TaxTMI 
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2020 (3) TMI 164
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.... November 2019 passed in CA(IB) No. 293/KB/2019, CA(IB) No. 1165/KB/2018, CA(IB) No. 615/KB/2019, CA(IB) No. 625/KB/2019, CA(IB) No. 755/KB/2019, CA(IB) No. 883/KB/2019, CA(IB) No. 957/KB/2019, CA(IB) No. 1345/KB/2019 in CP(IB) No. 176/KB/2018 by National Company Law Tribunal, Kolkata Bench. The respondents are as follows: Maithan Alloys Limited (R-1), Sova Electrocasting Limited (R-2), Typhoon, Financial Services Limited (R-3), Sonar Bangla Career Academy Pvt. Ltd. (R-4), Mr. Samir Kumar Bhattacharya (Liquidator of Impex Metal & Ferro Alloys Limited) (R-5). 2. Out of the above Respondent No. 1 has accepted the bid of the Company under liquidation, M/s. Impex Metal & Ferro Alloys Limited, in accordance with law and have paid the requisite amount of EMD and other such payment in accordance with the terms and conditions of auction/with the approval of NCLT. The liquidator is Respondent No. 5, Mr. Samir Kumar Bhattacharya, liquidator of Impex Metal & Ferro Alloys Limited Kolkata. The appellant has prayed for the following reliefs: (a) To set aside the impugned order dated 25-9-2019 passed in CA (IB) NO. 796/KB/2019 in CP (IB) No. 176/KB/2018 by the National Company Law Tribunal,....
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.... (g) Bidding by PB through designated e-auction platform on the appointed day. Pre-bid qualification: Technical & Financial EOI would be subject to evaluation on various Technical Parameters e.g. Consolidated group revenue and/or Assets under Management (AUM) in the same/similar activity and various Financial Parameters e.g. Consolidated Group Net Worth and/or Funds available for deployment including the following: In case of body Corporates: Private/Public Limited Company, LLP, Body Corporate whether incorporated in India or outside India, with minimum Tangible Net Worth (TNW) of INR 30.00 Crores (Rupees Thirty Crore only) as per The Companies Act, 2013) in the immediately preceding completed financial year. In case of Financial Institutions (FI)/Funds/Private Equity (PE) Investors/Non-banking financial company (NBFC**)/Any other applicant: Minimum Asset Under Management (AUM) of INR 500.00 Crores (Rupees Five Crore only) in the immediately preceding completed financial year, OR *FI as defined under section 45-I(c) of RBI Act **NBFC as defined under section 45-I(f) of RBI Act Note: 1. The aforesaid financial parameters to be certified by Auditor/Independent Chartered ....
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....sponsible for any Internet network problem/power failure/any other technical lapses/failure etc. In order to ward off such contingent situation the interested bidders are requested to ensure that they are technically well equipped with adequate power back-up etc. for successfully participating in the e-Auction event. The sale shall be subject to provisions of IBC 2016 and regulation of insolvency and bankruptcy board of India (Liquidation process) regulation 2016. 4. The bid was notified by liquidator on 10-5-2019 originally as first bid and the reserve price fixed was Rs. 80 Cr. but there was no response to the bid as a result of which second bid dated 27-5-2019, was notified with reduced value of Rs. 68 Cr. in which only one bidder declared successfully, who is Respondent No. 1/Maithan Alloys Limited and on 10th June, 2019 M/s. Maithan Alloys Limited was declared the successful bidder and in compliance with the terms and conditions and deposited the requisite amount during June, 2019. It was submitted that on 3rd July 2019 Respondent No. 2 to 4 forming a consortium challenged the e-auction in which the above said bidder i.e M/s Maithan Alloys Limited declared successfully and p....
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....ed the Tribunal that the liquidator may be directed to hand over the assets and overall affairs of the Corporate Debtor to them as a going concern. In the meantime as per the Order Sheet of NCLT Kolkata on 25-9-2019 vide Para 4 the M/s. Fairo Alloy Ltd i.e R-1 made a statement across the Bar that the successful bidder decided to withdraw his offer and purchase of the Corporate Debtor and requested NCLT Kolkata to permit them to withdraw from the process. NCLT Kolkata held on 25-9-2019 that this offer of finance bid of Rs. 70 cr is in tune with the objective of IBC that is "Maximisation of the Value of Assets of the Corporate Debtor" and accordingly passed the following order: I. "The Liquidator to accept bid of applicants/Sova Elecrocasting Limited, M/s Typhoon Financial Services Limited and M/s Sonar Bangla Career Academy Private Limited for sum of Rs. 70,00,00,000/- (Rupees seventy crores) as a sale price of the Corporate Debtor, Impex Metal and Ferro Alloys Limited. II. The applicants shall make payment of bid amount in following manner:- (a) 15% of the offered amount being sum of Rs. 70,00,00,000/-(Rupees Seventy Crores only) to be paid by the applicant immediately upon a....
