Merger and Amalgamation and the Path of IBC, 2016

 Merger and Amalgamation and the Path of IBC, 2016

IBC, 2016 since its enactment has created an avenue for litigation. In one of the case, ‘Resolution Professional’ submitted that he duly verified the claims of the creditors in terms of Section 18(1)(b) read with Regulation 13 of the ‘Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Person) Regulations, 2016’ and accordingly, constituted ‘Committee of Creditors’ of the ‘Corporate Debtor’. It was submitted that the ‘Resolution Professional’ in terms of provisions of ‘IBC, 2016' merely receives and collates claim. The aspect of Merger and amalgamation and how it impacts litigations in IBC, 2016 came to the fore in Edelweiss Asset Reconstruction Company Ltd v Synergies Dooray Automotive Ltd [2018] GCtR 4458 (NCLAT), where the issue was discussed.

It was held in Edelweiss (supra) that "Section 230 of the Companies Act, 2013 relates to ‘power to compromise or make arrangements with creditors and members’ whereas Section 232 relates to ‘merger and amalgamation of companies’. The question of filing an application before the National Company Law Tribunal under Sections 230-232, does not arise at the stage of filing of the ‘Resolution Plan’ as it is not known as to which of the ‘Resolution Plan’ will be approved. Once a plan is approved, one may argue that in terms of the provisions of the Companies Act, a formal order of amalgamation is required. No such argument can be advanced at the time of approval of the ‘Resolution Plan’ which merely proposes merger."

"The ‘IBC, 2016 ’ is a code by itself and Section 238 provides over riding effect of it over the provisions of the other Acts, if any of the provisions of an Act is in conflict with the provisions of the ‘I&B Code’. Therefore, the arguments that merger and amalgamation of the companies cannot be proposed in the ‘Resolution Plan’ or such proposal is violative of clause (e) of sub-section (2) of Section 30 of IBC, 2016 is fit to be rejected."

It was also held that "the courts usually adjudicate issues basing on cause of action arisen in a particular case. The Adjudicating Authority cannot enter into roving enquiry on mere apprehensions, baseless allegations. Whatever the rights the original assignor got it from the original lender will automatically accrues to subsequent assignees basing on executing appropriate legal documents in accordance with law."

Written by 

Vishal

Delhi

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