Alerts & Updates 18th Jul 2018

IBC | Case Law Alert | Liquidation Order not a bar to pass appropriate orders u/s 230 of the Companies Act, 2013

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The National Company Law Appellate Tribunal (“NCLAT”) has in the matter of Arun Kumar Jagatramka vs Gujarat NRE Coke Ltd., order dated 10 July 2018 (available here), held that a liquidation order passed by the National Company Law Tribunal (“NCLT”) under the Insolvency and Bankruptcy Code, 2016 (“Code”) will not come in the way of the NCLT to pass appropriate order in accordance with law on the petition filed under Section 230 of the Companies Act, 2013 (power to compromise or make arrangements with creditors and members) which should not be in conflicted with the provisions of the Code.

  • Factual Matrix:

    1. A liquidation order dated 11 January 2018 (“Liquidation Order”) was passed by the NCLT Kolkata against Gujarat NRE Coke Limited (“Corporate Debtor”) in absence of approval of resolution plan and in want of time beyond 270 days, under Section 33 of the Code.

    2. The promoters of the Corporate Debtor filed an appeal before the NCLAT against the Liquidation Order on the submissions for exclusion of time period from 270 days and plea under Section 230 of the Companies Act, 2013 that even during the period of liquidation, the corporate debtor can compromise with the creditors or shareholders or other members.

    3. Learned counsel for the appellant also submitted that application under Section 230 of the Companies Act, 2013 is pending before the NCLT, Kolkata Bench, which is likely to be taken up in near future and the meeting of shareholders will take place on 16 July 2018.

  • Observations of NCLAT:

    1. The NCLAT declined to exclude any period for the purpose of counting the period of 270 days of ‘insolvency resolution process’ in absence of any valid ground and thereby did not interfere with the Liquidation Order.

    However, it made it clear that the instant order passed by the NCLAT and Liquidation Order passed by the NCLT Kolkata will not come in the way of the NCLT to pass appropriate order in accordance with law on the petition filed under Section 230 of the Companies Act, 2013 which should not be in conflicted with the provisions of the Code.