Jm Financial Asset Reconstruction ... vs G. Madhusudhan Rao. Rp Of Bheema Cements ...

J.M. Financial Asset Reconstruction Company Limited ...Appellant

Versus

G. Madhusudhan Rao, R.P. of Bheema Cements Ltd. ...Respondent

Present: For Appellant : Mr. Ramji Srinivasan, Senior Advocate with Mr. Abhishek Anand, Mr. Tushar Tyagi, Ms. Sylona Mohapatra and Mr. Nikhil Ramdev, Advocates

For Respondent : Mr. G. Madhusudhan Rao, Resolution Professional

ORDER

18.07.2019 The Appellant - 'J.M. Financial Asset Reconstruction

Company Limited' (one of the 'Financial Creditor' and member of the 'Committee

of Creditors') filed I.A. No. 266 of 2019 before the Adjudicating Authority

(National Company Law Tribunal), Hyderabad Bench, Hyderabad for exclusion

of 135 days period from 27th August, 2018 to 8th January, 2019 and in addition

to the period of 147 days starting from 9th November, 2018 to 4th April, 2019

from the 'Corporate Insolvency Resolution Process' of the 'M/s Bheema Cements

Ltd.' (Corporate Debtor). Before the Adjudicating Authority, the Appellant

submitted that from 27th August, 2018 to 8th January, 2019 the matter remained

pending for renewal of mining lease, which is the main asset of the 'Corporate

Debtor'. In addition to it the period from 9th November, 2018 to 4th April, 2019

was prayed to be excluded as another I.A. No. 551 of 2018 was pending. The 2

Adjudicating Authority taking into consideration that it had already allowed

further period of 90 days on 10th January, 2019 in addition to 180 days period,

in view of the fact that 3 mining leases of renewed on 3rd January, 2019 refused

to exclude the further period by the impugned order dated 16th May, 2019.

Learned counsel appearing on behalf of the Appellant made similar prayer for

exclusion at lease the period during which the Interlocutory Application was

pending before the Adjudicating Authority. It was submitted that Section 28 of

the 'Insolvency and Bankruptcy Code, 2016' (for short, 'the I&B Code') was not

applicable as the Adjudicating Authority wrongly referred to the said provision

before the approval of the 'Committee of Creditors' and for that certain action

was required, which was not taken by the 'Financial Creditor'. It is further

submitted that the 'Resolution Plans' are already pending for consideration and

if the period is excluded then it will be open to the 'Committee of Creditors' to

consider the resolution plan, which are pending for consideration.

Mr. G. Madhusudhan Rao, 'Resolution Professional' submits that 2 plans

were received after 270 days and they were not opened by the 'Committee of

Creditors'.

In the present case, we find that during the 'Corporate Insolvency

Resolution Process' i.e. completion of 180 days, 3 Mining Leases were renewed

by the Government of Telangana. It is true that the Mining Leases are the assets

of the 'Corporate Debtor' and 'Information-Memorandum' should have been

reflected the assets. It is informed that the aforesaid asset was reflected in the

'Information-Memorandum' but in view of the fact that the Mining Leases were

not responsible to have renewed at the end of 180 days. However, we find

because of the fact that it was renewed at the time of end of 180 days i.e. on 8th

Company Appeal (AT) (Insolvency) No. 663 of 2019 3

January, 2019, the Adjudicating Authority allowed further 90 days on 10th

January, 2019 for completion of the process. Even during the extended period

of 90 days, there was nothing to suggest that 'Committee of Creditors' took any

step for calling of fresh resolution plan, though it was open to them to call for

fresh resolution plan or information that mining lease, which is reflected in the

'Information-Memorandum', has already been renewed. 90 days having already

allowed, we find no ground is made out to exclude any period for completion of

the 'resolution process' and in view of the fact that 270 days have already been

passed, the Adjudicating authority has no other option but to pass order of

liquidation. However, we are not expressing any opinion with regard to the same

as it is informed at the Bar that the Central Government has moved for

amendment to allow 330 days in place of 270 days. If it is amended then the

'Committee of Creditors' takes advantage of the same subject to its applicability.

On the other hand, the Appellant was Member of the 'Committee of Creditors' if

do not get any advantage of such amendment which is made in future, in such

case, the 'Corporate Debtor' is ordered to be liquidated. 'Liquidator' is required

to follow the observations and directions as given by this Appellate Tribunal in

"Y. Shivram Prasad Vs. S. Dhanapal & Ors.-Company Appeal (AT)

(Insolvency) No. 224 of 2018 etc." wherein this Appellate Tribunal vide order

dated 27th February, 2019 observed and directed as follows :

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. 663 of 2019 4

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 Adjudicating Authority in the matter of

liquidation and other as a Tribunal for passing

Company Appeal (AT) (Insolvency) No. 663 of 2019 5

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.

19. In view of the observations aforesaid, we hold that

the liquidator is required to act in terms of the

Company Appeal (AT) (Insolvency) No. 663 of 2019 6

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."

It is needless to say that if proceedings u/s 230 of the Companies Act,

2013 is taken up, it will be open to the 'Liquidator' to take up with creditors or

class of creditors (who was the Financial Creditors) and if any of the 'resolution

plan' has filed or may be called for following the same procedure of 'I&B Code',

may accept such plan as one of the scheme taking into consideration if it is viable

and feasible.

Company Appeal (AT) (Insolvency) No. 663 of 2019 7

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

[Justice S.J. Mukhopadhaya] Chairperson

[ Kanthi Narahari ] Member (Technical) /ns/gc

Company Appeal (AT) (Insolvency) No. 663 of 2019