AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2021 (2) TMI 1179
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....matter commenced vide order dated 19.06.2019 passed by this Tribunal. The Respondent was appointed as the Liquidator for the Corporate Debtor vide the order dated 19.06.2019 Pursuant to the order, the Respondent issued an E-Auction Notice dated December 12, 2019 (hereinafter the "E-Auction Notice") for the sale of certain assets (Lot 1 and Lot 2) of the Corporate Debtor, along with an E-Auction Sale Process Memorandum dated December 12, 2019 (hereinafter the "E-Auction Memo") under the Insolvency and Bankruptcy Code, 2016 (hereinafter the "IBC") and the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 (hereinafter the "Liquidation Process Regulations"). 3. As per the E-Auction Notice and the E-Auction Memo, the assets of the Corporate Debtor described specifically in Clause 8 of the E-Auction Memo comprised of High Value Fine Cotton Fabric Manufacturing Unit at Bharuch (Gujarat) as a going concern which included leasehold and freehold land, factory building, plant and machinery, furniture and fixtures and net current assets pertaining thereto and the Brands/ Trademarks owned by the Corporate Debtor along with licences, permits, approvals and registr....
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..... As per Article 11 of the E-Auction Memo, once a bidder was declared to be successful, a Letter of Intent (LoI) was to be issued by the Respondent whereby, the successful bidder would be invited to pay the balance sale consideration with applicable GST for the Lot 2. The successful bidder was to deposit the balance sale consideration within 90 days from the date of such demand by the Liquidator through the LoI, provided that payments after 30 days were to attract interest at the rate of 12% p.a. Further, the sale was to be cancelled, if full payment was not received within 90 days from the date of such demand. Any default in payment of the balance sale consideration and any applicable GST, if any, on 100% of the bid sum by the successful bidder was to result in the disqualification of the successful bidder including the forfeiture of EMD. 5. Further, Article 13, clause B of the E-Auction Memo provided that the successful bidder shall bear the sub-division charges of land payable on land area for Plot No. 825 proportionate to area in Lot 1 and Lot 2, respectively. It further provided that the Respondent shall apply for subdivision of GIDC Plots after issuance of LoI to the success....
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.... comprised of leasehold land being part of Plot No. 825, Jhagadia GIDC, Bharuch, Gujarat admeasuring 42.04 acres, factory building, plant and machinery contained therein, brand name and other current assets. Lot 2 comprised of only leasehold land being a part of Plot No. 825 Jhagadia GIDC, Bharuch, Gujarat admeasuring 28.57 acres and Freehold land. With respect to the leasehold land, it was specified that the land is leasehold from GIDC and is subject to sub-division of the said plot land was subject to sub-division from GIDC. 9. The Applicant submitted its bids for Lot No.2 for a sum of Rs. 43.43 crores along with an EMD of Rs. 2.84 crores. The Applicant was declared a successful bidder and a LoI dated January 18, 2020 was issued upon the Applicant demanding the balance consideration after adjusting the EMD. 10. The Respondent, vide his email dated January 09, 2020, replied to the above specific query, raised by the Applicant, as follows: 'Interest on delayed payment shall be waived off to the extent the delay is on account of sub-division of leased land' Clearly, the Respondent acknowledged that: a. the balance sale consideration in respect of auctioned assets whether for ....
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....ransferred/ conveyed to the Applicant, free from all encumbrances, and b) In relation to Plot no. 825 in Jhagadia Industrial Estate, GIDC, Gujarat, which is a leasehold land and a part of Lot 2 Assets, the transfer or assignment shall happen after obtaining the approval of Gujarat Industrial Development Corporation (GIDC). 14. However, vide its letter dated March 12, 2020, the Respondent/ Liquidator, for the first time, informed the Applicant that based on the survey conducted by the GIDC of Plot no. 825, it has come to their notice that an area of land admeasuring 12, 982 sq mtrs. is additional thereto. Accordingly, they sought the Applicant's in-principle consent to purchase the additional portion of land. 15. The Applicant, accordingly, provided its consent thereto under its first letter of March 30, 2020. 16. While the Applicant was awaiting communication from the Respondent regarding sub-division of the Plot no. 825 of Leasehold land into Lot 1 and Lot 2 by GIDC, the Applicant received a second letter dated March 12, 2020 from the Respondent/ Liquidator, whereby the Respondent, for the first time, called upon the Applicant to make the payment of the balance sale considera....
