Lima Rose vs Air Carnival Pvt Ltd. & Ors

For Respondent : Mr. S. Ananth and Mr. G. Ananda Selvam, Advocate for Resolution Profesional

Mr. G. V. Ravikumar, Advocate

Company Appeal (AT) (Insolvency) No. 192 of 2019

IN THE MATTER OF:

T. Nedumaran ...Appellant

Versus

G.V. Ravikumar, Official Liquidator M/s. Air Carnival Pvt. Ltd. & Ors. ...Respondents

Present: For Appellant : Mr. Brijesh Kumar Singh, Advocate

For Respondent : Mr. S. Ananth and Mr. G. Ananda Selvam, Advocate for Resolution Profesional

Mr. G. V. Ravikumar, Advocate

Company Appeal (AT) (Insolvency) No. 193 of 2019

IN THE MATTER OF:

D. Vishnu ...Appellant

Versus 2

G.V. Ravikumar, Official Liquidator M/s. Air Carnival Pvt. Ltd. & Ors. ...Respondents

Present: For Appellant : Mr. Brijesh Kumar Singh, Advocate

For Respondent : Mr. S. Ananth and Mr. G. Ananda Selvam, Advocate for Resolution Profesional

Mr. G. V. Ravikumar, Advocate

ORDER

26.02.2019 These appeals have been preferred by one of the 'Director' /

'Shareholder' of M/s. Air Carnival Pvt. Ltd. (Corporate Debtor) challenging the

order dated 20th December, 2018 passed by the Adjudicating Authority (National

Company Law Tribunal), Single Bench, Chennai whereby order of Liquidation

under Section 33(1) of the Insolvency & Bankruptcy Code (for short, 'the I&B

Code') has been passed.

2. Learned counsel appearing on behalf of the appellant(s) submits that the

'corporate insolvency resolution process' had not proceeded in accordance with

law as all the members of the Board of Directors were not directed to attend the

meeting of the 'Committee of Creditors'. The Adjudicating Authority had also not

extended the time to enable the 'resolution applicant(s)' to file 'resolution plan'

to save M/s. Air Carnival Private Limited (Corporate Debtor) from the

Liquidation.

3. Learned counsel for the 'Resolution Professional' submits that there was

no 'resolution plan' submitted by any person and thereafter more than 270 days

having been passed, the order of Liquidation has been passed by the

Adjudicating Authority.

4. In view of the aforesaid fact, we are not inclined to interfere with the

impugned order dated 20th December, 2018.

Company Appeal (AT) (Insolvency) Nos. 191, 192 & 193 of 2019 3

5. At this stage, learned counsel appearing on behalf of the appellant(s)

submits that the Liquidator should take steps under Section 230 of the

Companies Act, 2013 in the light of the decision of this Appellate Tribunal in

'S.C. Sekaran vs. Amit Gupta & Ors. - Company Appeal (AT)(Ins.) No. 495 &

496 of 2018'. In the said case, this Appellate Tribunal by judgment dated 29th

January, 2019 observed :

"7. Section 391 of the Companies Act, 1956 has

since been replaced by Section 230 of the Companies

Act, 2013, which is as follows:

"230. Power to compromise or make

arrangements with creditors and members

(1) Where a compromise or arrangement is proposed--

(a) between a company and its creditors or any class

of them; or

(b) between a company and its members or any

class of them,

the Tribunal may, on the application of the company

or of any creditor or member of the company, or in the

case of a company which is being wound up, of the

liquidator appointed under this Act or under the

Insolvency and Bankruptcy Code, 2016 as the case

may be, order a meeting of the creditors or class of

creditors, or of the members or class of members, as

the case may be, to be called, held and conducted in

such manner as the Tribunal directs.

Company Appeal (AT) (Insolvency) Nos. 191, 192 & 193 of 2019 4

Explanation.-- For the purposes of this sub-

section, arrangement includes a reorganisation of the

company's share capital by the consolidation of

shares of different classes or by the division of shares

into shares of different classes, or by both of those

methods.

(2) The company or any other person, by whom an

application is made under subsection (1), shall

disclose to the 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;

(c) 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

Company Appeal (AT) (Insolvency) Nos. 191, 192 & 193 of 2019 5

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 report in respect of the shares

and the property and all assets, tangible and

intangible, movable and immovable, of the

company by a registered valuer.

