TaxTMI 
TaxTMI 
2022 (3) TMI 1444
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....rty, Advocate , Ms. Pritha Ghose, Advocate For Successful Bidder Mr. Joy Saha, Sr. Advocate, Mr. Rishav Banerjee, Advocate, Mr. Ritoban Sarkar, Advocate, Ms. Madhuja Barman, Advocate, Ms. Tanvi Luhariwala, Advocate, Ms. Sandhya Iyer, Advocate,. Mr. Rishabh Chandra, Advocate For JSW Steel Limited Mr. Kumarjit Banerjee, Advocate, Mr. Raj Singhania, PCA For Liquidator Mr. Mainak Bose, Advocate, Mr. Rahul Auddy, Advocate For Chinar Steel ORDER Per: Rohit Kapoor, Member (Judicial) 1. The Court is convened by video conference today. 2. Corporate Debtor Gontermann-Peipers (India) Limited is under liquidation vide order dated April 30, 2021 passed by this Adjudicating Authority and Mr. Raj Singhania, was appointed as Liquidator. Applicants in these IAs filed under section 60(5) of the Insolvency and Bankruptcy Code, 2016 read with Rule 11 of the National Company Law Tribunal Rule, 2016, seek setting aside of the e-auction held on September 13,2021 by the liquidator. 3. Before we proceed further, the brief facts and contentions of applicants as contained in each these IAs are summarised as under, I.A. 830 of 2021 This is an Interlocutory Application filed by Ch....
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....ii. This application was filed on 17-09-2021. viii. LOI was issued to Respondent No.1 on 02-11-2021. I.A. 848 of 2021 This is an Interlocutory Application filed by HR Commercials Private Limited ('Applicant') against Raj Singhania, Liquidator of Gontermann- Peipers (India) Limited ('Liquidator') and Snaefell Heights LLP ('Snaefell Heights') praying for as follows; A. The E-Auction process for the sale of the Assets of the Corporate Debtor be set aside/quashed, B. Re-auction of assets, C. Allow it to participate in auction process, i. In this IA it is stated that the Applicant on September 10, 2021 came to learn that pursuant to the liquidation order dated April 30, 2020 the liquidator on August 24, 2021 has published an e-auction sale notice, and September 07, 2021 was the last date to submit EMD. ii. The Applicant is based in Mumbai and belatedly came to know about the advertisement published by the Liquidator. Under these circumstances, the Applicant was unable to apply and submit the documents and EMD within the specified period. iii. The Applicant is an interested party for purchasing the assets of the Corpora....
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....this Adjudicating Authority and Mr. Raj Singhania was appointed as the liquidator. v. On August 24, 2021 the liquidator issued an E-Auction Process Information Document towards the sale of the Corporate Debtor and the E-Auction was conducted on September 13, 2021 and the LOI was issued to the highest bidder i.e. Snaefell Heights. vi. The Applicant further submits that in order for the Corporate Debtor to go as a going concern, it is necessary that the liquidator should have restricted bidders only to steel industry. The liquidator failed to appreciate that selling of the Corporate Debtor to a real estate company will defeat the very object of the Code. vii. The Applicant is the only participant who had submitted the compliant resolution plan. The Applicant was always interested in acquiring the Corporate Debtor as a going concern and reviving its steel business but could not participate in the E-Auction process. viii. The successful bidder is an LLP incorporated in the year 2019 with a turnover for the Financial Year ending on March 31, 2019, Match 31, 2020 and Match 31, 2021 as NIL. ix. The liquidator has failed to do a proper due....
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....from the Liquidator whether 'he has any objection if a re-auction is conducted, to which the Liquidator replied that if the said re-auction starts at a value higher than the highest bid given, inasmuch as the same would maximize proceeds from auction of Corporate Debtor as a going concern, and take care of the interest of all the stakeholders, he would not have any objection if an Order to such effect is passed by the Hon'ble Bench. iv. The Hon'ble Bench directed the Liquidator to file an application for conducting re-auction giving reasons and justification for the same and not to declare Successful Bidder or issue LOI to H1 bidder till such application is disposed of. v. The representative of workers and employees present in the meeting also requested that in the interest of the workers and employees the Liquidator should go for re-auction and there is a possibility that some engineering concern will participate in the process and if successful, they can run the corporate debtor's undertaking as a going concern and saving the livelihood around 500 workers / employees. vi. The applicants state that JSW is a leading steel manufacturing compa....