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....ries Association, payment of sub-division charges, regularization of unauthorised construction on the Plot, etc. Further, the said Provisional Order also required the Respondent to make payment of "concessions" amounting to Rs. 1,64,92,000/- (Rupees One Crore Sixty-Four Lakhs and Ninety-Two Thousand Only) and an interest amount of Rs. 2,75,11,368/- (Rupees Two Crores Seventy-Five Lakhs Eleven Thousand Three Hundred and Sixty-Eight Only). 23. The Applicant, by its email of May 05, 2020, raised several issues and observations with respect to the Provisional Order as under: a. Proposed Plot Size Mismatch - Leasehold land of Plot no. 825 to be allotted to the Applicant was originally of 1,15,632 sq. mts. and further 12,982 sq. mts. was additionally added. Total Plot area for Plot Nol. 825 indicated in the Provisional Order is 2,84,265.73 sq. mts. (which includes the additional area). However, in the E-Auction Notice and the E-Auction Memo, total area for Plot No. 875 was 2,85,765 sq. mts. and later additional land of 12,982 sq. mts. was added. Further the Provisional Order with respect to Lot 2 mentions an area of 1,12,742.20 sq. mts. as opposed to 1,15,632 sq. mts. The discrepancy ....
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....ibunal seeking directions that Tax Deducted at Source ("TDS") @ 1% on the sale consideration ought not to be deducted by the Applicant at the time of making payment thereof under section 194IA of the Income Tax Act, 1961. The said Interim Application is pending till date and the next date of hearing is June 11, 2020. 25. The Applicant addressed a letter dated May 25, 2020 to the Respondent whereby, the Applicant opposed the Respondent's contention in its email April 16, 2020. The Applicant stated that interest @ 12% p.a. on delay in payment of the balance sale consideration ought not to be imposed on the Applicant, as the reasons for the delay were not attributable to the Applicant including the delay in compliance with the conditions of Provisional Order for sub-division of Plot no. 825 in Jhagadia Industrial Estate, GIDC, Gujarat; lockdown due to COVID-19 and the restrictions imposed by the Governments of India and Gujarat, the pending Interlocutory Application with respect to waiver of TDS before the this Hon'ble Tribunal. It was categorically pointed out that the Respondent had clarified to the Applicant by its email of January 09, 2020 (which was prior to the submission of bi....
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....ts commitment to expeditiously complete the transaction of purchase of Lot 2. 30. It is further submitted that the position adopted by the Respondent vide its e-mail dated April 8, 2020 that the Concerned Assets i.e. assets under Lot 2 were sold on "As is where is", "As is what is", "Whatever there is" and "No recourse" basis and that the payment of the balance sale consideration had fallen due for payment irrespective of sub-division of land, is legally untenable and contrary to the pre-bid clarification issued by the Respondent that interest on account of delay in completing sub division by the Respondent shall be waived. It is further submitted that this contention of the Respondent is contrary to the express terms and conditions of the E-Auction Memo, whereby the sale of Leasehold Land in respect of Lot 1 and Lot 2 was subject to sub-division and it was the obligation of the Respondent to apply for and comply with necessary sub-division orders from GIDC. 31. It is further submitted that in the absence of sub-division order from the GIDC, there was no question of payment of interest for delayed payment of balance sale consideration on account of delay in completion of sub-divi....
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....ing the transaction, within 15 days from the date when the lockdown is lifted by the Government of India. 35. It is submitted that in response, the Respondent acceded to the request to grant extension of time for payment of balance sale consideration, till 15 days after the lifting of lockdown. However, the extension of time was subject to charge of interest of 12% per annum. The Respondent reasoned that since the Applicant has not made payment of the balance sale consideration within 30 days from the date of receipt of LoI, which period expired much prior to the lockdown. 36. It is submitted that the above stand of the Respondent to charge interest during the lockdown period is contrary to Regulation 47A of the Liquidation Process Regulations and hence, untenable and unjust. The said Regulation is quoted hereinbelow for ease of reference: Exclusion of period of lockdown. 47A. Subject to the provisions of the Code, the period of lockdown imposed by the Central Government in the wake of Covid-19 outbreak shall not be counted for the purposes of computation of the time-line for any task that could not be completed due to such lockdown, in relation to any liquidation process. 3....
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....amount of interest so paid, if such amount partly or fully becomes refundable to the Applicant, pursuant to final decision of this Tribunal in the present IA. Submissions made by Respondent by way of Affidavit in Reply: 44. The Respondent deny each and every allegations and insinuations made in the said Affidavit in Reply, which are contrary and inconsistent with what is stated herein below. Nothing contained in the said Affidavit in Reply shall be deemed to have been admitted for specific non traverse and the same should be deemed to have been denied by this Applicant. 45. It is submitted that E-Auction notice and E-Auction Process memorandum was issued on 12th December 2019 to carry out the sale of the assets of the Corporate Debtor. The assets were divided into two parts Lot 1 and Lot 2 and the E-auction of assets was to be conducted on "As is where is", "As is what is", "whatever there is", and "no recourse" basis. 46. Further it is submitted that pursuant to the e-auction notice dated 12th December 2019, the Applicant had submitted an expression of interest and indicated its interest in participating in the e-auction of the assets of the Corporate Debtor. The Applicant par....
