TaxTMI 
TaxTMI 
2020 (3) TMI 164
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....olkata Bench and impugned order dated 6th 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....
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....bsp;Branch: IFB KOLKATA (f) Generation of User Id of the PB concerned for participation in E-Auction through designated service provider after submission of KYC document and EMD. (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 ....
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....erty/amount deposited. The prospective qualified bidders may avail online training on e-auction from www.ncltauction.auctiontiger.net prior to the date of e-Auction. Neither the liquidator nor www.ncltauction.auctiontiger.net will be held responsible 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 an....
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....acceptance of bid no. II. 15% of the offered amount that is Rs. 10.50 Cr. within a period of one month III. And balance 75% of the offered amount will be paid within 90 days from the date of acceptance of the offer. 11. The Respondents R-2 to R-4 further requested 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 ....
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....ay even first instalment as per time schedule. (4) Ld. Liquidator agreed the above arrangements subject to condition that successful bidders pay first instalment within 3 days. (5) We have accepted and approved bid of the applicant. They were only bidders and they have offered an amount more than the liquidation value of the Corporate Debtor. We also consider the 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....
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.... on affidavit and modality of the payment. Accordingly, on 7-9-2019, the applicant gave offer of Rs. 70 Crore. Since their offer was more than the offer by earlier successful bidder and it was more than the liquidation value of the Corporate Debtor, we accepted the offer directing the Liquidator to sell the Corporate Debtor to the applicants. We also observed that M/s. Maithan Alloys Ltd. is allowed to withdraw from the process. Ld. Counsel 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 ....
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....er: I. In Valji Khimji & Company v. Official Liquidator,[2008] 9 SCC, The Hon'ble Supreme Court held us under: "11. It may be noted that auction-sale was done after adequate publicity in well-known newspapers. Hence, if anyone wanted to make a bid in the auction he should have participated in the said auction and make his bid... However, in our opinion, entertaining objections after the sale is confirmed should not ordinarily be allowed except on very limited grounds like fraud, otherwise no auction-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 abovementio....
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....d adversely affect the liquidation process." V. The power to restore status quo ante was addressed by the Division Bench of the Hon'ble Bombay High Court in Anand jayant more v. Bank of India,2009 SCC Online BOm 1565, as under: "13...Nevertheless, the petitioner in the main proceedings as well as subsequent amended reliefs, have questioned the validity of the action sorted to by the respondent bank under section 13(4) of the act. If the said challenge succeeds, the Debt Recovery Tribunal would be competent and obliged to grant such reliefs as may be necessary even to the extent 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 t....
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....o the request of R1to withdraw from the proposed auction sale. Neither did SBI take the stand that R2 - R4 should not be allowed to derail the (then) proposed sale of Assets to R1. In fact, SBI moved before this Appellate Tribunal only when the AA passed consequential directions to refund the Advance to R1. No Sale Certificate was issued to R1 for the proposed auction sale in terms of Schedule - I of the Insolvency and Bankruptcy Code (Liquidation Process) Regulations, 2016. (Liquidation Regulations) It is clear that SBI's attempt, is to now seek performance of a contract that never came into existence, merely because SBI and R5 have been unable to hold R2 - R4 to 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 - ....
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....ct for sale, when on the basis of the Terms no sale could be completed. 24. The Respondent has also submitted that relief sought by Appellant beyond their jurisdiction: (a) It appears that SBI is keen to ensure that a non existing contract is enforced/thrust on R1. SBI is entitled to its remedies against R2 - R4 who, as is clear, are now absconding. Under the Terms of the auction sale (Pg. 22 - 23 Reply), R1 was required to submit a declaration (Pg. 38 - 40 Appeal) alongwith the bid which contained the following conditions: i. R1 was required to submit an Advance against the proposed auction sale which was subject to confirmation of AA. ii. The balance 75% bid amount was to be deposited within 30 days. iii. The 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....
