1

NATIONAL COMPANY LAW APPELLATE TRIBUNAL

PRINCIPAL BENCH
NEW DELHI
COMPANY APPEAL (AT) NO.148 OF 2024
(Arising out of order dated 04.04.2024 passed by the National Company Law
Tribunal, Mumbai, in CP(CAA)/189(MB)/2023 in CA(CAA)/109(MB)2023)
In the matter of:
1. Nikhil Jain
S/o Mr Om Prakash Jain
403 & 403A Citi Scape
CHS
Behind Hotel Kohinoor,
JB Nagar, Andheri East,
Mumbai 400059

2. Rohtsoffe International Private Ltd

Th: Director Nikhil Jain,
1304
Regent Chambers,
Jamnalal Bajaj Road Nariman Point,
Mumbai city, Mumbai, Maharashtra,
India 400021

3. Wendt Finance Pvt Ltd

Through Director Nikhil Jain,
1304
Regent Chambers
Jamnalal Bajaj Road
Nariman Point,
Mumbai City Mumbai
Maharashtra
India 400021 Appellants

Vs

1. Anil Goel, Liquidator of Birla

Cotsyn (India) Ltd
Basement, E-10A, Kailash Colony, Near
Greater Kailash-I,
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New Delhi 110048

2. Bombay Stock Exchange Ltd

Through Chief General Manager,
25th Floor,
Phoroze Jeejeebhoy Towers,
Dalal Street,
Mumbai 400001 Respondents

For Appellant:Mr Arun Kathpalia,Sr. Advocate and Mr Krishnendu Dutta, Sr

Advocate with Mr Viraj Parikh, Ms Aakashi Lodha, Mr. Aditya Dhupra, Mr.
Umang Mehta, Mr. Rahul, Mr. Kishitij Wadhwa, Advocates.
For Respondent:Mr Neeraj Malhotra, Sr. Advocate with Mr. Dhananjaya Sud,
Ms Aishwarya Prasad and Mr. Nimishi Kumar, Advocates for R1.
Mr. Abhishek Puri, Ms Surbhi Gupta, and Mr. Sahil Grewal, Mr. Sumit Yadav,
Mr. Manish, Advocates for R2.
JUDGEMENT

JUSTICE YOGESH KHANNA, MEMBER (JUDICIAL)

The present appeal is filed under Section 421 of the Companies Act,

2013 against order dated 04.04.2024 passed by the Ld.National Company

Law Tribunal, Mumbai in CP(CAA)/189(MB)2023 in CA(CAA)/109(MB)/2023.

The said application was filed by Respondent No.1/Liquidator of Birla Cotsyn

India Ltd for approval of the Scheme of Arrangement for the revival of the

Corporate Debtor under section 230 read with Section 66 of the Companies

Act, 2013 and Regulation 2-B of the IBBI (Liquidation Process) Regulations

2016 (hereinafter referred as “Liquidation Process Regulations”).

2. In the said Application, vide the Impugned Order dated 04.04.2024, the

Ld NCLT has held it is mandatory for the Liquidator to seek No-Objection

Certificate for the Scheme from Respondent No. 2 / Bombay Stock Exchange
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under Regulation 37 of the SEBI (Listing Obligation and Disclosure

Requirements), Regulations, 2015 (“LODR”), and accordingly directed the

Respondent No.1 to seek NoC from BSE before the approval of the Scheme by

the Ld. NCLT.

3. Thus the broad question of law to be addressed in the present Appeal

is whether Regulation 37(1) and (2) of the LODR would apply to the Scheme

submitted by the Liquidator under Section 230 of the Companies Act read

Regulation 2B of the Liquidation Process Regulations, and alternatively,

whether the clarification introduced by way of Regulation 37(7) of the LODR

for restructuring proposals under Section 31 of the Code would also apply to

a Scheme for revival of a company in liquidation under Regulation 2B of the

Liquidation Process Regulations read with Section 230 of the Companies Act,

2013 especially considering two modes of revival are in similar continuum.

4. The Learned Senior Counsel for the Appellant submitted that first

motion of Scheme of Arrangement was approved by the Learned NCLT. The

Appellants are the acquirers of Birla Cotsyn (India) Ltd in liquidation. The

company had complied with all the mandatory requirements of the Companies

Act and IBC regarding scheme of arrangement, more specifically the

requirements prescribed in sub-section (2) of Section 230 of Companies Act.

