Corporate debtor sold as going concern continues to exist under new ownership, dissolution not required

The NCLT Chennai disposed of an application seeking liquidation of a corporate debtor that had been sold as a going concern. The Tribunal held that since the corporate debtor was sold as a going concern to a successful bidder, dissolution was not required and the company continues to exist under the new ownership. The applicant was directed to constitute a board of directors per the Companies Act, 2013. Regarding stamp duty exemptions, tax concessions, and other reliefs sought, the Tribunal noted these matters were for relevant authorities to consider separately. The application was disposed of with these observations.

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Issues Involved:
1. CIRP initiation and liquidation of the Corporate Debtor.
2. E-auction sale process and reserve price adjustments.
3. Sale of the Corporate Debtor as a going concern.
4. Completion of sale and payment of consideration.
5. Reliefs sought by the Applicant post-sale.

Issue-Wise Detailed Analysis:

1. CIRP Initiation and Liquidation of the Corporate Debtor:
The Tribunal initiated the Corporate Insolvency Resolution Process (CIRP) on 28.09.2018. Subsequently, an order for liquidation was passed on 08.08.2019, appointing the Respondent as the Liquidator under the Insolvency & Bankruptcy Code, 2016 (IBC, 2016) and the IBBI (Liquidation Process) Regulations, 2016.

2. E-Auction Sale Process and Reserve Price Adjustments:
The Liquidator conducted four stakeholder meetings and called for bids for the e-auction sale of the Company as a going concern. The initial auction on 05.11.2019 with a reserve price of Rs. 85 Crore received no bids. Subsequent auctions with reduced reserve prices of Rs. 72 Crore, Rs. 66 Crore, and finally Rs. 63 Crore also failed until the auction on 22.01.2020, where the Applicant became the successful bidder.

3. Sale of the Corporate Debtor as a Going Concern:
The sale was conducted on an "as is where is" and "whatever there is basis," including all assets and liabilities. The Sale Process Memorandum specified that all assets, licenses, and employee-related liabilities would transfer to the successful bidder. The Deed of Sale executed on 14.10.2020 confirmed the transfer of 100% of the Company's equity shares to the Applicant.

4. Completion of Sale and Payment of Consideration:
The Applicant paid a total consideration of Rs. 64,02,90,000, including interest for delayed payment. The sale consideration included an Earnest Money Deposit (EMD) of Rs. 6.3 Crore. The Deed of Sale detailed the transfer of assets, share capital, and the appointment of new directors nominated by the Applicant.

5. Reliefs Sought by the Applicant Post-Sale:
- Relief 5.1: The Tribunal declared that the Corporate Debtor is relieved of all pre-sale liabilities as per Clause 8 of the Deed of Sale.
- Relief 5.2: The Tribunal confirmed that the share capital stands diluted as per the Sale Deed, and fresh shares are to be issued to the Applicant.
- Relief 5.3: The classification of the sale consideration as a loan is at the Applicant's discretion.
- Relief 5.4: Payments to Secured Creditors are to be handled by the Liquidator under Section 53 of IBC, 2016.
- Relief 5.5: The appointment of new directors is already provided for in the Deed of Sale, requiring no further Tribunal direction.
- Relief 5.6: Directors nominated by erstwhile promoters cease to hold office by operation of law upon liquidation.
- Relief 5.7: The Liquidator must ensure smooth transition and compliance with filing requirements, as clarified by the Ministry of Corporate Affairs.
- Relief 5.8: The Tribunal found no need for additional orders beyond what was already provided in the Deed of Sale and existing legal provisions.

Conclusion:
The Tribunal concluded that the sale of the Corporate Debtor as a going concern is valid, and the Liquidator must comply with the terms of the Deed of Sale and relevant legal provisions. The Application IA/852/2020 and urgent Application IA/1020/IB/2020 were disposed of accordingly.

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