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2021 (12) TMI 1430
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....: Mr. Ashok Kumar Jain, Advocate in I.A. 2346 of 2021., Mr. Gaurav Pathak, Advocate in I.A. 2484 of 2021. For the Respondents: Mr. Sumesh Dhawan, Vatsala Kak, Mr. Swarnendu Chatterjee, Mr. Abhishek Swaroop, Mr. Naman Kamdar, Mr. Anupam Prakash, Ms. Geetika Mittal, Advocates for R-1. ,Mr. Sandeep Singhal, Ms. Anushree Kapadia, Ms. Priyanka Rathi, Advocates for R-2. For the Liquidator : Mr. Vijay Kumar Iyer, Advocate for Liquidator. JUDGEMENT [Per; Shreesha Merla, Member (T)] 1. These Appeals namely Company Appeal (AT) (Insolvency) No. 140 of 2021, preferred by 'Prakash Chandra Kapoor and Anr.' (the Erstwhile Director of the 'Corporate Debtor Company'), Company Appeal (AT) (Insolvency) No. 165 of 2021 preferred by 'M/s. PGI - GmbH - Playglobal International' (hereinafter referred to as M/s. PGI Global) and Company Appeal (AT) (Insolvency) No. 243 of 2021 preferred by 'Bhartiya Kamgar Sena Workmen Union of BDIL', challenge the Common Impugned Order dated 18.12.2020 in I.A. No. 3702 of 2019 in CP (IB) No. 292/(MB)/2017 passed by the Learned Adjudicating Authority (National Company Law Tribunal, Mumbai Bench, Special Bench, Court No. II) under Section 61(1) of the Insolvency and Ba....
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....Notice dated 22.04.2020, the Principal Bench allowed this Tribunal to take urgent matters through video conferencing. 12. The matter came up for hearing on 22.06.2020 and this Authority gave a last chance to Seven Star Securities Private Limited to deposit the EMD. Learned Counsel for Seven Star Securities Private Limited submitted that due to Covid-19 pandemic, the Company was not in a position to arrange the funds but however assured to deposit Rs. 5 crores by 29.06.2020. The matter came up for hearing on 29.06.2020. The Counsel for Seven Star Securities Private Limited submitted that they had failed to comply with the Order dated 22.06.2020 and therefore in accordance with the said order, no further time was granted to deposit the EMD and the present Application was heard. 13. As the circumstances narrated supra would indicate, all possible steps have been taken to revive the Company and they have not yielded any fruitful result. The assets of the CD are lying idle and due to lack of business the CD, it has not been able to provide for its employees. That in turn has affected the maintenance of the assets, which has resulted in depreciation of its value and worth. Thus, it....
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....ed a blind eye to the observations of the Adjudicating Authority for publication of advertisement internationally or deliberately did not do so to ensure that serious bids were not received. * The advertisement inviting EoI was made as unattractive as possible and did not refer to the huge value that the 'Corporate Debtor' brought to a prospective bidder. * The Liquidator did not follow the requirements of Schedule-I of the IBB (Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016). Liquidator was required to follow the regulations which envisaged preparation of a marketing strategy taking help of market professionals, preparing information sheets for the assets, liaisoning with the agents etc. None of this was done by the Liquidator. * The Impugned Order has signed the death warrant of the 'Corporate Debtor' considering the statements of the Liquidator as the gospel truth without taking into consideration that the Liquidator did not put forth the offer of Playglobal International before the Adjudicating Authority, which had written to the Liquidator committing 800 Million Dollars approximately on 14.12.2020. However, the Liquidator simply replied ....
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....ppeal. * Maximisation of the Assets of the 'Corporate Debtor' can be fulfilled only if the 'Corporate Debtor' is sold as a 'going concern'; that no prejudice would be caused to the stakeholders if the Appellant is allowed to provide the Earnest Money Deposited. * Because of the pandemic and the lockdown, the Appellant could not submit its bid and a mere procedural delay should not result in grave injustice and lead to Corporate Death of the Company and hence prays for M/s. PGI Global to be allowed to submit a scheme under Section 231 & 232 of the Companies Act 2013. * Learned Counsel relied on the following Judgements in support of their case:- * 'Y. Shivaram Prasad' Vs. 'S. Dhanpal & Ors.' 2019 SCC OnLine NCLAT 172 (Paragraphs 10-14). * 'Arun Kumar Jagatramka' Vs. 'Jindal Steel and Power Ltd. & Anr.' 2021 SCC OnLine SC 220 (Paragraphs 75-76). * 'GSEC Green Energy Pvt. Ltd.' 2021 SCC OnLine NCLT 36 (Ahmedabad) - The prospective applicant was allowed to submit a scheme after 177 days of delay. * 'Forward Shoes (India) Pvt. Ltd. & Anr.' 2021 SCC OnLine NCLT 6 (Chennai, Division Bench) - The prospective Applicant was allowed to submit a scheme after 1005 days of delay. ....