The scheme of arrangement was submitted by the Liquidator and not by the

company and thus the Regulations 37(1) and 37(2) of LODR are not

applicable. It was submitted in any case the provisions of IBC override over

other laws in terms of Section 238 of the Code. It was submitted that

exemption provided in Regulation 37(7) to the resolution plan was introduced

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subsequent to the introduction of IBC, 2016 in 2018. The regulation in the

liquidation process regulation (2B) was introduced subsequently and thus the

LODR is silent on this issue. It was submitted that purchase as going concern

in liquidation is akin to resolution of the company under Section 31 and thus

on purposive interpretation, the exemption provided in Regulation 37(7) of

LODR shall be applicable to it also. The Learned Senior Counsel relied upon

judgements in the case of ‘Arun Kumar Jagatramka v. Jindal Steel and Power

Limited, (2021) 7 SCC 474’, ‘Meghal Homes Private Limited v. Shree Niwas Girni

KK Samiti (2007) 7 SCC 753’, ‘S.C. Sekaran v. Amit Gupta and Ors. 2019 SCC

Online NCLAT 517’, ‘ Y Shivram Prasad v. S. Dhanapal & Ors. 2019 SCC Online

NCLAT 172’ and ‘Soneko Marketing v. Girish Sriram Juneja in Company Appeal

(AT) (Ins.) No. 807 of 2023’, in support of his arguments.

5. The learned counsel for the Respondent/BSE had argued that

Regulation 37(1) & (2) of LODR shall squarely apply to the Scheme filed by the

Liquidator and that Regulation 37(7) has no applicability in a scheme even if

presented by the Liquidator under Section 230 of the Companies Act since it

is not akin to restructuring process as envisaged under Section 31 of the IBC.

He also argued once the legal provisions contain some prohibition it cannot

be ignored by the Court and the Court should not read between lines and is

expected to interpret a statute only when it is ambiguous and Court cannot

add or substract words to a Statute or read something into it which is not

there and also cannot recast and re-write a legislation per Nasiruddin and

others Vs Sita Ram Agarwal (2003) 2 Supreme Court Cases 577. The Ld.

Counsel for BSE also relied upon Regulation 5 and 11 of the LODR to say
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there exists an obligation upon the Liquidator to obtain an NOC from BSE

before filing the first motion.

6. Learned counsel for the Liquidator (R1) stated he supports the

appellant, and as Corporate Debtor is under liquidation, there are no

shareholders in the Company.

7. Heard.

8. Under the Companies Act, admittedly, there is no provision mandating

companies to obtain a prior NOC from stock exchanges for Scheme of

Arrangement. In this context, at the outset, reference may be made to the

following sub-sections (1), (2), (3) and (5) of Section 230 of the Companies Act

which are reproduced hereinbelow:

“230. Power to compromise or make arrangements

with creditors and members —

(1) Where a compromise or arrangement is proposed—

(a) between a company and its creditors or any class of
them; or
(b) between a company and its members or any class of
them,
the Tribunal may, on the application of the company or of any
creditor or member of the company, or in the case of a
company which is being wound up, of the liquidator,
appointed under this Act or under the Insolvency and
Bankruptcy Code, 2016, as the case may be, order a meeting
of the creditors or class of creditors, or of the members or
class of members, as the case may be, to be called, held and
conducted in such manner as the Tribunal directs.
Explanation- For the purposes of this sub-section,
arrangement includes a reorganisation of the company's
share capital by the consolidation of shares of different
classes or by the division of shares into shares of different
classes, or by both of those methods.
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(2) The company or any other person, by whom an

application is made under sub-section (1), shall
disclose to the Tribunal by affidavit—

(a) all material facts relating to the company, such as the

latest financial position of the company, the latest auditor's
report on the accounts of the company and the pendency of
any investigation or proceedings against the company;

(b) reduction of share capital of the company, if any, included

in the compromise or arrangement;

(c) any scheme of corporate debt restructuring consented to

by not less than seventy-five per cent of the secured creditors
in value, including—

(i) a creditor's responsibility statement in the prescribed form;

(ii) safeguards for the protection of other secured and

unsecured creditors;

(iii) report by the auditor that the fund requirements of the

company after the corporate debt restructuring as approved
shall conform to the liquidity test based upon the estimates
provided to them by the Board;

(iv) where the company proposes to adopt the corporate debt

restructuring guidelines specified by the Reserve Bank of
India, a statement to that effect; and

(v) a valuation report in respect of the shares and the property

and all assets, tangible and intangible, movable and
immovable, of the company by a registered valuer.

