Arun Kumar Jagatramka vs Jindal Steel and Power Ltd. & Anr.

Enactment of – Salutary objectives of good corporate governance and respect for and adherence to the rule of law; and re-organization and resolution of insolvencies under – Held: Can be achieved if the integrity of the resolution process is placed at the forefront – Purposive interpretation is required by the courts, while infusing meaning and content to its provisions, to ensure that the problems which beset the earlier regime do not enter through the backdoor through disingenuous stratagems.

s. 29A – Person not eligible to be resolution applicant – Purpose of the ineligibility under – Held: Is to achieve a sustainable revival and to ensure that a person who is the cause of the problem either by a design or a default cannot be a part of the process of solution – s. 29A encompasses not only conduct in relation to the corporate debtor but in relation to other companies as well. ss. 29A, 35(1)(f) – Interplay between the proposal of a scheme of compromise and arrangement u/s.230 of the Act of 2013 and liquidation proceedings initiated under IBC – Held: s. 230 of the Act of 2013 is wider in its ambit – 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 – Thus, the rigors of the IBC will not apply to proceedings u/s. 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 – However, where s. 230 of the Act of 2013 traces its origin to the liquidation proceedings initiated under IBC, harmonious construction is needed between the two statutes which would ensure that a scheme of compromise or arrangement u/s. 230 is being pursued, in a manner consistent with the underlying principles of the IBC – 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, are somehow permitted to propose a compromise or arrangement u/s. 230 of the Act of 2013 – IBC has made a provision for ineligibility u/s. 29A which operates during the course of the CIRP – Similar provision, s. 35(1)(f) forms a part of the liquidation provisions contained in Chapter III as well – In the context of the statutory linkage provided by the provisions of s.

230 of the Act of 2013 with Chapter III of the IBC, it would be farfetched to hold that the ineligibilities which attach u/s. 35(1)(f) r/w s. 29A would not apply when s. 230 is sought to be invoked – Such an interpretation would result in defeating the provisions of the IBC and must be eschewed – 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 in the company and are hence, ineligible to participate during these stages – Proposing a scheme of compromise or arrangement u/s. 230 of the Act of 2013, while the company is undergoing liquidation under the provisions of the IBC lies in a similar continuum – Companies Act, 2013 – ss. 230 to 232. ss. 6 to 32A – Modes of revival of a company under the provisions of the IBC – Explained.

s. 12A - Withdrawal of application – Withdrawal of the application admitted u/ss. 7, 9 and 10 – Discussed. Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016: Reg 2B - Constitutional validity of – Held: Reg 2 B provides that where a compromise or arrangement is proposed u/s. 230 of the Act of 2013, it shall be completed within ninety days of the order of liquidation under sub-Sections (1) and

(4) of s. 33 – Proviso to Reg 2B provides that a person who is not eligible under the IBC to submit a resolution plan for insolvency resolution of the corporate debtor shall not be a party in any manner to such compromise or arrangement – Reg 2B, specifically the proviso to Reg 2B(1) is constitutionally valid.

Dismissing the appeals and writ petition, the Court

HELD: 1.1 The prohibition placed by the Parliament in Section 29A and Section 35(1)(f) of the Insolvency and Bankruptcy Code, 2016 must also attach itself to a scheme of compromise or arrangement under Section 230 of the Companies Act 2013, when the company is undergoing liquidation under the auspices of the IBC. As such, Regulation 2B of the Liquidation Process Regulations, specifically the proviso to Regulation 2B(1), is also constitutionally valid. [Para 91][192-C-D]

2. Section 29A has been construed to be a crucial link in ensuring that the objects of the IBC are not defeated by allowing “ineligible persons”, including but not confined to those in the management who have run the company aground, to return in the new avatar of resolution applicants. Section 35(1)(f) is placed in the same continuum when the Court observes that the erstwhile promoters of a corporate debtor have no vested right to bid for the property of the corporate debtor in liquidation. The values which animate Section 29A continue to provide sustenance to the rationale underlying the exclusion of the same category of persons from the process of liquidation involving the sale of assets, by virtue of the provisions of Section 35(1)(f). [Para 52][166-B-D]

Chitra Sharma v. Union of India (2018) 18 SCC 575 : [2018] 12 SCR 1044; Arcelormittal India Private Limited v. Satish Kumar Gupta & Ors (2019) 2 SCC 1 : [2018]

12 SCR 362; Phoenix ARC Private Limited v. Spade Financial Service 2021 SCC OnLine SC 51; Ramesh Kymal v. M/s Siemens Gamesa Renewable Power Pvt Ltd. [2021] 3 SCC 224; Anuj Jain, Interim Resolution Professional for Jaypee Infratech Limited v. Axis Bank Limited (2020) 8 SCC 401 – relied on.

