N. Padmanabhan & Anr vs Sri Adinath Enterprises & Anr

N. Padmanabhan & Anr. ...Appellants Versus M/s. Sri Adinath Enterprises & Anr. ...Respondents

Present: For Appellant : Mr. M. Sridhar, Advocate For 2nd Respondent : Mr. Vikram Hegde, Advocate

ORDER

02.09.2019 This appeal has been preferred by the Appellants -

'Promoters'/'Directors' against the order dated 4th April, 2019 passed by the

Adjudicating Authority (National company Law Tribunal), Division Bench,

Chennai whereby the Adjudicating Authority ordered for 'Liquidation' of 'M/s.

RRP Housing Pvt. Ltd.'. Learned counsel for the Appellants submitted that the

'Resolution Professional' had not taken any interest and not issued 'Expression

of Interest' due to which no 'resolution plan' was submitted. On account of no

action on the part of the 'Resolution Professional' resulted in non-submission of

'Resolution Plan' and, therefore, Miscellaneous Application was filed for

exclusion of 162 days from the 'Corporate Insolvency Resolution Process'. It is

submitted that if 162 days had been excluded and proper resolution process had

taken place by the 'Resolution Professional', then there was a chance of

successful resolution.

2. Having heard the learned counsel for the parties and on perusal of the

record, we find that 270 days period was completed on 26th September, 2018

and within the aforesaid period for one or another reason, the 'Resolution

Professional failed to issue 'Information-Memorandum', resulted of non- 2

submission of any 'resolution plan'. For the said reason, the Adjudicating

Authority passed the order of 'Liquidation'.

3. Section 12A of the 'Insolvency and Bankruptcy Code, 2016 now stands

amended by the Gazette Notification issued on 6th August, 2019 to which

amendment has come into force on 16th August, 2019. Pursuant to the same,

even if some period is allowed we find that the process is to start from the very

beginning of 'collate the claims' and issue fresh 'Information-Memorandum', we

are not inclined to pass any order for exclusion of any period for successful

resolution.

4. In 'Y. Shivram Prasad vs. S. Dhanpal & Ors.' - 'Company Appeal

(AT)(Insolvency) No. 224 of 2018 etc.' disposed of on 27th February, 2019, this

Appellate Tribunal held that even during the 'Liquidation process', the

'Liquidator' should take steps under Section 230 of the Companies Act and on

failure, the 'Corporate Debtor' should be taken for outright sale of the 'Corporate

Debtor' so as to enable the employees to continue. This Appellate Tribunal

observed and held 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).

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.

Company Appeal (AT) (Insolvency) No. 577 of 2019 3

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

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 Company Appeal (AT) (Insolvency) No. 577 of 2019 4

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

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 Appeal (AT) (Insolvency) No. 577 of 2019 5

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."

5. In view of the aforesaid finding, we direct the 'Liquidator' to collate the

claims and proceed in accordance with the I&B Code and also as directed in 'Y.

Shivram Prasad vs. S. Dhanpal & Ors.' (Supra). The Appellant/Promoter can

also approach the 'Liquidator' and may submit a proposal or plan for revival of

the 'Corporate Debtor'.

6. The appeal stands disposed of with aforesaid observations. No costs.

[Justice S.J. Mukhopadhaya] Chairperson

[ Justice A.I.S. Cheema ] Member (Judicial)

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

Company Appeal (AT) (Insolvency) No. 577 of 2019