(3) Where a meeting is proposed to be called in pursuance

of an order of the Tribunal under sub-section (1), a

notice of such meeting shall be sent to all the creditors

or class of creditors and to all the members or class of

members and the debenture-holders of the company,

individually at the address registered with the

company which shall be accompanied by a statement

disclosing the details of the compromise or

arrangement, a copy of the valuation report, if any,

and explaining their effect on creditors, key

managerial personnel, promoters and non-promoter

members, and the debenture-holders and the effect of

the compromise or arrangement on any material

interests of the directors of the company or the

Company Appeal (AT) (Insolvency) Nos. 191, 192 & 193 of 2019 6

debenture trustees, and such other matters as may

be prescribed:

Provided that such notice and other documents shall

also be placed on the website of the company, if any,

and in case of a listed company, these documents

shall be sent to the Securities and Exchange Board

and stock exchange where the securities of the

companies are listed, for placing on their website and

shall also be published in newspapers in such

manner as may be prescribed:

Provided further that where the notice for the meeting

is also issued by way of an advertisement, it shall

indicate the time within which copies of the

compromise or arrangement shall be made available

to the concerned persons free of charge from the

registered office of the company.

(4) A notice under sub-section (3) shall provide that the

persons to whom the notice is sent may vote in the

meeting either themselves or through proxies or by

postal ballot to the adoption of the compromise or

arrangement within one month from the date of

receipt of such notice:

Provided that any objection to the compromise or

arrangement shall be made only by persons holding

not less than ten per cent of the shareholding or

Company Appeal (AT) (Insolvency) Nos. 191, 192 & 193 of 2019 7

having outstanding debt amounting to not less than

five per cent. of the total outstanding debt as per the

latest audited financial statement.

(5) A notice under sub-section (3) along with all the

documents in such form as may be prescribed shall

also be sent to the Central Government, the income-

tax authorities, the Reserve Bank of India, the

Securities and Exchange Board, the Registrar, the

respective stock exchanges, the Official Liquidator,

the Competition Commission of India established

under sub-section (1)of section 7 of the Competition

Act, 2002, 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

Company Appeal (AT) (Insolvency) Nos. 191, 192 & 193 of 2019 8

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 under the Insolvency and

Bankruptcy Code, 2016, as the case may be, and the

contributories of the company.

(7) An order made by the Tribunal under sub-section (6)

shall provide for all or any of the following matters,

namely:--

(a) where the compromise or arrangement provides

for conversion of preference shares into equity

shares, such preference shareholders shall be

given an option to either obtain arrears of

dividend in cash or accept equity shares equal

to the value of the dividend payable;

(b) the protection of any class of creditors;

(c) if the compromise or arrangement results in the

variation of the shareholders' rights, it shall be

given effect to under the provisions of section

48;

(d) if the compromise or arrangement is agreed to

by the creditors under sub-section (6), any

proceedings pending before the Board for

Company Appeal (AT) (Insolvency) Nos. 191, 192 & 193 of 2019 9

Industrial and Financial Reconstruction

established under section 4 of the Sick

Industrial Companies (Special Provisions) Act,

1985 shall abate;

(e) such other matters including exit offer to

dissenting shareholders, if any, as are in the

opinion of the Tribunal necessary to effectively

implement the terms of the compromise or

arrangement:

Provided that no compromise or arrangement

shall be sanctioned by the Tribunal unless a

certificate by the company's auditor has been

filed with the Tribunal to the effect that the

accounting treatment, if any, proposed in the

scheme of compromise or arrangement is in

conformity with the accounting standards

prescribed under section 133.

(8) The order of the Tribunal shall be filed with the

Registrar by the company within a period of thirty

days of the receipt of the order.

(9) The Tribunal may dispense with calling of a meeting

of creditor or class of creditors where such creditors

or class of creditors, having at least ninety per cent.

value, agree and confirm, by way of affidavit, to the

scheme of compromise or arrangement.

Company Appeal (AT) (Insolvency) Nos. 191, 192 & 193 of 2019 10

(10) No compromise or arrangement in respect of any buy-

back of securities under this section shall be

sanctioned by the Tribunal unless such buy-back is in

accordance with the provisions of section 68.

(11) Any compromise or arrangement may include

takeover offer made in such manner as may be

prescribed: Provided that in case of listed companies,

takeover offer shall be as per the regulations framed

by the Securities and Exchange Board.

(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."

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,

Company Appeal (AT) (Insolvency) Nos. 191, 192 & 193 of 2019 11

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&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."

6. In view of the aforesaid decision, we are of the view that the liquidator

should act in terms of the aforesaid directions of the Appellate Tribunal and take

steps under Section 230 of the Companies Act. If the members of the 'Corporate

Debtor' or the 'creditors' 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 National Company Law Tribunal, in

Company Appeal (AT) (Insolvency) Nos. 191, 192 & 193 of 2019 12

terms of the observations as made in 'S.C. Sekaran (Supra)'. On failure, as

observed above, steps should be taken for outright sale of the 'corporate debtor'

so as to enable the employees to continue in service on such outright sale.

7. The appeal(s) are disposed of with aforesaid observations and directions.

No cost.

[Justice S.J. Mukhopadhaya] Chairperson

[ Justice Bansi Lal Bhat ] Member (Judicial) /ns/uk/

Company Appeal (AT) (Insolvency) Nos. 191, 192 & 193 of 2019