Manish Jain vs Rakesh Bhatia And Ors

On perusal of the Applications filed by the promoter in all three group companies (PK Industries Pvt. Limited, M/s. Dream Land Realtors Pvt. Limited and PK Sales Company Pvt. Limited) - against which the promoters themselves filed Section 10 petitions in the year 2017 and initiated CIRP against these three Companies - now-seeking relief against the liquidator appointed in three companies to allow the promoters to file scheme before the liquidator. On perusal of IA 2075/2020 in (IB) 435 (ND) 2017 (P K Industries Private Limited), as we have observed that the Applicant, instead of filing Application in PK Industries (P) Limited, has filed Application in PK Sales Company (P) Ltd, therefore the Applicant/suspended Director is directed to cure the defects and file afresh.

As we are about to close this order with above directions, the Liquidator Counsel has submitted that liquidation order was passed on 25.03.2019 by appointing the liquidator in this matter, ever since no record of the company has been handed over to the liquidator either by the erstwhile Resolution Professional (RP) or by the promoters. He has further stated, he has come to know that the person who acted as RP, instead of handing over the records of the Corporate Debtors to the Liquidator, handed over the records to the promoters/Directors. Besides this, the Counsel has also submitted that these promoters are hit by Section 29A of the Insolvency & Bankruptcy Code (the Code), therefore they are not even entitled to file scheme applications (Section 230 of the Companies Act 2013) before this Bench.

As against the above submissions, the promoters/suspended director's counsel has stated that they have already got an order from the Hon'ble NCLAT on 21.05.2019 with a direction that the suspended directors could move scheme application before the liquidator based on the ratio held in Y. Shivram vs. S. Dhanapal & Ors. Company Appeal (AT) (Insolvency) No. 224 of 2018' vide order dated 27.02.2019.

In the same order, on the submission made by this Applicant/suspended director stating that if the opportunity was given to the promoters, they could have settled the matter with the "creditors" but no such opportunity was given, the Hon'ble NCLAT has held such ground cannot be taken once the resolution plan has been called for and in view of the above under Section 12A of the Code, therefore NCLT is not inclined to interfere with the impugned order of liquidation dated 25.03.2019 with a further direction to the Liquidator take steps of liquidation' in terms of the order of Hon'ble Appellate Tribunal in 'Y. Shivram supra.

From the quoted order of Shivam, it is apparent that the liquidator is required to act in terms of the directions of the Hon'ble Appellate Tribunal and take steps u/s 230 of the Companies Act, 2013. If the members or the corporate debtor or the creditors or class of creditors like financial creditor or operational creditor approach the company through the liquidator for compromise or arrangement by making proposal of payment to all the creditors, the liquidator on behalf of the company will move an application u/s 230 of the Companies Act, 2013 before Adjudicating Authority/NCLT in terms as made in the above. On failure, as observed above, above steps should be taken for outright sale of the corporate debtor so as to enable the employees to continue.

In this order it is nowhere envisaged that liquidator shall not proceed with liquidation, it only says in case application is filed in accordance with law u/s 230 of the Act, including bar under section 29A of the Code, then the liquidator has to consider it, but how could he remain waiting forever until promoter has filed scheme before him?

After having the promoter counsel shown the order above, the liquidator counsel has submitted that as per the above order, the promoter should have filed a proposal for scheme u/s 230 of the Act, but till date, though one year has gone by after NCLAT order, no scheme proposal has been filed before the Liquidator by the suspended directors/promoters. To have clarity, the liquidator, the counsel says, held a meeting with the creditors to find out as to whether any proposal for scheme under Section 230 of the Act has come forth from the promoters, to which, the creditors have categorically mentioned that no such proposal has come from the promoters.

The predicament of the liquidator is, he is not allowed to proceed with liquidation process because the records of the companies are not handed over till date, at least to place some scheme before this Bench, no scheme proposal has come from the suspended directors/promoters, no matter whether they are hit by section 29A of the Code or not. The liquidator counsel further submits the promoters by putting the liquidator in a piquant situation, they have successfully dragged this matter for more than one year keeping the records with themselves.

As against this, the suspended director counsel has surprised us by saying that the applicant has on 17.06.2017 (day before yesterday) obtained an order of extension of time up to 31.07.2020 for completion of OTS with the financial Creditor (Karnataka Bank) from the Hon'ble High Court of Delhi by filing a Writ Petition.

We regret to mention that this counsel ought to have mentioned this fact that the Hon'ble High Court passed an order on 17.06.2020 before making any submissions in this case. We ourselves after noting the defects, asked him to cure the defects. In case we decide the applications, if our orders are confronting the orders of honourable High Court, it will be against the principle of comity of courts.

The liquidator says he has not received any notice in the writ petition. The promoter counsel from one side argues he is entitled to file scheme in the companies that they themselves brought into CIRP by filing section 10 petitions, from other side he says he entered into OTS with the Bank/Financial Creditor (99% voting in the CoC), therefore as per High Court Order, he is at liberty to settle the claim of the financial creditor until before 311.07.2020. All this was said by the promoter counsel is, to say that the promoters have not delayed the proceedings.

In between the Bank Counsel says, it is true, they entered into OTS, but the promoters failed to settle the dues within the time mentioned in the agreement, moreover it has also mentioned in the OTS agreement that OTS is subject to the approval of NCLT.

On hearing back and forth, we shall make it clear that once CIRP is initiated and thereafter liquidation order has been passed, if at all matter is to be compromised, it has to be done through scheme u/s 230 of the Act provided the person proposing the scheme is not hit by section 29A of the Code. Here the liquidator counsel says the promoter directors are hit by Section 29A of the Code. It could be perhaps true because all the petitions were admitted u/s 10 of the Code. Moreover, if any settlement is to be arrived at, the only recourse is to file compromise through Section 230 alone, not otherwise. Neither of the things happened. We also make it clear that Section 12A proceedings cannot be invoked once liquidation order is passed.

So far, since all these facts are not on record at one place and to make record straight, we have made the observations above. With these observations, we leave it open to the parties to proceed in accordance with law.