2023 (1) TMI 907 - AT - Insolvency and Bankruptcy

Tribunal upholds Adjudicator's asset handover decision under Insolvency Code, rejects extension request.

Andhra Pradesh State Financial Corporation Versus Mr. S. Rajendran, Liquidator, M/s. Krishna Industrial Corporation Limited, Maximus ARC Limited

The Tribunal dismissed the appeal, upholding the Adjudicating Authority's decision to direct the Appellant to hand over assets to the Liquidator and pay ... Scope of Liquidation Estate - auction - immovable property’ being AC 44.65 Cents of Industrial Land at Nidadavole Village and Mandal, West Godavari District, Andhra Pradesh being unrelinquished, as communicated to the Liquidator - principles of Balance of Convenience - HELD THAT:- It transpires that the Liquidator through an E-mail on 06.09.2021 had claimed possession of the property to be handed over to him and that the Applicant / Appellant had failed to sell over the possession of the properties to and in favour of the Liquidator and hence, the Applicant / Appellant was perforced to prefer IA(IBC)/857(CHE)/2021 in CP/1053/IB/2018 before the Adjudicating Authority, (National Company Law Tribunal, Division Bench – I, Chennai) seeking extension of Three Months period. This Tribunal on going through the impugned order passed in IA(IBC)/857(CHE)/2021 in CP/1053/IB/2018 by the Adjudicating Authority, (National Company Law Tribunal, Division Bench – I, Chennai) dated 21.10.2022 is of the earnest opinion that the Adjudicating Authority, (National Company Law Tribunal, Division Bench – I, Chennai) had taken into account of the Judgment / Decision rendered by this Appellate Tribunal and, ultimately, had directed the Applicant / Appellant to hand over the possession of Assets of the Corporate Debtor, being an immovable property, admeasuring Acres 44.65 Cents of Industrial Land at Nidadavole Village and Mandal, West Godavari District, Andhra Pradesh to the Liquidator, within a period of 7 Days on the date of receipt of this Order. The Adjudicating Authority, (National Company Law Tribunal, Division Bench – I, Chennai) had directed the Applicant / Appellant to pay a sum of Rs.31,07,500/-, as Liquidation Cost to the Liquidator, as per the order passed by the Adjudicating Authority, (National Company Law Tribunal, Division Bench – I, Chennai) dated 04.06.2021. The said Order is free from any material irregularity and does not suffer from any Patent Legality, in the eye of Law, as opined by this Tribunal. This Tribunal, is in Complete Agreement with the view arrived at by the Adjudicating Authority, (National Company Law Tribunal, Division Bench – I, Chennai) in disposing of the aforesaid IA(IBC)/857(CHE)/2021 in CP/1053/IB/2018 dated 21.10.2022 and by issuing necessary Directions in the considered opinion, do not require any interference in the hand of this Tribunal, sitting in an Appellate Jurisdiction - Appeal dismissed. Issues Involved:1. Failure to sell assets within the stipulated time.2. Extension of time for selling security interest.3. Inclusion of unrelinquished property in the liquidation estate.4. Payment of liquidation cost.5. Prima facie case and balance of convenience for extension.Detailed Analysis:1. Failure to Sell Assets Within the Stipulated Time:The Appellant was granted a three-month period by the Adjudicating Authority to sell the assets of the Corporate Debtor. Despite multiple opportunities and indulgences granted by the Tribunal, the Appellant failed to present his case effectively and could not identify a buyer for the security interest in the E-auction held on 19.07.2021. The Tribunal noted that the Appellant had enough time until 04.09.2021 to complete the E-auction but chose to blame the pandemic for the failure instead of taking proactive steps.2. Extension of Time for Selling Security Interest:The Appellant sought an extension of six months to conclude the sale of the security interest, citing difficulties in identifying buyers due to the pandemic. However, the Tribunal emphasized the importance of timely realization of assets as per the Insolvency and Bankruptcy Code (IBC), 2016, and noted that more than two years had lapsed since the liquidation order. Granting further extension would delay the liquidation process and erode the value of the assets.3. Inclusion of Unrelinquished Property in the Liquidation Estate:The Appellant argued that the immovable property, being unrelinquished and communicated to the Liquidator, should stand outside the liquidation estate of the Corporate Debtor. However, the Tribunal, referencing the decision in Dhanalaxmi Bank vs. Techno Fab Manufacturings Ltd., held that a secured creditor must realize its security interest within a time-bound manner and relinquish it to the liquidator. Failure to do so would result in the asset becoming part of the liquidation estate.4. Payment of Liquidation Cost:The Appellant had already paid Rs.31,07,500/- under protest as liquidation cost. The Tribunal confirmed that the Appellant was liable to pay this amount as per the order dated 04.06.2021. The Appellant's request for clarification on whether only a share of the liquidation cost was payable was dismissed, and the Tribunal directed the Appellant to hand over the possession of the assets to the Liquidator within seven days.5. Prima Facie Case and Balance of Convenience for Extension:The Appellant contended that a prima facie case and balance of convenience favored granting the extension. However, the Tribunal found no merit in this argument, reiterating that the timely realization of assets is crucial under the IBC, 2016. The Tribunal held that the Adjudicating Authority had correctly directed the Appellant to hand over the assets to the Liquidator and that the assets would form part of the liquidation estate to be sold and distributed as per the IBC provisions.Conclusion:The Tribunal dismissed the appeal, agreeing with the Adjudicating Authority's decision to direct the Appellant to hand over the assets to the Liquidator and pay the liquidation cost. The Tribunal found no material irregularity or patent illegality in the Adjudicating Authority's order and concluded that the appeal was devoid of merits. Consequently, the connected applications for stay and exemption were also closed.