(3) Where a meeting is proposed to be called in

pursuance of an order of the Tribunal under sub-
section (1), a notice of such meeting shall be sent to all
the creditors or class of creditors and to all the
members or class of members and the debenture-
holders of the company, individually at the address
registered with the company which shall be accompanied by
a statement disclosing the details of the compromise or
arrangement, a copy of the valuation report, if any, and
explaining their effect on creditors, key managerial
personnel, promoters and non-promoter members, and the
debenture-holders and the effect of the compromise or
arrangement on any material interests of the directors of the
company or the debenture trustees, and such other matters
as may be prescribed:
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[…]

(5) A notice under sub-section (3) along with all the

documents in such form as may be prescribed shall
also be sent to the Central Government, the income tax
authorities, the Reserve Bank of India, the Securities and
Exchange Board, the Registrar, the respective stock
exchanges, the Official Liquidator, the Competition
Commission of India established under sub-section (1) of
Section 7 of the Competition Act, 2002 (12 of 2003), if
necessary, and such other sectoral regulators or
authorities which are likely to be affected by the
compromise or arrangement and shall require that
representations, if any, to be made by them shall be
made within a period of thirty days from the date of
receipt of such notice, failing which, it shall be
presumed that they have no representations to make
on the proposals. (Emphasis Supplied)

9. Section 230(2) of the Companies Act refers to the requirements /

disclosures for a Scheme of Arrangement and it does not prescribe any

requirement for a prior NoC from the stock exchanges. Now the Ld. NCLT has

stalled the proceedings in the present Scheme by directing the Liquidator to

obtain NoC from BSE. In Pentemedia Graphics Limited v. The Bombay Stock

Exchange, 2006 SCC Online Mad 918 (at Paragraph 38-41) it was held the

requirement of NoC from stock exchanges is not mandatory for approval of a

Scheme and it is only required for continued listing of the Company, which

can be pursued after the Scheme as well.

10. Further, Section 230(5) of the Companies Act, 2013 only contemplates

notice to the stock exchanges after the Scheme has been filed with the

Tribunal, and not a prior NoC from the stock exchanges. The requirement of

giving notice to the stock exchanges under Section 230(5) of the Companies

Act has admittedly been complied with by the Liquidator and the Scheme was

received by the BSE on 16.05.2023.

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11. Thus, under the Companies Act, there is no requirement for prior NOC

from the stock exchanges or SEBI before the Scheme is filed before the Ld.

NCLT, and the requirement is only to give notice to the stock exchanges and

SEBI once the Scheme is filed with the Ld. NCLT for calling/dispensing with

meetings of creditors and members, which has been duly complied with by

the Liquidator / Applicant of the Scheme.

12. Now the requirement for prior NOC from the stock exchanges is

imposed by Regulation 37(1) and (2) of the LODR, which stipulate as follows:

37. Draft Scheme of Arrangement & Scheme of

Arrangement.
(1)Without prejudice to provisions of regulation 11, the listed
entity desirous of undertaking a scheme of arrangement
or involved in a scheme of arrangement, shall file the
draft scheme of arrangement, proposed to be filed before
any Court or Tribunal under sections 391-394 and 101 of the
Companies Act, 1956 or under Sections 230-234 and Section
66 of Companies Act, 2013, whichever applicable, along with a
non-refundable fee as specified in Schedule XI, with the stock
exchange(s) for obtaining the No-objection letter, before
filing such scheme with any Court or Tribunal, in terms of
requirements specified by the Board or stock exchange(s) from
time to time.

(2)The listed entity shall not file any scheme of

arrangement under sections 391-394 and 101 of the
Companies Act, 1956 or under Sections 230-234 and Section
66 of Companies Act, 2013 ,whichever applicable, with any
Court or Tribunal unless it has obtained the No-objection
letter from the stock exchange(s). (Emphasis Supplied)

13. On a plain reading of Regulation 37(1) and 37(2), it becomes clear that

Regulation 37(1) mandates the ‘listed entity’ i.e. the ‘company’ must apply for

the NOC from the stock exchanges. Similarly, Regulation 37(2) imposes a

prohibition on the ‘listed entity’ / ‘company’ from filing any scheme for

approval without the NOC from stock exchanges.

