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2023 (2) TMI 103
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.... R-3 and R-4 JUDGMENT ASHOK BHUSHAN, J: 1. This Appeal by a Suspended Director of the Corporate Debtor has been filed challenging the Order dated 11th May, 2022 passed by the National Company Law Tribunal, New Delhi, Principal Bench by which I.A. No. 233/PB/2021 filed by the Liquidator for approving the acquisition plan submitted by the Respondent Nos. 5 to 8 has been approved and I.A. No. 672/PB/2021 filed by the Appellant for appointment of Independent Forensic Auditor has been rejected. 2. Brief facts of the case necessary for deciding this Appeal are:- (i) Corporate Insolvency Resolution Process (CIRP in short) was initiated by Order dated 05th April, 2018 passed by the Adjudicating Authority on an Application filed under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC in short) by the State Bank of India. On 04th June, 2018, an Advertisement was issued by the Resolution Professional inviting expression of interest (EOI in short), Appellant filed a Resolution Plan in consortium with M/s. Phoenix ARC Limited, the Appellant was declared ineligible under Section 29A (h) of the IBC by the Committee of Creditors (CoC in short). In absence of any Resol....
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....05.2020 inviting bidders for acquisition of the corporate debtor as a going concern. On 31st August, 2020, Liquidator in consultation with the Stakeholders' Consultation Committee issued a process document giving details for sale of the corporate debtor as a going concern. (vii) On 03/09/2020, Liquidator made an amendment to the public announcement by amending the announcement made on 04/05/2020. By amendment, other tangible assets including intellectual property rights, including Brand (Su-Kam) was also added. Auction of the Corporate Debtor was conducted on 12.10.2020 and 14.10.2020 for a reserve price of Rs. 40 Crores. A bid of Rs. 49.95 Crores given by Respondent Nos. 5 to 8 was declared to be the highest bid. The Highest Bidder remitted 10 % of the bid amount by way of RTGS towards performance security and bank guarantee for 15% of the bid amount on 19th and 20th October, 2020. (viii) On 14/12/2020, the Liquidator filed an I.A. No. 233/PB/2021 before the Adjudicating Authority seeking approval to the highest bid received in the Liquidation Proceedings. On 10.02.2021, I.A. No. 672/PB/2021 was filed before the Adjudicating Authority by the Appellant se....
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....tted that the role of ex-management is to assist the Liquidator for maximization of the value of the assets of the Corporate Debtor. It is further submitted that Liquidator has undervalued the assets of the Corporate Debtor. It is submitted that intellectual property of the Corporate Debtor having trademark (Su-Kam) had substantial value which although was added by amendment in the auction notice by the Liquidator but value of the assets of the corporate debtor was not increased. It is submitted that the First Public Notice dated 27.12.2019, the assets of the corporate debtor were valued at the reserve price of Rs. 51 Crores which was reduced in second public notice to 40 crores. Reserve Price was still kept at 40 crores even though by amendment on 03.09.2020 in tangible assets and intellectual property rights including the brand name (Su-Kam) was added. On 03rd April, 2022, Appellant proposed a settlement under Section 12-A of the IBC with upfront payment of Rs. 5 Crore and further payment of Rs. 45 Crores. The Liquidator has included the brand name trademark that is Su-Kam of which the Appellant has the proprietor right and Appeal before the Division Bench of the Delhi High Court....
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.... Appellant informing that they have formed consortium to submit bid and it was after the aforesaid letter at the instance of the Appellant Mr. Gurpreet Singh Vohra made an application on 26th May, 2021 seeking to acquire the corporate debtor as a going concern which was rejected. 6. Mr. Krishnendu Datta, Learned Sr. Counsel appearing for Respondent No. 1 and Successful Bidders supported the submissions made on behalf of the Learned Counsel for the Liquidator and contends that Respondent Nos. 5 to 8 being successful bidder has made entire deposit within 90 days as per the Liquidation Regulations. The submissions of Learned Sr. Counsel for the Appellant that there was no requirement of filing an application for approval is incorrect. Process Document clearly contemplated obtaining prior approval of the Adjudicating Authority for sale of the Corporate Debtor as a going concern. Respondent No. 5 to 8 after acquiring the Corporate Debtor are running the Corporate Debtor as a going concern. Mr. Gurpreet Singh Vohra has now claimed to have given an offer for taking over the corporate debtor who was a member of consortium who had given earlier EOI on 18th March, 2019, there was no occas....