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....lot 2 consisted of two sets of land parcel, Freehold and leasehold, if the Applicant in order to avoid paying interest on the balance sale consideration could have made payments towards the freehold land, any break up in e auction, value which as it is without any encumbrances and doesn't require any sub-division. Therefore, the present application is nothing but an afterthought to avoid paying interest. 50. It is submitted that in order to conclude the sale, as per Clause 11 of the Process Memorandum, the Applicant was required to deposit the balance sale consideration within 90 (ninety) days from the date of conclusion of the auction sale/demand, provided that the payments made after 30 (thirty) days shall attract interest at the rate of 12% p.a. The relevant clause of the Process Memorandum in this regard is reproduced herein below: "Clause 11. Declaration of Successful Bidders: Payment of sale consideration: The Successful Bidder(s) shall deposit the balance sale consideration within 90 (ninety) days from the date of such demand. Provided that the payments after 30 (thirty) days shall attract interest at the rate of 12% p.a. Provided further that the sale shall be cancelle....
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....e. 17th February 2020, however, payment of consideration after 30 days i.e. 17th February 2020 would attract interest @ 12% till the date Applicant makes the payment. 56. Further the Applicant Vide Letter dated 21st January 2020, has, unconditionally accepted the LoI which stated as below: "In relation to plot no. 825 in Jhagadia Industrial Estate, GIDC, Gujarat, which is a leasehold land and is part of Lot 2 Assets, the transfer or assignment shall happen after obtaining approval of Gujarat Industrial Development Corporation (GIDC)". 57. Respondent states that the LoI referred to transfer of the land after obtaining approval of the GIDC. Therefore, by no stretch of imagination could the Applicant construe that the balance consideration was payable after obtaining final order from the GIDC or after sub-division of land by GIDC. 58. It is submitted that the Applicant has acknowledged and thereby agreed to the clause 11 of the E-Auction Process Memorandum that the balance sale consideration was payable within 90 days from the date of issuance of LoI provided that payments made after 30 days, shall attract interest at the rate of 12% p.a. The Respondent further states that, it is....
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....sions of the E-auction Memorandum and Regulation 47A of the Liquidation Process Regulations to avoid the payment towards interest due to the Liquidator in respect of the sale of land on behalf of the Applicant. It is further pertinent to note that the Government of India had imposed a nationwide lockdown starting from 24th March, 2020 and further from 15th April 2020 as such the notification shall have retrospective effect beginning from 24th March 2020, and the interest free payment was due on 17th February 2020 which is way before the lockdown was imposed. 64. The unlock process in the state of Gujarat began from 1st of June 2020. I say that the assets under the Lot 1 and Lot 2 are situated in the state of Gujarat. Therefore, payment demanded from the Applicant as the extension was coming to an end under the extension provided to the Applicant. 65. Further attention was drawn by Respondent to the Insolvency and Bankruptcy Board (Liquidation Process) Regulations, 2016 under Regulation 33 provides for mode of sale of assets of the Corporate Debtor. I refer to Schedule I, Article 1, Clause 12 of the Liquidation Regulations, which states as under:- "(12) on the close of the aucti....
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....n pre-para GIDC also taken time to arrive at the amount payable as sub division charges, surveys conducted on various occasions, issued provisional order to pay "concession charges" along with other conditions to be fulfilled etc. From the submissions it is noted that the Applicant never denied payment of balance sale consideration neither on account of incapable, financial difficulty, nor willful nonpayment but on the other hand because of the specific clarification issued by the Respondent, time taken by GIDC as discussed above and finally on account of COVID 19 situation and Regulation 47 A of IBBI Regulation etc. It is also noted that the Applicant had made payment of Rs. 1,57,46,696/- on 25.06.20202 towards interest under protest. The submissions of the Applicant is acceptable. The submission of the Respondent that responsibility to follow up with GIDC for sub division of the land in upon the Applicant, no supporting document is produced for the same. Therefore, this submission is also not acceptable. The Respondent vide his email dated 09.01.2020 clarified that in case of delay in sub division of land the interest will be waived, the same is quoted in par 12 above. Therefore....