Gujarat NRE Coke Promoter Ineligible To Negotiate With Creditors, Says NCLAT
A two-member bench of NCLAT headed by Chairperson Justice SJ Mukhopadjaya said that as Jagatramka, who was ineligible to be a resolution applicant of the company under the Insolvency & Bankruptcy Code, he cannot be allowed at this stage to negotiate with the creditors of Gujarat NRE Coke.
Jindal Steel and Power, which is an unsecured creditor of Gujarat NRE Coke, had challenged an National Company Law Tribunal order that allowed the promoters to settle debts with its creditors.
NCLT had given a go ahead to Jagatramka for "financial scheme of compromise and arrangement" with him and the company through its liquidator, after holding the debts of shareholders, creditors etc.
The appellate tribunal set aside the order passed on May 15, 2018, by the Kolkata bench of NCLT.
“... it is clear that the Promoter, if ineligible under Section 29A cannot make an application for Compromise and Arrangement for taking back the immovable and movable property or actionable claims of the Corporate Debtor,” said NCLAT. Section 29A of IBC defines the persons, who are not eligible to submit bids for a company going through corporate insolvency resolution process.
“The NCLT by impugned order dated May 15, 2018, though ordered to proceed under Section 230 to 232 of the Companies Act, failed to notice that such application was not maintainable at the instance of 1st Respondent-Arun Kumar Jagatramka (Promoter), who was ineligible under Section 29A to be a Resolution Applicant,” said NCLAT.
It further added: “For the reasons aforesaid, we set-aside the impugned order dated May 15, 2018 and remit the case to Liquidator/Adjudicating Authority to proceed in terms of the decision of this Appellate Tribunal...”
The NCLAT said that Supreme Court in Swiss Ribbons case has held that the primary focus of IBC is to ensure revival and continuation of the corporate debtor by “protecting it from its own management and from a corporate death by liquidation”.
“The aforesaid judgment makes it clear that even during the period of Liquidation, for the purpose of Section 230 to 232 of the Companies Act, the Corporate Debtor' is to be saved from its own management, meaning thereby the Promoters, who are ineligible under Section 29A, are not entitled to file application for Compromise and Arrangement in their favour under Section 230 to 232 of the Companies Act,” said NCLAT.
Gujarat NRE Coke had voluntarily moved a plea before Kolkata NCLT to initiate insolvency proceedings on account of various defaults committed by it. NCLT admitted the plea on April 7, 2017.
However, the company could not attract any bids or finalise a resolution plan within the mandated 270 days under IBC, hence order for liquidation was passed by NCLT Jan. 11, 2018.
Jagatramka had challenged liquidation order and his ineligibility before the NCLAT earlier as the resolution plan submitted by him was not accepted. However, the NCLAT had allowed the liquidation proceeding to continue.
In the meantime, Jagatramka had moved an application under Sections 230 to 232 of the Companies Act before NCLT for Compromise and Arrangement between erstwhile Promoters and the Creditors, in which order was passed on May 15, 2018.