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2021 (12) TMI 484
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....or R7. (Caveator/ Welspun Steel Resources Pvt. Ltd.) Mr. Abhishek Shah, Mr. Sandeep Singhi, Mr. Gaurav Mathur, Ms. Anushree Kapadia and Ms. Priyanka Rathi, (Caveator for Kanter Steel India Pvt. Ltd.) JUDGMENT (Through Virtual Mode) 1. This appeal, filed under Section 61 of the Insolvency and Bankruptcy Code, 2016 (hereinafter called 'IBC'), emanates from the Impugned Order dated 16.8.2021, passed by the Adjudicating Authority (NCLT, Ahmedabad) in IA No. 273 of 2021, in IA No. 698 of 2020 and Company Petition (IB) No. 53 of 2017. 2. The Appellant had prayed for staying the Impugned Order vide IA No. 1830 of 2021 along with certain interim reliefs. This Tribunal had, on 2.9.2021, after hearing the Learned Sr. Counsels of parties in IA No. 1830 of 2021, passed an order staying the Impugned Order and the auction process till next date of hearing. The relevant portion of this Tribunal's order dated 2.9.2021 is reproduced below. " 7. We have considered the submissions of Learned Senior Counsels for the parties. It is not appropriate to express any opinion at this stage. This is a fit case for admission as well as for stay of the Impugned Order. Thus, we hereby st....
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....nsuccessful. The third e-auction process was taken up on 22.10.2019, also for composite assets of the Corporate Debtor (with a reduced reserve price of Rs. 1200crores). Since the third e-auction process was also unsuccessful, the fourth e-auction took place on 11.11.2019 (with reserve price of composite assets being Rs. 1102 crores), which also turned out to be unsuccessful. Thereafter the fifth e-auction process was held on 5.8.2020 also for composite assets of Corporate Debtor with reserve price of Rs. 1104 crores. This fifth round of e-auction was also unsuccessful except for sale of two residential flats. 7. Since the five rounds of e-auctions failed to fructify in sale and disposal of assets, the liquidator sought and received orders from the Adjudicating Authority vide IA No. 698/2020 for disposal of the assets of the Corporate Debtor through private sale in terms of Regulation 33(2)(e) of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 (hereinafter called 'Liquidation Regulations'). 8. Thereafter the Liquidator, on receiving an offer from a potential buyer, apprised the stakeholders in meeting dated 28.01.2021, of the interest of so....
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.... Swiss Challenge Process. 11. The second stage of the second Swiss Challenge Process started on 27.3.2021, with the liquidator publishing advertisement inviting other potential bidders to participate in the Swiss Challenge Process and submit their bids against the anchor bid of Rs. 430 crores. Thereafter, R.K. Industries (Appellant), HR Commercials Private Ltd., (Respondent No. 1), Bohra Exports Private Ltd. (Respondent No. 3)V.K. Industrial Corporation Ltd. (Respondent No.4) Ankit International (Respondent No. 5)and Shree Sai Baba Breaking Company (Respondent No.6) submitted bids. HR Commercials Private Limited proposed to bid in a consortium comprising of HR Commercials Private Limited, M/s Bohra Exports Private Limited, M/s V.K. Industrial Corporation limited, M/s Ankit International and M/s Shree Sai Baba Breaking Company. This consortium submitted an EMD in the second stage of the second Swiss Challenge Process. 12. In the meantime, IA No. 273 of 2020 was filed by HR Commercials Private Ltd. on 6.4.2021, challenging the anchor bid process in the second Swiss Challenge Process with the prayer that the selection of anchor bidder RK Industries be set aside. This IA No. 273 ....
