C Ganesh vs Ashok Seshadri & Anr.

[Per : Justice Sharad Kumar Sharma, Member (Judicial)]

In the instant Company Appeal, the Appellant challenges the impugned order dated 02.06.2025, which was rendered by the Learned NCLT, Chennai, in IA(IBC)/2232(CHE)/2024, which was preferred in CP/332/2019, being an application, which was filed by invoking the provisions contained under Section 60(5) of I & B Code, 2016, seeking for an extension of time for the purposes of making deposit of the balance amount, that was due to be paid for the execution of Scheme of Arrangement. By virtue of impugned order, the said application was rejected and as a consequence thereto, it had resulted into the cancellation of the Scheme of Arrangement that, was entered into between the parties as per provisions contained under Section 230-232 of the Companies Act, 2013.

During the liquidation process of M/s. RA Samy Trading Private Limited, the Corporate Debtor, the Appellant, has proposed a scheme of arrangement in his status of being that, of a Successful Scheme Proponent, offering a proposal for settlement in relation to the Corporate Debtor i.e., M/s. RA Samy Trading Private Limited. The CIRP Process of the Corporate Debtor had commenced on 30.04.2019, and it ended in failure, resulting into the initiation of a liquidation process by an order that was passed on 20.04.2021. It has come on record that the liquidator undertook the auction proceedings for the sale of the assets of the Corporate Debtor, in the liquidation process, but the three auction proceedings, which were undertaken by the liquidator, remained unsuccessful.

The assets of the Corporate Debtor, which was the subject matter of the CIRP Proceedings and consequently thereto, of the liquidation proceedings, is situated at Ranganathan Street, Chennai, which, according to the Appellant, is a major commercial area. The said property was leased out to the tenant from which the Corporate Debtor was earning lease rent. In the meantime, the Stakeholders Consultation Committee had voted in favour of the Scheme of Arrangement of the Appellant on 01.12.2022. The said scheme was submitted before the Learned NCLT for its approval and it was approved by the Learned Adjudicating Authority on 22.03.2024.

The approved payment terms and conditions of the said Scheme of Arrangement, are summarised in the following manner.

In accordance with the definition as contemplated under the Clause 2.2.4 of the scheme, “effective date” would be the date of approval of the scheme by Learned NCLT. Relevant clause 2.4 of clause 2 of the Scheme dated 25.11.2022 is extracted hereunder: -

Thus, the “effective date”, in the instant case, would be 22.03.2024 when the scheme stood approved by the Learned NCLT.

The case of the Appellant is that, in compliance of the conditions of the Approved Scheme of Arrangement, he had already paid the initial amount of 10% of the settlement amount to the Punjab National Bank along with the interest that would be payable on it for the delayed payment. The Appellant had also separately paid the provident fund amount that, was due to the EPFO, Chennai, as well as 10% of the liquidation cost. The Appellant has come with a case in this Company Appeal that, no further progress in the implementation in the Approved Scheme of Arrangement, could be achieved because multiple issues have cropped up, which were creating impediments in the effective implementation of the Scheme which would be attributable to the conduct of Respondent No.1, that despite several communications and oral conversations, with Respondent No.1 (the liquidator) no concrete resolution could be arrived, due to which, the payments under the Approved Scheme of Arrangement were delayed and that the Respondent No.1 instead of resolving the issue wrote to him by email on 16.09.2024, stating that, the Scheme of Arrangement and the payment schedule as agreed between the parties under the terms of Settlement was required to be followed in its strict sense, and the full payment must be made on or before 21.09.2024, failing which the Respondent No.1, on instructions of Punjab National Bank will approach the NCLT to report thereof that there has been an apparent contravention of the terms of the scheme and therefore the scheme itself would stand rescinded and as a result thereto the liquidation proceedings would revive back to be given effect to in a proceedings which were to be held before the NCLT.

Owing to the aforesaid contingency, the Appellant contends that since he had partially paid the amount under the Scheme, he was constrained to file IA(IBC)/2232(CHE)/2024, seeking extension of time of 50 days to enable him to implement the scheme and to make the payment under the approved scheme stating that the scheme implementation was delayed, on account of certain unresolved issues and on account of lack of cooperation of Respondent No.1. He has stated that the order sanctioning the scheme of arrangement was not submitted by the liquidator within one month of the order of Learned NCLT as per Section 230(8) of Companies Act, that it was filed by the liquidator with ROC only on 07.12.2024, that despite of the Approval of the Scheme of Arrangement by an order passed by the Tribunal on 22.03.2024, the status of the Corporate Debtor was still shown as to be a company “in liquidation”, since the status of the Corporate Debtor, has not changed to be “active”, he could not raise funds from lenders, and pay the amount as has been agreed, under the scheme. He has further stated that because of the errors that was made by Respondent No.1 in submission of the return in Form INC-28, to the Registrar of Companies/MCA, the status could not be changed.