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.... fact that the Corporate Debtor must be made operational so that some people may get employment. (6) While directing the successful bidders to pay first instalment to the Liquidator within 3 days, we further direct the Liquidator to allow the successful bidders to start the work under his supervision so that the Corporate Debtor can be made functional. (7) It is made clear that above arrangement is made for convenience of the successful bidders. But we make it clear that custody and possession of all assets of the Corporate Debtor shall remain with the Liquidator as per order dated 25-9-2019. (8) With above clarification, CA (IB) No. 1366/KB/2019 stand disposed off." 13. Vide 6-11-2019 NCLT Kolkata Bench Passed following order: "Ld. Liquidator appeared Ld. Counsel for the Liquidator appeared d. Counsel for SBI appeared Ld. Counsel for CA (IB) No. 293/KB/2019 appeared ld counsel for CA (IB) No 1345/KB/2019 appeared Ld. Counsel for CA for CA (IB) No 1165/KB/2018 appeared Ld. Counsel for CA (IB) No. 1366/KB/2019 appeared. Ld. Counsel for Maithan Alloys Ltd. appeared. Ld. Counsel for TUF Metallurgical Pvt. Ltd. & Million Link (China) Investment Ltd. appeared. Ld. Counsel for M....
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....unsel for Maithan Alloys Ltd. brought to our notice that thereafter on 30-9-2019, they requested the Liquidator to return the amount paid by it. However, the Liquidator did not consider their prayer. Ld. Counsel for the Liquidator submitted that since other bidders namely, M/s. Sova Electricals Limited, Typhoon Financial Services Limited and Sonar Bangla Career Academy Private Limited did not comply order of payment, Maithan Alloys Ltd. may not be allowed to withdraw from the process. Ld. Counsel for State Bank of India also submitted that the contract between the Liquidator and Maithan Alloys Ltd. may not be cancelled. In our considered opinion, we have already permitted M/s. Maithan Alloys Ltd. to withdraw from the process because we have accepted some good offer from the applicant in CA(IB)No.796/KB/2019. If the applicants in CA(IB)No.796/KB/2019 are not complying the order passed by this Authority, they shall be dealt with separately but only for this reason the Liquidator cannot withhold the amount deposited by Maithan Alloys Ltd. Hence, we direct the Liquidator to pay back sum of Rs. 17,06,25,000/- (Rupees Seventeen Crore Six Lakh Twenty Five Thousand Only) along with int....
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....tion-sale will ever be completed." II. In VedicaProcon Private Limited v. Balleshwar Greens Private Limited,[2015] 10 SCC 94, The Supreme Court Held: "40. In other words, in Navalkha case, this Court only recognized the existence of the discretion in the Company Court either to accept or reject the highest bid before an order of confirmation of the sale is made. This Court also emphasized that it is equally a well-settled principle that once the Company Court recorded its conclusion that the price is adequate, subsequent higher offer cannot be a ground for refusing confirmation" 47. "A survey of the abovementioned judgments relied upon by the first respondent does not indicate that this Court has ever laid down a principle that whenever a higher offer is received in respect of the sale of the property of a company in liquidation" In para 51, it was made clear by Hon'ble Supreme Court that except on the grounds of fraud and irregularity, there cannot be an intervention in public auction. Futhermore, a successful bidder contractual obligation arising out of the offer made by the bidder and accepted by the liquidator. III. In Datta v. The state of Mahar....
