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Fizzled out at NCLAT: No fizz for interest on unpaid MSME dues

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Neha Malu and Prerna Roy | resolution@vinodkothari.com

NCLAT in the matter of SNJ Synthetics Limited v. PepsiCo India Holdings Private Limited, rejected the section 9 application filed by an MSME operational creditor on the ground that the amount of default (excluding interest accrued as per sec 15 and 16 of MSMED Act) was less than the limit stipulated under section 4 that triggers IBC proceedings.

Brief Background:

The operational creditor in the present case was an MSME supplier which filed a section 9 application for an operational debt of 1.96 Crores which included 1.05 Crores as interest for the delayed payment in terms of the provisions of section 15 and 16 of the MSMED Act.

During the pendency of the matter, the parties reconciled accounts and revised the principal to around ₹77.37 lakh. Pursuant to directions from the AA, the CD paid this amount, which the OC accepted while continuing to press for interest at 24% pa in terms of section 16 the MSMED Act. Note, section 15 of the MSMED Act  makes it mandatory for the buyers to make payments to MSME suppliers on or before the agreed-upon date in writing. However, this period cannot exceed 45 days from the date of acceptance or deemed acceptance of the goods or services. If no such agreement exists, payment must be made within 45 days from the day of acceptance or deemed acceptance.

Section 16 prescribes that, upon failure to pay within the stipulated period, the buyer is liable to pay compound interest at three times the RBI notified bank rate. Crucially, this obligation applies notwithstanding any agreement to the contrary. Section 17 further confirms that both the principal and such interest are payable by the buyer.

The AA dismissed the application, holding that CIRP could not be initiated solely on the basis of unpaid interest, once the principal amount had been settled. NCLT observed:

“In the present case, the principal amount stands paid, therefore the CIRP cannot be initiated solely on the basis of the claim of interest component…”

On appeal, the NCLAT upheld this view and further stated:

“… We also notice that the Appellant has relied on the provisions of other laws like MSME Act or Interest Act to justify their claim of interest payment. Without making any observation on the merits of their contention, we would only like to add that neither the Adjudicating Authority nor this Appellate Tribunal is the appropriate forum for making any such determination on the liability of the Respondent- Corporate Debtor to pay interest under the MSME Act or Interest Act.”

While there may be facts specific to the case, for instance, comments of the NCLAT on the interest claim being unsubstantiated despite downward revision of principal, and whether the process was being abused as a debt recovery process, the only point of discussion in this article is whether only the interest component in case of an operational debt, particularly the interest arising under statute, can form sole basis for initiation of CIRP.

Interest as operational debt- A grey area?

While interest is explicitly included in the definition of financial debt under section 5(8) of IBC, the definition of operational debt under section 5(21) makes no such explicit reference. “Operational debt” u/s 5(21) is defined as:

“operational debt” means a claim in respect of the provision of goods or services including employment or a debt in respect of the payment of dues arising under any law for the time being in force and payable to the Central Government, any State Government or any local authority.

This distinction in statutory language has raised questions on inclusion of interest on delayed payments as part of operational debt for the purpose of initiating insolvency proceedings, even though there are clear stipulations under the MSMED Act[1].

However, in so far as the interplay between IBC and MSMED Act is concerned, with respect to the statutory interest, judicial decisions indicate that for the purpose of interpretation, such interest, unless mutually agreed upon or expressly admitted, is not regarded as forming part of operational debt under section 5(21) of the Code.

In Vedic Projects Pvt Ltd v. Sutanu Sinha Resolution Professional for Simplex Projects Ltd., NCLAT New Delhi confirmed the view of the AA and held that,

“10. With regard to claim under the MSME, the Adjudicating Authority has observed that NCLT is not appropriate Forum to consider the issue pertaining to the interest, claimed by the Appellant under Section 16 of the MSMED Act.”

Further, NCLT Mumbai in KBC Infrastructures Pvt. Ltd v. Shapoorji Pallonji band Company Pvt. Ltd., held that in the absence of mutual agreement or any promise to pay interest for delayed payment, the claim of OC for treating the interest payable under MSMED Act as operational debt cannot be sustained. The Tribunal held:

“...However, it is now settled in the context of the Code that if interest is not agreed upon between the parties, it cannot form a part of ‘operational debt’ within the meaning of Section 5(21) of the Code and that no such interest can be claimed in an application under Section 9 of the Code. Interest under Section 16 of MSME Act can be claimed before the MSME Facilitation Council (MSEFC) in terms of Section 18 of the MSME Act. Thus, the correct forum for such claims shall be the MSEFC and not this Tribunal…”

A similar view was also taken by NCLAT in Coal India Ltd v. Gulf Coil Lubricants India Ltd. & Anr, NCLT Mumbai in the matter of Skoda Auto Volkswagen India Pvt. Ltd. v. Susee Automotive Pvt. Ltd.and  NCLT New Delhi in Lakshya Infrapromoters Pvt. Ltd. v. The Indure Pvt. Ltd.

However, in other cases wherein the OC was not an MSME, the treatment of interest has seen divergent views.

In Prashant Agarwal v. Vikas Parasrampuria, the NCLAT held that when interest terms are clearly mentioned in the invoices and remain undisputed, such interest forms part of the debt and must be considered while computing the default threshold under Section 4 of the IBC.

“It is, therefore, clear from these facts that the total amount for maintainability of claim will include both principal debt amount as well as interest on delayed payment which was clearly stipulated in the invoice itself…”

Relying on the Prashant Agarwal judgement, NCLAT in Anuj Sharma v. Rustagi Projects Pvt. Ltd., held that:

“The above judgment of “Prashant Agarwal” clearly supports the submission of learned counsel for the Respondent that for calculating the amount for maintainability of the claim, for threshold purpose, both Principal Amount and Interest has to be calculated when the interest is stipulated between the parties.”

On the other hand, in Wanbury Ltd. v. Panacea Biotech Ltd. and SS Polymers v. Kanodia Technoplast Ltd., NCLAT  denied inclusion of interest in operational debt where there was no express agreement or where interest was unilaterally imposed through invoices not accepted or signed by the corporate debtor.

In Rohit Motawat v. Madhu Sharma, Permali Walla Ce Private Limited v. Narbada Forest Industries Private Ltd, also, the NCLAT reiterated that operational creditors cannot rely on unilaterally raised invoices to claim interest, and that once the principal is paid, section 9 proceedings solely for interest are not maintainable.

Further, in Swastik Enterprises v. Gammon India Limited, clarifying on whether interest should form part of the debt amount, held that:

“4. It is submitted that the ‘debt’ includes the interest, but such submission cannot be accepted in deciding all claims. If in terms of any agreement interest is payable to the Operational or Financial Creditor then debt will include interest, otherwise, the principle amount is to be treated as the debt which is the liability in respect of the claim which can be made from the Corporate Debtor.

5. In the present appeals, as we find that the principle amount has already been paid and as per agreement no interest was payable, the applications under Section 9 on the basis of claims for entitlement of interest, were not maintainable. If for delayed payment Appellant(s) claim any interest, it will be open to them to move before a court of competent jurisdiction, but initiation of Corporate Insolvency Resolution Process is not the answer.”

Our Analysis

It appears from the judicial precedents discussed above that, in case of operational debt, the judiciary is inclined to accept “interest” as a debt eligible to initiate CIRP, only when there is an explicit contract between the parties. However, the authors also submit that in case of MSME, the intent of the provisions in sections 15 and 16 is to ensure that the payments to MSMEs are not delayed. Such interest operates in the nature of a penalty[2], and thus there can be no question of any contract between the parties. Hence, going by the judicial precedents above, such statutory imposition of interest can never enable an operational creditor to initiate CIRP against the corporate debtor.

Further, the definitions of “debt” and “default” under IBC are quite broad. While “debt” is defined as  a liability or obligation in respect of a claim which is due from any person and includes a financial debt and operational debt; “default” is non-payment of debt when whole or any part or instalment of the amount of debt has become due and payable and is not paid by the debtor or the corporate debtor. Interest arising under section 16 of the MSMED Act would squarely fall under the definition of “debt” – hence, any non-payment of such interest as per statutory timelines should be considered as a default.

Also, in case of an application being filed by operational creditor, as referred in section 9(5), the AA shall admit the application when “no notice of dispute has been received by the operational creditor or there is no record of dispute in the information utility”, and shall reject the application when “notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility”. Therefore, unless there is a dispute, the AA does not have the discretion to reject the application – particularly on the grounds that such interest was not “contractually” agreed. Ofcourse, there can also be possibilities where the levy of interest by MSME is disputed by the corporate debtor, that is, there is a pre-existing dispute before the notice is given by the operational creditor under section 8 of IBC – in such cases, the AA should not admit the application, given that the very existence of such debt is in dispute.

Closing thoughts

The observation of NCLAT in the present case, read with the previous judicial precedents as well, has raised a significant concern i.e., whether statutory interest under laws such as the MSMED Act or the Interest Act is effectively excluded from consideration in insolvency proceedings?

This interpretation could have far-reaching implications. While such interest may be a rightful claim under special statutes, the exclusion of these amounts from the computation of default under section 9 in view of judicial interpretations, introduces a disconnect between substantive rights under one law and procedural access under another.

[1] See FAQs  on delayed payment to MSMEs at: https://vinodkothari.com/wp-content/uploads/2019/05/Revised-FAQs-MSME-upload-1.pdf

[2] ITAT Bengaluru in Dy. CIT (LTU) v. Bosch Ltd, held that “…we further note that as per the Section 15 of the MSMED Act, the liability of the buyer to make the payment to MSME within the period as agreed between the parties or in case there is a delay beyond 45 days from the date of acceptance or date of deemed acceptance the interest payable as per Section 16 shall be three times of the bank rate notified by the RBI. Thus as per Section 16 of the MSMED Act, the payment of interest on delayed payment is in the nature of penalty or it is penal interest…”

Navigating the Complexity of ‘Contingent Claims’ in IBC: a call for clarity

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– Barsha Dikshit & Archana Kejriwal (resolution@vinodkothari.com)

The Insolvency and Bankruptcy Code, 2016 (‘Code’) provides a unified and collective resolution mechanism aimed at resolving the claims of multiple creditors against a corporate debtor. In this process, creditors who may have varying claims based on the nature of their financial or operational relationship with the debtor, submit their claims, which are collated either by the resolution professional (in the case of a resolution process) or the liquidator (in the event of liquidation) and ultimately these claims are satisfied from the recoveries made through either an approved resolution plan or by way of realization during the liquidation process in terms of section 53 of the Code.

At the core of this framework lies a critical question- What constitutes a legitimate “claim” as per the Code, and how does one qualify as a “creditor” eligible for repayment? 

While claims that are clearly defined or crystallized are relatively easy to account for, the matter becomes complex when dealing with contingent or unascertainable claims. Although there have been judicial interpretations addressing this concern, the law is still evolving and lacks clarity on certain aspects. 

In this write up, the author seeks to analyze the validity of ‘contingent claims’ under the Code in light of the recent judgement passed by Hon’ble NCLAT in the matter of SBS Holdings v Mohan Lal Jain, whereby NCLAT had held that claims arising from an arbitral award issued after the liquidation commencement date, even if the liquidator has participated in the arbitration process, cannot be entertained during the liquidation process of the corporate debtor.

Validity of contingent claims under the Code

A contingent claim, by its nature, is dependent upon the occurrence or non-occurrence of an uncertain future event. Such claims, although not crystallized at the time of insolvency initiation may have significant implications for creditors and the corporate debtor. While the term ‘contingent claim’ is not explicitly defined in the Code, Section 3(6) of the Code defines a “claim” as:

“(a) a right to payment, whether or not such right is reduced to judgment, fixed, disputed, undisputed, legal, equitable, secured, or unsecured.

(b) right to remedy for breach of contract under any law for the time being in force, if such breach gives rise to a right to payment, whether or not such right is reduced to judgment, fixed, matured, unmatured, disputed, undisputed, secured or unsecured;”

While the definition does not explicitly distinguish between crystallized claims and contingent claims. However, the inclusive nature of the definition has led to the interpretation that contingent claims fall within the ambit of ‘claims’ that can be admitted during the CIRP or liquidation process, as the case may be. 

Status of ‘Contingent claim’ during CIRP

In CIRP, Regulation 13 of the Insolvency and Bankruptcy Board of India (IBBI) (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (hereinafter, ‘CIRP Regulations’), provides that the Resolution Professional (RP) shall verify every claim submitted under the CIRP and may either admit or reject such claims based on the available evidence and records, and Regulation 14 acknowledges the possibility of contingent claims by allowing the RP to “estimate” claims that are not fully crystallized. This estimation is critical as it permits contingent claims to be included within the broader claim pool, ensuring that such claims are not ignored merely because they have not yet matured.

Status of ‘Contingent claim’ during Liquidation

In case of liquidation, Section 38 of the Code read with Regulation 16 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 (hereinafter, ‘Liquidation Regulations’) provides for submission of claims by creditors in the liquidation process. Further, Reg. 25 of the Liquidation Regulations empowers the liquidator to “make an estimate of the value of the claim” when a claim cannot be ascertained precisely, thereby allowing the liquidator to admit contingent claims in estimated value for distribution purpose. 

Thus, CIRP Regulations and Liquidation Regulations both recognize the existence of contingent claims, thereby imposing a duty on the IRP/RP or the Liquidator, as the case may be, to exercise due diligence and make reasonable estimates regarding such claims, admitting them accordingly. Notwithstanding the common duty to estimate and admit contingent claims, the roles, responsibilities, and rights of the RP and the Liquidator are distinct and operate within the separate frameworks of the CIRP and liquidation proceedings, respectively.

Judicial precedents relating to treatment of ‘contingent claims’ under the Code

The judicial precedents relating to ‘contingent claims’ under the Code emphasize an inclusive approach to recognise claims that could become liabilities in the future. While recognizing contingent claims, courts have upheld the need for fair and equitable treatment, balancing creditor interests with the efficiency of the insolvency process. Moreover, some of the judgments have underscored the importance of valuation methods that reflect the realistic likelihood of contingent events, ensuring that contingent claims do not unduly burden the resolution process or impair creditor interests. The treatment of contingent claims, while still evolving, is guided by the principles of fairness.

For instance, in the matter of Essar Steels Limited, Committee of Creditors v. Satish Kumar Gupta & Ors (2020), Hon’ble Supreme Court has held that the resolution professional can admit a contingent claim at the notional value of INR1 if there are pending disputes regarding the claims in question.

In the matter of Innoventive Industries Ltd. v. ICICI Bank and Anr. (2018), the Hon’ble Supreme Court has emphasized the inclusive definition of “claim” under the Code. The Court held that the term “claim” includes a right to payment, even if it is disputed i.e. whether or not such right is reduced to judgment, fixed, disputed, undisputed, legal, equitable, secured, or unsecured. This broad definition extends to contingent claims, allowing them to be admitted in insolvency proceedings, provided they can be substantiated as potential liabilities.

In Phoenix ARC Private Limited v Spade Financial Services Limited & Ors.(2021), Hon’ble SC has addressed the treatment of certain financial claims that had characteristics similar to contingent claims. The Court held that contingent claims, when verified and valued, must be recognized appropriately in the resolution process. However, their priority in distribution must align with established principles of fairness, prioritizing claims based on certainty and enforceability over those based on speculative or highly conditional events.

Thus it is clear that the existence of ‘contingent claim’ as on the CIRP commencement/ liquidation commencement cannot be denied. Infact, it is the IRP/RP or the Liquidator who are entrusted with the duty to make best estimates for such claims.

[May also read Global scenario on treatment of ‘Contingent claim’ in our related article here].

Views of NCLAT in the matter of SBS Holdings v. Mohanlal  Jain

In the instant case, an appeal was submitted before Hon’ble NCLAT , wherein the appellant contested the decision of the Liquidator. The appellant argued that a claim arising from an arbitration award, issued after the liquidation commencement date in ongoing arbitration proceedings in which the Liquidator participated on behalf of the CD), had not been considered by the Liquidator. The Liquidator had declined to admit the claim on the grounds that it was submitted after the deadline for claim submission as stipulated under Regulation 16 of the Liquidation Regulations.

Upon review, the Hon’ble NCLAT upheld the decisions of both the Liquidator and the National Company Law Tribunal (NCLT), dismissing the appeal. The Hon’ble NCLAT held that claims based on an arbitration award issued after the liquidation commencement date are inadmissible, even where the Liquidator has participated in the arbitration proceedings during the liquidation process. The Hon’ble NCLAT stated- “When a statute provides for liquidation commencement date as a date up to which claims can be filed and proved, no claim thereafter can be entertained by the Liquidator.”

Conclusion

The treatment of contingent claims under the Code remains an evolving and intricate area of law. It is important to understand that contingent claims are not ‘unknown’, but rather ‘uncertain’ at the time of the insolvency proceedings, While the Code includes contingent claims within its broad definition of “claim,” their admission and valuation during the CIRP and liquidation processes necessitate careful assessment and estimation by IRP/RP/Liquidator, as the case may be. While there may be instances of delayed filing by claimants, such procedural delays are typically technical in nature, and the Code  also permits the late submission of claims under certain circumstances.

There are many judicial precedents that have supported the inclusion of contingent claims in insolvency proceedings. However, the recent ruling by NCLAT in SBS Holdings v. Mohanlal Jain, in the humble view of the author, tends to have added complexity by presenting divergent views. 

In the humble view of the author, the Code’s principal objective is to enable the swift revival of distressed companies and ensure equitable repayment to creditors. The exclusion of valid contingent claims would undermine this goal, potentially leaving creditors without recourse. As such, it is imperative that the legal framework surrounding contingent claims be clarified and refined to provide fair treatment to creditors with contingent liabilities, thus strengthening the overall integrity of the insolvency process.

CIRP (Second Amendment Regulations), 2023 – A snapshot

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– Team Resolution | resolution@vinodkothari.com

The Insolvency and Bankruptcy Board of India (IBBI), has, vide notification dated 18th September, 2023 introduced the IBBI (Insolvency Resolution Process for Corporate Persons) (Second Amendment) Regulations, 2023 (‘CIRP Amendment Regulations’/ ‘Amendment Regulations’) effective from 18th September, 2023, so as to further streamline the insolvency resolution process. 

The amendments (discussed below) provide some relaxation to the stakeholders thereby extending the timeline for submitting claims. Further, an attempt has also been made to provide assistance to NCLT Benches for dealing with applications u/s 7 or 9 for admission/rejection of claim. However, the obligation of the Resolution professionals (RPs) have also been  increased as the amendment now requires the RPs  to not just take handover of the assets of the Corporate Debtor (CD) but also verify asset by asset list of the CD,  tally the same with the financials of the CD, and to report the same while making application u/s 19(2), if not found in conformity with the assets shown in the financials of the CD. Also, for condonation of delay of claims filed by the stakeholders, the amendment now requires the RP to file application before AA.

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NCLT’s powers to rectify register of members restricted in case of breach of securities laws

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– Sharon Pinto, Manager | sharon@vinodkothari.com

Introduction

A recent judgment by the Supreme Court in Ifb Agro Industries Limited vs Sicgil India Limited, has put to rest the concerns regarding rectificatory jurisdiction of NCLT u/s 59 of Companies Act, 2013 (section 111A of the erstwhile Companies Act, 1956). The ruling has shed light on the scope of NCLT jurisdiction in case of rectification of the register of members, in cases where there are violations of specific laws and the facts of the case are such that the same requires proper enquiry, adjudication under the specific statute. The two major questions addressed by Hon’ble Supreme Court are as follows:

  • What is the scope and ambit of Section 111A of the Companies Act, 1956 (‘Act, 1956’) / Section 59 of the Companies Act, 2013 (‘Act, 2013’), to rectify the register of members?
  • Which is the appropriate forum for adjudication and determination of violations and consequent actions under the SEBI (Substantial Acquisition of Shares and Takeover) Regulations 1997 (‘SEBI SAST Regulations’) and the SEBI (Prohibition of Insider Trading) Regulations 1992 (‘SEBI PIT Regulations’)?
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Resolution Plans – A Non returning visa to the resolution land

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Anushka Vohra | Deputy Manager (corplaw@vinodkothari.com)

On September 13, 2021, in the matter of Ebix Singapore Private Limited v. Committee of Creditors of Educomp Solutions Limited[1], the Apex Court ruled that a Resolution Plan, once submitted with the Adjudicating Authority (“AA”) for approval, cannot be subsequently withdrawn at the behest of the Resolution Applicant. While this question of withdrawal of resolution plans has been around for quite some time, especially due to the COVID disruption, the Hon’ble Supreme Court has now given the final word of law.

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Dissolution without Resolution- A disguised Strike-off under IBC?

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–Megha Mittal

(resolution@vinodkothari.com)

In a first of its kind, the Hon’ble National Company Law Tribunal, Bengaluru Bench vide its order dated 16th November, 2020, in the matter of Synew Steel Private Limited[1], has ordered for direct dissolution from CIRP, thereby waiving off the mandatory requirement to undergo the liquidation process.

The said order was inspired by the fact that the corporate debtor had nil assets, which in turn made it certain that the liquidation process would not have been successful. Hence, to save the unfruitful costs that would have been incurred, the corporate debtor was allowed a direct dissolution.

In this article, the author makes a humble attempt to analyse this rather path-breaking order, and the implications it may carry.

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MCA need not be mandatorily impleaded in applications: NCLAT sets-aside directions issued by of Principal Bench

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–Megha Mittal

(resolution@vinodkothari.com)

The Hon’ble National Company Law Appellate Tribunal (‘NCLAT’), vide its order dated 22nd May, 2020[1] set aside the directions issued by the Hon’ble Principal Bench for impleadment of Ministry of Corporate Affairs (‘MCA’) as a respondent-party to all applications filed under the Companies Act, 2013 and the Insolvency and Bankruptcy Code, 2016.

This comes in light of the order dated 22nd November, 2019 of the Hon’ble National Company Law Tribunal, Principal Bench of New Delhi (‘NCLT’/ ‘Principal Bench’), in the matter of Oriental Bank of Commerce v. Sikka Papers Ltd. & Ors[2], wherein the Hon’ble NCLT directed that “…In all cases of Insolvency and Bankruptcy Code, and Company Petition, the Union of India, Ministry of Corporate Affairs through the Secretary be impleaded as a party respondent so that authentic record is made available by the officers of the Ministry of Corporate Affairs for proper appreciation of the matters..”(‘Impugned Directions’). The said requirement was directed to be made applicable in all benches of NCLT, pan-India.

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VIDEOCON RULING: SETTING A BENCHMARK FOR GROUP INSOLVENCY

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Richa Saraf

(richa@vinodkothari.com)

It is common business practice for group entities to regularly engage in related party transactions such as cross collateralisation, guarantee comforts, tunnelling or significant influence arrangements. While such structures largely respect the separate legal status of the group companies, practice suggests such inter-linkages in business, operations and management often raise significant challenges when any one or more entity in the group become insolvent[1]. In such cases, for maximisation of value to the stakeholders and to enhance the prospects of resolution, creditors may seek for substantive consolidation.

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Mandatory impleadment of MCA as a Respondent- Principal Bench issues direction to all NCLTs

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-Megha Mittal (mittal@vinodkothari.com) In its recent order dated 22.11.2019, the Hon’ble National Company Law Tribunal, Principal Bench at New Delhi (“Principal Bench”), in the matter of Oriental Bank of Commerce v. Sikka Papers Ltd. & Ors.[1], has directed that the Ministry of Corporate Affairs (MCA) be made party to all applications filed under the Insolvency […]

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Schemes under Section 230 with a pinch of section 29A – Is it the final recipe?

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-Sikha Bansal (resolution@vinodkothari.com)

Note: This article is in continuation of/an addition to our earlier article wherein the author discussed various aspects pertaining to schemes of arrangement in liquidation under section 230 of the Companies Act, 2013 read with various provisions of the Insolvency and Bankruptcy Code, 2016. The author has described various factors and principles which the judiciary may consider while sanctioning a scheme of arrangement for companies in liquidation, how a scheme is different from a resolution plan or a going concern sale, what constitutes ‘class’ in the context, whether the waterfall under section 53 will apply to such schemes, etc. The author also pointed out the lack of clarity as to applicability or inapplicability of section 29A on such schemes. However, very recently, NCLAT has clarified that persons ineligible under section 29A are not qualified to propose a scheme during liquidation. This Part discusses this ruling and ponders upon some questions which still remain open-ended/unanswered.

The conundrum as to whether section 29A of the Insolvency and Bankruptcy Code, 2016 (‘Code’) will apply to schemes under section 230 of the Companies Act, 2013 (‘Companies Act’) has been put to rest, at least for the time being, by a recent ruling of the National Company Law Appellate Tribunal (‘NCLAT’). In  Jindal Steel and Power Limited v. Arun Kumar Jagatramka & Gujarat NRE Coke Limited (Company Appeal (AT) No. 221 of 2018), vide order dated 24.10.2019, NCLAT held, while a scheme under section 230 is maintainable for companies in liquidation under the Code, the same is not maintainable at the instance of a person ineligible under section 29A of the Code. The NCLAT relied on the observation of the Hon’ble Supreme Court in Swiss Ribbons Pvt. Ltd. & Anr. v. Union of India & Ors., WP No. 99 of 2018, that the primary focus of the legislation is to ensure revival and continuation of the corporate debtor by protecting the corporate debtor from its own management and from a corporate death by liquidation.

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