The Delhi bench of the National Company Law Appellate Tribunal (NCLAT) ruled that no prior No-Objection Certificate (NOC) from stock exchanges is required for revival schemes of companies in liquidation under Listing Obligation and Disclosure Requirements (LODR) Regulation 37(1) (2).
An appeal has been filed under Section 421 of the Companies Act, 2013 against an order dated 04.04.2024 by the National Company Law Tribunal (NCLT), Mumbai. The order in question relates to CP(CAA)/189(MB)2023 in CA(CAA)/109(MB)/2023, involving a Scheme of Arrangement for the revival of Birla Cotsyn India Ltd, submitted by the Liquidator under Section 230 read with with Section 66 of the Companies Act, 2013, and Regulation 2-B of the IBBI (Liquidation Process) Regulations, 2016.
The NCLT, in its impugned order, mandated that the Liquidator obtain a No-Objection Certificate (NOC) from the Bombay Stock Exchange (BSE) under Regulation 37 of the SEBI (Listing Obligation and Disclosure Requirements), Regulations, 2015 (LODR), before the approval of the Scheme. The appeal raises a significant legal question: whether Regulation 37(1) and (2) of the LODR applies to the Scheme submitted by the Liquidator, and if the exemption introduced by Regulation 37(7) of the LODR for restructuring proposals under Section 31 of the IBC applies to the Scheme for the revival of a company under liquidation
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Senior Counsel Mr. Arun Kathpalia, representing the appellant, argued that the Scheme of Arrangement, approved in its first motion by the NCLT, was submitted by the Liquidator, not by the company itself, and hence, Regulations 37(1) and 37(2) of the LODR do not apply. He emphasized that the provisions of the Insolvency and Bankruptcy Code (IBC) override other laws under Section 238 of the Code.
Further highlighted that Regulation 37(7) of the LODR, which provides exemptions to resolution plans, was introduced after the IBC came into effect and that the LODR is silent on the application of this exemption to liquidation schemes. He argued that a purchase as a going concern in liquidation is similar to a resolution of the company under Section 31, and therefore, the exemption under Regulation 37(7) should apply.
The counsel for the respondent, Mr. Neeraj Malhotra, contended that Regulation 37(1) and (2) of the LODR are applicable to the Scheme filed by the Liquidator and that Regulation 37(7) does not apply to such schemes. He argued that legal provisions containing prohibitions cannot be ignored by the Court, and statutory interpretation should not involve adding or subtracting words from the legislation.
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The two member bench comprising Justice Yogesh Khanna and Ajai Das Mehrotra (Technical member) held that “the Impugned Order dated 4th April 2024 is set aside. 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. 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. We direct the 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”.
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