TaxTMI 
TaxTMI 
TaxTMI 
2022 (10) TMI 933
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..../3871(PB)/2021 & I.A.(I.B.C)/4489(PB)/2021 in C.P. (IB)/1446(PB)/2018. By the Impugned Order, the Adjudicating Authority has dismissed the I.A.(I.B.C.)/3871(PB)/2021 filed by the Liquidator-Respondent No. 2 and has allowed the I.A.(I.B.C.)/4489(PB)/2021 filed by the Jindal Stainless Limited-Respondent No. 1. 2. The brief facts of the case necessary for deciding the Appeal are: The Adjudicating Authority vide Order dated 12th June, 2019 initiated 'Corporate Insolvency Resolution Process' against the Corporate Debtor-Rathi Super Steel Limited. No Resolution Plan having been approved by the Committee of Creditors, an Application for liquidation of the Corporate Debtor was filed before the Adjudicating Authority which was allowed by Order dated 19th June, 2020 by the Adjudicating Authority. Mr. Harish Chander Arora, Respondent No. 2 herein who was working as Resolution Professional, has been appointed as Liquidator in accordance with Regulation 12 of the Insolvency and Bankruptcy Board of India (Liquidator Process) Regulations, 2016. A Public Announcement was made inviting claims from the Creditors of the Corporate Debtor. The Liquidator prepared a List of Stakeholders and constit....
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....f the SCC, the Liquidator issued Limited e-Auction Process Information Document for Limited e-Auction Process among existing bidders. The process of limited e-Auction Information Document contained various terms and conditions which we shall notice hereinafter. In pursuance thereof Limited e-Auction was conducted among three bidders on 17th June, 2021 in which the Appellants became the highest bidder with a bid or Rs. 177.50 Crores. SCC Meeting was held on 18.06.2021 in which the Appellant was noted as a Highest Bidder. The Letter of Intent (LoI) was issued on 01st July, 2021. The Revised LoI was issued by the Liquidator to the Appellants on 05th August, 2021 with inclusion of certain reliefs and concessions which was requested by the Appellants. On 31st August, 2021, Compliance Certificate under Form-H was submitted by the Liquidator. The Liquidator filed an I.A. No. 3871/2021 seeking closure of Liquidation process and approval of terms and conditions of sale. On 03.10.2021, an Application I.A. No. 4489/2021 was filed by the Jindal Stainless Limited for consideration of its bid for acquiring CD as a going concern. In the Application filed by the Jindal Stainless Limited, the Appli....
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....xcluding the time consumed in this application. vi. If the auction as ordered above takes place then as per terms to be refixed by the liquidator, the highest bidder will be confirmed as the purchaser and dealt with accordingly for such permissible reliefs. vii. After the auction concludes, liquidator shall be duty bound to return the EMD along with accrued interest (if any) to the unsuccessful bidder. viii. Liquidator shall give a report on conclusion of the auction to this Adjudicating Authority on or before 14.10.2022. ix. Based on the report of the Liquidator, matter will be proceeded further by this Adjudicating Authority. 4. This Appeal was filed challenging the Order dated 28th September, 2022 before this Tribunal on 29th September, 2022 and Appeal was entertained after hearing both the parties and Interim Order was passed adjourning the Auction for 15 days. 5. We have heard Ms. Sonal Alagn, Learned Counsel for the Appellant. Mr. Ramji Srinivasan, Sr. Advocate and Mr. Abhinav Vasisht, Sr. Advocate for Jindal Stainless Limited and Mr. Sumant Batra, Advocate for the Liquidator. 6. Learned Counsel for the Appellant Ms. Sonal Alagn advanced submissions on behalf of ....
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....be completed in a time bound manner and it cannot be allowed to be delayed by intervention of Jindal Stainless Limited. It is submitted that in the Application which was filed by the Liquidator as well as Form-H, no prior approval of the Adjudicating Authority was sought for as well for Limited e-Auction conducted on 17th June, 2021. The Approval of the Adjudicating Authority was sought only with respect to certain reliefs and concessions which was added in the 'Letter of Intent' dated 05th August, 2021 at the instance of the Appellant. The Liquidator has filed closure application with a request to close the Liquidation Process. The Adjudicating Authority while considering the Application of closure could not have assumed jurisdiction of approval of the sale and the assumption of jurisdiction of Adjudicating Authority is not in accordance with statutory scheme and deserved to be set aside. 7. It is further submitted that the offer submitted by the Appellant was higher than the last reserved price hence the sale being on a price higher than the reserved price, Liquidator was entitled to conduct the Private Sale without any intervention of the Adjudicating Authority. 8. Learned Cou....
