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2022 (10) TMI 96
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....1. For the Respondent No. 3 : Mr. Kaustubh Prakash and Mr. Satvik Issar, Advocates for R-3. For the Respondent No. 4 : Mr. Sudhanshu Prakash, Ms. Neha Tandon and Sabyasachi Roy Chaudhary, Advocates for R-4. For the Appellant : Mr. Anup Kumar, Ms. Neha Jaiswal, Mr. Shivam Kumar, Ms. Shruti Singh & Mr. Sumit Ranjan, Advocates. For the Respondent No. 1 : Mr. Mainak Bose, Mr. Anand Sukumar and Mr. Bhupesh Kumar Pathak, Advocates for R-1. For the Respondent No. 3 : Mr. Kaustubh Prakash and Mr. Satvik Issar, Advocates for R-3. For the Intervenor : Mr. H.P. Sharma, Sr. Advocate with Mr. Satish Rai and Mr. Akhil Shankhwar, Advocates for Intervenor. For the Respondent No. 4 : Mr. Sudhanshu Prakash, Ms. Neha Tandon and Sabyasachi Roy Chaudhary, Advocates for R-4. For the Respondent No. 6 : Mr. Abhijeet Sinha, Mr. Kumarjit Bannerjee, Mr. Gaurav Gupta and Mr. Saikat Sarkar, Advocates for R6. JUDGEMENT [ Per ; Hon'ble Mr. Justice M. Satyanarayan Murthy ] 1. These Appeals have been filed challenging the Order passed by the Learned Adjudicating Authority (National Company Law Tribunal, Kolkata Bench) dated 02.03.2022 passed in I.A. 830/KB/2021, I.A. 848/KB/2021, I....
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.... I. Injunction restraining the liquidator and Respondent No.1 to take any further action and giving further effect to e auction held on 13-09-2021. II. Alternatively, Respondent No. 1 be directed to hold Re-auction. It has been stated, applicant was an interested bidder and participated in the bid, submits that on enquiry about the e-auction process, the applicant came to know that by a corrigendum published on September 08, 2021, the last date for submission of the EMD was extended till September 11, 2021 and the e-auction was scheduled for September 13, 2021 from 2pm to 4 pm. III. As an interested bidder, the applicant deposited the EMD amount of Rs. 8.60 cr. and participated in the e- auction held on September 13, 2021. IV. The bidding process started from Rs. 86.00 cr. In the course of bidding, the applicant made four bids in excess of other bidder. The last registered bid of the applicant was standing at Rs.87.75 but at this point the applicant faced the connectivity issue and the applicant was unable to proceed further in the bidding process and there were interruptions and buffering. V. Applicant has further stated the last registered bid....
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....d not have sufficient time to furnish the bid." 6. The Respondents/JSW Steel Limited filed IA 962/KB/2021 claiming the following: "A. Order seeking intervention and impleadment as party; I. Direction for cancellation and, setting aside of the B- auction Information Process Document dated August 24, 2021 and E-auction dated September 13, 2021. II. Cancellation and setting aside of entire E auction dated 13-09-2021 and the LOI issued by the Liquidator to Snaefell Heights. III. Direction on the liquidator to conduct a fresh bidding for the sale of the Corporate Debtor as a going concern. IV. Interim Order directing the liquidator and Snaefell Heights to maintain status Quo as regard to the assets of the Corporate Debtor. i. The Applicant claims to be part of O.P. Jindal Group and one of the India's leading business houses. The Applicant is in business in sectors such as energy, infrastructure, cement, paints, sports and venture capital. ii. Balaji Metals ('Operational Creditor') had initiated insolvency proceedings against the Corporate Debtor being CP (IB) No.1542/KB/2018 under Section 9 of the Code. The Co....
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....Debtor and has to exercise its power in bona-fide. The purpose of the auction is to get the most remunerative price." 7. The Respondents/Rahul Roy Chowdhury filed IA 963/KB/2021 claiming the following: "A. Liquidator be directed to Re-auction, B. Liquidator not to declare Successful Bidder of to issue LOI to the HI bidder till disposal of this IA. i. Applicants states that as per the e-auction, Snaefell Heights was the highest bidder with the bid of Rs. 88 Crores. However due to some technical issue M/s. Chinar Steel could not put his bid of Rs.88.25 Cr and the same was communicated to the liquidator. ii. The Applicant approached the liquidator praying. that the Corporate Debtor be sold as a going concern because of 500 workmen and employees. iii. In the meantime, one of the bidders, M/s. Chinar Steel, who participated in the e-auction process, mentioned the matter before the Hon'ble NCLT, Kolkata Bench on 16.09.2021, wherein the Liquidator was also present. On the queries raised by the Hon'ble Bench, the Liquidator apprised them about the entire process. The Liquidator said that he has received one e-mail for extension of tim....
