2022 (5) TMI 1256 - AT - Insolvency and Bankruptcy

Appeals allowed, e-Auction sale confirmed with 90-day payment window under IBBI Regulations

The Appeals were allowed, setting aside the Adjudicating Authority's order and confirming the e-Auction Sale of Lot No. 1 and Lot No. 2 held on 26th ... Interpretation of Statute - IBBI (Liquidation Process), Regulations, Schedule I, Clause 12 as amended on 25th July, 2019. Schedule I of the IBBI (Liquidation Process), Regulations contains heading ‘Mode of Sale’ which is in reference to Regulation 33 of the IBBI (Liquidation Process) Regulations, 2016 - Confirmation of Auction Sale - seeking direction to Liquidator to issue fresh e-Auction Sale Notice - HELD THAT:- In the present case, the Auction in which the Appellant were declared highest bidders were closed on 26th February, 2021 and e-Auction Notice was issued for the said Auction on 23rd January, 2021. Even the earlier e-Auction Notice which were issued by the Liquidator, for the first time on 19th November, 2019 i.e. subsequent to the amended Regulations dated 25th July, 2019. In the Schedule I, Clause 12, there is no indication that period of 15 days or 90 days which is provided by un-amended and amended regulation has any nexus with the date of the Order of the Liquidation Regulation 33 under which this Schedule is framed deals with ‘Mode of Sale’. The Mode of Sale as provided in Regulation 33 triggers in after several steps taken by the Liquidator after the Order of the Liquidation is passed. The Circular dated 06th May, 2022 refers to Insolvency and Bankruptcy Board of India (Liquidation Process) (Amendment) Regulations, 2019. It is clear that by the said Amendment Regulation, explanations have been added in Regulations 2A, 21A, 31A and 44 by the Amendment Regulation, 2022 neither there is any explanation nor there is any indication with regard to Schedule I, Clause 12. Schedule I, Clause 12 was on a different subject with regard to which neither there is any indication in the Circular dated 26th August, 2019 nor there is any explanation in the Circular dated 06th May, 2022. There is no reference to Schedule I in the IBBI (Liquidation Process) (Amendment) Regulations, 2022 dated 28th April, 2022 also - There is no doubt that Amendment Regulation dated 25th July, 2019 amending Schedule I, Clause 12 is only prospective and shall not have effect on Auctions which were held prior to the amendment. The Circular dated 26th August, 2019 issued by the Board had neither any indication nor it can be said to have no any application with regard to the amendments brought into the Schedule I, Clause 12 by Notification dated 25th July, 2019, hence the time period of 90 days which was introduced in the Amendment dated 25th July, 2019 can be availed by the Auction Purchasers which Auction took place subsequent to the amendment dated 25th July, 2019. The Order of the Adjudicating Authority rejecting the application filed by the Liquidator seeking confirmation of the e-Auction Sale dated 26th February, 2021 is erroneous and unsustainable - Appeals are allowed. Issues Involved:1. Confirmation of the Auction Sale of Lot No. 1 and Lot No. 2.2. Applicability of the amended Schedule I, Clause 12 of the IBBI (Liquidation Process) Regulations, 2016.3. Validity and impact of the Circular dated 26th August 2019 issued by the Insolvency and Bankruptcy Board of India (IBBI).Detailed Analysis:1. Confirmation of the Auction Sale of Lot No. 1 and Lot No. 2:- The Appeals were filed against the Order dated 29.10.2021 by the National Company Law Tribunal (NCLT), Mumbai Bench, which directed the Liquidator to issue a fresh e-Auction Sale Notice instead of confirming the Auction Sale of Lot No. 1 and Lot No. 2.- The Appellants were the 'Successful Auction Purchasers' in the e-Auction held on 26th February 2021. They had deposited the entire sale consideration within the stipulated period of 90 days as per the Letter of Intent (LoI) and the statutory regulations.- The Liquidator had sought confirmation of the sale conducted under the e-Auction dated 26th February 2021. However, the Adjudicating Authority did not approve the e-Auction, leading to the Appeals.2. Applicability of the amended Schedule I, Clause 12 of the IBBI (Liquidation Process) Regulations, 2016:- Schedule I, Clause 12 was amended on 25th July 2019, extending the period for the highest bidder to deposit the balance sale consideration from 15 days to 90 days.- The Adjudicating Authority held that the amended regulation was not applicable as the liquidation process had commenced before the amendment date (30th July 2018).- The Appellants argued that since the e-Auction Notice was issued on 23rd January 2021, the amended regulations were applicable, allowing them 90 days to deposit the balance sale consideration.- The Tribunal clarified that the amended regulation applies to auctions conducted after the amendment date, irrespective of when the liquidation order was passed. The statutory requirement under Clause 12, Schedule I, is triggered 'on the close of the auction'.3. Validity and impact of the Circular dated 26th August 2019 issued by the Insolvency and Bankruptcy Board of India (IBBI):- The Circular stated that the amended regulations were not applicable to liquidation processes that commenced before 25th July 2019.- The Appellants contended that the Circular could not override the statutory provisions amended by the Notification dated 25th July 2019.- The Tribunal noted that the Circular did not reference Schedule I, Clause 12, and was subsequently withdrawn by another Circular dated 6th May 2022.- The Tribunal emphasized that Circulars and guidelines cannot override statutory provisions. The amended regulation in Schedule I, Clause 12, which allows 90 days for depositing the balance sale consideration, is applicable to auctions conducted after the amendment date.Conclusion:- The Tribunal concluded that the Adjudicating Authority's order rejecting the Liquidator's application for confirmation of the e-Auction Sale was erroneous and unsustainable.- The Appeals were allowed, and the order dated 29th October 2021 was set aside. The e-Auction Sale held on 26th February 2021 was confirmed, and the Liquidator was directed to take all consequential actions accordingly.- The Tribunal reiterated that statutory amendments have precedence over Circulars, and the amended Schedule I, Clause 12, was applicable to the auction in question.