TaxTMI 
TaxTMI 
2021 (1) TMI 341
X X X X Extracts X X X X
X X X X Extracts X X X X
.... (Liquidation Process) Regulation, 2016. 2. Ld. Sr. Counsel Mr. Joy Saha appearing for the Visisth Services Limited (Successful Bidder) has drawn attention of the Adjudicating Authority (in short AA) that the Successful Bidder, Visisth Services Limited, has also filed an interlocutory application being I.A. (IB) No./KB/2020 in CA(IB) No. 1313/KB/2019 connected with CP(IB) No. 898/KB/2018 also praying for expeditious hearing of CA(IB) No. 1313/KB/2019 mainly praying for withdrawal from the bidding and buying process of the Corporate Debtor under liquidation. 3. Upon hearing the submissions of the Ld. Counsel Mr. Ajay Gaggar for the Liquidator as well as the Ld. Sr. Counsel for the Successful Bidder on 24/07/2020 and as requested, directions were given to list the IAs along with CA(IB) No. 1313/KB/2020 on 07/08/2020 as well as to submit e-copy of CA(IB) No. 1313/KB/2019 and written notes of defence and argument notes at the earliest preferably 3 days before the date of listing. 4. Both applications were heard at length through video conference since the work of the Tribunal was disrupted to COVID - 19 and consequential lockdown from 23.3.2020. Both applications were herd together,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....) Such further order and/or other orders, as this Learned Tribunal deems fit and proper; 7. Brief Facts. 8. M/s. United Chloro-Paraffins Pvt. Ltd. had filed an application u/s. 10 of the Insolvency and Bankruptcy Code, 2016 (in short, 'I & B Code') which was admitted under Corporate Insolvency Resolution Process (in short, 'CIRP) vide an order dated 12/10/2018. During the course of CIRP, the Committee of Creditors did not approve the Resolution Plan as proposed by a Resolution Applicant, Visisth Services Limited, recommending liquidation of the Corporate Debtor. Accordingly, the RP had filed an application u/s. 33(1)(a)(i) of the 'I & B Code' praying for liquidation of the Corporate Debtor. 9. Vide an order dated 19/07/2019 this Adjudicating Authority has passed an order directing the Corporate Applicant, United Chloro - Paraffins Private Ltd. to be liquidated and Mr. S. V. Ramani, having Registration No. IBBI/IPA-002/IP-N00530/2017-18/11692, was appointed as a Liquidator. Newspapers advertisement was published in the "Financial Express" and "Ek Din" on 25/07/2019 inviting claims from the stakeholders and in response only one claim received from secured credi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y may be pleased to permit the Successful Bidder,(in short bidder) Visisth Services Limited, to withdraw its bid in such circumstances and the Liquidator be directed to refund the EMD and the money paid by them for purchasing the bid document. 12. The Liquidator was directed to file reply to the supplementary affidavit filed by the successful bidder in CA(IB) No. 1313/KB/2019 fixing the next date of hearing on 04/02/2020. Thereafter, the matter came up for consideration on 04/02/2020, 18/02/2020 and 13/03/2020. On 13/03/2020 the matter was directed to appear on 24/03/2020. However, due to pandemic COVID-19 situation, lockdown was declared and is still continuing, as a result of which the CA(IB) No. 1313/KB/2019 could not be taken up on 24/03/2020. 13. In view of the above, the applicant has filed the unnumbered IA for early hearing of CA(IB) No. 1313/KB/2019 which is pending consideration since 24/03/2020 due to lockdown declared on account of pandemic COVID-19 situation prevailing praying for expeditious disposal of the CA(IB) No. 1313/KB/2019 as well as for passing necessary orders directing the Visisth Services Limited to complete the sale transaction and/or make payment of th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e matter forward. On 6th September, 2019, believing that, the conditions stipulated by the Applicant as aforesaid had been accepted by the liquidator, the Applicant had submitted the Earnest Money Deposit ("EMD") to the liquidator through a demand draft no. 509566 dated 05.09.2019 for a value of Rs. 37,10,000 (Rupees Thirty Seven Lacs Ten Thousand Only) and subsequently participated in the E-Auction/bidding Process. On the same day (i.e. 6th September, 2019) the Applicant wrote a letter to the Liquidator mentioning that the Company under liquidation shall be transferred without any liabilities and averred that the total sale consideration along with the Applicant's terms and conditions must be approved by the Hon'ble NCLT, being Annexure-D to the application. On 8th September, 2019 the Applicant has sent an email to Liquidator stating that, "upon any litigation arising from any source the monies paid including EMD and bidding document purchase amount to be refunded immediately within 3 days" being Annexure-E to the application. The liquidator has subsequently informed the Applicant that it was declared as the successful bidder. On 29th October, 2019 the Applicant sent a let....
