Vijay Kumar Iyer And Anr. vs Bharati Defence And Infrastructure

The Application has filed by the Applicant/Liquidator of Bharati Defence Infrastructure (the CD) seeking further directions in the liquidation

process and sale of the assets of the CD.

The brief facts leading to the Application are as under. This Authority vide order dated 14.01.2019 directed liquidation of the CD and appointed the

Applicant as the Liquidator. Due to the National importance of the product line of the CD, this Authority directed the Liquidator to sell the CD as a

going concern. Meanwhile, one of the Shareholders of the Company challenged the order of liquidation in an appeal before Hon’ble National

Company Law Tribunal (NCLAT). The Hon’ble NCLAT upheld the decision of this Authority and directed the Liquidator to ensure that the CD

remains a going concern. The Hon’ble Appellate Tribunal also directed the Liquidator to follow the decision and direction passed by the

Hon’ble Appellate Tribunal in Y. Shivram Prasad vs. S. Dhanpal & Ors. which is as follows:

“13. Therefore, it is clear that during the liquidation process, step required to be taken for its revival and continuance of the ‘Corporate

Debtor’ by protecting the ‘Corporate Debtor’ from its management and from a death by liquidation. Thus, the steps which are required to

be taken are as follows:

i. By compromise or arrangement with the creditors, or class of creditors or members or class of members in terms of Section 230 of the Companies

Act, 2013.

ii. On failure, the Liquidator is required to take step to sell the business of the ‘Corporate Debtor’ as going concern in its totality along with the

employees.â€​

The steps under section 230 of the Companies Act, 2013 were to be taken within 90 days. In case liquidation process under section 230 of the

Companies Act takes more time for any reason, it would be open to the Adjudicating Authority to extend the period if there is a chance of approval of

arrangement of the Scheme. The Hon’ble NCLAT further directed that on failure of revival of the CD, the Liquidator will proceed with the sale

of the assets.

Pursuant to the order, the Applicant issued a public announcement on 12.06.2019 in 6 (six) newspapers stating the eligibility criteria for submission

of Expression of Interest (EOI), Earnest Money Deposit (EMD) and other instructions. The last date for submission of EOI was 28.06.2019. The

Applicant in response received request for extension of time for the submission of the compromise or arrangement Scheme for the CD whereby the

date for submission of the Scheme was extended to 19.07.2019 and 01.08.2019.

On 19.07.2019, the promoters of the CD, submitted an EOI. Pursuant thereto, a draft proposal of the Scheme of compromise or arrangement was

shared by the promoters. The Applicant issued comments in relation to the said Scheme but the proposal of the promoters did not qualify to be a

Scheme. Another entity submitted its EOI and also filed an IA before this Authority seeking extension of time for submission of a Scheme and the

same was allowed. The time period for the submission of a Scheme was extended till 10.11.2019.

Subsequently the Applicant received many proposals and Schemes from different stakeholders. However, in spite of extending the date for the

submission of the EOI and Scheme, the Applicant did not receive any compliant Scheme of compromise or arrangement as prescribed under Section

230 (1) of the Companies Act, 2013.

The Applicant states that during the process of the revival proposals of the CD, the Applicant had received interest from a prospective buyer to

purchase certain equipment and vessels of the CD in its Ratnagiri and Dabhol units.

An Additional Affidavit filed by the Applicant states that the financial position and deteriorating condition of the assets lying in the shipyards of the

CD. The cash flow position of the CD has deteriorated and the Applicant is finding difficult to run the CD as a going concern. The Affidavit also

states that there are 250 employees of the CD at Ratnagiri, whose salaries are outstanding for the past 8 months. The salary of the employees needs

to be released for protection of the assets of the CD. Manpower is essential to maintain the shipyards and vessels. It is also stated that the Applicant

has received threats of suicide from the employees of the CD due to nonpayment of salaries.

The Applicant states that due to Nisarga cyclone which hit various parts of Maharashtra, it also affected the Dabhol shipyard causing extensive

damage. Due to heavy rainfall the condition of the assets has deteriorated adversely affecting its value. In case the assets of the CD are not sold

soon, it will be difficult to control the damage caused to the assets due to non-availability of funds.

The Applicant states that the Financial Creditor had already contributed an amount of Rs. 1,97,19,474 and the said amounts have been utilized for

making payments towards renewal of insurance for fixed assets and stock of the CD. The Applicant once again requested the Financial Creditors to

contribute funds to ensure that the assets of the CD are safeguarded and protected. In view of the fact that no compliant Scheme is received for the

CD along with EMD, the Applicant seeks directions for sale of the assets of the CD.

This Authority vide order dated 04.03.2020 in IA No. 3897 of 2019, had directed Seven Star Securities Private Limited to deposit the EMD of Rs.

25 crores by 31.03.2020 (Rs. 5 crores to be deposited by 20.03.2020 and remaining Rs. 20 crores by 31.03.2020). Due to the nationwide lockdown

declared by Central Government in view of Covid-19 pandemic, this Tribunal’s work was closed. Subsequently vide a Notice dated 22.04.2020,

the Principal Bench allowed this Tribunal to take urgent matters through video conferencing.

The matter came up for hearing on 22.06.2020 and this Authority gave a last chance to Seven Star Securities Private Limited to deposit the EMD.

Learned Counsel for Seven Star Securities Private Limited submitted that due to Covid-19 pandemic, the Company was not in a position to arrange

the funds but however assured to deposit Rs. 5 crores by 29.06.2020. The matter came up for hearing on 29.06.2020. The Counsel for Seven Star

Securities Private Limited submitted that they had failed to comply with the Order dated 22.06.2020 and therefore in accordance with the said order,

no further time was granted to deposit the EMD and the present Application was heard.

As the circumstances narrated supra would indicate, all possible steps have been taken to revive the Company and they have not yielded any

fruitful result. The assets of the CD are lying idle and due to lack of business the CD, it has not been able to provide for its employees. That in turn

has affected the maintenance of the assets, which has resulted in depreciation of its value and worth. Thus, it would accordingly be appropriate to

order sale of its assets, before they further deteriorate. Hence ordered.

ORDER

The IA be and the same is allowed. The Applicant is directed to take further appropriate steps for liquidation of the CD, including sale of assets,

collectively or in parcels or individually, as per the provisions of the Code and Rules made thereunder. He is directed to complete the process at the

earliest.