Arun Kumar Jagatramka Vs. Jindal Steel and Power Ltd. & Anr. - (Supreme Court) (15 Mar 2021)
A person ineligible under Section 29A of IBC would not be permitted to propose a compromise or arrangement under Section 230 of the Companies Act, 2013
In present case, by its judgment, the National Company Law Appellate Tribunal held that, a person who is ineligible under Section 29A of the Insolvency Bankruptcy Code, 2016 (IBC) to submit a resolution plan, is also barred from proposing a scheme of compromise and arrangement under Section 230 of the Companies Act, 2013. The judgment was rendered in an appeal filed by Jindal Steel and Power Limited, an unsecured creditor of the corporate debtor, Gujarat NRE Coke Limited.
The appeal was preferred against an order passed by the National Company Law Tribunal in an application under Sections 230 to 232 of the Act, 2013, preferred by Arun Kumar Jagatramka, who is a promoter of GNCL. The NCLT had allowed the application and issued directions for convening a meeting of the shareholders and creditors. In its decision, the NCLAT reversed this decision and allowed the appeal by JSPL. The decision of the NCLAT is challenged in the appeal before present Court.
The stages of submitting a resolution plan, selling assets of a Company in liquidation and selling the company as a going concern during liquidation, all indicate that, the promoter or those in the management of the Company must not be allowed a back-door entry in the Company and are hence, ineligible to participate during these stages. A scheme of compromise or arrangement proposal under Section 230 of the Act, 2013, while the Company is undergoing liquidation under the provisions of the IBC lies in a similar continuum.
In the case of a Company which is undergoing liquidation pursuant to the provisions of Chapter III of the IBC, a scheme of compromise or arrangement proposed under Section 230 is a facet of the liquidation process. The object of the scheme of compromise or arrangement is to revive the Company. The principle was enunciated in the decision in Meghal Homes Pvt. Ltd. v Shree Niwas Girni K. K. Samiti. There can be no manner of doubt that, the proviso to Regulation 2B is clarificatory in nature. Even absent the proviso, a person who is ineligible under Section 29A of IBC would not be permitted to propose a compromise or arrangement under Section 230 of the Act, 2013.
The prohibition placed by the Parliament in Section 29A and Section 35(1)(f) of the IBC must also attach itself to a scheme of compromise or arrangement under Section 230 of the Act, 2013, when the Company is undergoing liquidation under the auspices of the IBC. Regulation 2B of the Liquidation Process Regulations, 2016, specifically the proviso to Regulation 2B(1), is also constitutionally valid. There is no merit in the appeals and the writ petition. Appeals dismissed.
Tags : COMPROMISE PROPOSAL ELIGIBILITY