X X X X Extracts X X X X
X X X X Extracts X X X X
....xchanged various emails and letters and the bidder had stipulated certain conditions to participate in the bidding process and purchasing process. Believing that, the conditions stipulated by the bidder vide emails had been accepted by the liquidator, the bidder had submitted the Earnest Money Deposit ("EMD") to the Liquidator through a demand draft no. 509566 dated 05.09.2019 for a value of Rs. 37,10,000 (Rupees Thirty Seven Lacs Ten Thousand Only) and participated in the E-Auction/bidding Process. 17. The Ld. Sr. Counsel further submits that about 10 months have passed since the date of payment of EMD, the Liquidator has not taken any progressive steps towards completion of the purchasing process of the Corporate Debtor under Liquidation, as such the Successful Bidder has incurred significant monetary loss/expenses towards bank interest on Rs. 42,10,000/- being the amount spent towards purchasing the E-Auction Process Information Document (Rs. 5,00,000/-) plus Earnest Money Deposit (Rs. 37,10,000). Due to lockdown declared for COVID-19 situation, the Successful Bidder has suffered colossal losses in their business which is around Rs. 7,59,00,000/- which has caused huge disruptio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ndemic to fill the gap in the code and to make it an exhaustive code. Three years have elapsed after the enforcement of the code but still, there are some gray area yet to be resolved and settled. The concept of transferring a company as a 'going concern' was introduced by way of amendment to IBC w.e.f. 25.07.2019. Several challenges were brought up, in respect of selling corporate debtor as a going concern. One among the objections the Ld. Sr. Counsel for the bidder, raised is that the IBC Code, does not explain as to whether in a going concern all the assets and liabilities are to be taken by the successful bidder as well or not in a case of liquidation. So It is good to read and understood what Regulation 32-A say about sale of a going concern. It read as follows:- 32A. Sale as a going concern. (1) Where the committee of creditors has recommended sale under clause (e) or (f) of regulation 32 or where the liquidator is of the opinion that sale under clause (e) or (f) of regulation 32 shall maximise the value of the corporate debtor, he shall endeavour to first sell under the said clauses. (2) For the purpose of sale under sub-regulation (1), the group of assets and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s) Regulations, 2016, with Regulation 39-C of IBBI (Insolvency Resolution process for corporate Person) regulations, 2016, I have no doubt that sale as a going concern means transfer of CD with its assets and liabilities. Since various challenges regarding the sale of going concern were gone to NCLT, the IBBI has published a Discussion Paper on Corporate Liquidation Process along with Draft Regulations dated: 27th April, 2019 observing that: (https://ibbi.gov.in/Discussion paper LIQUIDATION.pdf) Sale under regulation 32(e): In this form of GCS, the CD will not be dissolved. It will form part of the liquidation estate. It will be transferred along with the business, assets and liabilities, including all contracts, licenses, concessions, agreements, benefits, privileges, rights or interests to the acquirer. The consideration received from sale will be split into share capital and liabilities, based on a capital structure that the acquirer decides. There will be an issuance of shares by the CD being sold to the extent of the share capital. The existing shares of the CD will not be transferred and shall be extinguished. The existing shareholders will become claimants from liquidation....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the Liquidator to the Prospective Bidders or any other person. The objective of this E- Auction Process Information Document is to provide interested parties with information that may be useful to them in making their bids. It may be noted that the assumptions, assessments, statements and information contained in the E-Auction Process Information Document may not be complete, accurate, adequate or correct. Each Bidder should, therefore, conduct its own due-diligence, investigations and analysis and should also check the accuracy, adequacy, correctness, reliability and completeness of the assumptions, assessments, statements and information contained in this E-Auction Process Information Document and may get independent advice from appropriate sources. 14. Information provided in this E-Auction Process Information Document to the Bidder(s) has been collected and collated from several sources. The information given by no means claims to be an exhaustive account of statutory requirements and should not be regarded as complete in all respects. The Liquidator accepts no liability or responsibility for the authenticity, accuracy or otherwise for any statement or information contained i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ation Process) Regulations, 2016. This point is answered accordingly. POINT NO (ii) & (iii): 25. Both these points are taken together for convenience and for avoiding repetition of facts. The ld. Sr. Counsel for the bidder attempted to convince me that the offer accepted by him is conditional one and referred to the letter dated 04.09.2019. According to him before the bidder bid raised a conditional offer and that offer being not rejected by the liquidator before acceptance and therefore there is no acceptance of his offer by the liquidator and hence he is entitled to withdraw from the bid with all the money he paid inclusive of EMD and the 5 lakh paid as the cost of the copy of the bid documents with interest for delayed refund. He further argued that in a tender process or in any other form of public auction, a bidder can make his offer as per his suitability. The Liquidator has to accept it or reject it. If the Liquidator is silent on the conditions, it means that the liquidator accepts the conditions. If the liquidator does not respond to the conditions, law says the liquidator has accepted the conditions. If the Liquidator accepted the conditions, he cannot go back by not re....