3. The purpose of the ineligibility under Section 29A is to achieve a sustainable revival and to ensure that a person who is the cause of the problem either by a design or a default cannot be a part of the process of solution. Section 29A encompasses not only conduct in relation to the corporate debtor but in relation to other companies as well. [Para 53][166-F-G]

4.1 Section 230 of the Act of 2013 is incorporated in Chapter XV which is titled “compromise, arrangement and amalgamations”. A compromise or arrangement under Subsection (1) of Section 230 may take place: between a company and its creditors or any subset of creditors; or between a company and its members or subset of members. Liquidation is one of the factual situations in which the provisions of Section 230 can be invoked. Section 230(1) can also be invoked in the case of a company which is wound up, as is evident from the statutory provision itself, which contemplates that an application may be submitted to the NCLT, acting as the Tribunal, by the liquidator. Upon the sanctioning of the compromise or arrangement by the NCLT, it binds the company, all the creditors or members or a class of them, as may be, or in the case of a company being wound up, the liquidator appointed under the Act of 2013 or the IBC and the contributories. [Para 57-59, 61][168-D; 169-A-C; 170B-C]

5.1 There is no reference in the body of the IBC to a scheme of compromise or arrangement under Section 230 of the Act of 2013. Sub-section (1) of Section 230 was however amended with effect from 15 November 2016 so as to allow for a scheme of compromise or arrangement being proposed on the application of a liquidator who has been appointed under the provisions of the IBC. It was submitted by the appellant that Section 230 is not regulated by the IBC but is a provision independent of it, though after the amendment of Sub-section (1), a compromise or arrangement can be proposed by the liquidator appointed under the IBC; that the decision in Meghal Homes’s case recognises that the liquidator is an additional person who may submit an application under Section 391 of the Act of 1956 (corresponding to Section 230 of the Act of 2013). The submission however, misses the crucial interface between the provisions of Section

230 of the Act of 2013 in their engagement with a company in respect of which the provisions of the IBC have been invoked, resulting in an order of liquidation under Section 33 of the IBC. Liquidation of the company under the IBC is a matter of last resort. Section 33 requires the NCLT, acting as the Adjudicating Authority, to pass an order for the liquidation of the corporate debtor where: before the expiry of the insolvency resolution process period or the maximum period contemplated for its completion a resolution plan has not been received under Subsection (6) of Section 30; or the resolution plan has been rejected under Section 31 for non-compliance with the requirements of the provision. [Para 64][171-H; 172-A-E]

Meghal Homes Pvt. Ltd. v Shree Niwas Girni K. K. Samiti (2007) 7 SCC 753 : [2007] 9 SCR 330; Miheer H Mafatlal v. Mafatlal Industries Ltd. (1997) 1 SCC

579 : [1996] 6 Suppl. SCR 1 – referred to.

5.2 Under Sub-Section (2) of Section 33, the Adjudicating Authority has to pass a liquidation order where the resolution professional, during the CIRP but before the confirmation of the resolution plan, intimates the Adjudicating Authority of the decision of the CoC approved by not less than 66 per cent of the voting shares to liquidate the corporate debtor. Under Section 34, upon the Adjudication Authority passing an order for liquidation of the corporate debtor under Section 33, the resolution professional appointed for the CIRP under Chapter II is to act as a liquidator for the purpose of liquidation. Section 35 proceeds to stipulate that subject to the directions of the Adjudicating Authority, the liquidator shall have the powers and duties enumerated in the provision. [Para 65][172-F-H]

5.3 There are three modes in which a revival is contemplated under the 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 in Y Shivram Prasad v. S Dhanapal’s case wherein NCLAT took note of the fact that while passing the order u/s. 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 u/s. 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. [Para 67][173-C-G] Y Shivram Prasad v. S Dhanapal 2019 SCC OnLine NCLAT 172 – approved.

