2022 (9) TMI 804 - AT - Insolvency and Bankruptcy

Validity of auction upheld despite lack of notice; COVID-19 extension deemed valid; sale justified; appeals dismissed.

Mr. V.S. Palanivel, Share Holder/ Ex-Managing Director Versus Mr. P. Shriram, CS, Liquidator, M/s Sri Lakshmi Hotels Pvt. Ltd.

Mr. V.S. Palanivel, Share Holder/ Ex-Managing Director Versus Mr. P. Shriram, CS, Liquidator, M/s Sri Lakshmi Hotels Pvt. Ltd. - TMI Issues Involved:1. Validity of Auction without proper Notice to Shareholders/Stakeholders.2. Validity of Sale when Payment from Auction Purchaser is not received within 90 days and possibility of extension.3. Validity of Sale at Revised and Reduced Upset Price.4. Justification of selling entire assets of the company instead of part.5. Justification of conducting Auction Proceedings without forming the Committee of Stakeholders.6. Power of Adjudicating Authority to review its own order.Issue-wise Detailed Analysis:Issue No. (I): Validity of Auction without proper Notice to Shareholders/Stakeholders of the CompanyThe Tribunal examined whether the auction held by the liquidator without proper notice to shareholders/stakeholders was valid. The relevant rules under the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016, were considered. The liquidator issued public notices through newspapers for the auctions held on 25.11.2019 and 23.12.2019. The Tribunal found that the liquidator followed the correct procedure and there was no infringement of the appellant's rights. Therefore, the auction was deemed valid.Issue No. (II): Validity of Sale when Payment from Auction Purchaser is not received within 90 days and possibility of extensionThe Tribunal referred to Regulation 33 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016, which mandates that the highest bidder must pay the balance sale consideration within 90 days. However, due to the COVID-19 pandemic and subsequent lockdowns, the Supreme Court of India extended the period of limitation in all proceedings. The Tribunal found that the extension granted by the Adjudicating Authority was valid, considering the extraordinary circumstances. The liquidator's actions were justified, and there was no error in the impugned order.Issue No. (III): Validity of Sale at Revised and Reduced Upset PriceThe Tribunal examined whether the liquidator's decision to sell the property at a revised and reduced upset price was valid. The liquidator engaged two registered valuers to determine the property's value, which was set at Rs. 39,41,28,500. The auction was conducted transparently, and the liquidator followed the rules under Regulation 33 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016. The Tribunal upheld the liquidator's decision, finding no error in the impugned order.Issue No. (IV): Justification of selling entire assets of the company instead of partThe Tribunal considered whether the liquidator was justified in selling the entire assets of the company when selling a part could have sufficed to discharge the liability. The liquidator's discretion in deciding the mode of sale was supported by Regulation 32 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016. The Tribunal emphasized the liquidator's commercial wisdom and found that the decision to sell the entire property was justified. The impugned order was upheld.Issue No. (V): Justification of conducting Auction Proceedings without forming the Committee of StakeholdersThe Tribunal addressed the appellant's contention that the liquidator did not form the Committee of Stakeholders as required by the Insolvency and Bankruptcy Code, 2016. The relevant amendment came into effect on 25.07.2019, after the liquidation process had commenced. The Tribunal noted that retrospective application of the amendment was not enforceable. Therefore, the liquidator's actions were in accordance with the law, and the impugned order was upheld.Issue No. (VI): Power of Adjudicating Authority to review its own orderThe Tribunal examined whether the Adjudicating Authority could review its own order. The principle of res judicata was considered, which prevents the same issue from being litigated once it has been judged on its merits. The Tribunal referred to Rule 154 and Rule 155 of the NCLT Rules, 2016, which allow for rectification of clerical or arithmetical mistakes but not for review or recall of orders. The Tribunal upheld the Adjudicating Authority's decision that it had no power to review or recall its own order.Conclusion:The Tribunal found no grounds for interference with the impugned orders passed by the Adjudicating Authority. The appeals were dismissed, and the connected interlocutory applications were closed.