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....ers of the Stakeholders Committee of the Corporate Debtor, requesting to conduct the auction again and allow it to participate in the said auction. However, no response to the same has been received. Therefore, the Applicant is constrained to file the present Application. 4. During the course of argument, Ld. Counsel appearing for the applicants submitted that the Applicant/s challenge the auction proceedings held by the Liquidator of Gontermann Peipers India Limited for sale of its assets and properties. The Applicants were interested bidders. 5. In one IA, it had participated in the auction by submitting an EMD of Rs.8.60 Cores. In course of the e-auction, as a participating bidder, the Applicant faced connectivity issues and accordingly, by an email to Respondent No.1 Liquidator, made a request for consideration. Considering the request, though the auction time expired at 16.00 hrs. the time period was extended and during the extended period, a bid of Respondent No.2 of Rs.88.00 Crores was received on the portal which was in excess of the Applicant's last bid of Rs.87.75 Crores. The Applicant wanted to give a higher incremental bid of Rs.88.25 Crores but despite best effor....
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....1.10.2021. However, a purported LoI appears to have been issued by R1 in favour of R 2 on 02.11.2021. 12. It is argued that in the facts of the present case and as a participating bidder whose Earnest Money of Rs.8.60 Crores still remains deposited, it is respectfully stated that in the interest of justice and towards maximization of the value of the assets of the Corporate Debtor and also in the interest of all stakeholders, the Applicant's higher bid of Rs.93 Crores be accepted and the Sale be confirmed in its favour. Alternatively, the assets of the Corporate Debtor, now in liquidation, be reopened and the Applicant and the Respondent No.2 be directed to make their offers as participating bidders to make sure the maximization of value and the assets be sold to the person. 13. It is further evident that the Applicant was a bona fide bidder who has participated in the auction process, but for reasons beyond its control could not lodge a higher bid. It has also been unequivocally admitted what transpired on participated in the auction process, but for reasons beyond its control could not lodge a higher bid. It has also been unequivocally admitted what transpired on 16.09.2021....
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.... not participate in the auction proceedings and made any offer and/or the offer is made only for the sake of making it. 18. On notice being issued, Respondent No.1 filed reply affidavits and submitted that the IAs are nothing but a trumped- up effort in hindsight to reopen a concluded auction process with the sole mala fide intent to put a spanner in the liquidation process of the Corporate Debtor by an unsuccessful bidders or persons who never put the bid and as such, deserves to be dismissed in limine with exemplary costs. 19. It is submitted by the Liquidator that the Liquidator published a notice of sale of the Corporate Debtor as a going concern in the Business Standard, all India Edition and AajKal, a vernacular Bengali Newspaper on 24.08.2021 and also unloaded the e-Auction Process Information Document at the e-auction portal and the website of the Corporate Debtor. Under the terms of the sale notice dated 24.08.2021, the reserve price for the proposed e-auction process was fixed at Rs. 86 crore with EMD of Rs.8.6 crore. The last date of submission of EMD was initially fixed on 07.09.2021 and the e-auction was schedule to be held on 09.09.2021. Although number of inten....
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....oncluded with the last bid being placed at 4.49 p.m.by Sanefell Heights LLP for an amount of Rs.88 Crores. 22. It is further submitted that subsequently upon receipt of the abovementioned e-mails, the Liquidator immediately proceeded to issue notice for conducting meeting of the Stakeholders' Consultation Committee ('SCC' and/or 'Committee') on 15.09.2021 for a meeting to be held on 16.09.2021 through virtual mode for apprising the committee about the developments and suggestion on future course of action. 23. It is further submitted that in the meantime, one of the applicants, who participated in the e-auction process mentioned the matter before this Adjudicating Authority on 16.09.2021, wherein the Liquidator was also present. On the queries, raised by this Adjudicating Authority, the Liquidator apprised them about the entire process and the free and fair manner in which the entire e-auction process was carried out. On the issue of applicant's contention regarding technical glitches, the Liquidator apprised this Adjudicating Authority that he has received one e-mail for extension of time which he allowed but was not in a position to confirm if at all there was any technical....
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....due to reconstitution of the Benches at Kolkata NCLT, the order dated 28.09.2021 was uploaded on the website of the NCLT on 28.10.2021. It is further submitted that as per the said order, the only direction given to the Liquidator in respect of IAs 830 and 848/KB/2021 was to file reply within three weeks and no stay or injunction of whatsoever nature was granted. 26. It is submitted that in the meantime, with a view to verify the allegation of technical glitch preventing the applicant from placing its last bid, the Liquidator also obtained a Log report from Linkstar Infosys Pvt. Ltd., the e- Auction service provider. The e-auction service provider furnished the log report of the participants in the e-auction process held on 13.09.2021 and a confirmation to the effect that there was no technical glitch on the part of the e-auction portal during the entire eauction process. Subsequent upon issuance of the order dt. 28.10.2021, the Liquidator proceeded to convene a meeting of the SCC on 30.10.2021. In course of the said meeting, the Liquidator appraised the stakeholders of the various developments, as mentioned hereinabove. 27. It is submitted that in the said 3rd meeting of the....
