TaxTMI 
TaxTMI 
TaxTMI 
2021 (6) TMI 940
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....compliance of the terms of auction sale, all concerned authorities and parties be advised about the sale of the Corporate Debtor on going concern basis without antecedent liabilities of any kind as may be relevant for the operation of the Company post its release from the liquidation. d) That the Applicants be permitted to conduct the affairs of the company post its release from the liquidation in the manner as they may considered appropriate for the operation of the company's business. e) Any other reliefs as the Hn. Bench may considered just and appropriate in the facts and circumstances of the case matter. 2. The facts leading to the present Application are as under. i. On a Petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 (the Code), the Corporate Debtor was put under Corporate Insolvency Resolution Process (CIRP) by an order dated 04.12.2017 of this Bench. ii. Upon failure of the Resolution process, the Committee of Creditors (CoC) of the Corporate Debtor in its 10th meeting recommended for the liquidation of the Corporate Debtor as a going concern. This Tribunal vide Order dated 27.03.2019 ordered the Corporate Debtor to be liquidated as a goi....
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....g concern. xi. In the above circumstances, the Applicants are before us with the following consequential reliefs (Para 8(b) of the Application): a) The promoters be permitted to restructure the capital account of the company by cancellation of existing capital and substituting with the investment of the bid amount in such manner and for such amount as it may consider appropriate for the working of the capital base of the company. b) The direction be issued that after payment of the entire bid amount, the Consortium gets all the rights, title and interest in the whole and every part of the Corporate Debtor including contracts, free from security interest, encumbrances, claim, counter claim, or any demur in the Consortium and the sale proceeds shall be disturbed against accordance with section 53 of the IBC. c) A direction be issued that upon completion of the sale of the Corporate Debtor as a going concern all the claims or demands made by or liabilities or obligations owned or payable to any actual or potential creditors of the Corporate Debtor including Government dues whether direct or indirect, whether admitted or not, due or contingent, asserted or unasserted, crystaliz....
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....Debtor. k) A direction be issued exempting the corporate debtor from payment of registration fee/stamp duty and other local levies, taxes, duties with respect to transfer of the bid amount. l) Pass an order to provide the applicant 100% exemption on stamp duty and registration fee and all local taxes and levies imposed by the appropriate Government, applicable in respect of any transaction required to be undertaken pursuant to the e-auction, and taxes thereon. m) A direction be issued that upon completion of sale of the corporate debtor as a whole as a going concern all the assets specified in the complete e-auction process document shall continue to be the assets of the corporate debtor, towards which the consortium has made payment without encumbrances of any kind. n) That the Secured creditors be directed to handover the title documents deleting all encumbrances mentioned in the assets secured to them including by way of assignment to any person other than the Corporate Debtor. xii. The Applicants have submitted that they are the promoters of the Corporate Debtor which is a MSME company and are eligible to make application u/s. 29A read with Section 240A of the Code. T....
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....e corporate debtor as a going concern: Provided that where an asset is subject to security interest, it shall not be sold under any of the clauses (a) to (f) unless the 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' mean....
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....on 53 and the corporate debtor will be dissolved." 8. Both the options require consent of the 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 th....
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....de regarding "sale of the Company as a going concern", IBBI has formed the Liquidation Process 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 judgment in the case of Arcelor Mittal 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'." 7. As a consequence to the above discussions and on perusal of the pleadings and submissions made by the learned counsel for the Applicants and the Liquidator the following order is passed. ORDER The Application be and the same is allowed subject to the following. I. In respect of prayer 1.(a), since the Liquidator has already accepted the bid for Rs. 15.30 Crores and the auction sale of the Corporate Debtor as a going concern is completed on 18.....