NCLAT Invokes S. 231 to Oversee Corporate Debtor Revival, Grants Final 60‑Day Extension for Arrangement Scheme Implementation [Read Order]

In a significant ruling, the National Company Law Appellate Tribunal (NCLAT), Chennai, has invoked its supervisory power of Tribunal under section 231 and granted a final 60-day extension to implement the arrangement scheme under sections 230-232 of the Insolvency and Bankruptcy Code (IBC) 2016.

The Tribunal quashed the cancellation of the Scheme of Arrangement earlier ordered by the National Company Law Tribunal (NCLT), Chennai.

The case arose during the liquidation of RA Samy Trading Pvt. Ltd., whose corporate insolvency resolution process had failed in 2019, leading to liquidation in 2021. In December 2022, the Stakeholders’ Consultation Committee approved a Scheme of Arrangement proposed by C Ganesh, the appellant, which was sanctioned by the NCLT in March 2024.

The scheme envisaged settlement of dues to Punjab National Bank, the sole secured creditor, to the tune of ₹14.25 crore, along with payment of CIRP and liquidation costs, statutory dues to EPFO, and partial settlement of unsecured and operational creditors’ claims. The effective date of the scheme was fixed as 22 March 2024, with strict timelines for payment, including 10% upfront to PNB within one week and the balance within one month.

Ganesh made partial payments, including the initial 10% to PNB and certain statutory dues, but failed to comply with the larger settlement obligations. He sought extensions citing non‑cooperation by the liquidator and delays in filing Form INC‑28 with the Registrar of Companies, which kept the corporate debtor’s status as “in liquidation” and allegedly prevented him from raising funds.

The NCLT granted multiple extensions, directing payments by March, May, and later May 2025, but the appellant failed to meet deadlines despite producing demand drafts and cheques for partial amounts. On 15 July 2025, the NCLT cancelled the scheme and directed the revival of liquidation proceedings.

Challenging this order, Ganesh argued before NCLAT that under Section 231(1)(b) of the Companies Act, 2013, the tribunal had wide powers to supervise and modify schemes, including granting equitable extensions of time.

Section 231: Power of Tribunal to enforce compromise or arrangement

231. (1) Where the Tribunal makes an order under section 230 sanctioning a compromise or an arrangement in respect of a company, it—

(a) shall have power to supervise the implementation of the compromise or arrangement; and

(b) may, at the time of making such order or at any time thereafter, give such directions in regard to any matter or make such modifications in the compromise or arrangement as it may consider necessary for the proper implementation of the compromise or arrangement…..

He argued that revival of the corporate debtor was the legislative objective and that the Tribunal had equitable jurisdiction to extend timelines. To demonstrate bona fides, the appellant produced demand drafts worth several crores, expressing readiness to discharge obligations along with accrued interest and incidental costs.

The respondents opposed the appeal, stressing that “time is of the essence” under the IBC. They contended that repeated defaults had eroded creditor confidence and that the appellant’s requested extension period had already expired, rendering the relief redundant. The liquidator further argued that additional interest and costs had accrued during litigation, which the appellant had not accounted for.

The two-member bench comprising Sharad Kumar Sharm (Judicial Member) and Jatindranath Swain (Technical Member), after considering submissions, acknowledged the tension between revival and liquidation.

It noted precedents such as Ashok Dattatray Atre v. SBI and Prakash Oil Depot v. G. Madhusudhan Rao, where courts recognised the Tribunal’s jurisdiction to extend timelines for scheme implementation. The tribunal emphasised that Section 231 empowers the Tribunal not only to supervise but also to issue directions or modifications necessary for the proper implementation of a compromise or arrangement.

Balancing these considerations, the Tribunal granted the appellant a final 60‑day extension to comply with the sanctioned scheme. It directed that all dues, including secured creditor payments, CIRP and liquidation costs, and incidental interest, must be discharged within this period.

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