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....of ordering status-quo ante to be resorted." 16. The contention that the Appellant Bank has no locus to file the Appeal is without any merit because as per section 61(1) of the IBC which starts with a non-obstante clause, any person aggrieved by the order passed by the Adjudicating Authority is entitled to file an appeal. The Appellant Bank being the lead Financial Creditor of the consortium of banks of the Corporate Debtor, who had opposed the intervention by NCLT in the auction, is well within its rights to approach this Hon'ble Appellate Tribunal. 17. The contention that time was of the essence and the sale not having concluded in 30 days the 1st Respondent could walk out of the auction is wholly untenable for the reason that:- (a) The reference to the 30 days period in the terms & conditions is in respect of the obligation of 1st Respondent to make the payments within 30 days and not as regards the obligation of the liquidator to conclude the sale in the said period. (b) The delay, if any was due to the erroneous approach of the NCLT to entertain an oral offer of R2 - R4 made in Court and the same cannot be a ground to completely overlook the public auction conducted ....
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....o the "better" offer. 19. As mentioned above, on 27-8-2019, R1 reiterated its request to withdraw from the auction process. R2 - R4 offered before the AA to improve upon the offer made by R1. AA therefore directed R2 - R4 to file an affidavit stating the modalities of payment for purchase of the Assets. On 3-9-2019, AA directed R2 - R4 to reconsider their proposal by making it workable so that the CD could be sold as a going concern. It is after the order passed on 27-8-2019 it was clear that R1 was replaced by R2 - R4 as the successful bidder and R1 was the erstwhile successful bidder. The order passed on 27-8-2019 was not challenged by either SBI or R5. Neither did anyone seek any recall of the order. That order has attained finality. 20. On 25-9-2019, the AA passed a specific order directing R1 to withdraw from the auction process and accepted the higher bid proposed by R2 - R4. On 23-10-2019, AA granted an extension of 3 days to R2 - R4 for making payment of the bid amount and also directed R5 to allow R2 - R4 to start work qua the CD; and on 06-11-2019, the AA directed R5 to refund the Advance paid by R1. 21. Liquidator has in compliance of the order dated 06-11-2019 passed....
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....he Advance paid by Respondent No. 1 would stand forfeited, in the event R1 failed to pay the remainder 75% amounts within the stipulated timeframe. (b) The only criteria for forfeiture of Advance under the declaration furnished by R1 were: i. Failure to act upon the Terms of the auction sale, and ii. Failure to complete the transaction within the time limit specified. None of these are fulfilled in the present case. It was always the understanding between R5 and R1 that the proposed auction sale was subject to the approval of the AA which is also evident from R5's email dated 20-6-2019 to R1. Since, the conditions stipulated under the Terms of the auction sale were never completed and no rights accrued under the Terms of the auction sale and/or from the said declaration. Therefore no specific performance of a non-existing contract can be sought for by SBI against R1. (Section 19 & 20 of The specific relief Act, 1963) (c) Furthermore, SBI has failed to show anywhere from the records that R1 has failed to honour any of its obligation(s) towards deposit of the Advance within the stipulated timelines as set by R5. In fact the Appellant had made payment of th....
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....inciple cannot be invoked to amend, alter or vary the expressed terms of the contract between the parties." ii. Satyanarayana Construction co. v. Union of india,[2011]15 SCC 101 : [2014] 2 SCC (Civ)252 at page 104: "11 Thus, as per the contract, the contractor was to be paid for cutting the earth and sectioning to profile etc. @ Rs. 110 per cubic meter. There may be some merit in the contention of Mr. Tandale that contractor was required to spend huge amount on the rock blasting work but, in our view, once the rate had been fixed in the contract for a particular work, the contractor was not entitled to claim additional amount merely because he had to spend more for carrying out such work. The whole exercise undertaken by the Arbitrator in determining the rate for the work at serial No. 3 of Schedule 'A' was beyond his competence and authority. It was not open to the Arbitrator to rewrite the terms of the contract and award the contractor a higher rate for the work for which rate was already fixed in the contract. The Arbitrator having exceeded his authority and power, the High Court cannot be said to have committed any error in upsetting the Award passed by the Ar....
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....sements were issued by the Official liquidator on 15th/17th/18th, June only. Both these bidders could have made appropriate grievance before this Court at the time of consideration of their offers. If they wanted to retract, they could have done so after seeking permission of this Court and only if such permission was granted. Otherwise, they were duty bound to continue to participate till appropriate orders in this respect were passed by this Court. The obligation cast by "terms and conditions" is on each bidder whose offer is to be placed for consideration of this Court. The second highest bidder, therefore, cannot take shelter behind the first highest bidder. Otherwise, the very purpose of incorporating clause Nos. 6 and 8 in said terms and conditions will stand defeated. The said property was required to be re-advertised and sold by undertaking fresh exercise, expenditure and at less price. The breach of Clauses 10 and 6 above by Bhaskar Exxols Ltd. and Sankh Impex is established in the matter. Where the parties have deliberately specified the amount of Rs. 6,50,000/- as Earnest Money for each bidder and agreed to stipulation in clause No. 10 above, there can be no presumption ....
