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2024 Supreme(Online)(NCLAT) 186
NATIONAL COMPANY LAW APPELLATE TRIBUNAL
Hon'ble Justice Yogesh Khanna (Member(Judicial)) , Hon'ble Mr. Ajai Das Mehrotra (Member (Technical)) ,
Nikhil Jain – Appellant
Versus
Anil Goel Liquidator of Birla Cotsyn (India) Limited – Respondent
148/ND/2024 COMPANY APPEAL(AT)
The court ruled that prior No-Objection Certificate from stock exchanges is not required for schemes of arrangement under Section 230 of the Companies Act when proposed by a Liquidator.
Headnote:(A) Companies Act, 2013 - Sections 230 and 421 - SEBI (Listing Obligation and Disclosure Requirements) Regulations, 2015 - Regulation 37 - Appeal against NCLT order regarding No-Objection Certificate for Scheme of Arrangement - Liquidator's application for revival of company in liquidation - Court held that prior NOC from stock exchanges is not mandatory for schemes under Section 230, as the Liquidator is treated separately from the company. (Paras 4, 8, 40)
(B) Interpretation of Regulations - The court emphasized that the provisions of the IBC override other laws, and the interpretation of Regulation 37 must align with the objective of preventing corporate death. (Paras 20, 36)
Facts of the case:
The appeal was filed against an NCLT order mandating a No-Objection Certificate from the Bombay Stock Exchange for a scheme of arrangement proposed by the Liquidator of a company in liquidation. The Liquidator argued that such a requirement is not stipulated under the Companies Act. (Paras 1, 4)
Findings of Court:
The court found that the requirement for prior NOC from stock exchanges does not apply to schemes for revival of companies in liquidation, and the NCLT should proceed with the scheme on merits. (Paras 40, 41)
Issues: The main issues were whether Regulation 37(1) and (2) of the LODR apply to schemes submitted by the Liquidator and the interpretation of Regulation 37(7) concerning restructuring proposals. (Paras 3, 4)
Ratio Decidendi: The court ruled that the Liquidator is a separate entity from the company, and thus the requirements of Regulation 37 do not apply. It also held that the interpretation of regulations must facilitate the revival of companies. (Paras 15, 20)
Result: The appeal is allowed, and the NCLT is directed to proceed with the scheme without requiring prior NOC from stock exchanges.
JUDGEMENT
JUSTICE YOGESH KHANNA, MEMBER (JUDICIAL)
The present appeal is filed under Section 421 of the Companies Act, 2013 against order dated 04.04.2024 passed by the Ld.National Company Law Tribunal, Mumbai in CP( CA A)/189(MB)2023 in CA ( CA A)/109(MB)/2023. The said application was filed by Respondent No.1/Liquidator of Birla Cotsyn India Ltd for approval of the Scheme of Arrangement for the revival of the Corporate Debtor under section 230 read with Section 66 of the Companies Act, 2013 and Regulation 2-B of the IBBI (Liquidation Process) Regulations
2016 (hereinafter referred as “Liquidation Process Regulations”).
2. In the said Application, vide the Impugned Order dated 04.04.2024, the Ld NCLT has held it is mandatory for the Liquidator to seek No-Objection Certificate for the Scheme from Respondent No. 2 / Bombay Stock Exchange under Regulation 37 of the SEBI (Listing Obligation and Disclosure Requirements), Regulations, 2015 (“LODR”), and accordingly directed the Respondent No.1 to seek NoC from BSE before the approval of the Scheme by the Ld. NCLT.
3. Thus the broad question of law to be addressed in the present Appeal is whether Regulation 37(1) and (2) of the LODR would apply to the Scheme submitted by the Liquidator under Section 230 of the Companies Act read Regulation 2B of the Liquidation Process Regulations, and alternatively, whether the clarification introduced by way of Regulation 37(7) of the LODR for restructuring proposals under Section 31 of the Code would also apply to a Scheme for revival of a company in liquidation under Regulation 2B of the Liquidation Process Regulations read with Section 230 of the Companies Act, 2013 especially considering two modes of revival are in similar continuum.
4. The Learned Senior Counsel for the Appellant submitted that first motion of Scheme of Arrangement was approved by the Learned NCLT. The Appellants are the acquirers of Birla Cotsyn (India) Ltd in liquidation. The company had complied with all the mandatory requirements of the Companies Act and IBC regarding scheme of arrangement, more specifically the requirements prescribed in sub-section (2) of Section 230 of Companies Act. The scheme of arrangement was submitted by the Liquidator and not by the company and thus the Regulations 37(1) and 37(2) of LODR are not applicable. It was submitted in any case the provisions of IBC override over other laws in terms of Section 238 of the Code. It was submitted that exemption provided in Regulation 37(7) to the resolution plan was introduced subsequent to the introduction of IBC, 2016 in 2018. The regulation in the liquidation process regulation (2B) was introduced subsequently and thus the LODR is silent on this issue. It was submitted that purchase as going concern in liquidation is akin to resolution of the company under Section 31 and thus on purposive interpretation, the exemption provided in Regulation 37(7) of LODR shall be applicable to it also. The Learned Senior Counsel relied upon judgements in the case of ‘ Arun Kumar Jagatramka v. Jindal Steel and Power Limited , (2021) 7 SCC 474 ’, ‘ Meghal Homes Private Limited v. Shree Niwas Girni KK Samiti (2007) 7 SCC 753 ’, ‘ S.C. Sekaran v. Amit Gupta and Ors. 2019 SCC Online NCLAT 517 ’, ‘ Y Shivram Prasad v. S. Dhanapal & Ors. 2019 SCC Online NCLAT 172 ’ and ‘Soneko Marketing v. Girish Sriram Juneja in Company Appeal (AT) (Ins.) No. 807 of 2023’, in support of his arguments.
5. The learned counsel for the Respondent/BSE had argued that Regulation 37(1) & (2) of LODR shall squarely apply to the Scheme filed by the Liquidator and that Regulation 37(7) has no applicability in a scheme even if presented by the Liquidator under Section 230 of the Companies Act since it is not akin to restructuring process as envisaged under Section 31 of the IBC. He also argued once the legal provisions contain some prohibition it cannot be ignored by the Court and the Court should not read between lines and is expected to interpret a statute
