AI Drafter 
TaxTMI 
TaxTMI 
2022 (10) TMI 933
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....incipal Bench, New Delhi in I.A.(I.B.C.)/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. Th....
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....e Adjudicating Authority with interest at MCLR. After the resolution of 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 concer....
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....der i.e. M/s. Rimjhim Ispat and Anr. and proceed to collect the balance amount as per time period specified excluding 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. S....
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....he Liquidator nor has submitted any EMD so as to enable to consider its offer. It is submitted that Liquidation Proceedings have to 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 reser....
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....hority was required for the limited e-Auction Sale. Sale in favour of the Appellant was never completed. The mere fact that Appellant was 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 knowled....
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....related party; or (c) any professional appointed by him. (3) The liquidator shall not proceed with the sale of an asset if he has reason to believe that there is any collusion between the buyers, 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 sha....
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.... 5. The issuance of the instant Auction Document does not imply that the Liquidator is bound to select a Successful Bidder out of the Existing Bidders or to appoint the Preferred Bidder as Successful Bidder for the sale of the company on Going Concern Basis and the Liquidator 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 und....
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....ing to the Corporate Debtor in possession of the undersigned shall be handed over to the Successful Bidder upon making of full payment. ...... 18. The Successful Bidder are requested to unconditionally agree and accept this LOI in entirety by countersigning this LOI and returning the original of the same to the Liquidator within a 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 ....
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....l always prevail." 22. There can be no quarrel to the submissions that if there is conflict between the auction process document and the Code or the Liquidation Process Regulations, the provision of the Code and Liquidation Regulations shall prevail. The above clause clearly contemplates the same. 23. Now we have to see whether the requirement contained in the process 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 th....
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....roper; d. Direct that no action shall be taken by any statutory/quasi-judicial body/government department/any other body against Corporate Debtor or its assets and/ or Synergy Steels Limited & Rimjhim Ispat Limited being the successful bidders in view of Section 32A of the Insolvency and Bankruptcy Code, 2016 for any cause of action emanating on or before commencement of Corporate Insolvency 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 requ....
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....se the asset at a much higher price than the Reserve Price of Rs. 6.15 Crores. However, the Appellant instead of addressing letter to the Liquidator should have participated in the bid process on the date the Sale Notice was advertised in the newspapers and we are of the view that the Appellant was aware of the Sale Notice. However, to the reasons best known to the Appellant, he did not participate in the e-auction held 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 b....
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....ing on the terms of the sale as well as to obtain the object of maximization of the assets of the Corporate Debtor. The exercise of jurisdiction by the Adjudicating Authority in the Impugned Order can not be said to be reliance on any equity jurisdiction. The Judgement of the Hon'ble Supreme in "Pratap Technocrats" thus does not help the Appellant in the facts of the present case. 29. We may also refer to the Judgement of this Tribunal in "PNB 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....