TaxTMI 
TaxTMI 
2022 (9) TMI 804
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....P.H. Arvindh Pandian, Senior Advocate for Respondent No.1 / Liquidator For Mr. S. Sathiyanarayanan, Advocate of Wise & Worth For Respondent No. 1/Liquidator And Mr. V.S. Palanivel, Share holder/ Ex-Managing Director, M/s Sri Lakshmi Hotels Pvt. Ltd. Versus Mr. P. Shriram, CS, Liquidator, M/s Sri Lakshmi Hotels Pvt. Ltd., M/s KMC Specialty Hospitals (India ) Ltd. And Mr. V.S. Palanivel, Share holder/ Ex-Managing Director, M/s Sri Lakshmi Hotels Pvt. Ltd. Versus M/s KMC Specialty Hospitals (India ) Ltd. For the Appellant : Mr. A.L. Somayaji, Senior Advocate For APR Associates. For the Respondent : Mr. P.H. Arvindh Pandian, Senior Advocate for Respondent No.1 / Liquidator For Mr. S. Sathiyanarayanan, Advocate of Wise & Worth For Respondent No. 1/ Liquidator Mr. P.S. Raman, Senior Advocate for Respondent No.2 / Auction Purchaser For M/s. A.K. Mylsamy & Associates. For the Appellant : Mr. A.L. Somayaji, Senior Advocate For APR Associates For the Respondent : Mr. P.H. Arvindh Pandian, Senior Advocate for Respondent No.1 / Liquidator For Mr. S. Sathiyanarayanan, Advocate of Wise & Worth For Respondent No. 1/Liquidator. Mr. P.S. Raman, Senior Advocate for Respondent No.2 / Auct....
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....tion Award' on 16.11.2017. Due to non-payment of Arbitral Award, 'Financial Creditor' filed an Application under Section 7 of the I&B Code, 2016 by filing CP/1140/(IB)/CB/2018 before 'Adjudicating Authority', who admitted this petition on 28.02.2019 and 'Mr. P. Sriram CS' was appointed 'Interim Resolution Professional' (in short 'IRP') who was later confirmed as 'Resolution Professional' and finally as Liquidator. 4. The `Interim Resolution Professional' on 02.03.2019, made a public announcement, calling upon the `Financial' as well as `Operational Creditors' to submit the `Claims'. Until 21.06.2019, no `Resolution Plan' for revival of the Company was received. The 'Committee of Creditors' i.e. `CoC' thereafter, had recommended for `Liquidation' of the company in MA No. 689 of 2019 filed in CP/1140/IBC/CB/2018 before 'Adjudicating Authority'. 5. By way of an order dated 17.07.2019, the 'Adjudicating Authority' passed an order of `Liquidation' in MA/689/2019 in CP/1140/IB/CB/2018. 6. The Liquidator had engaged two `Registered Valuers' and arrived at a valuation of the subject/said property at Rs.39,41,28,500/-. Based on this `Liquidation Value', the `Liquidator' fixed `Auct....
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....circumstances, `Time Period' for making the `Payment' cannot be extended. 13. Also the `Appellant' had alleged that the `Auction Purchaser' and the `Liquidator' misled the 'Adjudicating Authority' by misinterpreting the `Orders of the Hon'ble Supreme Court of India and the National Company Law Appellate Tribunal', to contend that the `Time Period' for depositing the amount is extended. 14. The Appellant filed a `Special Leave Petition' before the Hon'ble Supreme Court of India in SLP (c) No. 12300 of 2020 and the same is pending, as on date. 15. The Appellant filed an `Application' before the 'Adjudicating Authority' for the purpose of setting aside the `Sale Deed' dated 28.08.2020 (vide registered as Document no. 3551/2020) before the District Registrar, Tiruchirapalli. 16. The 'Appellant' has urged the 'Adjudicating Authority' to `Recall' the 'impugned order' dated 05.05.2020l, passed in IA No. 335 of 2020 in M.A. No. 689 of 2019 in C.P. No. 1140/IBC/CB/2018 and the unnumbered `Application' was SR No. 944 of 2020. 17. The `impugned order' was passed by the 'Adjudicating Authority', after hearing the `Applications' MA No. 120 of 2021 and the SR No. 944 of 2020 a....