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....and contractual law decisions. There is a vital distinction between the administrative and contractual law decisions." "32.. It was stated in no uncertain terms that duty to act fairly which is sought to be imported into a contract to modify and/or alter its terms and/or to create an obligation upon the State Government which is not there in the contract is not covered by any doctrine of fairness or reasonableness. The duty to act fairly and reasonably is a doctrine developed in administrative law field to ensure the rule of law and to prevent failure of justice when the action is administrative in nature." "33.. Just as the principles of natural justice ensure fair decision where function is quasi-judicial the doctrine of fairness is evolved to ensure fair action when the function is administrative. But the said principle 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 pro....
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....e and also deposited earnest money of Rs. 6.5 lakhs each to show their bona fides. Having participated in the auction, both these bidders could not have withdrawn/retracted from the process or, bid. The auction was being conducted as per directions and under the supervision of this Court and unilaterally, Bhaskar Exxols Ltd. and Sankh Impex could not have retracted their bids and withdrawn from auction process. Their bids were not rejected and were under the process of consideration of this Court. Merely because two new bids were received or negotiations were held, that did not mean that their bids were rejected. The terms and conditions in this case cannot and does not prescribe any time limit, but here, in any case, both the bidders raised their bid only in negotiations on 23-6-2003 and the bids were placed for consideration of this Court in these proceedings on 3-7-2003 in a very reasonable time. Advertisements 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 thi....
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....egulation, 2016. The Liquidator has endeavoured to achieve the purpose of ensuring that the company itself sold so as to ensure the continuance of its business after such liquidation as well. The Liquidator has framed the terms and conditions of the sale so as to ensure that the bids are received only from identified entities having certain minimum credential. Which would be indicated of their intention to run the business of the company and to operate as a going concern even after the liquidation sale. So that to ensure continuance of commercial and industrial activities and employment of the workman engaged in such activity. Therefore, the criteria given is just to ascertaining the identity of the bidders. The initial auction published by him in the reserve price for sale of the company at Rs. 80/-Crores and provided for an earnest money deposit of Rs. 8/-Cr. Even so this e-auction did not receive any response. Thereafter 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....
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....th regard to Typhoon the bidder does not disclose financial eligibility document as stated above. Liquidator reiterated that the balance sheet of the Typhoon which he obtained from MCA Website. It appeared that their net worth of Rs. 500/- Crores for a NBFC. Therefore the documents were not being disclosed intentionally since they were not complying with the minimum eligibility criteria. Liquidator also pursued study of the balance sheet of the Sova Electrocast and it appears that net worth of Sova Electrocast as on 31-3-2018 was Rs. 22.11 Crores. (d) Liquidator further submitted that it had issued three mails on 11-6-2019 to the bidder seeking clarification upon the net worth and eligibility criteria and calling upon the bidder to submit documents as earliest. It is also stated in the mail that if documents have not been submitted on time then liquidator will not permit prospective bidder to bid in the absence of the document. 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 require....
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....provide basic information about their net worth and supporting documents such as their balance sheet confidentiality undertakings and 29-A undertakings in three days in spite of several mails sent by liquidators, the same clearly conveys the intention and seriousness and genuinity of the bidder. In the application in one place it says Typhoon is the lead member of the consortium and in another place it says Sonar Bangla Academy is the lead member. It is significant that the bidder for two days over several mail did not mention the name of the lead member of the consortium and only after the bidding had started and after it was disqualified for non-submission of necessary documents, choose to mention for the very first time that Sonar Bangla is the consortium member and in this application for the first time described it as the lead member. As bidder clearly failed to provide the name of the lead member of the consortium the same speaks volumes 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....
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....nding provision in the IBC and NCLT was entitled to forfeit their entire amount. Regulation 32, 32(A) and 33 of Insolvency and Bankruptcy Board of India liquidation process regulation 2016, provides for the mode of liquidation. Regulation 32 of Insolvency and Bankruptcy Board of India Liquidation Process Regulation 2016 the liquidator should originally sell the Corporate Debtor through an auction and private auction is permitted only in certain classes of assets which are of perishable nature, assets likely to deteriorate in value if not sold immediately, if it is sold at a higher price than the Reserve Price of a failed auction etc. Regulation 33(3) states as follows:- "The liquidator shall not proceed with the sale of an asset if he has reason to believe that there is any collusion between the buyers, or the corporate debtor's related parties and buyers, or the creditors and the buyer, and shall submit a report to the Adjudicating Authority in this regard, 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 o....