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....ts to Rs. 650 crores. Subsequently Stakeholders' Consultation Committee meeting was convened on 6.8.2021, wherein the liquidator apprised the stakeholders about the interest of WSRPL in purchasing the Dahej shipyard (including land, buildings on it and scrap and metals on the yard land) and some other assets. WSRPL again revised its offer upwards to Rs. 675 crores vide e-mail dated 16.8.2021. Another meeting of the Stakeholders Committee took place on 13.8.2021 wherein the stakeholders (all of whom joined through audio calls) decided that it would be beneficial if the Dahej shipyard and related assets are sold as a composite asset. Moreover, the list of assets that formed part of WSRPL's offer included Dhaj Metals and Scrap, Dahej Land and Building, GIDC Labour Colony at Dahej, Office Premises at Patel Chambers, Charni Road, Mumbai, Vasan Udyog Bhawan, Parel Gala, Mumbai, Diamond Harbour Land Parcel, Kolkata and 70 acres land at Village Atali, Kaladara, Bharuch (attached at pg. 5 of the Stakeholders' meeting minutes dated 13.8.2021). 17. The Liquidator apprised the Adjudicating Authority of the recommendations of the Stakeholders Committee regarding entertaining a consolidated o....
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....ant has adverted to the claim of the liquidator, which appears in the Impugned Order as follows:- "If these assets are sold in one go, it will save time and maximise the value to the stakeholders." 21. According to the Learned Counsel of Appellant, this is an arbitrary action of the liquidator, especially when the liquidator does not have any unfettered powers to halt the Swiss Challenge Process, as he is claiming to have under various provisions of the bid document. The Learned Counsel for Appellant also adverted to the fact that as a requirement of the second Swiss Challenge Process, the Appellant has deposited a sum of Rs. 43.1 crores as directed, and the bid offered by the Appellant is adequate. Moreover, he has urged, it is not that WSRPL has projected to the liquidator a higher bid for the same assets as offered in the second Swiss Challenge Process, but rather it has sought to purchase the shipyard and several other properties (listed atpp.597-598, Appeal Paperbook, Vol.II) for an amount whose adequacy is not even assessed or examined. He has pointed out that out of these properties, the yard is located on leasehold land, which is on 30 years lease under an agreement d....
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....wing judgments:- (1) Ravi Development vs. Shreekrishna Pratisthan and Ors. (2009 7 SCC 462, Para 27) (2) Raju Mathew and Ors. vs. State of Kerala and Ors. [1 2016 BC 74 (KER.) Para 14] Therefore, Impugned Order is predicated on the unsolicited offer of WSRPL, while the second Swiss Challenge Process is still going on. (iv) Despite NCLAT directions contained in its order dated 18.6.2021, the Adjudicating Authority did not decide IA No. 273 of 2021 and IA No.379 of 2021 on priority, but instead of doing so put a halt to the second Swiss Challenge Process. (v) It is not true that the second Swiss Challenge Process has delayed the disposal of assets in any manner, except for the fact that certain Interlocutory Applications have been filed and such judicial intervention resulted in lapse of some time. Now when the second Swiss Challenge Process is nearing completion, there is a complete turnaround by the liquidator for stopping the Swiss Challenge Process without a cogent explanation. Moreover, the Adjudicating Authority does not ask the liquidator why he has changed his stand, but acts on the premise that the second Swiss Challenge Process w....
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....uidator placed all the facts as well as the offer of WSRPL before the stakeholders on 6.8.2021, who decided to go for disposal by sale of the composite assets instead of continuing with Swiss Challenge Process. The judgment of the Hon'ble Supreme Court regarding maximisation value of assets in the matter of Swiss Ribbons (P) Ltd. vs. Union of India (2019 4 SCC 17) and Innovative Industries Limited vs. ICICI Bank & Anr. (2018 1 SCC 1025) are relevant in this regard. (iv) The SCC has recommended for selling the assets as a whole. The commercial wisdom of the creditors should be respected as is laid down in K. Sashidhar vs. Indian Overseas Bank [(2019) 12 SCC 150] and Committee of Creditors of Essar Steel India Limited (through authorized signatory) v. Satish Kumar Gupta and Others, (2020) 8 SCC 531. (v) If Dahej Materials are sold first, the purchaser will require around 12 to 15 months to first lift the scrap and other material from the site and only after this the related land and other assets can be sold. Such a delay may lead to deterioration of assets' quality and decrease in their value. (vi) The offer of WSPRL was placed before the stakeholders vide ....
