Impact of Pending Appeal before Hon’ble supreme court post Liquidation Order

Sanjay Chaturvedi (Appellant/Suspended Director of corporate debtor) filed two separate appeals viz:- (i) Company Appeal (AT) Ins. No. 333 of 2022 with Hon’ble National Company Law Appellate Tribunal (Hon’ble NCLAT) against the Order dated 31^st January 2022 by which the Hon’ble National Company Law Tribunal Allahabad Bench, Prayag Raj (Hon’ble NCLT) has allowed application filed by the Resolution Professional seeking liquidation of the Shamken Cotsyn Limited (Corporate Debtor) and (ii) Company Appeal (AT) No. 157 of 2022 against the Order dated 14^th June 2022 passed by the Hon’ble NCLT dismissing petition under section 391/394 of companies act 1956.

Grounds of Appeal to NCLAT: –

Pending of appeal with Hon’ble Supreme Court for petition under section 391-394 of Companies Act 1956 for Scheme of Arrangement involving corporate debtor:

Scheme involving corporate debtor under Section 391 & 394 of the Companies Act, 1956 was filed before the Companies Judge of Hon’ble Allahabad High Court, where an Order was passed on 15^th May 2008 for convening the Meeting of Secured Creditors. An application was filed by ING Vysya Bank Ltd. objecting convening of the meeting of the creditors on the ground that ING Vysya Bank Ltd. is a secured creditor. The case of ING Vysya Bank Ltd. was that proceedings are pending before the AAIFR. Application under Sections 391 & 394 is not maintainable. Against the Order dated 18^th January 2010, Special Appeal 1396/2010 was also dismissed by the Division Bench of High Court on 08^th September 2010 which matter was taken to before the Hon’ble Supreme Court in SLP Civil Appeal No. 121 of 2011 and the matter is still pending before the Hon’ble Supreme Court hence the Adjudicating Authority ought not to have rejected the petition filed under Section 391 & 394 of the Companies Act, 1956.

Further, scheme or arrangement being already submitted and under consideration, the Hon’ble NCLT ought not to have passed the Order dated 31^st January 2022 directing for liquidation of the Corporate Debtor.

Hon’ble NCLT has dismissed petition filed under Section 391 to 394 of Companies Act, 1956 involving corporate debtor as infructuous in view of the initiation of ‘Corporate Insolvency Resolution Process’ (CIRP) on 29^th May 2018 and subsequently liquidation order passed on 31^st January 2022.

Respondent Reply

1. Corporate Insolvency Resolution Process (CIRP) has begun by order dated 29^th May 2018 for corporate debtor, hence no scheme or arrangement, no proceeding for approval of the scheme or arrangement under Companies Act could have proceeded with and the scheme or arrangement if any could be submitted only by the Liquidator.
2. Said order of CIRP was never challenged by appellant and no resolution plan submitted to Committee of Creditors.
3. In CIRP, no plan having been approved, CoC (Committee of Creditors) had taken a decision to liquidate the Corporate Debtor.

NCLAT dismissed the appeal on the following grounds

1. It is noted that the present case is pending before this Adjudicating Authority from 2017 and in the meantime, the company has gone into CIRP on 29^th May 2018 and subsequently liquidation order was also passed on 31^st January 2022. The pendency of appeal before the Hon’ble Supreme Court will not have any bearing in the present matter as the liquidation order has already been passed. In any case, any scheme or arrangement with the creditors can now be brought only by the Liquidator once the Liquidator is appointed by this Adjudicating Authority under IBC(Insolvency & Bankruptcy Code).
2. CIRP has been initiated against the Corporate Debtor on 29th May 2018 which Order was never challenged and subsequently, the Order of Liquidation has been passed on 31st January 2022. There is no occasion for consideration of any scheme or arrangement which has been pending consideration since the year 2008. After a moratorium has been imposed on Section 14 of IBC, all the proceedings have to keep in abeyance. Further, when Order of Liquidation has been passed on 31^st January 2022, any scheme or arrangement can only be placed by the Liquidator for consideration before the Adjudicating Authority.

Conclusion

Not only the corporate debtor and /or secured creditor but even the present appellant did not bring to the notice of NCLT the scheme under Sec 391/394 of the companies act, 1956 is pending in the Hon’ble Supreme Court even when CIRP was initiated in May 2018 and any stage thereafter. NCLT imposed a moratorium under Sec 14 of THE IBC Act. Subsequently, the order of liquidation was passed in January 2022. Considering the facts of the case, NCLAT held that only the liquidator could have considered the scheme before the liquidation.