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....ion sale was scheduled to be held on 09.09.2021 from 15:00 hours to 17:00 hours. However, on the date of e-auction bids by only one bidder could be submitted and a prospective bidder, namely Nortech could not submit its bid despite its intent. ii. Consequentially, in an application listed as IA. 720/2021, the Hon'ble Tribunal extended the outer time limit for sale of the Corporate Debtor as a 'going concern' till 13.09:2021 and the e-auction which was originally scheduled to be held on 09.09.2021, came to beheld on 13.09.2021. Pertinently, the prospective bidder, namely Nortech, along with all intending prospective bidders were permitted to participate in the E-auction. iii. Notably, this was done so as to ensure maximization of the value of the Corporate Debtor. However, the Applicant herein, who is a prospective bidder, had no notice or knowledge of the said extension of time for participation in the e-auction till 13.09.2021and was, as such, unable to submit the EMD and consequently participate in the e-auction process. The Applicant/ Prospective Bidder became aware of the said extension recently. iv. Upon becoming aware of the same, the Ap....
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.... It is further submitted that though much has been said on the said email but the fact remains that the auction process, immediately upon. its completion was brought to the notice of the Tribunal by the applicant and the fact that the same was entertained in the presence of the Liquidator. 13. It is further submitted by the Ld. Counsel for the applicant in IA. No. 830/2021 that since the petitioner was prevented by sufficient cause from suitably making its offer during the auction process, the matter was immediately mentioned before this Adjudicating Authority upon notice for the Liquidator on 16th September, 2021. The Liquidator in his Affidavit has unequivocally admitted the said fact at paragraph 'm' at page 7. 14. It is stated that it has also been admitted that based on the oral directions of this Adjudicating Authority, the Liquidator was directed to consider re-auction and was further directed not to declare the successful bidder or issue any LoI to the H/1, bidder in the meantime till such time the proposed application of the Applicant was listed for consideration. 15. It is submitted that the application was filed on 17 September, 2021, and the Respondents....
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....posterous to suggest that the stakeholders would agree to accept a lower bid when the Applicant for offering a higher bid had already made an application which was pending adjudication. 19. It is submitted that based on the principle of maximization of value, which is the object of the Code, there are overwhelming reasons in the facts of the present case that an opportunity is required to be given to the Applicant to make a higher bid. The Applicant wishes to make a bid of Rs.93 crores to purchase the assets and properties of the Company in Liquidation and further undertakes to improve its offer, if required. 20. It is further submitted that though much has been said on the said email but the fact remains that the auction process, immediately upon its completion was brought to the notice of the Tribunal by the applicant and the fact that the same was entertained in the presence of the Liquidator. 21. It is submitted that in the present applications, the Applicant seeks to set aside the sale held on 13th September, 2021, reconsider its higher bid and alternatively, re-auction of the assets of the Company in Liquidation." 22. The Appellant/Raj Singhania, the Liquidator co....
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....assword for participation in the e-Auction Process to both M/s. Snaefell Heights LLP and M/s. Chinar Steel Segment Centre Pvt. Ltd. based upon the EMD received. The e-Auction Process was commenced at 2:00 PM and both the bidders had submitted at least one bid till 4:00 PM. Subsequently, the Liquidator received an e-mail from the Applicant that they are having network issues and sought extension of 45 minutes on such ground. The Liquidator extended 30 minutes time and again both the bidders submitted further bids. The e-Auction Process concluded with the last bid being placed at 4:49 PM by M/s. Sanefell Heights LLP for an amount of Rs.88Crores/-. 24. Subsequently, the Liquidator immediately proceeded to issue Notice for conducting of meeting of the Stakeholders' Consultation Committee on 15.09.2021 for meeting to be held on 16.09.2021 through Virtual Mode for suggestion on future course of action. While so, one of the Applicants, who participated in the e-Auction Process mentioned the matter before the Adjudicating Authority on 16.09.2021, wherein in the presence of Liquidator and the Liquidator apprised the Adjudicating Authority about the entire process in free and fair manner ....