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....declared as a highest bidder does not clothe with the Appellant right to enforce the auction sale. One of the objects of the IBC is maximization of the assets of the Corporate Debtor. Offer having been made of Rs. 190 Crores and to make payment within three months was an offer which was in accordance with the object of IBC and Adjudicating Authority did not commit any error in not accepting the sale in favour of the Appellants and directing a fresh Limited e-Auction between the Appellant and Respondent-Jindal Stainless Limited and other two bidders who participated in the Limited e-Auction Process dated 17th June, 2021. The Order passed by the Adjudicating Authority does substantial justice and is in accordance with the object of IBC which does not require any interference by this Tribunal. The Appellants as well as the Jindal Stainless Limited had not participated in any of the seven EAuction conducted by the Liquidator. With regard to private sale offer submitted by the Appellants and entertained by the Liquidator, the Respondent had no knowledge and it came to know about the developments only when the Adjudicating Authority granted extension of the Liquidation Process on 29th Ju....
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....s, or the corporate debtor's related parties and buyers, or the creditors and the buyer, and shall submit a report to the Adjudicating Authority in this regard, seeking appropriate orders against the colluding parties." 13. Under Regulation 33(2) which empowers the Liquidator to sell the assets of the Corporate Debtor by means of private sale in the manner as specified in Schedule I. Schedule I, Clause 2 deals with 'Private Sale' which is as follows: "2. PRIVATE SALE (1) Where an asset is to be sold through private sale, a liquidator shall conduct the sale in the manner specified herein. (2) The liquidator shall prepare a strategy to approach interested buyers for assets to be sold by private sale. (3) Private sale may be conducted through directly liaising with potential buyers or their agents, through retail shops, or through any other means that is likely to maximize the realizations from the sale of assets. (4) The sale shall stand completed in accordance with the terms of sale. (5) Thereafter, the assets shall be delivered to the purchaser, on receipt of full consideration for the assets, in the manner specified in the terms of sale. 14. It was in the proc....
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....reserves the right to reject all or any of the Existing Bidders or their bids without assigning any reason whatsoever. ...... 7. All terms and conditions with respect to the sale of the company on Going Concern Basis shall be governed by the directions of the Hon'ble NCLT, Principal Bench, New Delhi (NCLT) and in accordance with the provisions of the Code and other applicable laws. The Liquidator shall exercise all rights with respect to sale of the Company on Going Concern Basis and it would be open to the Liquidator to appoint such experts, professionals or other persons, as the Liquidator might think necessary and appropriate, as per the provisions of the Code and the applicable rules thereunder, so as to enable the sale of the Company on Going Concern Basis." ( Emphasis Supplied ) 16. Further under the heading D. Earnest Money Deposit (EMD), there are certain bullet points under the heading issuance of Letter of Intent and Transaction Documents, following is stated: "The Liquidator within twenty days of the end of EAuction date shall issue the letter of intent (LOI) to the Successful Bidder. The Successful Bidder within two (2) Working Days from the date issue of LO....
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.... period of 2 (Two) business days from the date of issuance of the LOI. .......... 20. Notwithstanding anything contained herein, the issuance of this LOI shall not be deemed to have created any rights, title or interest in the Corporate Debtor. In the event the Successful Bidder are found to have made any misrepresentation or wrongful disclosure under section 29A of the Code or otherwise, this LOI may be revoked." 19. After noticing the relevant statutory provisions and process document containing terms and conditions of the sale and also certain conditions contained in the LOI issued by the Appellant, it is clear that the process documents itself contemplated about the approval of the NCLT. We have noticed above under heading G-Terms and Conditions of Limited e- Auction which specifically noted that payment shall be done in three instalments (i) 10% of reserve price amount as EMD amount before participation in the E-Auction Process, (ii) 33% to be paid after the approval order from the Hon'ble NCLT within 60 days and (iii) balance amount shall be paid within one year from the date approval by the AA with interest at MCLR. We further noticed that in the Letter of Intent als....
