Obtaining Prior NOC From Stock Exchanges/SEBI Not Mandatory Before Submitting Scheme Of Arrangement For Company In Liquidation: NCLAT New Delhi

The National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, comprising Mr. Justice Yogesh Khanna (Judicial Member) and Shri Ajai Das Mehrotra (Technical Member), observed that it is not mandatory to obtain No Objection Certificate (NOC) before submitting a scheme of arrangement to revive a company in liquidation under Insolvency and Bankruptcy Code (IBC) before the National Company Law Tribunal (NCLT) under section 230 of the Companies Act. The NCLAT held that it is required for the listed entities to obtain the NOC under Regulation 37 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR) but not for the liquidator. Brief Facts The Birla Cotsyn (India) Ltd. (corporate debtor) was in liquidation under provisions of the IBC. The liquidator filed a scheme of arrangement before National Company Law Tribunal (NCLT), Mumbai for its approval to revive the corporate debtor under section 230 of the Companies Act and Regulation 2B of the IBBI (Liquidation Process) Regulations, 2016. The NCLT did not approve the scheme on the ground that prior approval of the Bombay Stock Exchange was not taken under Regulation 37 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 before submitting the scheme. Issues before NCLAT 1. 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? 2. 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? NCLAT's Analysis The NCLAT observed that prior approval from stock exchanges is not required while submitting scheme of arrangement under section 230 of the Companies Act, 2013 before the NCLT. Section 230 only mandates that a notice should be given to the stock exchanges that the scheme has been submitted before the tribunal for its approval of which the liquidator has complied with. It was wrong to insist the prior approval of the stock exchange before the scheme can be approved. The tribunal held as under: “In Pentemedia Graphics Limited v. The Bombay Stock Exchange, (2006) 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. 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 been complied with by the Liquidator and the Scheme was received by the BSE on 16.05.2023.(p10) 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”. The NCLAT further noted that Regulation 37(1) and (2) of the LODR which require listed companies to seek NOC from stock exchanges, are not applicable on the liquidator submitting a scheme to revive the company. When it comes to company under liquidation, scheme of arrangement is not filed by the company rather it is filed by the liquidator. The liquidator is considered as a separate and independent entity from the company for the purpose of section 230 of the Companies Act. This section contemplates four persons who can file a scheme of arrangement and the liquidator is one of them along with a company. It was held as under: “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. 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 ...

Obtaining Prior NOC From Stock Exchanges/SEBI Not Mandatory Before Submitting Scheme Of Arrangement For Company In Liquidation: NCLAT New Delhi

Mohd Malik Chauhan

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