2022 (1) TMI 460 - AT - Insolvency and Bankruptcy

Sale of Corporate Debtor as 'Going Concern' Includes Assets & Liabilities: Tribunal Upholds Bid Terms

M/s. Visisth Services Limited Versus S.V. Ramani, United Chloro – Paraffins Private Ltd., State Bank of India

M/s. Visisth Services Limited Versus S.V. Ramani, United Chloro – Paraffins Private Ltd., State Bank of India - TMI Issues Involved:- Whether the sale of the Corporate Debtor as a 'Going Concern' in Liquidation Proceedings includes its liabilities.- Whether the Appellant can withdraw from the Bid after payment of the EMD and seek a refund on the grounds that the offer made was a 'conditional offer'.Detailed Analysis:1. Sale of Corporate Debtor as a 'Going Concern' and its Liabilities:The Tribunal examined Regulation 32A of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016, which elucidates the sale of a corporate debtor as a 'Going Concern'. The regulation specifies that both assets and liabilities are to be sold together. The Tribunal emphasized that 'Sale as a 'Going Concern' means sale of assets as well as liabilities and not assets sans liabilities.' This interpretation was supported by paragraphs from the IBBI Discussion Paper, which clarified that the entire business, including assets and liabilities, must be transferred together to ensure the business remains operational without disruption.2. Withdrawal from the Bid and Refund of EMD:The Tribunal addressed whether the Appellant could withdraw from the bid after paying the EMD and seek a refund. The Appellant argued that their participation was conditional and based on the assumption that the liabilities would be clarified and extinguished. However, the Tribunal found that the Appellant was bound by the terms and conditions of the Bid Document, which stated that the sale was on an 'as is where is basis' and included liabilities. The Tribunal noted that the Appellant had communicated conditions to the Liquidator before the e-Auction, but the Liquidator had clarified that no changes could be made to the Information Document after public notification. The Tribunal held that the Appellant, having participated in the bid and paid the EMD, could not later impose conditions or withdraw from the bid. The terms and conditions of the bid were clear, and the Appellant had accepted them by participating in the auction.Conclusion:The Tribunal concluded that the sale of a company as a 'Going Concern' includes both assets and liabilities if it is stated on an 'as is where is basis'. The Appellant could not withdraw from the bid or seek a refund of the EMD and the amount paid for the bid document, as they were bound by the terms of the contract. The Tribunal dismissed the appeal, finding no illegality or infirmity in the Adjudicating Authority's order.