5.4 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 instant 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 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 , 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 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 that Section 230 of the Act of 2013 is a standalone provision which has no connect with the provisions of the IBC. 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 instant 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. [Para 68][174-A-H; 175-A-C]

5.5 The IBC has made a provision for ineligibility under Section 29A which operates during the course of the CIRP. A similar provision is engrafted in Section 35(1)(f) which forms a part of the liquidation provisions contained in Chapter III as well. In the context of the statutory linkage provided by the provisions of Section 230 of the Act of 2013 with Chapter III of the IBC, where a scheme is proposed of a company which is in liquidation under the IBC, it would be far-fetched to hold that the ineligibilities which attach under Section 35(1)(f) read with Section 29A would not apply when Section 230 is sought to be invoked. Such an interpretation would result in defeating the provisions of the IBC and must be eschewed. [Para 69][175-C-F]

5.6 There is no merit in the submission 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. 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 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. [Para 70][175-E-F; 176-A-C]

6. Section 12A of the IBC was inserted with effect from 6 June 2018 by Amending Act 26 of 2018. Under Section 12A, the Adjudicating Authority may allow the withdrawal of an application which is admitted under Sections 7, 9 and 10, on an application made by the applicant with the approval of a 90 per cent voting share of the CoC in such manner as may be specified. Rule 8 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, on the other hand, contemplates that the NCLT, functioning as the Adjudicating Authority, may permit a withdrawal of an application made under Rule 4 (by the financial creditor), Rule 6 (by the operational creditor) or Rule 7 (by the corporate applicant) on the request made by the applicant before its admission. Regulation 30-A of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 contains provisions for the withdrawal of an application. Under Regulation 30-A, as it originally stood, an application for withdrawal under Section 12-A was required to be submitted before the issuance of an invitation for the expression of interest under Regulation 36-A. The decision in Swiss Ribbons led to substitution of the Regulation 30-A which stipulates that an application for withdrawal under Section 12-A may be made to the adjudicating authority: before the constitution of the CoC, by the applicant through the IRP; and after the constitution of the CoC, by the applicant through the IRP or the RP as the case may be. However, where the application under clause (b) is made after the issuance of the invitation for expression of interest, the applicant has to state the reasons justifying withdrawal after the issuance of the invitation. [Para 72][178-B-E; 179-A-B; 180-A-B]

Swiss Ribbons Private Limited v. Union of India (2019)

4 SCC 17 : [2019] 3 SCR 535; Brilliant Alloys (P) Ltd. v. S Rajagopal 2018 SCC OnLine SC 3154 – referred to.

7.1 There is a fundamental fallacy in the submission that on the withdrawal of the application under Sections 7, 9 and 10, as the case may be, the company goes back to the same promoter in spite of such a promoter being ineligible under Section 29A for submitting a resolution plan, as such, there is no reason or justification then to preclude a promoter from presenting a scheme of compromise or arrangement under Section 230. An application for withdrawal under Section 12-A is not intended to be a culmination of the resolution process. This, as the statutory scheme would indicate, is at the inception of the process. Rule 8 of the Adjudicating Authority Rules contemplates a withdrawal before admission. Section 12-A subjects a withdrawal of an application, which has been admitted under Sections 7, 9 and 10, to the requirement of an approval of ninety per cent voting shares of the CoC. A withdrawal in other words is by the applicant. The withdrawal leads to a status quo ante in respect of the liabilities of the corporate debtor. A withdrawal under Section 12-A is in the nature of settlement, which has to be distinguished both from a resolution plan which is approved under Section 31 and a scheme which is sanctioned under Section 230 of the Act of 2013. A resolution plan upon approval under Section 31(1) of the IBC is binding on the corporate debtor, its employees, members, creditors (including the central and state governments), local authorities, guarantors and other stakeholders. The approval of a resolution plan u/s. 31 results in a “clean slate,”. [Para 73, 74] [181-D-H; 182-A-C]

Swiss Ribbons Private Limited v. Union of India (2019)

4 SCC 17 : [2019] 3 SCR 535; Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta (2020) 8 SCC 531 : [2019] 16 SCR 275 – referred to.

7.2 The benefit under Section 31, following upon the approval of the resolution plan, is that the successful resolution applicant starts running the business of the corporate debtor on “a fresh slate”. The scheme of compromise or arrangement under Section 230 of the Act of 2013 cannot certainly be equated with a withdrawal simpliciter of an application, as is contemplated under Section 12-A of the IBC. A scheme of compromise or arrangement, upon receiving sanction under Sub-section (6) of Section 230, binds the company, its creditors and members or a class of persons or creditors as the case may be as well as the liquidator (appointed under the Act of 2013 or the IBC). Both, the resolution plan upon being approved under Section 31 of the IBC and a scheme of compromise or arrangement upon being sanctioned under Sub-section (6) of Section 230, represent the culmination of the process. This must be distinguished from a mere withdrawal of an application under Section 12-A. There is a clear distinction between these processes, in terms of statutory context and its consequences and the latter cannot be equated with the former. [Para 75][183-F-H; 184-A]

