Appeal dismissed as bidder lacks standing to challenge fresh asset valuation order in liquidation proceedings

NCLAT Chennai dismissed an appeal challenging NCLT's order for fresh asset valuation in a corporate debtor's liquidation. The tribunal held that IBC 2016 and Companies Act 2013 should be interpreted harmoniously. Key issues included liquidator's zero valuation of Rayagada property and failure to include it in Asset Memorandum. NCLAT ruled the appeal non-maintainable as the appellant bidder was not a stakeholder under IBC and thus not an aggrieved party. The tribunal upheld NCLT's direction for fresh valuation per Regulation 35(2) and subsequent scheme invitations under Section 230 of Companies Act.

---

---

Issues Involved:

1. Inclusion and Valuation of Rayagada Property in Liquidation Estate.
2. Compliance with Regulation 35 of IBBI (Liquidation Process) Regulations, 2016.
3. Approval and Process of Scheme under Section 230 of the Companies Act, 2013.
4. Confidentiality and Sharing of Valuation Reports.
5. Legal Standing and Rights of Appellant as H1 Bidder.

Summary:

1. Inclusion and Valuation of Rayagada Property in Liquidation Estate:
The Appellant argued that the Rayagada Property was included in the valuation report during the CIRP process but later valued at nil based on legal opinion and directions from the Committee of Creditors (CoC). The Tribunal noted that the Rayagada Property, with a market value of over Rs. 1000 crores, was initially valued at zero due to ongoing legal disputes and non-marketability as per legal opinion. However, the Tribunal emphasized that the property should be included in the Liquidation Estate and revalued.

2. Compliance with Regulation 35 of IBBI (Liquidation Process) Regulations, 2016:
The Appellant contended that the Liquidator followed the CoC's directions and revised the valuation considering COVID-19 impacts. The Respondents argued that the valuation process was flawed and not compliant with Regulation 35. The Tribunal found that the valuation was conducted separately for land and building and plant and machinery, which was against the procedure specified under Regulation 35. The Tribunal directed a fresh valuation of the assets, including the Rayagada Property.

3. Approval and Process of Scheme under Section 230 of the Companies Act, 2013:
The Appellant claimed that the scheme was based on the revised valuation and approved by the CoC. The Tribunal highlighted that the scheme under Section 230 requires approval from creditors with a voting share of not less than 75%. The Tribunal noted that the Liquidator had not taken the necessary approval and directed that the scheme process be conducted afresh after the fresh valuation.

4. Confidentiality and Sharing of Valuation Reports:
The Appellant argued that sharing valuation reports was necessary for transparency. The Respondents contended that sharing confidential valuation reports was against the regulations. The Tribunal agreed with the Respondents, stating that the Liquidator sharing the reports with potential resolution applicants was contrary to Regulation 34(4) and compromised the process's integrity.

5. Legal Standing and Rights of Appellant as H1 Bidder:
The Appellant claimed to be the H1 bidder and argued that the Tribunal's order affected its rights. The Tribunal concluded that the Appellant, as a prospective bidder, did not have a vested right or fundamental right to have its plan approved. The Tribunal emphasized that valuation issues are within the realm of stakeholders and not for the Appellant to contest.

Disposition:
The Tribunal dismissed the appeal, upheld the Adjudicating Authority's order for fresh valuation of the Corporate Debtor's assets, including the Rayagada Property, and directed the process under Section 230 of the Companies Act, 2013, to be conducted afresh. The Tribunal found no legal flaws in the Adjudicating Authority's order and emphasized the need for compliance with the IBBI regulations and the maximization of asset value.

---