Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2024 Supreme(Online)(NCLT) 1349

NATIONAL COMPANY LAW TRIBUNAL
Mr. Sanjiv Dutt, Member (Technical), Mr. Kishore Vemulapalli, Member (Judicial)
Mr. Anil Goel Liquidator of M/s. Birla Cotysn (India) Limited – Appellant
Versus
Regional Director (WR) – Respondent
Company Scheme Petition C.P. (CAA) 189 of 2023 | Company Appeal (AT) No.148 of 2024

Advocates:
For the Appellants/Petitioners: Mr. Rohit Gupta, Ms. Prashansa Agarwal, Mr. Gaurav Joshi, Mr. Viraj Parikh, Mr. Umang Mehta, Mr. Aamir Attari, Ms. Aalisha Sharma
For the Respondents: Mr. Kunal Kanungo

A court-sanctioned scheme under Section 230 ensures corporate debtor revival despite objections, recognizing acquirer eligibility and prioritizing creditor interests over technical disqualifications, thereby enhancing economic utility.

Headnote:(A) Companies Act, 2013 - Sections 230 and 66 - Insolvency and Bankruptcy Code, 2016 - Sanction of Scheme of Compromise and Arrangement - Corporate debtor in liquidation - A composite scheme proposed for revival approved by the Tribunal despite objections raised regarding the disqualification of acquirers under Section 29A of the IBC - The scheme is deemed beneficial for creditors and continuation of business, ensuring payouts exceeding liquidation value. (Paras 14, 16, 17)

(B) The Nexus of Scheme Approval and Regulatory Compliance - The court addressed the importance of regulatory nods and adjudicated that prior NOCs from stock exchanges are unnecessary for schemes filed during liquidation - Protection to stakeholders is preserved during the application process. (Paras 10, 12, 18)

Facts of the case:
The corporate debtor started defaulting on financial obligations, leading to its liquidation under the IBC, 2016, and has faced legal challenges regarding a proposed compromise scheme by various acquirers aimed at reviving the business.

Findings of Court:
The court finds that the scheme offers a financially viable option for creditors, promising higher recoveries compared to other resolution plans.

Issues: The main issues include the requirements for NOCs from stock exchanges and the eligibility of the acquirers as per Section 29A and ongoing legal inquiries.

Ratio Decidendi: The court determined that the scheme holds substantial merit for all stakeholders, advocating for the revival of the corporate debtor and rejecting the notion that acquirers should be automatically disqualified under the provided statutory clauses.

Result: The scheme is hereby sanctioned and approved.

Table of Content
1. factual background of the corporate debtor's financial history. (Para 1 , 2)
2. introduction of proposed scheme of arrangement. (Para 3)
3. discussion on lacks of objections from regulatory authorities. (Para 4 , 5 , 8 , 9)
4. court's analysis of objections and rulings on eligibility. (Para 10 , 12)
5. final decision to sanction the scheme. (Para 14 , 15 , 16 , 20)

ORDER

1. The captioned Company Scheme Petition bearing C.P. (CAA) No. 189 of 2023 has been filed u/s. 230 r/w. s.66 of the Companies Act, 2013 and Regulation 2-B of the IBBI (Liquidation Process) Regulations, 2016 on 05.07.2023 seeking sanction of this Tribunal to a Composite Scheme of Compromise and Arrangement (“the Scheme”) between Mr. Nikhil Jain (“Acquirer No.1”), Rohstoffe International Private Limited (“Acquirer No.2”) and Wendt Finance Private Limited (“Acquirer No.3”; collectively referred to as “Acquirers”) for revival of M/s. Birla Cotysn (India) Limited (“Corporate Debtor”), along with its creditors and shareholders. The Scheme has been propounded by Mr. Anil Goel (“Liquidator”/ “Petitioner”), the Liquidator of the Corporate Debtor herein. The Corporate Debtor is a listed public company in Liquidation under the provisions of Insolvency and Bankruptcy Code, 2016 , (“IBC, 2016”) r/w. the IBBI (Liquidation Process) Regulations, 2016.

BACKGROUND OF THE SCHEME IN LIQUIDATION

2. The factual matrix leading up to the proposed Scheme in Liquidation is as under:

2.1. The Corporate Debtor herein was incorporated in circa 1941, converted into a Public Limited Company in circa 1998 and eventually listed on the Bombay Stock Exchange in July, 2008. In furtherance of its objects under the Memorandum of Association, the Corporate Debtor ventured into commercial production of textiles at its two units in Khamgaon and Malkapur, located in Maharashtra. The Corporate Debtor had availed financial facilities from various Banks. However, in course of time, the Corporate Debtor failed to observe financial discipline and started committing defaults in its payment obligations. Owing to the same, all of the loan accounts of the Corporate Debtor were declared as Non- Performing Asset(s) (“NPA”) in the intervening period of 2012-13, which led to a substantial reduction in its turnover and resulted in the closure of its afore-mentioned unit at Khamgaon.

2.2. In view of Corporate Debtor’s failure to pay off its dues owed to its financial creditors, an application u/s. 7 of IBC, 2016 came to be filed in April, 2018 before this Tribunal by Edelweiss Asset Reconstruction Company Limited. This Tribunal was pleased to admit the said Application vide its Order dated 20.11.2018, which resulted in initiation of CIRP in respect of the Corporate Debtor herein and one Ms. Sujata Chattopadhyay was appointed as the Interim Resolution Professional to carry out the functions under the IBC, 2016.

2.3. Pursuant to the constitution of Committee of Creditors (“CoC”), deliberations ensued in furtherance of a Resolution Plan, but to no avail. The CoC, in its Fifteenth Meeting dated 16.08.2019, passed a resolution seeking initiation of the Liquidation Process of the Corporate Debtor, with a voting share of 91.24%. Accordingly, an application for initiation of Liquidation Process came to be filed before this Tribunal, which was admitted vide Order dated 24.09.2019. Mr. Anil Goel (i.e. Petitioner in the captioned Company Scheme Petition) was thereafter appointed as the Liquidator of the Corporate Debtor to oversee the same in accordance with the provisions of IBC, 2016 and the relevant Regulations.

2.4. The Petitioner in the captioned Company Scheme Petition submits that it filed the Preliminary Report, Asset Memorandum and List of Stakeholders before this Tribunal in accordance with Regulations 5, 13 and 34 of the IBBI (Liquidation Process) Regulations, 2016 in the following manner: