NCLAT | ‘Till further orders’, not in order — No bar in merging unhealthy company with healthy company to succour

National Company Law Appellate Tribunal (NCLAT): The Coram of Justice Jarat Kumar Jain, Judicial Member and Ashok Kumar Mishra, Technical Member while disposing of an appeal challenging an impugned order of the National Company Law Tribunal, Kolkata Bench. Kolkata stated,

“There is no bar in merging unhealthy company with healthy company to come over the crisis. There was no need perhaps to pass this specific direction”.

In the instant case two appeals under Section 421 of the Companies Act, 2013 were clubbed together. The appeals had challenged the impugned order of the National Company Law Tribunal, Kolkata Bench, Kolkata wherein the Tribunal [in para

23 (xviii)] directed that “part III and part IV of the creditors of the applicant Company shall maintain status quo till further orders with respect to their respective contractual terms dues claims and rights and are estopped from taking any coercive steps including reporting in any form and /or changing the account status of the Applicant Company and its holding Company (SREI Infrastructure Finance Limited) from being a standard asset, which will prejudicially affect the implementation of the Scheme and render the said Scheme ineffective”. The appellant raised an issue of material irregularity in exercising the jurisdiction by the Tribunal under Section 230 of the Companies Act, 2013. Both the appeals arising out of the same impugned order were clubbed and heard together for disposal of the case.

The Coram, while disposing of the appeals, left many aspects of the impugned order untouched except the direction in para 23 (xviii) of the order. The Tribunal made certain observations regarding the aspects enunciated in the impugned order and accepted and rejected them with sound reasons.

Observations:

-The Tribunal to issue notice under Section 230(5) of the Act, requiring representation to all the authorities concerned, and which were likely to be affected by the compromises or arrangements

-To dispense with calling of meetings of creditors having at least 90% value agreed to the scheme

-The Tribunal was right in calling the meeting of creditors and appointing ‘Chairperson’ and ‘Scrutiniser’ etc.

-The direction, not to classify loan amount as NPA, till further orders and stopping from taking coercive steps including reporting in any form was not in order.

Therefore, keeping all the other aspects intact, Coram refuted the direction on the grounds that there is no harm in merging unhealthy company with healthy company to survive.[UCO Bank v. SREI, Company Appeal( AT) No. 232 of 2020, decided on 07-09-2021]


Agatha Shukla, Editorial Assistant has reported this brief.


For Appellant:

Mr. C.A. Sundaram, Sr. Advocate with Mr. P.C. Ghosh, Mr. Partha Sil and Mr. Tavish Bhushan Prasad Advocates.

For Respondents:

Mr. Joy Saha, Sr. Advocate with Mr. Abhijeet Sinha, Mr. Dipen Chatterjee, Ms. Rusha Mitra, Mr. Saptrshi Mandal, Ms. Shreyas Edupuganti, Advocates for Respondent No. 1.

Mr. Kumar Anurag Singh, Mr. Zain A. Khan and Mr. Saikat Sarkar, Advocates for Respondent No. 2.

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