The reliefs prayed for in the Application IA(IBC)/2232(CHE)/2024 on 19.09.2024 by invoking the provisions contained under Section 60(5) of the I & B Code, 2016, by the Appellant are given below: -

Learned NCLT, after taking up for consideration the said application for extension of time, first proceeded to pass an order directing Respondent No.1 / the liquidator to provide all the necessary information for the execution of the plan, which was undertaken by the Counsel for the liquidator and to do so within the prescribed period as it was provided in the order dated 02.12.2024, of Learned NCLT. Relevant part of the order dated 02.12.2024 is extracted hereunder: -

In a further proceeding, that was carried before the Learned Adjudicating Authority on 07.01.2025, the Tribunal observed that “Applicant has sought an adjournment, the Applicant is directed to fulfil the commitment to the liquidator and the matter was directed to be posted on 03.02.2025”. When the proceedings revived back on 03.02.2025, the Learned Tribunal proceeded to pass an order observing thereof that, since the Appellant has sought 30 days of time for the payment of the amount, as it has been settled to be paid under the Scheme of Arrangement, and he has brought a demand draft for Rs.1.5 crore for handing over the same to the liquidator, time is granted by way of a final opportunity for making the payment prior to 05.03.2025 with no further extension to be granted in any manner. In the same order Learned NCLT directed ROC to change the status of the Corporate Debtor ‘in liquidation’ to ‘active’.

It is apparent from the records as available in this Company Appeal that the directions as given in the order of 03.02.2025 of remitting the balance amount within a period of 30 days, were not complied with despite of there being an order. Hence, the Tribunal had proceeded to pass an order on 24.04.2025 observing thereof in the following manner: -

The proceedings in respect of the said Application IA(IBC)/2232(CHE)/2024 were taken up subsequently on production of demand drafts and the cheque showing his intention to comply by the order of 09.05.2025, where time line was extended to 28.05.2025. During the hearing dated 17.06.2025, Financial Creditor / Punjab National Bank submitted that they want to proceed with liquidation; the case was subsequently taken up on 15.07.2025 where Learned NCLT after observing that the Appellant has not complied with his commitment to pay by 08.05.2025 and that he has not fulfilled his payment commitments in spite of several opportunities, proceeded to cancel the scheme of arrangement and directed Stakeholder’s Consultation Committee to take appropriate consequential action by an order dated 15.07.2025. It is this order which is being challenged by the Appellant in the instant Appeal.

The Appellant being aggrieved against the said order, has approached this Appellate Tribunal making a prayer that this Tribunal in the exercise of its powers vested in it under Section 230-232 of Companies Act, 2013, may extend their time period on the basis of the grounds that had been taken in the IA, for enabling him to deposit the balance amount as payable under the scheme and further, to restrain the Respondents from proceeding with the liquidation process, due to non-compliance of the conditions of the Scheme of Arrangement by the Appellant. The Appellant in the appeal has formulated the following reliefs: -

When the Company Appeal was taken up by this Appellate Tribunal on 11.08.2025, after considering the aforesaid backdrop, and particularly, in the context of the relief sought for in the IA for extension of time to comply with the Scheme of Arrangement, we had directed the Respondents to the proceedings to complete their instructions. In response thereto, the Punjab National Bank had filed an affidavit on 19.08.2025 opposing the prayer sought for by the Appellant, for the grant of time for fulfilling the conditions of the Scheme of Arrangement on the ground that, since despite several extensions being granted by the Learned NCLT, the same has not been complied with by the Scheme Proponent. They have further contended that time is the essence under the I & B Code, 2016, and despite several opportunities being granted to Scheme Proponent, the conditions of the Scheme that have not been complied with and therefore, the relief for extension of time should not be granted. Similar was the expression given by the Learned Counsels for the Respondents on record, wherein, they have vehemently opposed the prayer for grant of extension of time on the ground that, the Appellant would not be entitled for any further extension for the reason being that the period of extension as sought for in the application, that is, the period from 21.09.2024 to 21.12.2024 has long expired and the prayer sought for itself had become redundant with the efflux of time and hence, no further extension could be granted because, thereafter no further extension beyond the aforesaid period has been prayed for in the Application.