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....dder(s) to take the delivery of the Assets. The delivery of the Assets by the Liquidator to the Successful Bidder(s) shall be evidence by a delivery receipt signed by the Liquidator or any authorized Representative of the Liquidator and acknowledged by the Successful Bidder(s). With respect of acquisition of the Company as a going concern, the Successful Bidder shall ensure that the Transfer Date occurs within 90 days of the approval by the Adjudicating Authority of the Bid of the Successful Bidder. Without prejudice to the above mentioned timeline, the Company and the Successful Bidder shall enter into suitable definitive documents to the satisfaction of the Liquidator to give effect to the acquisition of the Company as a going concern or the Assets, as the case may be. The successful Bidder shall make payment of the balance consideration within 30 days of the demand raised by the Liquidator and any amount received after the said period will attract interest @ 12 % p.a." 10. The principal challenge which was laid by the Learned Sr. Counsel for the Appellant is non-compliance of the provision of Liquidation Regulations by the Respondent Nos. 5 to 8 in not makin....
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....that when on 16.10.2020, the Respondent Nos. 5 to 8 were declared as highest bidder, they ought to have made the entire payment within a period of 90 days and they have not made the payment within 90 days, the sale is liable to be cancelled. Further submission of Learned Counsel for the Appellant is that there was no requirement of obtaining any approval to the auction sale by the Liquidator from the Adjudicating Authority. An application filed by the Liquidator seeking approval of the Adjudicating Authority for approval of sale was not in accordance with the Liquidation Regulations and can not give any benefit to Respondent No. 5 to 8. 13. Schedule 1 Paragraph 3 empowers the Liquidator to prepare terms and conditions of sale. Paragraph 3 of the Schedule 1 is as follows: "The liquidator shall prepare terms and conditions of sale, including reserve price, earnest money deposit as well as pre-bid qualifications, if any. [Provided that the liquidator shall not require payment of any non-refundable deposit or fee for participation in an auction under the liquidation process: Provided further that the earnest money deposit shall not exceed ten percent of th....
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.... from the date approval by the AA with interest at MCLR. We further noticed that in the Letter of Intent also there are specific conditions which contemplated "the sale of the Corporate Debtor as a going concern to the Successful Bidder is subject to approval by the Hon'ble NCLT, Principal Bench, New Delhi." 20. Now the submissions which has been pressed by Learned Counsel for the Appellant is that prior permission for sale with regard to the private sale as contemplated under Regulation 33 is only with regard to three circumstances mentioned in the proviso and for no other private sale, any prior permission of the Adjudicating Authority is required. The proviso to Regulation 33(2) as noted above is clear that the sale as contemplated in (a), (b) and (c) shall not be done without prior permission of the adjudicating authority. Thus the sale with regard to a related party of the Corporate Debtor, his related party or any professional appointed by the liquidator requires prior permission. Present is not a case where proviso to Regulation 33 (2) is attracted since present sale is not covered by any of the contingency mentioned in proviso hence present is a case where no prior....
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.... failed, liquidator in accordance with the provisions of Schedule I has reduced the reserve price as per Schedule I hence reserve reduced price of second auction was Rs. 40 Crores. 20. The Successful Bidder has been sold the Corporate Debtor for Rs. 49.95 Crores that is much above the reserve price. Liquidator is entitled to fix the auction price as per the liquidation valuation and the provisions of Liquidation Regulations, 2016. It is not the case of any of the parties that fixing the reserve price on Rs. 51 Crores in the First Auction, there was any challenge to the reserve price. The submission of Learned Counsel for the Appellant that reserve price is less, cannot be accepted. 21. The Appellant in his appeal by Annexure A-18 has brought on record the Settlement Proposal dated 03rd April, 2022 which proposal is submitted by the Appellant where he had proposed upfront payment of Rs. 5 Crore with conversion of Rs. 45 Crores into zero interest term loan, balance debt of secured creditor will be converted into equity of the company. It does not lie in the mouth of the Appellant to contend that reserve price fixed by the second auction is not in accordance with law. 22. Lea....