TaxTMI 
TaxTMI 
2021 (9) TMI 927
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....egulations, 2016 ("Regulations" for short). Relying on Circular issued by the IBBI, the Adjudicating Authority held that as the liquidation order in the proceeding was passed before the amendment dated 25.07.2019 benefit under amended clause 12, could not be granted. Hence, the Appeal. 2. A few facts may be referred. 'ICICI Bank Ltd.' had filed Application under Section 7 of the Insolvency and Bankruptcy Code, 2016 ("IBC" for short) against the Corporate Debtor which was admitted on 01.08.2017 in C.P. No. (IB) 53 of 2017. Since no Resolution Plan was approved by the Committee of Creditors ("CoC" for short), liquidation order was passed on 25.04.2019. The Appellant who was appointed Liquidator made four consecutive attempts for sale of assets of Corporate Debtor through public auction but did not succeed for one reason or the other. The Appellant claims that the Appellant made efforts to understand the local market and realised that the timeframe for payment of consideration of 15 days on conclusion of e-auction after declaration of the highest bidder was too short considering the quantum of sale considerations and the ongoing economic slow-down due to the COVID-19 pandemic. The ....
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....ered to him in the manner specified in the terms of sale." After substitution vide Notification No. IBBI/2019-20/GN/REG.047 dated 25.07.2019, Paras 12 and 13 now read as follows:- "(12) On the close of the auction, the highest bidder shall be invited to provide balance sale consideration within ninety days of the date of such demand: PROVIDED that payments made after thirty days shall attract interest at the rate of 12%: PROVIDED FURTHER that the sale shall be cancelled if the payment interest is not received within ninety days. (13) On payment of the full amount, the sale shall stand completed, the liquidator shall execute certificate of sale or sale deed to transfer such assets and the assets shall be delivered to him in the manner specified in the terms of sale." 4. The Appellant filed I.A No. 698 of 2020 before the Adjudicating Authority making following prayers as can be seen in the impugned order:- "i. To allow the Liquidator to apply Clause 12 of Schedule-I of the Liquidation Regulation as amended on 25 July 2019, for the liquidation process of the Corporate Debtor in exercise of power under Rule 11 of NCLT Rules, 2016; ....
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.... and the assets shall be delivered to him in the manner specified in the terms of sale." The above Clause was substituted by IBBI vide Notification No. IBBI/2019-20/GN/REG047 dated 25th July, 2019 w.e.f. 25th July, 2019. After substitution the Clause 12 reads as under:- "(12) On the close of the auction, the highest bidder shall be invited to provide balance sale consideration within ninety days of the date of such demand: PROVIDED that payments made after thirty days shall attract interest at the rate of 12%. PROVIDED FURTHER that the sale shall be cancelled if the payment is not received within ninety days." Thereafter it appears that IBBI issued some Circular No. IBBI/LIQ/024/2019 dated 20th *[Sic- Read "26th"] August, 2019, relevant of which has been extracted by the Adjudicating Authority in impugned order in Para 4 which is as under:- "2. The stakeholders have expressed a difficulty in applying the Amendment Regulations to a Liquidation process, which commenced before 25th July, 2019. It is reiterated that the provisions of the Amendment Regulations are not applicable to the Liquidation processes, which had commenced befor....
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....payment of consideration within fifteen days. Many Liquidators find this too short. Some have suggested to increase this period to 90 days in sync with the time period of three months provided under SARFAESI Act. However, payment made after 30 days may attract interest at the rate of 12%." 8. According to the Learned Amicus Curiae, such 'Discussion Paper' was released on 27.04.2019 and, later on 25.07.2019 after getting feedback, the Liquidation Regulations were amended so as to permit the Liquidator to receive payments from the auction purchaser up till 90 days after the sale. The amendment to the Regulations was gazetted as per the Gazette of India- Extraordinary [Part III- Sec.4] vide IBBI/2019-20/GN/REG047. The earlier para 12 came to be substituted with the present para 12 on 25.07.2019. The substitution by way of Gazette Notification can be seen at Page 151 of the paper book. 9. Learned Amicus Curiae pointed out that the Hon'ble Supreme Court in the matter of "Swiss Ribbons Private Limited & Anr. vs. Union of India & Ors." - [(2019) 4 SCC 17] observed that if there is a Resolution Applicant who can continue to run the Corporate Debtor as a going concern, every effort mu....
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....e of the powers under section 196 of the Insolvency and Bankruptcy Code, 2016. Yours faithfully, (I. Sreekara Rao) Chief General Manager Email: [email protected]" 10. Learned Amicus Curiae has submitted that once the IBBI amended Schedule I in the Regulations, whether the amendment would apply retrospectively or prospectively, could not be decided by issuing a Circular. It is not a case of IBBI amending Regulations as per powers available under Section 196 of the IBC. It is argued that under Section 196 of the IBC which deals with powers and functions of the IBBI, the Board shall, subject to the general direction of the Central Government, perform all or any of the functions specified under Section 196(1). The Board can by notification make Regulations which are consistent with the Code and the Rules to carry out the provisions of the Code. The Learned Amicus Curiae pointed out that under Section 241 of the IBC, the Rules and Regulations are required to be laid before Parliament. It is argued that there is no parallel provision for placing Circular before Parliament. Thus, the binding force of Regulations cannot be equated with the impug....
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....Paper referred to Regulation 32 and the option to explore sale of Corporate Debtor as a going concern along with the other available sale options and the need to provide complete framework to enable the Liquidator to exercise the option. The Discussion Paper tries to balance need to be within timeframe for maximisation of the value and the need to have sufficient time for steps to be taken. In such backdrop, Para 5.2.2 (referred supra) was included in the Discussion Paper with regard to difficulties found by Liquidators when time is of mere 15 days. 13. Perusing the Liquidation Regulations and Clause 12 of Schedule I as was subsequently introduced on 25.07.2019, the substituted Regulation which has been brought by way of amendment does not show that the Regulation is to be applied only prospectively. It is open ended provision relating to procedural law which in no way states that it will not apply to pending liquidation processes on the date of substitution. In our view, the Circular dated 26.08.2019 could not interpret the Regulations in the manner it is done. Power of Board under Section 196(1) (p) or (t) to issue guidelines cannot be expanded to interpreting provisions made.....