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14. Now in cases of companies in liquidation, a scheme of arrangement is

not filed by the ‘company’ / ‘listed entity’. It is rather filed by the liquidator.

Further, under Section 230(1) of the Companies Act, the Liquidator is treated

as separate and independent from the ‘company’. This is evident from the

plain language of Section 230(1), which stipulates the Tribunal may, on the

application of the company or of any creditor or member of the

company, or in the case of a company which is being wound up, of the

liquidator.

15. Thus section 230(1) of the Companies Act contemplates four different

categories of persons who can apply to the NCLT for approval of a Scheme.

Pertinently, Section 230(1) treats the liquidator as a separate and distinct

category of person who can file a scheme before the Ld.NCLT. It does not

consider the liquidator to be the same as the company, hence the rigors of

Regulation 37(1) and 37(2) of LODR shall not apply.

16. The argument of the Ld. Counsel for BSE that Regulation 5 and 11 of

the LODR indicate there exists an obligation for the Liquidator to obtain a

NOC from BSE before submitting a Scheme of Arrangement for listed entity,

is also not convincing. Regulation 5 and 11 of LODR are as under:-

“Regulation 5: The listed entity shall ensure that key

managerial personnel, directors, promoters or any other person
dealing with the listed entity, complies with responsibilities or
obligations, if any assigned to them under these regulations.”
Regulation 11: The listed entity shall ensure that any scheme
ofarrangement/amalgamation/merger/reconstruction/reducti
on of capital etc to be presented to any Court or Tribunal does
not in any way violate, override or limit the provisions of
securities laws or requirements of the stock exchange(s).”
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17. Regulation 5 above pertains to an obligation of a listed company to

ensure its key managerial personnel, officers etc shall comply with the

responsibilities or obligations assigned to them and it does not make the

obligation of the listed entity the obligation of key managerial personnel,

directors, promoters or the persons dealing with the listed entity. To attract

Regulation 5, there must be an assignment of responsibility/obligations and

there is no Regulation under the LODR which cast an obligation on the

Liquidator to obtain a prior NOC before filing a scheme of arrangement. So

far Regulation 11 of the LODR is concerned, it does not deal or impose any

obligation on the Liquidator to obtain a NOC in respect of a scheme of

arrangement and the said Regulation deals with merits of the Scheme to ensure

the same does not violate any provision of the Securities Laws.

18. So far as phrase relied upon by the learned counsel for the BSE viz.

listed company “involved in a scheme of arrangement” in Regulation 37(1) of

LODR, we may say the Regulation cannot be interpreted by selectively

referring to a particular phrase without considering the context which it deals.

Regulation 37(1) of the LODR refers to obligation of a listed entity. As earlier

noted there are four categories of persons who may apply for approval of

scheme of arrangement, including creditor or a member of the company.

Section 230(1) treats the Liquidator as a separate and distinct category.

Suppose scheme is filed through the creditor, can he be made bound by the

rigours of Regulation 37(1) & (2). The answer would be no.

19. Now we come to applicability of Regulation 37(7) to find out if the

requirement for prior NOC does not apply only to ‘restructuring proposals’
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approved as part of a resolution plan by the NCLT under section 31 of the

Code. Pertinently, a scheme of arrangement for revival of a company in

liquidation is also a ‘restructuring proposal’. It contains all the same

attributes and characteristics of a resolution plan under Section 31 of the

Code. It is just a different mode contemplated under the Code for achieving

the same objective i.e. revival of the Corporate Debtor. Regulation 37(7)

stipulates as follows:

(7) The requirements as specified under this regulation and

under regulation 94 of these regulations shall not apply to a
restructuring proposal approved as part of a resolution
plan by the Tribunal under section 31 of the Insolvency
Code, subject to the details being disclosed to the recognized stock
exchanges within one day of the resolution plan being approved.
(Emphasis Supplied)