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the successful bidder would be made liable to pay any amount in addition to the total price as envisaged after being the successful bidder. Dispensation is also sought from all the cases whether listed or not in the Information Memorandum and not proposed to be settled. Dispensation is further sought from fresh initiation of any case or proceedings against the corporate debtor or the resolution applicant relating to any period prior to the Insolvency Commencement date, no amount would be paid to any creditor or authority under any circumstance relating to the period prior to the insolvency commencement date except as specifically provided under this Liquidation Process and that any such would consequently qualify as "operational debt" (as defined under the IBC) and therefore the full amount of such Liabilities shall be deemed to be owed and due as of the Insolvency Commencement Date and therefore no amount is payable in relation thereto. The Company shall have no Liabilities towards the persons currently classified as promoter or promoter group (including the Existing Promoter Group), persons acting in concert with promoters, holding companies, subsidiary companies, associate ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ding document and hence the liquidator in the nature of this case appears to me can ignore it. Moreover, the said letter was timely replied by the liquidator before the alleged acceptance of the bid. The reply is copied below: Letter dated 5 Sep 2019 From: Sv Ramani [email protected] Sent: Thu, 5 Sep 2019 18:59:18 GMT+0530 To: Nathmal Bangani [email protected] Subject: Re: Clarifications Dear Mr. Bengani Looks this mail is prior to our talk. As explained over phone, the time schedule was already known to you as categorically mentioned in Information Document. The legal issues pertaining to e-auction cannot be changed after public notification You have consistently made averments that DD is ready. You were aware of the time schedule from 1st September Moreover on 2nd after our meeting you wrote a mail for which I sought clarification from SBI on mail and today over meeting with DGM. He was kind enough to seek further approval from Corp Office over the phone on my request. Hence make sure you deposit the DD positively tomorrow at the SBI commercial branch in A/c mentioned in the Information Document. Deposit of DD in bid is condition precedent. SV ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ocuments. The declaration read as follows: Visisth Services Limited Shivam Chambers, 53, Syed Amir Ali Avenue, 4th floor, Unit-4F, Kolkata 700019 Annexure - III Declaration by Bidders 05.09.2019 To Mr. S.V. Ramani, Liquidator ....... Kolkata 700020 Dear Sir, I/We, the Bidder(s) aforesaid do hereby state that I/We have read the entire terms and conditions for the sale of assets as specified in the Information Sheet and have understood them fully. I/We, hereby unconditionally agree to confirm with and to be bound by the said terms and conditions and agree to take part in the e-auction process. I/We declare that the Earnest Money Deposit (EMD) and the deposit towards purchase-price have been made by me/us as against my/our bid and that the particulars of remittance and all other information given by me/us in the online form is true and correct. I/We further understand and agree that if any of the statement/information revealed by me/us is found to be incorrect and/or untrue, the bid submitted by me/us is liable to be cancelled and in such case, the EMD and/or any monies paid by me/us is liable to be forfeited by the Seller(-Liquidator) and the Seller will be at....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t. (i) I/We hereby confirm that I/we are eligible to purchase the assets of the Company under Section 29A of the Insolvency and Bankruptcy Code, 2016. For VISISTH SERVICES LTD. Sd/-Nathmal Bangani Director Seal Name: Visisth Services Ltd. Shivam Chambers, 53, Syed Amir Ali Avenue, 4th floor, Unit-4F, Kolkata 700019 The above said declaration read with the letters dated 4th September, 2019 and 5th September, 2019, demonstrate that the bid was unconditional and complete and the bidder who is bound to abide by the offer and the terms and conditions of the bid had accepted the bidder unconditionally. In the above said background of facts regarding bid offer and conditional offer, proved in this case, the judgments cited by the Ld. Sr. Counsel has not helpful to strengthen the arguments on the side of the bidder. 28. In view of the above said discussion I am of the view that a bidder cannot raise unilateral terms and conditions contrary to the terms of the bidding document published. The law is settled as to the power of a Tribunal/Court that the terms of tender are not open to judicial scrutiny and that the authority calling for the tender is the best judge to prescribe the ter....