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....1so that if any engineering concern show their willingness to participate and take over the Corporate Debtor to run its factory as a going concern thereby saving the livelihood of around 500 workers/employees. On this the Liquidator, stated that based upon the same suggestion from them earlier also, he waited hoping for any such party to show interest in running the factory of the company, but unfortunately he did not receive any communication/expression of interest in that regard, despite postponement thereof. As such, withholding the liquidation process on such conjecture and surmise is neither prudent nor keeping with the object and scheme of the Code. If the process is delayed, it is the workers and employees who will be hit most as they have not received a single Rupee since last five years. 30. It is submitted that the Liquidator is a creature of the statute and is bound by the Code and /or Regulations framed thereunder. The Liquidation is a time bound process and more particularly if the Corporate Debtor is to be sold as a going concern as per Regulation 32( e), the time limit at his disposal is very limited. 31. It is submitted that pursuant to the suggestion of the m....
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....facing network issues in placing its incremental bid. Pursuant to the said request, the Liquidator had duly extended the period of auction by 30 minutes i.e. till 4.30 p.m. It is argued that it is evident from the Log Report, that the applicant had duly placed its bid at 4.28 p.m., thereby irrefutably evidencing that it was not facing any technical issue post 4 p.m. It is submitted that the applicant never informed the Liquidator about any technical glitches thereafter. 34.It is submitted that in any event, without prejudice to what has been stated hereinabove, there is no evidence whatsoever furnished by the petitioner substantiating its allegation of any technical glitch and/or veracity of its allegation pertaining to technical glitch and/or connectivity issues faced by it in placing its incremental bid in the e-auction process. As such, the allegations and/or averments made in the petition to this effect should be disregarded in limine. 35.It is further submitted that the petitioner has no locus standi to challenge the instant auction process in any manner whatsoever insofar as it has failed to participate and submit its incremental bid despite extension of time by 30 minu....
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....in the e-auction sale process of the Corporate Debtor is that the said applicant despite participating in the e-auction process in 13.09.2021 was allegedly prevented by "connectivity issues" in placing its intended incremental bid of Rs. 88.25 Crores, which was Rs. 25 Crores more than the H1 bidder, the Respondent No.2 herein. It is submitted that the excuse of the applicant seeking to justify its failure to place the highest bid in course of e-auction process is malafide incorrect and ex facie contrary to matters of record and is replied with erroneous and factually incorrect statements. It is submitted that the applicant is seeking to aprobate and reprobate in its conscious and deliberate stand that it is the unsuccessful bidder without any dispute or demur. 41.The Liquidator further argued that a perusal of the log report would further show that both applicant and Respondent No.2, the H 1 bidder continued to place incremental bids till 4.49 p.m. within 5 minutes of the last incremental bid, in accordance with swiss bid mechanism without any technical issue. Ld. Counsel further submitted that after facing of the H1 bide of Rs.88 crores by Respondent No.2 at 4.49 p.m, the appli....
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....he Liquidator and/or the e-auction service provider shall not be responsible or liable in any manner whatsoever for any technical lapses/glitch at the end of the intending bidder. It is argued that there was no stay or injunction on continuation or conclusion of the auction process vide order dated 28.09.2021 contrary to the assertion of the applicant. Ld. Counsel for the Liquidator submitted that the assertion and contention of the applicant are without any merit and be dismissed with costs. 46.Ld. Sr. Counsel and other counsel appearing for the parties have made detailed submissions on variety of grounds, as pleaded in their respective IAs, summarised hereinabove with a view to show that the entire E auction by Liquidator is grossly flawed and the same is liable to be set aside followed by holding of a fresh auction in order to maximize the value of assets. A number of judgments of Hon'ble Supreme court and Hon'ble NCLAT have been cited and compilation given to us. 47.Similarly detailed arguments have been advanced on behalf of Liquidator to rebut the contentions of applicants and to show that the liquidator has acted in accordance with law, in best of its wisdom under circ....
