Whether in a liquidation proceeding under I&B Code, the Scheme for Compromise and Arrangement can be made in terms of Sections 230 to 232 of the Companies Act?

The Appellate Tribunal state that in Liquidation proceeding under I&B Code, a petition under Section 230 to 232 of the Companies Act is maintainable.

In the matter of Jindal Steel and Power Limited vs. Arun Kumar Jagatramka & Ors., the question arose before the Appellate Tribunal was whether in a liquidation proceeding under Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the ‘I&B Code’) the Scheme for Compromise and Arrangement can be made in terms of Sections 230 to 232 of the Companies Act?

The question as to whether in a Liquidation proceeding under I&B Code, an application under Sections 230 to 232 of the Companies Act can be entertained by the Tribunal or not, fell for consideration before this Appellate Tribunal in “S.C. Sekaran v. Amit Gupta & Ors. – Company Appeal (AT) (Insolvency) Nos.495 & 496 of 2019”. In the said case, the Appellate Tribunal passed certain orders, which were noticed by this Appellate Tribunal in “Y. Shivram Prasad vs. S. Dhanapal & Ors. – Company Appeal (AT) (Insolvency) No.224 of 2018” disposed of on 27th February, 2019.

The Appellate Tribunal observed that during the liquidation process, step required to be taken for its revival and continuance of the ‘Corporate Debtor’ by protecting the ‘Corporate Debtor’ from its management and from a death by liquidation. Thus, the steps which are required to be taken are as follows:

(i). By compromise or arrangement with the creditors, or class of creditors or members or class of members in terms of Section 230 of the Companies Act, 2013.

(ii). On failure, the liquidator is required to take step to sell the business of the ‘Corporate Debtor’ as going concern in its totality along with the employees.

Thus, the last stage will be death of the ‘Corporate Debtor’ by liquidation, which should be avoided.

Considering the decision of the Appellate Tribunal in Y. Shivram Prasad and S.C. Sekaran, the Appellate Tribunal answered affirmative, i.e., to say that in a Liquidation proceeding under I&B Code, a petition under Section 230 to 232 of the Companies Act is maintainable.

(Link : https://nclat.nic.in/Useradmin/upload/15079343875db2a20803bdc.pdf)

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