On the contrary, the argument of the Learned Counsel for the Appellant is that, the grant of an extension for the implementation of the scheme under Section 230-232 of the Companies Act, 2013, is exclusively falling within the discretionary domain of the Tribunal and the Appellate Tribunal too, to exercise its discretion owing to the provisions contained under Section 231(1)(b) of Companies Act, 2013, which provides for, that where the Tribunal had passed an order of an approval of the scheme under Section 230, it shall have all powers to supervise the implementation or the enforcement of the scheme. Further, making reference to Sub-Clause(b) of Sub-Section (1) of Section 231, the Learned Counsel for the Appellant contended that, owing to the language used therein under the aforesaid provision, the Tribunal itself is vested with all the powers, which are wide enough to grant an equitable relief of extension of time to make such orders or arrangements, which the Tribunal may consider it to be necessary to meet the ends of Justice. Section 231 of the Companies Act, 2013, is extracted hereunder: -

In order to show his bonafide the Appellant, along with Interlocutory Application No.1085/2025, has filed copies of the demand drafts, which he has prepared, and which, as per his submission are ready to be handed over. The details are given hereunder: -

But the same was declined to be accepted by the Respondents, contending that, since they are opposing the acceptance of the Scheme of Arrangement as of now, they are not willing to accept the said amount. Further, the Learned Counsel for the Respondent / Liquidator, Mr. Pranava Charan, submitted that the demand drafts, which are attempted to be submitted by the Appellant now, cannot be accepted as of now, for the reason being that, by the passage of time certain additional amount would have also accrued to be payable owing to the interest and other incidental expenditures, which would have fallen due to be paid during the intervening period when the litigation was pending by way of Company Appeal and the same was also required to be remitted along with the amount agreed for in the Approved Scheme. On this argument, the Learned Counsel for the Appellant submitted that apart from the amount, which has been covered by the demand drafts submitted by the Appellant, accompanied with IA No.1085/2025, they are also agreeable to pay any other incidental amount, which might have fallen due to be paid during the pendency of the proceedings of the Company Appeal, including the CIRP and liquidation costs.

The Learned Counsel for the Appellant submitted that since the Scheme of Arrangement as contemplated under Section 230 of the Companies Act, 2013, is with a wider objective for making of an arrangement between the two rival factions, the wider objective of Section 230 of the Companies Act, was to resolve the controversy for making the Corporate Debtor functional, as per the settled terms, and that is why the scope of the terms and conditions of the scheme has been made flexible in its applicability at the hands of the Tribunal, who are vested with wide enough powers to modify the terms and conditions of the settlement and the time stipulations as contained in the Scheme of Arrangement or in the orders that, were passed by the Tribunal of approving the Scheme of Arrangement. In support thereto, the Learned Counsel for the Appellant had referred to the Judgment rendered by the Hon’ble Principal Bench in the matter of Ashok Dattatray Atre & Ors. Vs State Bank of India & Ors., Comp App (AT) (Ins) Nos.221 & 222/2024. Particularly, he has made reference to para 20 of the said Judgment, and while elaborating his argument on the same, he has contended that the observation, made in para 20 by the Principal Bench was in the context of as to what authority the Tribunal or the Appellate Tribunal, could exercise for the purposes of extension of time in making the payment of the amount payable under the Approved Resolution Plan. The relevant observation made in para 20 is extracted hereunder: -

We too had an occasion to deal with the similar issue about the purpose and object of extension of time under the Scheme of Arrangement in the matters of Comp App (AT) (CH) (Ins) Nos.304 & 306/2025, M/s. Prakash Oil Depot vs G. Madhusudhan Rao & Anr. The relevant paras 17, 18 & 19 are extracted hereunder: -

Owing to the basic objective, which could be discernible from the provision contained under Section 231(1)(b) of Companies Act, we are of the opinion that, where the settlement is a process contemplated under law and where the scheme has been approved by the Learned Adjudicating Authority, in order to effectively resolve the controversy on vital issues between the parties, this will be a fit case to exercise our power which is reserved to be exercised by us under Section 231(1)(b), which has been extracted above, since it gives ambit of authority to the Tribunal, as well as the Appellate Tribunal to pass any orders or to make any such modifications, which may be necessary under/facts of a case to carry on the necessary steps for ensuring the implementation of the Scheme of Arrangement. Looking into the time constraints, delayed filing with ROC and the other contributing factors resulting to the delayed payment, this will be a fit case where we could exercise our discretion of extension of time. Owing to the above, the Company Appeal (AT) (Ins) No.361/2025 is allowed. The impugned order dated 02.06.2025 is hereby quashed, and IA(IBC)/2232(CHE)/2024, would stand allowed, and as a consequence thereto, further 60 days time is granted to the Appellant to make full and final payment, including the additional expenditures and the interest which would have accrued during this period along with the liquidation charges, within a period of 60 days from the date of uploading of the order. The drafts which were presented by the Appellant in IA No.1085/2025 (as detailed in para 16 of this order) would be immediately handed over to the respondents before the Learned Adjudicating Authority, within 3 days of uploading of this order, failing which, the impugned order will take its own effect as per law. All pending interlocutory applications would stand closed.