20. Hence whatever benefits and rigors that applies to a resolution plan

under Section 31 of the Code must equally apply to a scheme of arrangement

submitted under Section 230 of the Companies Act read with Regulation 2-B

of the Liquidation Process Regulations. Both these modes of revival operate in

a similar continuum. They deserve equal treatment. The Hon’ble Supreme

Court has had a chance to consider the different modes for revival of a

Corporate Debtor under the IBC in Arun Kumar Jagatramka v. Jindal Steel

and Power Limited, (2021) 7 SCC 474. In that judgment, the Hon’ble Supreme

Court held that although Section 29-A of the Code only contemplates

disqualification when submitting a Resolution Plan, it would apply equally to

a Scheme for Restructuring in Liquidation. The Court observed as follows:

68. Now, it is in this backdrop that it becomes necessary to

revisit, in the context of the above discussion the three
modes in which a revival is contemplated under the
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provisions of the IBC. The first of those modes of revival is in

the form of the CIRP elucidated in the provisions of Chapter
II of the IBC. The second mode is where the corporate debtor
or its business is sold as a going concern within the purview
of clauses (e) and (f) of Regulation 32. The third is when a
revival is contemplated through the modalities provided in
Section 230 of the Act of 2013. A scheme of compromise or
arrangement under Section 230, in the context of a company which
is in liquidation under the IBC, follows upon an order under Section
33 and the appointment of a liquidator under Section 34. While
there is no direct recognition of the provisions of Section 230 of the
Act of 2013 in the IBC, a decision was rendered by the NCLAT on
27 February 2019 in Y Shivram Prasad v. S Dhanapal. NCLAT in
the course of its decision observed that during the liquidation
process the steps which are required to be taken by the liquidator
include a compromise or arrangement in terms of Section 230 of the
Act of 2013, so as to ensure the revival and continuance of the
corporate debtor by protecting it from its management and from "a
death by liquidation". The decision by NCLAT took note of the fact
that while passing the order under Section 230, the Adjudicating
Authority would perform a dual role: one as the Adjudicating
Authority in the matter of liquidation under the IBC and the other
as a Tribunal for passing an order under Section 230 of the Act of
2013. Following the decision of NCLAT, an amendment was made
on 25 July 2019 to the Liquidation Process Regulations by the IBBI
so as to refer to the process envisaged under Section 230 of the Act
of 2013.

69. The statutory scheme underlying the IBC and the legislative
history of its linkage with Section 230 of the Act of 2013, in the
context of a company which is in liquidation, has important
consequences for the outcome of the controversy in the present
case. The first point is that a liquidation under Chapter III of the IBC
follows upon the entire gamut of proceedings contemplated under
that statute. The second point to be noted is that one of the modes
of revival in the course of the liquidation process is envisaged in the
enabling provisions of Section 230 of the Act of 2013, to which
recourse can be taken by the liquidator appointed under Section 34
of the IBC. The third point is that the statutorily contemplated 2019
SCC OnLine NCLAT 172; herein, referred to as “Y Shivram Prasad”
activities of the liquidator do not cease while inviting a scheme of
compromise or arrangement under Section 230. The appointment
of the liquidator in an IBC liquidation is provided in Section
34 and their duties are specified in Section 35. In taking
recourse to the provisions of Section 230 of the Act of 2013,
the liquidator appointed under the IBC is, above all, to
attempt a revival of the corporate debtor so as to save it from
the prospect of a corporate death. The consequence of the
approval of the scheme of revival or compromise, and its
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sanction thereafter by the Tribunal under Sub-section (6), is

that the scheme attains a binding character upon
stakeholders including the liquidator who has been
appointed under the IBC. In this backdrop, it is difficult to
accept the submission of Mr Bajaj that Section 230 of the Act
of 2013 is a standalone provision which has no connect with
the provisions of the IBC.

70. Undoubtedly, Section 230 of the Act of 2013 is wider in its ambit
in the sense that it is not confined only to a company in liquidation
or to corporate debtor which is being wound up under Chapter III of
the IBC. Obviously, therefore, the rigors of the IBC will not apply to
proceedings under Section 230 of the Act of 2013 where the scheme
of compromise or arrangement proposed is in relation to an entity
which is not the subject of a proceeding under the IBC. But, when,
as in the present case, the process of invoking the provisions
of Section 230 of the Act of 2013 traces its origin or, as it
may be described, the trigger to the liquidation proceedings
which have been initiated under the IBC, it becomes
necessary to read both sets of provisions in harmony. A
harmonious construction between the two statutes would
ensure that while on the one hand a scheme of compromise
or arrangement under Section 230 is being pursued, this
takes place in a manner which is consistent with the
underlying principles of the IBC because the scheme is
proposed in respect of an entity which is undergoing
liquidation under Chapter III of the IBC. As such, the
company has to be protected from its management and a
corporate death. It would lead to a manifest absurdity if the
very persons who are ineligible for submitting a resolution
plan, participating in the sale of assets of the company in
liquidation or participating in the sale of the corporate
debtor as a ‘going concern’, are somehow permitted to
propose a compromise or arrangement under Section 230 of
the Act of 2013.