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....nd foremost grounds in both the Appeals is that the Adjudicating Authority did not appreciate the facts on record and erroneously concluded that the Liquidator Appellant in Comp. App. (AT) (Ins.) No. 465/2022 in allowing the Interlocutory Applications to set aside the same filed by non-participants which is a serious flaw in the Order, apart from that the Liquidator has strictly adhered to the procedure contemplated under Regulation for sale of the 'Corporate Debtor' as 'a Going Concern' as per Corporate Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016, and that the alleged illegality pointed out by the Petitioners is not material irregularity, it is only an accidental. 30. The Learned Counsel for the Respondents supported the Order in all respects while placing reliance on 'Bharat Heavy Electricals Ltd.' Vs. 'Anil Goel & Ors.' Comp. App. (AT) (Ins.) No. 22/2020, 'Arun Kumar Jagatramka' Vs. 'Jindal Steel & Power Limited' (2021) 7 SCC 474, Circular bearing reference no. IP(CIRP)/006/2018, 'Prakash Chandra Kapoor & Anr.' (referred Supra), 'Ekambareswara Rao Manne' Vs. 'Gonugunta Madhusudhan Rao, Liquidator' C.P. (IB) No. 265/9/HDB/2017 and in 'Binan....
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....EMD and date and time for Auction. 35. The Liquidator/Appellant in Comp. App. (AT) (Ins.) No. 465/2022, proposing to sell the assets of the 'Corporate Debtor' as 'a Going Concern' issued e-Auction Notification dated 24.08.2021 fixing the date of e-Auction as 09.09.2021 from 3:00 PM to 5:00 PM and the last date to apply and submission of the documents and EMD as 07.09.2021 before 6:00 PM while fixing date and time of inspection between 10:00 AM and 5:00 PM on 07.09.2021. The notification was issued strictly adhering to Regulation 32(e) read with Regulation 32A and 33(1) of Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016. 36. The Adjudicating Authority examined the corrigendum and found that no opportunity was given to the prospective bidders in the corrigendum dated 08.09.2021 to inspect physically the 'Corporate Debtor' while maintaining other condition of initial notification as provided in any initial bid documents. It is irrational and unreasonable and fail to conduct the e-Auction in the fair manner and also pointed out that a Successful Highest Bidder is an LLP incorporated in the Year 2019 with a turnover for the FY ending by 31.03.2019,....
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....ten happens that certain mistakes are found to have been overlooked. In later editions, it is usual to insert, a list of such mistakes and to point out the necessary corrections, these are called 'corrigenda'. 38. In the present facts of the case, the Liquidator/Appellant in Comp. App. (AT) (Ins.) No. 465/2022 issued corrigendum extending time not an addenda. Irrespective of nomenclature of the Notification, the purport of the Notification if taken as it is, the Notification dated 24.08.2021 i.e., by the corrigendum is intended to extend time for submission of documents of EMD and change of date and time of Auction. Admittedly, the Liquidator received no documents of EMD till expiry of time limited in the Original Notification dated 24.06.2021 and thus nobody intends to participate in the e-Auction Process. Therefore, it is the duty of the Liquidator to afford an opportunity to inspect the 'Corporate Debtor' enabling the participant or interested bidders to submit the EMD Application, as participation in the e-Auction Process is to maximize the Assets of the 'Corporate Debtor'. But in the corrigendum extending date and time for submission of EMD and fixing time and date for cond....
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.... corporate debtor, as identified by the committee of creditors under sub- regulation (2) of regulation 39C of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 shall be sold as a going concern. (3) Where the committee of creditors has not identified the assets and liabilities under subregulation (2) of regulation 39C of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, the liquidator shall identify and group the assets and liabilities to be sold as a going concern, in consultation with the consultation committee. (4) If the liquidator is unable to sell the corporate debtor or its business under clause (e) or (f) of regulation 32 within ninety days from the liquidation commencement date, he shall proceed to sell the assets of the corporate debtor under clauses (a) to (d) of regulation 32.]" 41. According to Regulation 33, the Liquidator shall order and to sell the assets of the 'Corporate Debtor' to an Auction in a manner specified in the Schedule. Schedule I describes the mode of sale. The first mode is Auction whether an asset ....
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....cating Authority tested the validity of the Auction and the corrigendum and Auction conducted in pursuance of the same receiving bids in 'Manoj I Naik & Associates' (referred Supra), the Hon'ble Supreme Court held that there can be no speck of doubt that the properties of a company under Liquidation when sold there has to be a proper Auction, a fair one. It must fetch the maximum price. It takes care of Statutory Dues, dues of the workmen and the Creditors. It has its own public character. In another Judgement in 'Bank of India' (referred Supra), the Court held as follows: "The sanctity of auction process has to be maintained i.e., once it is closed, normally it should not be reopened as generally understood. As stated earlier, generally the same can be done only on two grounds i.e., fraud or material irregularity occurred in the process of auction. However, another ground is added by IBC, 2016 i.e., maximization of value of assets of corporate debtor'. Thus, when a situation of challenge to auction process arises on the ground of assets not being sold at the maximum possible value, then, also in our considered view, auction process can be enquired into and such process ca....