2024 (4) TMI 564 - AT - Insolvency and Bankruptcy

Liquidation buyer not entitled to interest on deposited sale consideration despite handover delays

Gokul Agro Resources Ltd. Versus Mr. Supriyo Kumar Chaudhuri Liquidator of JVL Agro Industries Ltd.

The NCLAT Principal Bench dismissed an appeal where the appellant sought interest on sale consideration deposited during asset acquisition. The appellant ... Interest on deposit - sale consideration amount deposited by the appellant - claim of interest after completion of the sale - rate of interest - HELD THAT:- The sale consideration was deposited by the Appellant, which was lying with the Liquidator and has earned interest. Sale consideration received for the assets of the Corporate Debtor is to be distributed to the stakeholders. The present is a case where assets have been handed over to the Appellant. Present is not a case where due to any reason, the Appellant is entitled for refund of sale consideration. In event the Appellant may be entitled for refund of sale consideration the prayer for refund of the sale consideration along with interest could have been considered. But, here the sale consideration, which was deposited and which has earned interest is in lieu of the assets, which have been ultimately sold to the Appellant and handed over to him. There is no merit in the submission of the Appellant that Liquidator should be directed to make payment of interest on the sale consideration, which was deposited by the Appellant due to delay in handing over of assets to the Appellant, which assets could not be handed over earlier due to restraint order of the Adjudicating Authority dated 04.04.2022, which could be vacated only on 01.06.2023. There are no merits in the appeal - appeal dismissed. Issues Involved:1. Condonation of delay in filing the appeal.2. Entitlement to interest on the sale consideration deposited by the appellant.Summary:Issue 1: Condonation of DelayThe Appellant filed Interlocutory Application No. 3688 of 2023 seeking condonation of a 13-day delay in filing the appeal. The delay was condoned by the Tribunal as sufficient cause was shown. Accordingly, IA No. 3688 of 2023 was disposed of.Issue 2: Entitlement to Interest on Sale ConsiderationThe Appellant, a Successful Bidder, challenged the order dated 01.06.2023 passed by the National Company Law Tribunal, Allahabad Bench, in IA No. 394 of 2022. The Appellant sought interest @ 12% per annum from 10.06.2022 to 02.06.2023 on the sale consideration amount deposited.Facts of the Case:(i) The Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor commenced on 25.07.2018. The liquidation order was passed on 19.08.2020 and was upheld by the Tribunal on 18.01.2022.(ii) The Liquidator issued a Sale Notice on 24.01.2022, which failed. Another Sale Notice was issued on 04.03.2022 for a public E-auction scheduled on 06.04.2022. The Adjudicating Authority allowed the auction but directed not to issue any Sale Certificate without prior approval.(iii) The Appellant was declared the Successful Bidder on 29.04.2022 and deposited the entire sale consideration on 01.06.2022. However, due to pending IAs, the Sale Certificate could not be issued immediately.(iv) The Appellant filed IA No. 394 of 2022 on 14.11.2022 seeking issuance of the Sale Certificate and interest on the sale consideration.(v) The Adjudicating Authority dismissed IA Nos. 89 and 98 of 2022 on 01.06.2023 and directed the issuance of the Sale Certificate.Tribunal's Observations:The Tribunal noted that the Liquidator was diligent in pursuing the early hearing of the IAs. The delay in issuing the Sale Certificate was due to the Adjudicating Authority's restraint order dated 04.04.2022, which required prior approval before issuing the Sale Certificate.The Tribunal referred to the disclaimer in the E-auction Process Information Document, which stated that no person, including the Bidder, shall claim for any loss or damage arising from the document. The Tribunal also referred to Clauses 12 and 13 of Schedule-1 of the Liquidation Regulation, 2016, which mandates the issuance of the Sale Certificate upon full payment of the sale consideration.The Tribunal rejected the Appellant's reliance on the judgment in South Eastern Coalfields Ltd. vs. State of M.P. & Ors., stating that the delay was due to the Adjudicating Authority's order, not the Liquidator's fault. The Tribunal also noted that the sale consideration was kept in a fixed deposit and would be distributed to stakeholders as per Section 53 of IBC.Conclusion:The Tribunal dismissed the appeal, stating that the Appellant is not entitled to interest on the sale consideration due to the delay caused by the Adjudicating Authority's restraint order. The Tribunal found no merit in the Appellant's claim and dismissed the appeal with no order as to costs.