2023 (7) TMI 211 - AT - Insolvency and Bankruptcy

Tribunal Upholds Decision Setting Aside E-Auction Due to Procedural Issues & Criticizes Liquidator

The Tribunal upheld the Adjudicating Authority's decision to set aside the e-auction of the corporate debtor's property due to procedural irregularities ... E-auction of the sole property of the corporate debtor - correct procedure was followed in the E-auction or not - whether auction was conducted in haste without giving adequate opportunity to all to participate? - principles of natural justice - HELD THAT:- It is observed that the Liquidator issued a notice for sale of assets on 02.04.2022 and date of E-auction was mentioned in the said notice was 08.04.2022 from 2 pm to 4 pm. In the said notice, 4th and 7th April, 2022 were stipulated as last dates for submission of KYC and EMD respectively. The notice also erroneously stated last date and time for submission of EoI by interested bidder as 15.04.2022 (5pm) with last date and time for payment of EMD as 16.04.2022 (5pm). These clear conflicting dates are sufficient to cause confusion and therefore can not be treated as mere typographical error as claimed by the Liquidator. Apparently no time frame was given for any inspection of the premise by the prospective bidder, which is not very rightful thing to do on behalf of the Liquidator - It is also observed that the corrigendum for rectification of error in the notice for sale of assets was given in newspapers and IBBI website which was after the E-auction was completed, rendering these to be futile and at best paper exercise on post facto basis. There are no error in the Impugned Order dated 02.03.2023, wherein the E-auction was set aside and it was held that the Liquidator must bear all expenses incurred for the auction - appeal dismissed. Issues Involved:1. Whether the correct procedure was followed in the E-auction.2. Whether the auction was conducted in haste without giving adequate opportunity to all to participate.Summary:Issue 1: Correct Procedure in E-auctionThe appeals were filed under Section 61 of the Insolvency and Bankruptcy Code, 2016, against an order that set aside the e-auction dated 08.04.2022 of the corporate debtor's sole property. The Liquidator, Mr. Naren Seth, conducted multiple auctions, with the third notice for sale being published on 02.04.2022. A typographical error in the notice was later corrected, but allegations were made that bidders took undue advantage of the error. The successful bidder, Marine Electrical (India) Pvt. Ltd., submitted a bid of Rs. 11.6 Crores. However, Sunrise Industries contested that the sale notice had conflicting dates, causing confusion. The Appellate Tribunal noted that the conflicting dates could not be treated as mere typographical errors and observed that the entire e-auction process was conducted in a hurry, with insufficient time given for due diligence and participation.Issue 2: Haste in Conducting AuctionThe Tribunal found that the notice for sale was issued on 02.04.2022, with the e-auction scheduled for 08.04.2022. The timeline provided was insufficient, with only one working day given for submitting KYC documents and a few days for submitting the EMD. The corrigendum correcting the error was issued after the e-auction was completed, rendering it ineffective. The Tribunal emphasized that sufficient time, typically 30 days, should be given for such processes to ensure the best value. The Tribunal also noted that no time frame was provided for inspecting the premises, which was improper. The Adjudicating Authority observed that the auction was conducted in haste and with procedural irregularities, pointing fingers at the Liquidator's conduct.Conclusion:The Tribunal upheld the Adjudicating Authority's order setting aside the e-auction and directing the Liquidator to bear the auction expenses. The appeals were dismissed, and the Tribunal criticized the Liquidator's conduct in the entire process.