Tribunal sets aside e-auction, new bid accepted with conditions, higher asset value secured.

The Tribunal set aside the previous e-auction process as it did not maximize the value of the assets of the corporate debtor. A new bid was accepted, with the condition that the balance amount must be deposited within six weeks. The application challenging the auction process was allowed, and the new bidder was declared successful, ensuring a higher value for the assets.

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Issues Involved:
1. Jurisdiction and applicability of Section 60(5) of IBC, 2016.
2. Validity of the e-auction process held on 11th June 2019.
3. Maximization of value of the Corporate Debtor's assets.
4. Role and responsibilities of the liquidator under IBC, 2016.
5. Legal standing of the applicant to challenge the auction process.
6. Compliance with Liquidation Process Regulations, 2016.

Issue-wise Detailed Analysis:

1. Jurisdiction and Applicability of Section 60(5) of IBC, 2016:
The application was filed under Section 60(5) of the Insolvency and Bankruptcy Code, 2016, seeking to declare the e-auction held on 11th June 2019 as void and to set aside the same. The Tribunal clarified that Section 60(5) empowers it to entertain or dispose of any application or proceeding by or against the corporate debtor or corporate person. This includes any question of priorities or any question of law or facts arising out of or in relation to the insolvency resolution or liquidation proceedings. The Tribunal emphasized that Section 60(5)(c) is a residuary provision that overrides contrary provisions of any other law but not IBC, 2016.

2. Validity of the E-Auction Process Held on 11th June 2019:
The applicant argued that the e-auction was not conducted in the spirit of maximization of value as only one bidder participated, and the bid was accepted at the reserve price without any attempt for upward revision. The Tribunal noted that the liquidator accepted the bid without conducting multiple rounds of auctions, which is required under Schedule I of the Liquidation Process Regulations, 2016. The Tribunal found that the auction process did not maximize the value of the assets and was thus subject to scrutiny.

3. Maximization of Value of the Corporate Debtor's Assets:
The Tribunal highlighted that one of the key objectives of IBC, 2016 is the maximization of value of the assets of the corporate debtor. It referred to the Supreme Court's decision in the case of Committee of Creditors of Essar Steel India Limited, which emphasized that the resolution plan must maximize the value of the assets and balance the interests of all stakeholders. The Tribunal concluded that the liquidator's acceptance of the bid at the reserve price did not achieve this objective, especially when a higher bid was subsequently offered.

4. Role and Responsibilities of the Liquidator Under IBC, 2016:
The Tribunal analyzed the role and responsibilities of the liquidator as prescribed in Section 35 of IBC, 2016. The liquidator is required to sell the assets of the corporate debtor in a manner that maximizes value and is time-bound. The Tribunal found that the liquidator failed to conduct multiple rounds of auctions and did not provide adequate reasons for not doing so, thus not fulfilling the responsibilities as mandated.

5. Legal Standing of the Applicant to Challenge the Auction Process:
The successful bidder contended that the applicant had no locus to challenge the auction as it did not participate in the e-auction and pointed out no fraud or irregularity. However, the Tribunal held that any interested party could approach it under Sections 60(5)(a) and 60(5)(c) of IBC, 2016, especially when the maximization of value of assets is in question. The Tribunal emphasized that legal technicalities should not bar a party ready to pay more from participating.

6. Compliance with Liquidation Process Regulations, 2016:
The Tribunal found that the liquidator did not comply with the Liquidation Process Regulations, 2016, particularly Regulation 33, which mandates multiple rounds of auctions to maximize the realization from the sale of assets. The Tribunal also noted the deviation from the terms of the notice inviting expression of interest, as the balance consideration was not deposited within the stipulated time but was instead secured by a bank guarantee.

Conclusion:
The Tribunal concluded that the old e-auction process was flawed and did not achieve the maximization of value. Consequently, it set aside the previous auction and accepted the new bid, subject to the condition that the balance amount must be deposited within six weeks. The application was allowed, and the new bidder was declared successful, ensuring a higher value for the assets of the corporate debtor.

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