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....8 SCC 319 and (vii) Potens Transmissions & Power Pvt. Ltd. Vs. Gian Chand Narang 2022 SCC OnLine NCLAT 295 were also submitted. 24. The Learned Counsel for the Appellants refuted the counter arguments of the 'Respondents', as `false' and `misleading'. 25. The Learned Counsel for the Appellants highlighted that on 16.10.2019, the 1st Sale Notice was issued and the Second Respondent deliberately had not taken part in the `Auction', proposed on 25.11.2019. 26. The Learned Counsel for the sake of clarity summarised the prayers which were made by him in his `Petitions', before the 'Adjudicating Authority' are herein as under:- "3.a. The prayers in IA No. 120 of 2020 i) Directing the Respondent to stay all further proceedings in respect of e-auction conducted on 23.12.2019; (ii) To work on alternate way by dividing the property and sell a portion of the land as per market value to meet the demand; and (iii) To grant sufficient time to the Applicant to make payment to the financial creditor. 3.b. The prayer in IA SR No. 944 of 2020: (a) Set aside the sale deed dated 28.08.2020 registered as document No.3551/2020 before the Dis....
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.... only referred to difficulties faced by litigants across the country and the second respondent as an 'Auction Purchaser' cannot be termed to be a `Litigant'. The timeline for making the balance sale consideration, is as-per clause12 of Schedule1 of the relevant rules as mentioned earlier and the proviso specifically mentions that the `Sale' shall be cancelled if the `Payment' is not received within 90 days. 31. As per the Learned Counsel for the Appellant, the decision of the Hon'ble Supreme Court of India in GPR Power Solutions Pvt. Ltd. Vs. Supriyo Chaudhuri, reported in 2021 SCC OnLine SC 1328 and another judgment passed by this Tribunal in Standard Surfa Chem India Pvt. Ltd. Vs. Kishore Gopal Somani, reported in 2022 SCC On Line NCLAT 305 are in different context and cannot taken as basis, as projected by the Respondent. 32. The Learned Counsel for the Appellant emphasised that the 'Adjudicating Authority' has the `Power to Recall its own Order'. As from the facts of the present case, it can be seen that the Order dated 05.05.2020 was passed in the light of misrepresentations and fraud played by the First Respondent and the Second Respondent. 33. The Learned Counse....
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....6, the `Highest Bidder' is required to pay the `balance sale consideration' within 90 days from the date of `Demand'. The Respondent/Liquidator had intimated the `Successful Bidder' about the close of the `Auction' vide letter dated 24.12.2019 received by the Successful Bidder on 26.12.2019 and called upon them to pay the `balance sale consideration'. 41. The Learned Counsel for the Respondents stated that as per `Terms and Conditions' of e-auction and Schedule I of the IBBI (Liquidation Process) Regulations, 2016, the `Successful Bidder' was required to pay the `balance consideration' within 90 days from 26.12.2020, i.e., on or before 25.03.2020. 42. Learned Counsel for the Respondents brought out the order of the Hon'ble Supreme Court of India in Suo Moto Writ Petition (Civil) No. 3/2020, extending the period of limitation in all proceedings, is also applicable for Auction Process conducted in a Liquidation Proceeding. The Hon'ble Supreme Court of India in Suo Moto Writ Petition (Civil) No. 3/2020, had extended the period of `Limitation' in all `Proceedings', irrespective of the Limitation prescribed under the General Law or Special Laws whether condonable or not, was exten....
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....ed the property from two `Registered Valuers' and arrived at a valuation of the property at Rs. 39,41,28,500/- 51. The Learned Counsel for the Respondent submitted that 1st E-auction was conducted on 25.11.2019 by the Respondent No. 1 / Liquidator with `Reserve Price' of Rs.39,41,28,500/- and no `Bidders' participated. 52. The Learned Counsel for the Respondents mentioned that on 23.12.2019 Second E-auction was conducted by the `Liquidator' with `Reserve Price' of Rs.29,55,96,375/- as per Regulation 33 r/w Serial 4-A of Schedule 1 of the IBBI (Liquidation Process) Regulations, 2016, it is stated that, 'Where an Auction fails at the `Reserve Price', the `Liquidator' may reduce the `Reserve Price' by upto 25% of such value to conduct subsequent Auction'. 53. The Learned Counsel for the Respondents stated that on 18.12.2019, 2nd Respondent paid the `Earnest Money Deposit' [`EMD'] of Rs.2,95,59,638/-. `Balance Sale Consideration' of Rs.26,60,36,737/- was payable within 90 days from the date of `Demand' (in accordance with Regulation 33, r/w Serial 12 of Schedule 1 of the IBBI (Liquidation Process) Regulations, 2016). 54. The Learned Counsel for the Respondents brought out t....
