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Scheme of Compromise or Arrangement under Sec 230 of Companies Act, 2013 for Companies in Liquidation
The Insolvency and Bankruptcy Code, 2016 (Code) enacted on 28th May 2016 provides for invitation of Resolution Plans from Prospective Resolution Applicants (PRAs) for revival of the corporate debtor (CD). However, in case no resolution plans are received or approved, the Adjudicating Authority (AA) may pass an order of Liquidation under Sec 33 of the Code.
Regulation 2B was introduced in IBBI (Liquidation Process) Regulations, 2016 on 25.07.2019 opening another window for CD to be sold by inviting scheme of Compromise or Arrangement under Sec 230 of Companies Act, 2013 (the Scheme). While this initiative is a welcome move, but it is saddled with ambiguities and thus a non-starter. There has been hardly any Proposal under the Scheme having been approved in the recent past for CD in Liquidation.