TaxTMI 
TaxTMI 
2022 (9) TMI 804
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....or 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 / Auction Purchaser For M/s. A.K. Mylsamy & Associat....
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....ard, '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 `Auction' to be conducted on 25.11.2019, to `sell the property' at a `R....
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....3. 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 and the same were dismissed, vide the common order dated 17.11.2021 in CP/1140/IB/CB/20....
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....AT 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 District Registrar, Tiruchirappalli. (b) Recall the order passed by this Hon'ble Court dated 05.05.2020 passed by this Hon'ble Court in MA No....
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...., 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 Counsel for the Appellant emphatically stated that `Liquidation Proceedings' without constituting the `Stakeholders Committee' was Improper and Regulation 8 of Insolvency and Bankruptcy Board of India (Liquidation Process) R....
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....4.12.2019 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 extended w.e.f. 15.03.2020 till further orders. The said order of the Hon'ble Supreme Court of India is wide in its scope so as to include all proceedings irrespective of the limitation prescribed under the general law or special law. 43. The....
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....`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 that on 24.12.2019, a Letter was sent by the `Respondent No. 1 i.e., Liquidator', informing the 2nd Respondent that he has been declared as the `Successful Auction Purchaser' which was received by the Rs. 2nd Respondent' on 26.12.2019. 55. Vide order dated 05.05....
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....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 dismissal of all the three instant `Appeals' by this `Tribunal', in the `interest of justice'. Discussions: 62. Heard the Learned Counsel for both the parties and also perused record made available to us including 'Written Submissions', 'Counter Statement' and 'Additional Written....
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....ting 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. Issue No. (I) Whether the Auction held by the liquidator, without proper Notice to the Shareholders/Stakeholders of the Company is valid in accordance with the IBBI Rules and Regulations, 2016? In order to understand the exact issue raised and the implication, it will be imperative to go through the exact rules as provided in I & B Code, 2016, on this issue. (i) Following are the relevant Rules provided in the I & B C....
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....ted 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 ninety days. b. [(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.] [emphasis supplied] (ii) This Appellate Tribunal passed a Judgment in the case of Standard Surfa Chem India Pvt. Ltd vs. Kishore Gopal Somani vide order dated 09.08.2021, reported in 2022 SCC OnLine NCLAT 305 held that:- a. Para 24- In the instant case....
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....r 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 may also refer to Section 424 of the 'Companies Act, 2013'. "Rule 11 of NCLT Rules, 2016 Inherent Powers- Nothing in these rules shall be deemed to limit or otherwise affect the inherent powers of the Tribunal to make such orders as may be necessary for meeting the ends of justice or to prevent abuse of the process of the Tribunal. Section 424 of the Companies Act, 2013. Procedure before the Tribunal and Appellate Tribunal.- (1) The Tribunal and the Appellate Tribunal shall not, while disposing of any proceeding before it, or the case may be, an appeal before it, be bound....
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....ed 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-auction Upset Price Rs.39,41,28,500 (vi) Thus, from the above table, it is evident that Rs.39,41,28,500/- was `Average of Liquidation Value' for the purpose of E-auction Upset Price, which is as stipulated in the relevant Rules. (vii) We also need to appreciate that different property may have different value depending upon location, size of property, economic situation prevailing at the particular time, demand and supply of properties at the relevant time. The sale of distressed assets, more so, if it is along with dispute, may also impact the valuation of the property adversely. Although, many parameters like last `Auction' of similar property or notified rates by relevant `....
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....sdom' 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 selling the entire assets of the company when sale of a part of the `Assets' of the company would have been sufficient to discharge the liability of the company. (i) The counsel for the `Applicant' in CP No. 336 of 2021, contended that the liability was not even the 1/10th and could have been satisfied with only selling some particular part of the property and there was no need to sell the whole property. It can be argued both ways as stated in 'CHAPTER VI REGULATION 32 OF IBBI Rules and Regulations' "32 [Sale of Assets, etc. The liquidator may sell- (a) an asset on a standalone basis; (b) the assets in a slump sale; (c) a set of assets collectively; (d) the assets in parcels; (e) the corporate ....
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....me 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 `Appeal'. This `Tribunal therefore, do not find any error on the part of the `Liquidator' and uphold the decision of the `Adjudicating Authority' on this aspect. [emphasis supplied] Issue No. (V) Whether the `Liquidator' was justified in conducting the `Auction Proceedings' without forming the `Committee of Stakeholders', as envisaged under the I & B Code, 2016? (i) The Liquidator was appointed by the `Adjudicating Authority' vide order dated 17.07.2019 and the `Auction' has been successfully carried out. The property has been sold, and the Appellant has objected that the `Liquidator' did not form `Committee of Stakeholders', as per I & B Code, 2016. (ii) We will need to refer to the Amendment, Regulation 31A vide Notification No. - IBBI/2019-20/GN/REG047 w.e.f. 25.07.2019 and the Amendment Regulation 31A vide,....