7.3 There is no merit in the submission that Section 35(1)(f) applies only to a liquidator who conducts a sale of the property of the corporate debtor in liquidation but not to the NLCT, acting as the Tribunal, when it exercises its powers under Section 230 of the Act of 2013. The liquidator appointed under the provisions of Chapter III of the IBC is entrusted with several powers and duties. Sections 37 to 42 of the IBC are illustrative of the powers of the liquidator in the course of the liquidation. The liquidator exercises several functions which are of a quasi-judicial in nature and character. Section 35(1) itself enunciates that the powers and duties which are entrusted to the liquidator are “subject to the directions of the adjudicating authority”. The liquidator, in other words, exercises functions which have been made amenable to the jurisdiction of the NCLT, acting as the Adjudicating Authority. To hold therefore that the ineligibility prescribed under the provisions of Section 35(1)(f) can be disregarded by the Tribunal for the purpose of considering an application for a scheme of compromise or arrangement under Section 230 of the Act of 2013, in respect of a company which is under liquidation under the IBC, would not be a correct construction of the provisions of law. [Para 76][184-B-E]

8. Regulation 2B(1) introduced on 25 July 2019 provides that where a compromise or arrangement is proposed under Section 230 of the Act of 2013, it shall be completed within ninety days of the order of liquidation under sub- Sections (1) and (4) of Section 33. The proviso to Regulation 2B has been inserted with effect from 6 January 2020 to stipulate that a person who is not eligible under the IBC to submit a resolution plan for insolvency resolution of the corporate debtor shall not be a party in any manner to such compromise or arrangement. [Para 77] [184-F-G]

9. IBBI noted in its discussion paper that the introduction of ineligibilities stipulated under Section 29-A of the IBC to Section 230 of the Act of 2013 would pose practical difficulties in its implementation. The IBBI solicited public comments on its proposals. The IBBI evolved its view on the issue of whether Section 29-A should be made applicable to Section 230 of the Act of 2013 in its subsequent discussion paper. The discussion paper brought out on 3 November 2019 by IBBI discussed the applicability of Section 29A of the IBC to a compromise and arrangement under Section 230 of the Act of 2013. The discussion paper notes that there were many instances where the NCLAT had allowed the application under Section 230 of the Act of 2013. Thereafter, public comments were invited. The discussion paper is what it professes to be-a matter for discussion in the public realm. This cannot be held to constitute an admission of IBBI that an applicant who is ineligible under Section 29A may submit a scheme of compromise or arrangement under Section 230 of the Act of 2013. The validity of the provisions of Regulation 2B, more specifically the proviso, has to be considered on their own footing. [Para 79, 80, 82][185-G-H; 186-E-F; 187-G-H]

10. The powers and functions entrusted to IBBI are specified in Section 196 of the IBC. Section 196(1)(t) provides IBBI with the power to frame regulations. Clause (t) empowers IBBI to make regulations and guidelines on matters relating to insolvency and bankruptcy, as may be required under the IBC. Section 240(1) empowers IBBI with the power to make regulations. Under Sub-Section (1) of Section 240, the power to frame regulations is conditioned by two requirements: first, the regulations have to be consistent with the provisions of the IBC and the rules framed by the Central Government; and second, the regulations must be to carry out the provisions of the IBC. Regulation 2B meets both the requirements, of being consistent with the provisions of IBC and of being made in order to carry out the provisions of the IBC. [Para 83][188-A-E]

11. The principal ground of challenge to Regulation 2B is that the regulation transgressed the authority of IBBI by introducing a disqualification or ineligibility in regard to the presentation of an application for a scheme of compromise or arrangement under Section 230 of the Act of 2013. It was submitted that IBBI, as an entity constituted by the IBC, had no statutory jurisdiction to amend the provisions of Section 230 of the Act of 2013 or to impose a restriction which operates under the purview of Section 230. The position can be considered from two perspectives, independent of the provisions of Regulation 2B. Even in the absence of the Regulation 2B, a person ineligible under Section 29A read with Section 35(1)(f) is not permitted to propose a scheme for revival under Section 230, in the case of a company which is undergoing a liquidation under the IBC. In the case of a company which is undergoing liquidation pursuant to the provisions of Chapter III of the IBC, a scheme of compromise or arrangement proposed under Section 230 is a facet of the liquidation process. The object of the scheme of compromise or arrangement is to revive the company. The same rationale which permeates the resolution process under Chapter II (by virtue of the provisions of Section 29A) permeates the liquidation process under Chapter III (by virtue of the provisions of Section 35(1)(f)). That being the position, there can be no manner of doubt that the proviso to Regulation 2B is clarificatory in nature. Even absent the proviso, a person who is ineligible under Section 29A would not be permitted to propose a compromise or arrangement under Section 230 of the Act of 2013. Thus, there is no merit in the challenge to the validity of Regulation 2B. [Para 84][188-F-H; 189-A-D]

Meghal Homes Pvt. Ltd. v Shree Niwas Girni K. K. Samiti (2007) 7 SCC 753 : [2007] 9 SCR 330 – referred to.

