TaxTMI 
TaxTMI 
2021 (3) TMI 556
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....2016 (the Code) by Bank of Baroda, the Corporate Debtor viz. Topworth Pipes & Tubes Private Limited was put under Corporate Insolvency Resolution Process (CIRP) by an order dated 11/12/2018 of this Bench. 3. In the absence of a Resolution Plan, this Bench on 12/06/2020 passed an order for liquidation of the Corporate Debtor under Section 33 of the Code. 4. The Liquidator invited bids for the sale of the Corporate Debtor as a 'going concern' by an E-auction process memorandum dated 13/10/2020. The Liquidator published first addendum to the E-auction process memorandum on 29/10/2020 and second addendum on 03/11/2020. 5. The E-auction process memorandum states that the sale of the Company is on 'going concern' basis in accordance with the provisions of the Code, Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 (Liquidation Process Regulations) and the E-auction process information document. It further states that the sale of the Company is proposed to be done on "as is where is basis", "as is what is basis", "whatever there is basis" and "no recourse basis" and the proposed sale of the Company on going concern basis does not entail transfer of ....
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.... under Section 29A of the Code which provides that certain persons are not eligible to be Resolution Applicant. 8. The Liquidator issued an Addendum dated 29/10/2020 to the Eauction process document wherein the key timelines were mentioned. The Liquidator issued another Addendum dated 03/11/2020 to the main E-auction process document wherein the key highlights of the asset sale process mentioned in the Eauction process document dated 13/10/2020 is replaced as below- Version dated: October 13th, 2020 Corporate Debtor Topworth Pipes & Tubes Pvt. Ltd. Asset Lot # Block 1 Asset Lot: Brief description: Khopoli Unit (As a going concern) Details of assets are available in the asset sale memorandums available on the Primus's website listed at (http://www.primusresolutions.in) and shall also be uploaded on the Eauction portal www.right2vote.in Auction Commencement date and time November 2nd, 2020 at 12 pm Auction closure date & time November 2nd, 2020 at 3 pm Reserve Price Rs. 152 Crores Refundable Earnest Money Deposit: Rs. 15.20 Crores Minimum bid increment amount: Rs. 5 Lakhs The Company proposed to be sold on a "going con....
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....ares shall be issued only in the name of the successful bidder and will not be issued in any other name. The closing date of the agreement shall be 90 days from the payment of the last instalment, wherein in these 90 days, all the ancillary processes as mentioned in the agreement shall be executed and implemented by the Liquidator and the bidder. The said executions include but are not restricted to distribution of the purchase consideration to the various stakeholders, extinguishment of shares of the Corporate Debtor, issuance of fresh equity shares to the bidder, execution of novation deeds which the relevant counter parties to novate the contracts executed by the Corporate Debtor, employee related agreements and contracts, etc. b. Confirmation of sale: On payment of the 100% of the bid amount, and any applicable GST/Taxes, registration fees, etc. the successful bidder shall be issued the letter for confirmation of sale. The confirmation of sale is subject to the necessary approvals and processes, if any, towards various statutory and non statutory authorities which includes but is not restricted to Securities and Exchange Board of India, Bombay Stock E....
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.... in favour of the Applicant. 16. In the above background this Applicant preferred Application with the following reliefs: (a) the Applicant along with the entities as mentioned in Paragraph 2 above may be permitted to pay/adjust the Sale Consideration in the following manner (i) INR 40,00,00,000/- (Indian Rupees Forty Crores only) by way of investment into the equity shares of the Corporate Debtor; and (ii) the balance amount of INR 150,90,00,000/- (Indian Rupees One Hundred and Fifty Crores and Ninety Lakhs only) in the form of unsecured debt; (b) a direction be issued that immediately upon payment of the entire Sale Consideration, the Applicant (or the entities as mentioned in Paragraph 2 above, as the case may be) get all the rights, title and interest in the whole and every part of the Corporate Debtor, including but not limited to contracts, free from security interest, encumbrance, claim, counter claim or any demur, and the Sale Consideration shall be distributed by the Liquidator in terms of the Section 53 of the Code; (c) a direction be issued that on and from the Date of Acquisition, all the claims or demands made by, or liabilities or obligation....