X X X X Extracts X X X X
X X X X Extracts X X X X
....SCC 26 the Hon'ble Supreme Court has held as under: [para 139 & 140] "139. In the case of State of Haryana v. Lal Chand this Court held that after making a bid for grant of exclusive privilege of liquor vendor with full knowledge of terms and conditions of auction, the bidder cannot wriggle out of the contractual obligations arising out of acceptance of his bid by filing writ petition. 140. In the case of State of Punjab v. Dial Chand Gian Chand and Co. this Court held that a licensee who participates in the auction voluntarily and with full knowledge is bound by the bargain and the writ petition filed under Article 226 by such licensee in an attempt to dictate terms of the licence without paying the licence fee must fail. The highest bidder after acceptance of his bid cannot challenge the second auction on the ground of adverse effect on his business." 29. In view of the matter and the above position of law, it is clear that when the bidder had participated in the e auction and had deposited the EMD, then he cannot ask for waiver of tax liabilities and other relief which were not permissible as per the bidding documents. The Hon'ble Supreme court makes it clear that t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....stimation of the reasonable damages. Because of single bidder no damage has been caused since the contract was conditional. Both these submissions appear to me not worthy for consideration in the peculiar nature and circumstances in detail discussed as above. In the given factual situation section 74 of the Contract Act, has no application. The forfeiture of EMD claimed by the liquidator is not on the basis of damages but as per terms of bidding document. 32. As per the position of law discussed above, whenever a bid is submitted it is done so only after knowing the terms of bidding. Even the amount of EMD is to be deposited in accordance with the terms of bidding. If there is any clarification on the terms of bidding including the EMD, it has to be made prior to submission of their bid. The clarification asked for was answered in the negative. Knowing fully well, by signing a declaration the bidder submitted their bid. In the declaration signed by the bidder he agreed unconditionally to abide by the terms of e auction inclusive of forfeiture of EMD in case he did not perform his part of obligation after acceptance of the bid in his favour. In the said circumstances, the bidder ca....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Visisth Services Limited was an unsuccessful resolution applicant, that the bidder cannot withdraw from the bid in contravention of the bidding terms as per the position of law discussed above, that the terms of e caution provide for forfeiture of EMD upon withdrawal, and that the bidder has signed a declaration agreeing to forfeit in case of default on his side and since it becomes a binding contract once his bid is accepted the bidder is disentitled to claim back the EMD. He does not have a right to withdraw his offer at any time after the acceptance is conveyed to him. The acceptance was conveyed to him on 25.09.2019. It is as per an affidavit filed on 09.01.2020 in the CA 1313 of 19 the bidder expressed his inability in continuing its offer with a prayer to permit the bidder to withdraw its bid directing the liquidator to refund the EMD and the money paid for purchasing the bid document. Being satisfied that as per the bidding terms and the declaration signed by the bidder, the bidder is found disentitled to claim the amount he deposited with the liquidator. 34. In the view of the matter, and the position of law discussed above, I have no hesitation in holding that the bidder ....