2022 (10) TMI 743 - AT - Insolvency and Bankruptcy

Tribunal upholds auction cancellation, penalties imposed, fresh auctions ordered

The Tribunal upheld the cancellation of 'Chhota's' auction and directed fresh auctions for the assets. 'Chhota' faced a penalty with the forfeiture of 10% ... Liquidation of the Corporate Debtor - Resolution Plan not approved - HELD THAT:- As per the order passed by the Adjudicating Authority and affirmed by us, fresh auction of the plant and machinery has to be undertaken by the Liquidator. The Highest Successful Bidder of the plant and machinery in whose favour letter of intent is issued shall be liable to deposit the entire bid amount, for which amount the plant and machinery is re-auctioned. The ends of justice be served in directing forfeiting of 10% of the bid amount deposited by the Appellant ‘Chhota’ i.e an amount of Rs.41 Lakhs. The balance amount out of the total amount deposited by the Appellant needs to be refunded subject to the condition that in the fresh auction to be conducted a higher amount is received towards 90% of the bid which may be refunded to the Appellant. In case, in the fresh auction any lesser amount is received as towards 90% of the bid, the Appellant shall be entitled to be refunded only lesser amount and not the entire balance amount. The Appeal having been entertained by this Tribunal, which is being decided by this order, the ends of justice be served in disposing of the Appeal by directing the Appellant ‘Singhi Infrapower’ to deposit the balance amount within one month from the date of this order failing which the Liquidator shall proceed with the fresh auction of the land and building forfeiting 10% of bid amount already deposited - appeal disposed off. Issues Involved:1. Liquidation Proceedings and E-Auction of the Corporate Debtor's Assets2. Payment and Possession Issues by the Highest Bidder3. Missing Parts and Machinery Allegations4. Fresh Auction and Forfeiture of Deposits5. Intervention by Third Parties6. Compliance with Adjudicating Authority's OrdersDetailed Analysis:1. Liquidation Proceedings and E-Auction of the Corporate Debtor's Assets:The Corporate Debtor, 'Haridwar Iron and Ispat Rollings Ltd.', was admitted to insolvency on 22.05.2018, and liquidation was directed on 17.09.2019. The Liquidator conducted multiple e-auctions. The fifth e-auction on 12.10.2020 saw 'Chhota' as the highest bidder for plant and machinery, while the sixth e-auction on 27.11.2020 saw 'Singhi Infrapower Projects Pvt. Ltd.' as the highest bidder for land and building.2. Payment and Possession Issues by the Highest Bidder:'Chhota' was issued a letter of intent on 22.10.2020 and made the balance payment on 31.01.2021. A Sale Certificate and Letter of Possession were issued on 02.02.2021, with a deadline to lift the material by 21.03.2021. Despite reminders, 'Chhota' did not remove the machinery, resulting in the Liquidator seeking directions from the Adjudicating Authority.3. Missing Parts and Machinery Allegations:'Chhota' raised concerns about missing parts and machinery on 19.02.2021 and filed a police complaint. The Liquidator refuted these claims, emphasizing that the sale was on an 'as is where is' basis. The Adjudicating Authority found no merit in 'Chhota's' allegations and upheld the terms of the sale.4. Fresh Auction and Forfeiture of Deposits:Due to 'Chhota's' failure to remove the machinery, the Adjudicating Authority directed a fresh auction and forfeiture of the deposit if the machinery was not removed within a week. The Liquidator complied, and the auction in favor of 'Chhota' was canceled. The Tribunal upheld this decision, directing the forfeiture of 10% of the bid amount (Rs.41 Lakhs) and refund of the balance subject to conditions.5. Intervention by Third Parties:'Sunhill Proptech Private Limited' sought to intervene, offering Rs.4.25 crore for the plant and machinery. The Tribunal directed a fresh auction as per liquidation regulations, rejecting the direct sale to 'Sunhill Proptech'.6. Compliance with Adjudicating Authority's Orders:The Tribunal upheld the Adjudicating Authority's orders dated 28.01.2022 and 16.02.2022, dismissing 'Chhota's' applications for recall and review. 'Singhi Infrapower' was directed to deposit the balance amount within one month, failing which their deposit would be forfeited, and a fresh auction for land and building would be conducted.Conclusion:The Tribunal disposed of both appeals, upholding the cancellation of 'Chhota's' auction and directing fresh auctions for the assets. 'Chhota' was penalized with the forfeiture of 10% of the bid amount, while 'Singhi Infrapower' was given a final opportunity to deposit the balance amount. The Tribunal ensured compliance with liquidation regulations and the Adjudicating Authority's directives.