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....document as well as Letter of Intent are in conflict with the provisions of the Code or Liquidation Regulations. As noted above, terms and conditions of the Limited e-Auction contained under Heading G of the Process Information Document contemplated approval order from the NCLT. Whether there is conflict between Regulation 33, Schedule I of the Liquidation Process Regulations is the question to be answered. The Schedule I, Clause 2 deals with 'Private Sale'. Clause 4 of the Private Sale provides "the sale shall stand completed in accordance with the terms of sale." The Terms of Sale as noticed above clearly contemplates approval by the NCLT which is further clarified and amplified by the conditions contained in the LOI issued by the Liquidator to the Appellant. When the approval of the NCLT is contemplated in the "Terms of Sale" we do not agree with the submissions of Learned Counsel for the Appellant that there is any conflict between the terms of the sale requiring approval of the NCLT under the Regulation 33 or Schedule I. In the meeting of the Stakeholders Consultation Committee dated 11th June, 2021 as noted above under Item No. 3, there was clear contemplation for Order of th....
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....y Resolution Process for the Corportae Debtor i.e., 12.06.2019; e. Direct closure of liquidation on payment of full sale consideration of Rs. 177.50 Crores plus interest by Synergy Steel Limited & Rimjhim Ispat Limited and completion of Sale in accordance with Limited EAuction Process Information Document dated 13.06.2021 and Letter of Intent dated 05.08.2021; f. Pass such orders as deemed fit and proper by this Hon'ble Adjudicating Authority in the facts and circumstances of the case and in the interest of justice." 24. The prayers which has been made by the Liquidator as noted above clearly mentioned about the terms and conditions mentioned in Limited E- Auction and the sale was to be taken cognizance by the Adjudicating Authority. The prayers thus contained a request for recognition of the sale in question. Adjudicating Authority after considering all terms and conditions of the sale and others attending facts and circumstances, have taken view that sale was not complete unless approval is granted by the Adjudicating Authority. We see no reason to take a different view. The submissions of Learned Counsel for the Appellant that at the stage when request/offer was made by ....
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....on 15.04.2019. We also noticed that one of the ex- Director, Mr. Vikrant Mahajan by e-mail dated 20.04.2019 addressed to the Liquidator wherein it is stated that the conduct of second public e-auction with a shorter time given smell that the whole process was done to sell the property to a pre-settled buyer. 10. From the letter of the ex-Director dated 20.04.2019 and the earlier letter of the Appellant dated 15.04.2019, it is apparent that the Appellant may be related party to the ex-Director. However, we are not expressing any opinion with respect to the same. As per Regulation 33 (Liquidation Process Regulations, 2016) and as per sub-clause 3, the Liquidator shall not proceed with the sale of asset if he has reason to believe that there is any collusion between the buyer and creditor and the buyer shall submit a report to the Adjudicating Authority in this regard, seeking appropriate orders against the colluding parties. 11. However, the Appellant did not participate in the e-auction and now making vague allegations without any substantial grounds cannot be accepted. As per Regulation 44(1) of the Liquidation Process Regulations, 2016, the Liquidator shall liquidate the 'Co....
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....B Sastra Division" (supra) which has been relied on by the Learned Counsel for the Respondent. In the above case, this Tribunal had laid down that Successful Bidder does not acquire any vested right in law enforcing the auction. In paragraph 13, 15 and 17, following has been laid down: "13. In the instant case, Respondent No 1, the sole bidder on 20 July 2021, had placed its bid at the reserve price. For the reasons as stated supra, the learned Liquidator invoked the provisions contained in Clause 3(k) of the sale auction notice dated 28 June 2021 and decided to cancel the auction. However, the learned Adjudicating Authority failed to consider Clause 13 of the Schedule 1, to IBBI (liquidation process) Regulation 2016, which provides that on payment of the total amount, the sale shall stand completed, the Liquidator shall execute the certificate of sale deed to transfer such assets. The assets shall be delivered to him in the manner specified in terms of sale. ...... 15. It is well-settled law laid down by Hon'ble Supreme Court in the catena of decisions that the successful bidder in the auction sale does not acquire any vested right in law to enforce the auction, more p....