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....d. &Anr., reported 2021 OnLine NCLAT 1182 (Hon'ble NCLAT, Principal Bench), wherein it was held that "It cannot be gainsaid that there is no express provision for "Review" under the NCLAT Rules'', 2016. Moreover, the `Applicant/Appellant' cannot fall back upon Rule 11 of NCLAT Rules, 2016, which provides for "inherent powers". In fact, Rule 11 of NCLAT Rules, 2016, is not a substantive Rule which showers any power or jurisdiction upon the `Tribunal'. Undoubtedly, the `Tribunal' has no power to perform an act which is prohibited by Law." c) In the decision in Standard Sufra Chem India Pvt. Ltd. Vs. Mr. Kishore Gopal Somani, reported in 2022 SCC OnLine NCLAT 305 (NCLAT, Principal Bench), wherein it was observed that, "it is pertinent to mention that `Liquidation Process Regulation 47', deals with the Model Timeline for Liquidation Process. Model Timeline is only directory in nature. It cannot be considered a deadline. It is provided under Regulation as a guiding factor to complete the `Liquidation Process' in a time-bound manner. In exceptional circumstances, such a time limit can be extended. 61. While summing up his arguments, the Learned Counsel for the Respondent prays for ....
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.... Auction. 07. 24.12.2019 First Respondent intimated the Second Respondent that they were the Highest Bidder. 08. 31.12.2019 Request made by the Second Respondent to remove the Income Tax attachment of the said property. 09. 10.02.2020 First Respondent filed an Application before the `Adjudicating Authority' for a direction to the `Income Tax Department' for vacating the `order of attachment' and the same was allowed by the 'Adjudicating Authority' vide order dated 10.02.2020 in MA No. 63 of 2020 in CP/1140/IB/2018. 10(a) 10(b) 22.03.2020 25.03.2020 Last date for payment of the `balance sale consideration' as per Appellant. Last date for payment of the `balance sale consideration', as per the Respondent. 11. 05.05.2020 Impugned order in IA No. 335 of 2020 passed for extending time to deposit balance payment. 12. 24.04.2020 Balance sale consideration was paid. 13. 28.08.2020 The Sale Deed was executed, which is the subject matter of challenge in Company Appeal (AT) (Ins.) No. 339 of 2021. 14. 17.11.2021 The `Adjudicating Authority' dismissed the Applications in MA No. 120 of 2020 and IA in SR No. 944 of 2020. ....
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.... limit was reduced to one year vide amendment dated 25.07.2019. Hence, this `Tribunal' find that the required Notice was issued correctly by the `Liquidator' in accordance with the Rules, as provided in I & B Code, 2016, and there was no infringement of rights of the `Appellant'. We do not find any error in the 'impugned order' on this issue. Issue No. (II) Whether sale was valid when payment from the 'Auction Purchaser' is not received within 90 days. Can any extension be granted for the same? We will refer to exact rules as provided in I & B Code, 2016 on this issue, and see precedent Judgments. (i) Following are the relevant rules as provided in I & B Code, 2016. Chapter VI of Regulation 33 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 Schedule IMode of sale, a. [(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 nin....
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....ration may be extended by the sole discretion of Liquidator, to the extent permissible under the applicable laws and regulations. However, in case final sale consideration is not paid within stipulated timeline, the Liquidator shall forfeit earnest money." [emphasis supplied] (iii) As per above mentioned provisions and decision of this Appellate Tribunal, the extension was granted due to the Covid-19 lockdown. The order passed by the 'Adjudicating Authority' stands valid on the grounds that almost all functioning were restricted during Covid-19 outbreak, vide Order dated 05.05.2020. (iv) Moreover, the property was said to be in subsistence of attachment of Income Tax Department, and due to the same, the Registrar was not registering the property in the name of the `Successful Bidder' and subsequently the 'Adjudicating Authority' directed the Income Tax Department to issue a NOC, and then the property was registered successfully in name of Successful Bidder. (v) Further the delay in payment if reasonable, the 'Adjudicating Authority' by exercising its `inherent powers' under Rule 11 of I & B Code, 2016, can grant extension of payment by the `Successful Bidder'. We ....