71. […]

72. An argument has also been advanced by the appellants and

the petitioners that attaching the ineligibilities under Section 29A
and Section 35(1)(f) of the IBC to a scheme of compromise and
arrangement under Section 230 of the Act of 2013 would be
violative of Article 14 of the Constitution as the appellant would be
“deemed ineligible” to submit a proposal under Section 230 of the
Act of 2013. We find no merit in this contention. As explained above,
the stages of submitting a resolution plan, selling assets of a
company in liquidation and selling the company as a going concern
during liquidation, all indicate that the promoter or those in the
management of the company must not be allowed a back-door entry
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in the company and are hence, ineligible to participate during these

stages. Proposing a scheme of compromise or arrangement under
Section 230 of the Act of 2013, while the company is undergoing
liquidation under the provisions of the IBC lies in a similar
continuum. Thus, the prohibitions that apply in the former
situations must naturally also attach to the latter to ensure
that like situations are treated equally. (Emphasis Supplied)

21. After the introduction of the Code, in 2018 SEBI conducted a major

overhaul of all its regulations to bring them in line with the provisions of the

Code. This included an amendment to Regulation 37 of the LODR. By way of

the amendment dated 31st May 2018, SEBI introduced sub-regulation 7 to

Regulation 37 of the LODR.

22. SEBI has thus chosen to exempt the requirement of seeking NOC from

stock exchanges for any restructuring proposal by way of a resolution plan

under Section 31 of the Code. This is in accordance with the principle the

CIRP process under the Code must be carried out in a time-bound manner

under the supervision of one authority i.e. the Ld. NCLT.

23. Pertinently, when the amendment was carried out, the concept of

schemes of arrangement for revival of companies in liquidation was not

statutorily recognized under the Code. There was no specific provision under

the Code or under the Liquidation Process Regulations that permitted such a

scheme of revival. Admittedly, schemes for revival of companies in liquidation

was prevalent under the old Companies Act, 1956 and had been recognized

by the Hon’ble Supreme Court in Meghal Homes Private Limited v. Shree Niwas

Girni KK Samiti (2007) 7 SCC 753. However, it was not clear as to whether the

same would also apply to a company undergoing liquidation under the Code.
 15

24. This clarity was only supplied by this Tribunal in its judgment passed

on 29th January 2019 in S.C. Sekaran v. Amit Gupta and Ors. 2019 SCC

Online NCLAT 517. In this judgment, this Tribunal approved the concept of

a scheme in liquidation under the Code and also held that a scheme in

liquidation must be attempted first, before sale of assets of the company as a

going concern / in parts. Paragraph 8 is relevant and holds as follows:

8. In view of the provision of Section 230 and the

decision of the Hon'ble Supreme Court in ‘Meghal
Homes Pvt. Ltd.’ and ‘Swiss Ribbons Pvt. Ltd.’, we
direct the ‘Liquidator’ to proceed in accordance with
law. He will verify claims of all the creditors; take into
custody and control of all the assets, property, effects and
actionable claims of the ‘corporate debtor’, carry on the
business of the ‘corporate debtor’ for its beneficial
liquidation etc. as prescribed under Section 35 of the I&B
Code. The Liquidator will access information under Section
33 and will consolidate the claim under Section 38 and after
verification of claim in terms of Section 39 will either admit
or reject the claim, as required under Section 40. Before
taking steps to sell the assets of the ‘corporate
debtor(s)’ (companies herein), the Liquidator will take
steps in terms of Section 230 of the Companies Act,
2013. The Adjudicating Authority, if so required, will
pass appropriate order. Only on failure of revival, the
Adjudicating Authority and the Liquidator will first
proceed with the sale of company's assets wholly and
thereafter, if not possible to sell the company in part
and in accordance with law. (Emphasis Supplied)

