019 thereby in fact 68 days of extension was granted.

6. It is submitted that further 22 days is excluded by extending the

period from prospective date i.e. with effect from 20th February, 2019, the

'Committee of Creditors' would have taken a call for the 'Resolution Plan'

submitted by the Appellant.

7. In the present case, the Appellant has not challenged the order

dated 20th February, 2019 whereby 90 days' period was granted from

retrospective date. In such circumstances, we are not inclined to

deliberate on the issue whether the extension of 90 days from the

retrospective date is right or wrong in absence of such challenge. Now

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270 days is being over as per calculation on the basis of the order of

extension, we hold that in absence of any other reason, the Adjudicating

Authority has rightly rejected the application for exclusion of certain

period.

8. From the impugned order, it will be evident that the Adjudicating

Authority has noticed that even during liquidation it is still open to the

liquidator to sell the 'Corporate Debtor' as a going concern.

9. In the present case, no order of liquidation has been passed but we

accepted that the period of 'Corporate Insolvency Resolution Process' is

completed, appropriate order is required to be passed by the Adjudicating

Authority. Even if an order of liquidation is passed by the Adjudicating

Authority, in such case, the liquidator is to follow the procedure laid down

under Section 230 of the Companies Act, 2013 in the light of the decision

of this Appellate Tribunal in "Y. Shivram Prasad Vs. S. Dhanapal &

Ors.─ Company Appeal (AT) (Insolvency) No. 224 of 2018". Relevant

of which is quoted below:

"15. Learned counsel appearing on behalf of the

Appellant (Promoter) submitted that the provisions

under Section 230 may not be completed within 90

days, as observed in "S.C. Sekaran v. Amit Gupta

& Ors." (Supra).

Company Appeal (AT) (Insolvency) No. 720 of 2019 -5-

16. It is further submitted that there will be

objections by some of the creditors or members who

may not allow the Tribunal to pass appropriate order

under Section 230 of the Companies Act, 2013.

17. Normally, the total period for liquidation is to

be completed preferably within two years. Therefore,

in "S.C. Sekaran v. Amit Gupta & Ors." (Supra),

this Appellate Tribunal allowed 90 days' time to take

steps under Section 230 of the Companies Act, 2013.

In case, for any reason the liquidation process under

Section 230 takes more time, it is open to the

Adjudicating Authority (Tribunal) to extend the period

if there is a chance of approval of arrangement of the

scheme.

18. During proceeding under Section 230, if any,

objection is raised, it is open to the Adjudicating

Authority (National Company Law Tribunal) which

has power to pass order under Section 230 to overrule

the objections, if the arrangement and scheme is

beneficial for revival of the 'Corporate Debtor'

(Company). While passing such order, the

Adjudicating Authority is to play dual role, one as the

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Adjudicating Authority in the matter of liquidation

and other as a Tribunal for passing order under

Section 230 of the Companies Act, 2013. As the

liquidation so taken up under the 'I&B Code', the

arrangement of scheme should be in consonance with

the statement and object of the 'I&B Code'. Meaning

thereby, the scheme must ensure maximisation of the

assets of the 'Corporate Debtor' and balance the

stakeholders such as, the 'Financial Creditors',

'Operational Creditors', 'Secured Creditors' and

'Unsecured Creditors' without any discrimination.

Before approval of an arrangement or Scheme, the

Adjudicating Authority (National Company Law

Tribunal) should follow the same principle and should

allow the 'Liquidator' to constitute a 'Committee of

Creditors' for its opinion to find out 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.

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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 employees to continue.

20. Both the appeals are disposed of with

aforesaid observations and directions. No cost."

10. In view of such decision, we are of view that it is open to the

Appellant to negotiate with the group of creditors ('Financial Creditor')

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and the liquidator on behalf of the company to consider the 'Resolution

Plan' as a Scheme under Section 230 of the Companies Act, 2013 along

with any other Scheme, if proposed by any other member or group of

members of person. In such case, the liquidator or group of creditors

('Financial Creditors') may consider the same.

11. The appeal stands disposed of with aforesaid observations. No cost.

(Justice S.J. Mukhopadhaya) Chairperson

(Kanthi Narahari) Member(Technical) Ar/g

Company Appeal (AT) (Insolvency) No. 720 of 2019