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....ed price under clause (4A), the reserve price in subsequent auctions may be further reduced by not more than ten percent at a time."; [emphasis supplied] (iii) We need to note that after admitting Section 9 Application by the 'Adjudicating Authority', a complete drill was carried out for 'Corporate Insolvency Resolution Process'. Even then, it is noted that no proposal was received for Resolution. (iv) Subsequently, based on the `Application' of `Resolution Professional', the 'Adjudicating Authority' ordered for `Liquidation' of the company. (v) As required by the Rules relating to `Liquidation', as provided in I & B Code, 2016, the `Liquidator' engaged two `Registered Valuers' to arrive at right price of the property of the company. Following table gives clear picture and how the `Liquidator' came to the conclusion of `Reserve Price' against a plea of the `Appellant' that, prevailing market rate of the property is more than Rs.100 Crore. Name of the Valuer Tax Value Liquidation Value Ms. Vijayalakshmi Rs.48,03,00,000 Rs.40,82,57,000 Mr. R.S. Babu Rajendran Rs.48,48,00,000 Rs.38,00,00,000 Average Liquidation Value for the purpose of E....
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....It is the onerous responsibility of the `Liquidator' to ensure maximum realisation of the property and therefore, it is expected that he shall take decisions in the sale of the property to `Auction', based on the `Commercial Wisdom' as being done in case of 'Corporate Insolvency Resolution Process' by the 'Committee of Creditors'. In catena of Judgment of the Hon'ble Supreme Court of India, it has been clearly held that the 'Adjudicating Authority' or the `Appellate Authority', need not to dwell upon the `Commercial Wisdom' of the 'Committee of Creditors'. Although, there is no scope for the `Liquidator' to be treated at par with the 'Committee of Creditors', however we need to recognise the `Commercial Wisdom' of the `Liquidator' in conduct of an `Auction' to realise `Maximum Value'. (xi) In view of the above discussions, the act of `Liquidator' stands to be valid as the process was conducted in accordance with the IBBI Rules and Regulations, especially as per Rule 4A and 4B, the `Liquidator' has power to reduce the Reserve Price by 25% for subsequent action. There is no error in the 'impugned order' w.r.t. this aspect. Issue No. (IV) Whether the Liquidator was justified in ....
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.... of market value of a property differ in many aspects, sometimes a property as whole holds more market value and if sold in parts, the value may depreciate and vice versa. The `Commercial wisdom' of the `Liquidator' is not questionable by the 'Adjudicating Authority', and if the `Liquidator' is of the idea that, then, it should be understood that the `Liquidator' is appointed to benefit and improve the situation of the `Corporate Debtor' and not degrade it. We do not know that what would appreciate or depreciate the value of the property, but the `Liquidator' is a person who has knowledge on the ground and can identify the best possible way to benefit the `Corporate Debtor' and understands the practical aspects of Commercial Real Estate Markets, then, it should not be questioned. Also, the Hon'ble Supreme Court of India in case of R.K. Industries LLP v. H.R. Commercial (P) Ltd., reported in MANU/SC/1069/2022 held that Liquidator's commercial wisdom not open to judicial review by the Adjudicating Authority. (iv) The 'Adjudicating Authority' finds the Liquidator's action justified and reasonable and in accordance with `Law', hence this issue is not maintainable in the `Appea....
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....54 of the NCLT Rules, 2016 provides that: (1) Any clerical or arithmetical mistakes in any order of the Tribunal or error therein arising from any accidental slip or omission may, at any time, be corrected by the Tribunal on its own motion or on application of any party by way of rectification." "General power to amend: Further, Rule 155 of the NCLT Rules, 2016, provides that the Tribunal may, within a period of thirty days from the date of completion of pleadings, and on such terms as to costs or otherwise, as it may think fit, amend any defect or error in any proceeding before it; and all necessary amendments shall be made for the purpose of determining the real question or issue raised by or depending on such proceeding." From the abovementioned points, this `Tribunal' can easily differentiate between `Review' and `Recall'. The Hon'ble Supreme Court of India in the case of Lily Thomas vs. Union of India, reported in (2000) 6 SCC 224 held : "That the power of review can only be exercised for correction of a mistake and not to substitute a view and that the power of review could only be exercised within the limits of the statute dealing with the exercise of su....