25. This Tribunal in Y. Shivram Prasad v. S. Dhanapal & Ors. 2019 SCC

Online NCLAT 172 in judgement dated 27th February, 2019 further

emphasized the revival of a Corporate Debtor during liquidation by way of the

Scheme under Section 230 of the Companies Act. The said aspect has been

duly noted by the Hon’ble Supreme Court in Arun Kumar Jagatramka (supra).
 16

26. It is after the judgment of the Hon’ble NCLAT in S.C. Sekaran (supra)

and Y. Shivram (supra) that Regulation 2-B was introduced in the Liquidation

Process Regulations by amendment dated 25th July 2019. Regulation 2-B as

it is now stipulates as follows:

2-B. Compromise or arrangement.—(1) Where a compromise or

arrangement is proposed under Section 230 of the Companies Act,
2013 (18 of 2013), it shall be completed within ninety days of the
order of liquidation under Section 33

27. Considering the aforesaid, it can be safely stated that when SEBI

carried out the amendment to various regulations including the LODR in May

2018, it did not have in its contemplation the concept of a scheme for

compromise or arrangement for revival of a company in liquidation.

28. Pertinently, the Code contemplates a ‘single window’ process in revival

of companies in distress, where necessary approvals are to be obtained from

the Ld. NCLT. This is to ensure a timely completion of the CIRP and liquidation

process. For instance, Section 31(4) contemplates that if any statutory

approvals are required for a resolution plan, they can be obtained within one

year from the date of approval of the resolution plan. Section 31(4) stipulates

as follows:

“31….(4)The resolution applicant shall, pursuant to the

resolution plan approved under sub-section (1), obtain the
necessary approval required under any law for the time being
in force within a period of one year from the date of approval of
the resolution plan by the Adjudicating Authority under sub-
section (1) or within such period as provided for in such law,
whichever is later.
Provided that where the resolution plan contains a provision for
combination, as referred to in section 5 of the Competition Act,
2002, the resolution applicant shall obtain the approval of the
 17

Competition Commission of India under that Act prior to the

approval of such resolution plan by the committee of creditors.”

29. In fact, even though the proviso to Section 31(4) of the Code requires

prior approval of the Competition Commission in cases of ‘combinations’, this

Tribunal has even read that provision as directory and not mandatory in

Soneko Marketing v. Girish Sriram Juneja in Company Appeal (AT) (Ins.) No.

807 of 2023.

30. Considering the aforesaid situation, if Regulation 37 is considered to

impose a mandatory requirement for prior NOC from stock exchanges for a

scheme for revival of a company in liquidation also, it would conflict with the

strict timelines provided under the Code and the Liquidation Process

Regulations. In case of any such conflict, the provisions of the Code must

prevail given the non-obstante clause contained in Section 238 of the Code.

31. It is also relevant to note Regulation 37(7) of LODR must be given a

purposive interpretation. The strict literal interpretation of Regulation 37(7)

must give way to a dynamic interpretation that achieves the objective of the

sub-regulation i.e. to facilitate the modes of revival with an objective of

preventing civil death of the companies. In this regard, the judgment of the

Hon’ble Supreme Court in Shailesh Dhairyawan v. Mohan Balkrishna (2016)

3 SCC 619 is apposite. In paragraph 33, the Hon’ble Supreme Court holds as

follows:

We may also emphasize that the statutory interpretation of a

provision is never static but is always dynamic. Though literal
rule of interpretation, till some time ago, was treated as the
'golden rule', it is now the doctrine of purposive
interpretation which is predominant, particularly in those
cases where literal interpretation may not serve the purpose
 18

or may lead to absurdity. If it brings about an end which is at

variance with the purpose of statute, that cannot be
countenanced. Not only legal process thinkers such as Hart
and Sacks rejected intentionalism as a grand strategy for
statutory interpretation, and in its place they offered
purposivism, this principle is now widely applied by the Courts
not only in this country but in many other legal systems as
well.

32. It is pertinent to note even other principles that are exclusively

contemplated for resolution plans under the Code have been extended to the

other modes of revival. For instance, the ‘clean slate theory’ recognized by the

Hon’ble Supreme Court in Ghanashyam Mishra & Sons Pvt. Ltd. v. Edelweiss

Asset Reconstruction Company Ltd. (2021) 9 SCC 657 has been equally

applied in cases of sale of a corporate debtor as a going concern during

liquidation, despite there being no express statutory provision to that effect.

