NCLAT (29.01.2019) in S.C. Sekaran Vs. Amit Gupta & Ors. [Company Appeal (AT) (Insolvency) No. 495 & 496 of 2018] held that; Before taking steps to sell the assets of the ‘corporate debtor(s)’ (companies herein), the Liquidator will take steps in terms of Section 230 of the Companies Act, 2013.
Excerpts of the order;
29.01.2019 These appeals have been preferred by the management of ‘Hindustan Dorr-Oliver Limited’ (Corporate Debtor) and ‘HDO Technologies Limited’ (the other Corporate Debtor) against orders both dated 25th June, 2018 whereby and whereunder the Adjudicating Authority (National Company Law Tribunal) Mumbai Bench passed order(s) of liquidation under Section 33(1) of the Insolvency and Bankruptcy Code, 2016 (for short, ‘the I&B Code’) of both the companies with certain directions to the liquidator.
# 3. Learned counsel appearing on behalf of the Management (Appellant) submitted that the ‘Liquidator’ is supposed to keep the companies as ‘going concern’ even during the period of liquidation. If so necessary, the ‘Liquidator’ can take steps under Section 230 of the Companies Act, 2013 after consultation with the ‘members’ or ‘the creditors’ of the Companies for making arrangements with the third party and thereafter take approval of the ‘National Company Law Tribunal, Mumbai Bench’. It is further submitted that it is also open to the ‘Liquidator’ to sell the companies to third parties before selling the moveable or immovable assets of the company separately.
#4. Learned counsel appearing on behalf of the ‘Liquidator’, on instructions from the ‘Liquidator’, who is present, submits that the ‘Liquidator’ will ensure that both the companies remain going concern and if so necessary, he will take appropriate orders from the Adjudicating Authority. He may also take other steps in accordance with law as suggested by the learned counsel for the appellant subject to the approval of the Adjudicating Authority.
# 5. We have heard the learned counsel for the parties and perused the record. The Hon’ble Supreme Court in ‘Swiss Ribbons Pvt. Ltd. & Anr. vs. Union of India & Ors. – Writ Petition (Civil) No. 99 of 2018’ by its judgment dated 25th January, 2019, observed as follows:
“11. ………What is interesting to note is that the Preamble does not, in any manner, refer to liquidation, which is only availed of as a last resort if there is either no resolution plan or the resolution plans submitted are not up to the mark. Even in liquidation, the liquidator can sell the business of the corporate debtor as a going concern. [See ArcelorMittal (supra) at paragraph 83, footnote 3].
12. It can thus be seen that the primary focus of the legislation is to ensure revival and continuation of the corporate debtor by protecting the corporate debtor from its own management and from a corporate death by liquidation. The Code is thus a beneficial legislation which puts the corporate debtor back on its feet, not being a mere recovery legislation for creditors. ……..
In ‘Arcelormittal India Pvt. Ltd. vs. Satish Kumar Gupta & Ors.’ at paragraph 83, footnote 3 is mentioned. The Hon’ble Supreme Court noticed that :
“3. Regulation 32 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016, states that the liquidator may also sell the corporate debtor as a going concern.”
# 6. In ‘Meghal Homes Pvt. Ltd. vs. Shree Niwas Girni K.K. Samiti & Ors. – (2007) 7 SCC 753” the Hon’ble Supreme Court observed and held as follows:
“33. The argument that Section 391 would not apply to a company which has already been ordered to be wound up, cannot be accepted in view of the language of Section 391(1) of the Act, which speaks of a company which is being wound up. If we substitute the definition in Section 390(a) of the Act, this would mean a company liable to be wound up and which is being wound up. It also does not appear to be necessary to restrict the scope of that provision considering the purpose for which it is enacted, namely, the revival of a company including a company that is liable to be wound up or is being wound up and normally, the attempt must be to ensure that rather than dissolving a company it is allowed to revive. Moreover, Section 391(1)(b) gives a right to the liquidator in the case of a company which is being wound up, to propose a compromise or arrangement with creditors and members indicating that the provision would apply even in a case where an order of winding up has been made and a liquidator had been appointed. Equally, it does not appear to be necessary to go elaborately into the question whether in the case of a company in liquidation, only the Official Liquidator could propose a compromise or arrangement with the creditors and members as contemplated by Section 391 of the Act or any of the contributories or creditors also can come forward with such an application.”
# 7. Section 391 of the Companies Act, 1956 has since been replaced by Section 230 of the Companies Act, 2013, which is as follows: ………...
# 8. In view of the provision of Section 230 and the decision of the Hon’ble Supreme Court in ‘Meghal Homes Pvt. Ltd.’ and ‘Swiss Ribbons Pvt. Ltd.’, we direct the ‘Liquidator’ to proceed in accordance with law. He will verify claims of all the creditors; take into custody and control of all the assets, property, effects and actionable claims of the ‘corporate debtor’, carry on the business of the ‘corporate debtor’ for its beneficial liquidation etc. as prescribed under Section 35 of the I&B Code. The Liquidator will access information under Section 33 and will consolidate the claim under Section 38 and after verification of claim in terms of Section 39 will either admit or reject the claim, as required under Section 40. Before taking steps to sell the assets of the ‘corporate debtor(s)’ (companies herein), the Liquidator will take steps in terms of Section 230 of the Companies Act, 2013. The Adjudicating Authority, if so required, will pass appropriate order. Only on failure of revival, the Adjudicating Authority and the Liquidator will first proceed with the sale of company’s assets wholly and thereafter, if not possible to sell the company in part and in accordance with law.
# 9. The ‘Liquidator’ if initiates, will complete the process under Section 230 of the Companies Act within 90 days. For the purpose of counting the period of liquidation, the pendency of the appeal(s) preferred by the ‘Eight Finance Pvt. Ltd.’ that is from 12th July, 2018 and till date should be excluded. In the circumstances, while we are not inclined to interfere with the impugned order(s) both dated 25th June, 2018 direct the Liquidator to act in accordance with law and as observe above.
Both the appeal(s) stand disposed of with the aforesaid observations and directions. No costs.
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“11. ………What is interesting to note is that the Preamble does not, in any manner, refer to liquidation, which is only availed of as a last resort if there is either no resolution plan or the resolution plans submitted are not up to the mark. Even in liquidation, the liquidator can sell the business of the corporate debtor as a going concern.
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