2022 (11) TMI 635 - Tri - Insolvency and Bankruptcy

Tribunal Approves Sterling Biotech Acquisition; Successful Bidder Complies with Terms

The Tribunal approved the acquisition of Sterling Biotech Limited as a going concern under liquidation. The successful bidder complied with the terms, ... Scheme of going concern sale of the Corporate Debtor - Seeking permission of this Tribunal to execute and conclude the purchase/acquisition of the Corporate Debtor as a whole on a going concern basis under liquidation by way of implementation of the acquisition plan submitted by the Applicant - Section 60(5) of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- The Applicant is directed to deposit the balance sale consideration into the Liquidation Account in accordance with Regulation 41 of the Liquidation Process Regulations. Upon payment of the Final Consideration, the Acquirers shall be deemed to have been granted all the rights, title and interest in the whole and every part of the Corporate Debtor, including but not limited to the assets, properties, contracts and Approvals, free and clear of all security Interest. The said sale consideration shall be distributed by the Liquidator in terms of Section 53 of the Code. Further, the Acquirers shall have no financial obligation or liability to any Person or Stakeholder apart from payment of Final Consideration - On the date of approval by the Adjudicating Authority, all such claims which are not a part of statement of claims, shall stand extinguished and no person will be entitled to initiate or continue any proceedings in respect to a claim which is not a part of the statement of claims. The cancellation and extinguishment of existing share capital of the Corporate Debtor, issuance and allotment of shares to the Acquirers and filing intimation to the Stock Exchange and other Government Authorities are allowed - the application deserves to be allowed. Application allowed. Issues Involved:1. Approval of the acquisition of the Corporate Debtor as a going concern.2. Reliefs, concessions, directions, dispensations, and exemptions sought by the Applicant.3. Compliance with regulatory requirements for foreign investment.4. Deviation from the Process Document terms.5. Extinguishment of liabilities and security interests.6. Role and cooperation of the Liquidator post-acquisition.Issue-Wise Detailed Analysis:1. Approval of the Acquisition of the Corporate Debtor as a Going Concern:The Tribunal approved the acquisition of Sterling Biotech Limited as a whole on a going concern basis under liquidation. The Applicant submitted a binding bid of INR 638 Crores, was declared the successful bidder through an e-auction process, and complied with the terms of the Letter of Intent (LOI) by making the upfront payment.2. Reliefs, Concessions, Directions, Dispensations, and Exemptions Sought by the Applicant:The Applicant sought various reliefs and concessions necessary for acquiring the Corporate Debtor as a going concern. These included the extinguishment of liabilities, issuance of new shares, and other regulatory exemptions. The Tribunal noted that similar reliefs had been granted in previous cases and deemed them essential for the successful acquisition and operation of the Corporate Debtor.3. Compliance with Regulatory Requirements for Foreign Investment:The Applicant, being a company incorporated under the laws of the United States, had to comply with regulatory requirements for foreign investment in the pharmaceutical sector. The acquisition structure involved the Applicant directly acquiring 73.9% of the share capital, while the balance would be acquired by Perrya, LLC. The Tribunal acknowledged these regulatory requirements and the Applicant's compliance with them.4. Deviation from the Process Document Terms:The Acquisition Plan submitted by the Applicant contained certain deviations from the terms of the Process Document. These deviations included the manner of share transfer, issuance of sale certificates, and the handling of liabilities. The Liquidator highlighted these deviations but recommended their acceptance in the best interest of the Corporate Debtor and stakeholders. The Tribunal considered these deviations and approved the Acquisition Plan, emphasizing the need for flexibility given the peculiarities of the case.5. Extinguishment of Liabilities and Security Interests:The Applicant sought the extinguishment of all liabilities and security interests of the Corporate Debtor arising prior to the effective date of acquisition. The Tribunal approved this request, ensuring that the Acquirers would have no financial obligation or liability apart from the payment of the final consideration. The Tribunal referenced similar reliefs granted in other cases and emphasized the importance of a clean slate for the successful bidder.6. Role and Cooperation of the Liquidator Post-Acquisition:The Acquisition Plan envisaged the Liquidator's cooperation and support for a period of 180 days post-acquisition. The Tribunal acknowledged this requirement and directed the Liquidator to provide necessary assistance to the Acquirers during this transition period.Findings and Orders:The Tribunal approved the going concern sale of the Corporate Debtor and directed the Applicant to deposit the balance sale consideration. Upon payment, the Acquirers would be granted all rights, title, and interest in the Corporate Debtor, free of all security interests. The Tribunal allowed the cancellation of existing share capital, issuance of new shares, and necessary regulatory filings. The application was disposed of as allowed in the above terms, enabling the Applicant to take over and run the Corporate Debtor on a clean slate basis.