33. The situation must also be looked at from a practical point of view. The

Corporate Debtor is already in liquidation. It implies its assets are insufficient

to meet its liabilities. Therefore, if the scheme fails and the Corporate Debtor

is liquidated, its shareholders will get nothing. Presumably, the purpose of

seeking a prior NOC under Regulation 37 is to protect the interests of public

shareholders. Under the Scheme, public shareholders will continue to hold

5% of the total equity shares of the Corporate Debtor. Under the Scheme, they

are retaining some value whereas in the alternative scenario, they would get

‘nil’ value. That being so, the Scheme cannot possibly be contrary to the

interests of public shareholders.

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34. Considering what is stated hereinabove, the clarification / exemption

to the prior NOC requirement in Regulation 37(7) must equally apply to a

scheme of arrangement for revival of a company in liquidation.

35. The scheme in question in the present matter is akin to a Resolution

Plan under Section 31 of the Code and it complies with the requirement of

Resolution Plan under Section 30(2) of the Code and Regulation 37 and 38 of

IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.

The scheme contemplates full payment of CIRP and liquidation cost, dues of

workmen, payment of settlement value to creditors, extinguishment of all

liabilities filed or not filed/admitted or not admitted, ouster of the erstwhile

promoters, inducting of the acquirers as new promoters, constitution of

monitoring committee, payment of EMD and performance security etc. If a

restrictive literal interpretation of Regulation 37(7) of LODR is accepted then

the same will lead to manifest absurdity in as much as while the Resolution

Plan and the Scheme seek to achieve the same objective i.e. to prevent civil

death of the company, and are also similar in form, the mode of revival by

way of Scheme of Arrangement under liquidation would be more onerous than

a Resolution Plan under Section 31 of the Code. The interpretation argued

by the Respondent would run contrary to the entire objective of the Code to

provide multiple modes of revival at various stages in order to resolve the

indebtness of the Corporate Debtor and revive the company. The Courts have

time and again held that every effort must be made to revive the business of

the company as the same is in the interest of all the stake holders.
 20

36. The argument of the learned counsel for the Respondent that strict

meaning be given to Regulations does not convince us since the scheme of

arrangement under Section 230 of the Companies Act has also been

considered as a mode of revival, through judicial interpretation and

subsequent introduction of Regulation 2B of Liquidation Process Regulation.

37. It is also relevant to note that the Ld. NCLT vide its order dated

02.05.2023 had directed that the Scheme shall be proceeded with. No

appeal has been filed by Respondent No. 2 against the said order dated

02.05.2023 despite the same being in their knowledge as early as 16.05.2023.

38. The Impugned Order dated 04.04.2024 is in effect a review of the order

dated 02.05.2023. In absence of any challenge to the order dated 02.05.2023,

the objection raised by BSE / Respondent No.2 at this stage could not have

been entertained.

39. Admittedly till date no objection has been raised by BSE on the merits

of the Scheme, which offers Rs. 52.3 Crore for the Corporate Debtor (i.e. 3

times offers made by way of rejected resolution plans and higher than

liquidation value of the Corporate Debtor). Further, the Stock Exchange has

the opportunity to place before Ld. NCLT its objections, if any, to the Scheme

of Arrangement in response to the notice issued to it prior to final approval of

the scheme.

40. In view of the above stated facts and circumstances, we hold:

a) the Impugned Order dated 4th April 2024 is set aside.

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b) prior NOC from stock exchanges under Regulation 37(1)(2) of the LODR
is not required for schemes for revival of companies undergoing
liquidation under the Code.

c) Alternatively, the clarification introduced by way of Regulation 37(7) of

the LODR for restructuring proposals also applies to Scheme by the
liquidator under Section 230 of the Code, which is in similar continuum
as a restructuring proposal by way of a resolution plan under Section
31 of the Code.

d) We direct the Ld. NCLT to proceed with hearing the scheme on merits
without insisting on prior NOC from the stock exchanges and dispose
of the same expeditiously, preferably within four weeks.

41. Hence we allow the appeal.

42. Pending applications, if any, are closed.

(Justice Yogesh Khanna)

Member (Judicial)

(Mr. Ajai Das Mehrotra)

Member (Technical)
Dated: 20 -8-2024

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