12.1 The Insolvency Law Committee in its report began by acknowledging that the floating of schemes of compromise or arrangement under Sections 230 to 232 of the Act, even for companies undergoing liquidation, was not part of the framework under the IBC. This, the Committee noted, had led to a multiplicity of issues including, but not limited to, the duality of the role of the NCLT (as a supervisory Adjudicatory Authority under the IBC versus the driving Tribunal under the Act of 2013) and indeed the very question whether the disqualification under Section 29A and proviso to Section 35(1)(f) of the IBC also attaches to Section 230 of the Act of 2013. However, the Committee notes that judicial intervention by the NCLAT along with the IBBI’s introduction of new regulations have led to some alignment in the two frameworks. [Para 86][189-G-H; 190-A-B]

< h t t p s : / / i b b i . g o v. i n / u p l o a d s / r e s o u r c e s c6cb71c9f69f66858830630da08e45b4.pdf> accessed on 10 March 2021 – referred to.

12.2 The Committee thereafter, notes that the introduction of such schemes into the framework of the IBC may be worrisome since it would alter the incentives during the CIRP and lead to destructive delays, which often plagued the process under the Sick Industrial Companies (Special Provisions) Act, 1985. However, it nonetheless also acknowledges the benefits such schemes may have to offer. Even so, the Committee concludes by noting that such schemes, if at all they are to be brought in, should not be under the Act of 2013 but the IBC itself. [Para 87] [190-C-D]

Umakanth Varottil, ‘The Scheme of Arrangement as a Debt Restructuring Tool in India: Problems and Prospects’ (March 2017) NUS Working Paper 2017/005 available at <http://law.nus.edu.sg/wp> - referred to.

12.3 Due to the ambiguity in the application of the two frameworks, it became imperative that a clarification be issued in this regard. The introduction of the proviso to Regulation 2B was a step in this direction which sought to clarify the position with respect to the applicability of the disqualifications set out in Section 29A of the IBC to Section 230 of the Act of 2013 in tandem with the legislative intendment. [Para 88][191-A-B]

12.4 The explicit recognition of the schemes under Section

230 into the liquidation process under the IBC was through the judicial intervention of the NCLAT in Y Shivram Prasad’s case. Since the efficacy of this arrangement is not challenged in this case, this Court cannot comment on its merits. However, the NCLT and NCLAT are cautioned as regards, functioning as the Adjudicatory Authority and Appellate Authority under the IBC respectively, from judicially interfering in the framework envisaged under the IBC. The IBC was introduced in order to overhaul the insolvency and bankruptcy regime in India. As such, it is a carefully considered and well thought out piece of legislation which sought to shed away the practices of the past. The legislature has also been working hard to ensure that the efficacy of this legislation remains robust by constantly amending it based on its experience. Consequently, the need for judicial intervention or innovation from the NCLT and NCLAT should be kept at its bare minimum and should not disturb the foundational principles of the IBC. This conscious shift in their role has been noted in the report of the Bankruptcy Law Reforms Committee (2015). [Para 89][191-B-E]

Y Shivram Prasad v. S Dhanapal 2019 SCC OnLine NCLAT 172 – approved.

Jogendra Lal Saha v. State of Bihar, 1991 Supp (2) SCC 654; Jasbir Singh v. Vipin Kumar Jaggi, (2001) 8 SCC 289 : [2001] 1 Suppl. SCR 598; P.V. Hemlatha v. Kattam Kandi Puthiya Maliackal Saheeda, (2002) 5 SCC 548 : [2002] 3 SCR 1098; Talchar Municipality v. Talcher Regulated Market Committee, (2004) 6 SCC

178 : [2004] 3 Suppl. SCR 167; Iridium India Telecom Ltd. v. Motorola Inc, (2005) 2 SCC 145 : [2005] 1 SCR

73 – referred to.

Salomon v. A. Salomon & Co. Ltd. 1897 AC 22 (HL) – referred to.