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.... (ii) The minutes of the Stakeholders Consultation Committee meeting held on 13.8.2021 were not produced before this tribunal earlier. Also, while the General Manager of State Bank of India was present before the Adjudicating Authority, he did not make any submission. Under Regulation 31-A(10) of the IBBI (Liquidation Process) Regulations, 2016 and section 35(2) of the IBC, the views of the Committee are not binding on the liquidator. Therefore, it is not proper for the liquidator to take recourse to the decision of the Stakeholders Consultation Committee in meeting dated 13.8.2021 for scrapping the second Swiss Challenge Process and go for private sale. (iii) None of the Respondents has shown that there is an illegality in the second Swiss Challenge Process. Therefore, it is not understandable why this process is being scrapped. 27. The appellant has prayed for setting aside the impugned order dated 16.08.2021 passed by the Adjudicating Authority and to stay the bid process for specified assets of ABG Shipyard Limited started by the liquidator. 28. We turn our attention to the Impugned Order dated 16.8.2021 (attached at pp. 72-74 of Appeal paperbook, Vol.I). Th....
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....e at pp.597-598 of Appeal paperbook, Vol.II). 31. The first Swiss Challenge Process started on 12.3.2021, over seven months after the completion of the five rounds of failed e-auction processes. Thus the time spent in deliberations of stakeholders and the failed e-auctions show that the sale of a complex unit as a shipbuilding yard alongwith accompanying assets, in various states of disuse and disarray, is a complicated process and hence ascribing the delay to any specific part of the entire process such as Swiss Challenge Processes may not be reasonable. A certain balance, therefore, has to be struck between timeliness of disposal and adequate value realisation in the sale processes. This first Swiss Challenge Process only offered Dahej materials for sale, whose reserve price was Rs. 516 crores. "Dahej Materials" consisted of metal and scraps without sheds and warehouse. After first Swiss Challenge Process turned out to be unsuccessful, the second Swiss Challenge Process started on 22.3.2021. In the second Swiss Challenge Process, the Dahej Yard (comprising of land including civil structure, ship lift alongwith specified machineries and custom list of other plant and machinery)....
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....structures, shiplift with specific machineries, customised list of other plant and machineries (attached at p 26, appeal paperbook ) Reserve price = Rs. 627 Cr Offer Price = Rs. 650 Cr (as stated inminutes of stakeholder meeting dated 13.8.21) 34. The provision containing sale of assets through private sale is contained in Regulation 33 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016, which is reproduced below:- "33. Mode of sale. - (1) The liquidator shall ordinarily sell the assets of the corporate debtor through an auction in the manner specified in Schedule I. (2) The liquidator may sell the assets of the corporate debtor by means of private sale in the manner specified in Schedule I when - (a) the asset is perishable; (b) the asset is likely to deteriorate in value significantly if not sold immediately; (c) the asset is sold at a price higher than the reserve price of a failed auction; (d) the prior permission of the Adjudicating Authority has been obtained for such sale: Provided that the liquidator shall not sell the assets, without prior permission of th....
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....ticular party. In short, such powers have to be exercised without any bias and by maintaining fairness and transparency. 38. In the judgment of Hon'ble Supreme Court in the matter of Meerut Development Authority and Ors. vs. Association of Management Studies and Ors. (supra), it was held that Meerut Development Authority has the right not to accept the highest bid and even to prefer a tender other than the highest bidder, if there exist good and sufficient reasons and that such action in accepting or refusing the bid must be free from arbitrariness or favouritism. Also, Hon'ble Supreme Court has held in Laxmikant and Ors. vs. Satyawan and Ors. (supra) that the right of the highest bidder has to be examined in the context of the conditions under which such auction has been held, and no right had accrued to the highest bidder under conditions of the sale which were notified before the public auction was held Hon'ble Supreme Court has held in Ramana Dayaram Shetty vs. International Airport Authority of India and Ors. (supra) that International Airport Authority of India had allowed another inexperienced tenderer to participate and the same was awarded, and others were denied equali....