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....ereafter liquidator published another e-auction in "Business Standard" and cuts of the price from 80/- Crores to 68/- Crores in second public announcement. The only eligibility criteria to garb this offer is to meet the requirement of the terms and conditions of the sale. (b) It was further submitted by the liquidator that on 10-6-2019, he received an e-mail from one nucleus consultant submitting a bid form though the e-mail was sent after 5 PM as the RTGS of the EMD was done prior to the 5 PM. Liquidator is decided to consider the bid form. From the perusal of the bid form it appears that the name of the bidder was "Typhoon Financial Services Limited and Associate Companies". The email id and contract details were given of Typhoon Financial Services Limited however, the EMD was paid by "One Sova Electrocasting Limited". Upon consideration of the said email and the bid form liquidator was not at all sure as to the who is the bidder and who were its associates. The name of the bidder was written as "Typhoon Financial Services Limited and Associates". The EMD was paid by "One Sova Electrocasting" and the email was sent by one nucleus consultant so that liquidator was not at all cer....
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.... In response to above mentioned mail nucleus consultant responded back to liquidator by saying that they have done essential requirement of submission of EMD and informed that their group turnover is Rs. 4000 Cr. and sought time to submit the required document and requested to postpone the auction by one week. In response liquidator stated that instead of submitting net worth of bidder, they mentioned turnover of group which is of no use. It is submitted by the liquidator that since the bidder had failed to provide any document for information about its financial eligibility confidentiality undertaking 29 A compliance, which is mandate under the Code .In spite of giving several opportunities again liquidator sent mail on 12-6-2019 about 8 minute before the auction was supposed to commence inform the bidder that he is not allowed to participate in the auction. As appear from the email dated 12-6-2019 issued another mail to liquidator informing that they complied all requisite details and shall sent all document within 4 to 5 days and also requested to participate in the bid. As liquidator obliged to act in accordance with the terms and conditions of sale, liquidator was not at liber....
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.... about the seriousness and intention of such bidders. (f) It is stated by the liquidator that in the instant case, the successful bidder is Maithon Alloys Limited which is a reputed company carrying on the same business as that of the company - In Liquidation. On the other hand, the consortium members of the instant bidder are NBFC, Academic Company etc and they do not even meet the financial requirements. It may be relevant to note that said Maithan Alloys Limited has since, in accordance with the terms and conditions of the sale deposited 25% of the sale price within seven days upon its confirmation as successful bidder. (g) Maithan Alloys Limited, being in the same line of business, has a clear demonstrable interest in running the company as a going concern. It has, in pursuance of such interest, acted as per the clear mandate of the terms and conditions of sale, and satisfied all eligibility criteria set-forth for its participation. It has, thereafter, upon being declared the successful bidder also acted in depositing the 25% of the sale consideration within the time provided and has also clearly represented to me that it was in as state of readiness to deposit the balance ....
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....rd, seeking appropriate orders against the colluding parties." 29. Hon'ble Supreme Court has already observed in Valji and Khimji Company v. Official liquidator of Hindustan nitro product (Gujarat) limited and others. where bids were received and were opened in the Court. The highest bid was that of the appellant M/s. Valji Khimji & Company amounting to Rs. 3.51 crores. With the consent of the learned advocates representing the secured creditors, the said bid was accepted and the sale was confirmed on 30-7-2003. The Court directed the appellant to deposit 25% of the purchase price i.e. Rs. 63,98,000/- within 30 days from the said day and to deposit the balance amount within the next three months. The Court also directed that the amount may be deposited in instalments, but no instalment should be less than Rs. 5 lakhs. Accordingly Hon'ble Supreme Court confirmed the auction sale in favour of the Appellant. Conclusion 30. The appeal is, therefore, maintainable in view of the provision of Section 61 (1) of IBC as SBI has a large stake of Rs. 469.29 cr. 31. The Auction is not challenged on the ground of fraud and/or irregularity. 32. There is no provision in the terms and ....