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....ve' from the status of 'liquidation' (i) a direction be issued that from the Date of Acquisition, the Board of Directors of the Corporate Debtor be reconstituted as per the Companies Act, 2013 and that the following individuals be permitted to act as Directors of the Corporate Debtor duly appointed under the provisions of the Companies Act, 2013, and direct the Registrar of Companies to do all such acts, deeds and things that are necessary to appoint the following individuals as directors of the Corporate Debtor, who are individuals recommended by the Applicant, in order to enable the Corporate Debtor to file relevant returns required by applicable law: Name of the Proposed Directors DIN Mr. Satyapal Jain 00011774 Mr. Gaurav Jain 00077770 Mr. Sampat Bhudeka 02796982 (j) a direction be issued that all subsisting consents, licenses, approvals, rights, entitlements, benefits and privileges whether under law, contract, lease or license, granted in favour of the Corporate Debtor or to which the Corporate Debtor is entitled to shall, notwithstanding any provision to the contrary in their terms and irrespective of the commencement of t....
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.... that the brought forward tax losses of the Corporate Debtor be permitted to be carried forward and set-off against future income as change of shareholding of the Corporate Debtor is pursuant to the bid submitted by the Applicant under the E-Auction Process; (q) a direction be issued that the eligibility of the Corporate Debtor to claim incentives under the Package Incentive Scheme, as framed by the Government of Maharashtra, shall be extended for a period of 5 (five) years from the Date of Acquisition; (r) the bid submitted by the Applicant should be considered to be a resolution plan under Section 79 of the Income Tax Act, 1961; (s) Other or further order or orders be passed and/or direction or directions be given as this Hon'ble Tribunal may deem fit and proper. 17. The Respondent / Liquidator in his reply stated that the Prayer in Clause (a) is in consonance with the letter and spirit of the Eauction Memorandum and he has no objection to the said prayer. 18. The Respondent submits that he has filed Second Progress Report dated 10/10/2020 with the Registry of the Tribunal pursuant to the Regulation 15(1)(b) of the Liquidation Process Regulations ....
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....e security interest therein has been relinquished to the liquidation estate.]" 21. While the Liquidation Process Regulations recognises going concern sale as one of the methods of sale, however, there is no definition as such for 'going concern' either in the Code or in the Regulations. 22. It is beneficial to refer the report of the Insolvency Law Committee dated 26/03/2018 (Para 8.1 of the Report), wherein the committee examined the term "going concern" as below: "The phrase 'as a going concern' imply that the Corporate Debtor would be functional as it would have been prior to the initiation of CIRP, other than the restrictions put by the Code." 23. It is beneficial to refer Para Nos. 7 & 8 of the Round Table of Insolvency and Bankruptcy Board of India held with the stakeholders on 21/05/2018, referring to the case of Gujarat NRE Gujarat NRE - NCLT KOLKATA BENCH: C.P. (IB) No. 182/KB/2017 , wherein a note was published by IBBI defining "going concern" as below: "7. 'Going Concern' means all the assets, tangibles or intangibles and resources needed to continue to operate independently a business activity which may be whole or a part of the business of th....
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....e secured creditors to relinquish security interest. If security interest is not relinquished, other modes of sale will be used." 24. One advantage of the sale of the Corporate Debtor as a 'going concern' is that the Corporate Debtor is retained, it will not be dissolved and the Corporate Debtor will be transferred along with the assets. So, the Corporate Debtor as a legal entity remains as such. 25. The crux of the 'going concern sale' is that the equity shareholding of the Corporate Debtor is extinguished and the acquirer takes over the undertaking with the assets, licenses, entitlements etc. The undertaking includes the business of the Corporate Debtor, assets, properties and rights etc. excluding the liabilities. However, in this case the assets that are included in the E-Auction Memorandum only have to be taken over by the Applicant. 26. The Corporate Debtor survives, only the ownership is transferred by the Liquidator to the purchaser. All the rights, titles and interest in the Corporate Debtor including the legal entity is transferred to the purchaser. After the sale as a 'going concern', the purchaser will be carrying on the business of the Corporate Debtor. 27.....
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....s Regulations, under the Code and we have to take them as guiding principles in dealing with the case. 33. The learned senior counsel for the Applicant referred to Para 83 of the Hon'ble Supreme Court's judgement in the case of ArcelorMittal India Private Limited....V/s....Satish Kumar Gupta and Others (MANU/SC/1123/2018). The Hon'ble Supreme Court in the said Judgment has referred to Regulation 32 of the Liquidation Process Regulations which states that the Liquidator may also sale the Corporate Debtor as a 'going concern'. Hence there is no impediment for the sale of the Corporate Debtor as a 'going concern'. 34. As a consequence to the above discussions and on perusal of the pleadings and submissions made by the learned senior counsel for the Applicant the following order is passed: (a) Prayer (a) is allowed. The Applicant is permitted to bring in Rs. 40 crores as share capital and Rs. 150.90 crores as unsecured debt towards payment of sale consideration. (b) The Applicant shall get all the rights, title and interest over whole and every part of the Corporate Debtor, including but not limited to contracts free from security interest, encumbrance, claim, counter claim....