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....ioned and same is reproduced hereinafter: 5. ....."It is to be noted that no information being provided in this e-auction Process Document is claimed to be comprehensive. Independent due diligence of the intended user of this document or the bidder is highly recommended". 14. " ...... It may be noticed that the assumptions, assessments, statements and information contained in the e-Auction Process Document may not be complete, accurate, adequate or correct and the liquidator shall not be responsible and/or liable for the veracity thereof. Each bidder should therefore, conduct its own due diligence, investigations and analysis and should also check the accuracy, adequacy, correctness, reliability and completeness of the assumptions, assessments, statements and information contained in this E-Auction Process Information Document and may get independent advice from appropriate sources. The decision to participate in this E-Auction Process shall be strictly at the bidders risk and cost." 52.Overview of the assets and properties of CD is contained at Page-56 of the bidding document. The details of document required to be submitted by the bidder start from Page-61. T....
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....rtunity to the intending bidder, how could one bid for! For bidding for such high value assets, as was mentioned in the original bid notice, intending bidder was required to conduct physical inspection and due diligence, even as per the liquidator. There were so many assets and one wonders how one could bid for it without seeing the things physically and conducting due diligence and its valuation. Thus, the extension notice has deprived the intending bidders including the applicant to participate in the bidding process and the bidding process is liable to be set aside the same being conducted in unfair manner. The extension of auction notice and sale conducted in pursuance to it was done in a slipshod manner by the liquidator. 56.It is apparent from the facts on record, the time of completion of the liquidation process was till April, 2022 (without extension) and why there was so hurry with the liquidator to extend the time only for three days when he was having not even a single bidder in response to its first notice and at the same time inviting bids afresh without affording anyone the opportunity of conducting physical inspection of the huge and high value assets of the compa....
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....es that the person who is to pay for the goods shall have the opportunity afforded to him, before he is called on to part with his money, of seeing that those presented for his acceptance are really those packages for which he has bargained. Reliance for this proposition has been placed on a judgment tilted Isherweeod vs. WhitMore, (1843) 11 M & W 347 : 63 RR 634. A tender made at such a late or of the appointed date that the buyer has no time to inspect them is not good. Reliance is placed on a judgment Startup v Macdonald, (1843) 6 Man & G 593 : 64 RR 810. " Reasonable opportunity of inspection is all that the Act requires. It is the receiving parties business to verify, not the delivery party's supply that the further goods are according to contract. 61.Tested on settled proposition of law by Hon'ble Supreme Court, whether the process adopted or decision made is so arbitrary and irrational that the court can say: 'the decision is such that no responsible authority acting reasonably and in accordance with relevant law could have reached', And as held by Hon'ble Supreme Court in Manoj I Naik & Associates vs Official Liquidator on 28 October, 2014 in SLP Nos 34782-347....
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....have reached it." 62. The facts as noticed above when tested on the basis of above reproduced position in law we of the view: A. By omitting the opportunity to the Intending Bidders, in corrigendum impugned dated 08-09-2021, to conduct physical inspection and due diligence as provided in initial bid document, as discussed hereinabove, it is apparent that the liquidator has not acted rationally, reasonably and failed to conduct the auction in a fair manner as pointed hereinabove. B. The successful bidder is an LLP incorporated in the year 2019 with a turnover for the Financial Year ending on March 31, 2019, March 31, 2020 and Match 31, 2021 as NIL, this aspect when seen in the context of law laid down, 'the decision is such that no responsible authority acting reasonably could have reached', the liquidator could not have ignored this facet of auction, which apparently can have far reaching consequences for CD to continue as a going concern along with its 500 employees and incurring other costs. There is a complete silence on this by liquidator or Stakeholder's Committee except for taking technical plea/s to oppose it. We find that there is force in the argum....
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....33(1) of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 by the Liquidator appointed by the Hon'ble NCLT, Kolkata Bench vide order IA No. 432/KB/2021 in CP (IB) No. 1542/KB/2018 dated April 30, 2021 under The Insolvency and Bankruptcy Code, 2016 ("Code"). The bidding shall take place through online e-auction service provider Linkstar Infosys Private Limited at https://eauctions.co.in/ SL NO. PARTICULARS Date and Time of E-Auction DETAILS 09.09.2021 from 3.00p.m. to 5.00 p.m. Last Date to apply and submission 07.09.2021 before 6.00 p.m. 1 2 of Documents and EMD 3 Inspection Date and Time On or before 07.09.2021 from 10:00 a.m. to 5:00 p.m. Basic Description of Assets and Properties for sale: Asset/Location Sale of Corporate Debtor as going| concern along with its assets including Land and Building, Plant & Machinery, Inventory, Stores and spares etc. IMPORTANT NOTES: Reserve Price Earnest Money Deposit Incremental Bid 86,00,00,000/- * 8,60,00,000/- 25,00,000/- 1. E-Auction will be held for sale of the Corporate Debtor as a "GOING CONCERN" on "AS IS WHERE IS BAS....