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.... of less than 6 months, eroding the value. Any further auction will reduce the value, leaving the Company to be sold at a scrap value. It was strenuously contended that the Liquidator and the 'Financial Creditor' were not working in the interest of the Company which provides employment for more than 850 employees,and hence prays for the proposal given by M/s. PGI Global also to be considered and also to direct that all wages and statutory dues including provident fund and gratuity since 2012 to be paid to the workers immediately. 6. I.A. 2346 of 2021: I.A. 2346 of 2021 has been filed by M/s. Goldman Securities Limited seeking impleadment as one of the Respondents in Company Appeal (AT) (Insolvency) No. 243 of 2021 (preferred by Workmen Union of the 'Corporate Debtor'). The Applicant in this I.A. seeks a direction to consider the proposal being given by the Applicant and permit the Applicant to acquire and to run the 'Corporate Debtor' as a 'going concern' as per the proposed Terms of Acquisition. The submissions of the Learned Counsel appearing for the Applicant in I.A. 2346 of 2021 are as follows:- * Learned Counsel for the Applicant submitted that the Applicant's 'Terms of Ac....
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....st in submitting a 'Scheme' to participate in the aforementioned bidding process. It is submitted that a perusal of the said Public Notice, shows that the Liquidator is admitting to sell the 'Corporate Debtor' as a 'going concern' only. * In the seventh Meeting of the stakeholders of the 'Corporate Debtor', the Liquidator informed the stakeholders that the next steps and only if the Company cannot be sold as a 'going concern' as a whole, the next step would be shipyard wise sale for the various yards of the 'Corporate Debtor', the next subsequent step would be selling the Assets in parcels. Selling the 'Asset' as a piecemeal sale would be the last resort. * The pandemic cannot be a reason to delay the entire process where two years have already been spent in the CIRP process. The Appellant M/s. PGI Global never participated in the process and never approached the Liquidator with the compliant scheme. The name of the Appellant cropped up only for the first time in an email dated 15.12.2020 of another entity called Capital Edge Investment Limited (CEIL) and no scheme along with the EMD was ever submitted by CEIL. * The Appellant/PGI Global was neither a party to I.A. No. 3702 o....
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....ng the stage of final arguments. * Learned Counsel for the Liquidator submitted that this I.A. is not maintainable as it is filed for impleadment and for consideration of the Applicant's bid under Rule 11 of NCLAT Rules, 2016, read with Section 31 of the Code. The entire process which deals with approval of Resolution Plan has no applicability in the Liquidation Process and the Applicant seeking consideration of its 'Terms of Acquisition' and offer akin to a Resolution Plan, at the stage of Liquidation Proceeding under Chapter 3 of the Code, is impermissible. * It is further submitted that the 'Tems of Acquisition' suffers from various issues detailed as hereunder:- * inclusion of assets of the Corporate Debtor which are lying at the premises owned by subsidiary of the 'Corporate Debtor'. * inclusion of assets already sold during the various auction processes already conducted i.e., assets at Bhandarli and Ghodbunder yards and the Kolkata yard and the Goa yard (excluding assets stored in the premises owned by Gultare Energy Projects limited). * a long drawn payment schedule of 4 years for the proposed consideration of INR 405 Crores in contravention to the requirement of ....
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....f the 'Corporate Debtor' in liquidation. The Appellants have failed to establish any grounds as to how they are personally aggrieved by the Impugned Order. * The Public Announcement has been made inviting EoIs once again to sell the 'Corporate Debtor' as a whole, rendering the Appeal as infructuous. At the stakeholders Meeting on 22.01.2021 the liquidator informed that the first object would be to sell the 'Corporate Debtor'/its business as a whole and subsequently if the same is not successful, the next step would be shipyard wise sale. In the event, such a sale does not succeed, the next step would be selling the asset in parcels, such that there is a possibility to realize higher value from combination of assets before proceeding to piecemeal sale of the Asset. * Vide Public Announcement dated 23.02.2021, the 'Corporate Debtor' was to be sold as a 'going concern' only. * Significant time has lapsed since the passing of the Liquidation Order where numerous efforts have been made by the Liquidator to sell the 'Corporate Debtor' as a 'going concern'. There were no submissions of EMD by any Applicant since 14.05.2019. * 22 months have lapsed since passing of the Order of the....
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....mpany, or in the case of a company which is being wound up, of the liquidator appointed under this Act or under the Insolvency and Bankruptcy Code, 2016 as the case may be, order a meeting of the creditors or class of creditors, or of the members or class of members, as the case may be, to be called, held and conducted in such manner as the Tribunal directs. Explanation.- For the purposes of this sub- section, arrangement includes a reorganisation of the company's share capital by the consolidation of shares of different classes or by the division of shares into shares of different classes, or by both of those methods. (2) The company or any other person, by whom an application is made under subsection (1), shall disclose to the by affidavit- (a) all material facts relating to the company, such as the latest financial position of the company, the latest auditor's report on the accounts of the company and the pendency of any investigation or proceedings against the company; (b) reduction of share capital of the company, if any, included in the compromise or arrangement; (c) any scheme of corporate debt restructuring consented to by not less than seventy-five per cent of th....
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....rrangement within one month from the date of receipt of such notice: Provided that any objection to the compromise or arrangement shall be made only by persons holding not less than ten per cent. of the shareholding or having outstanding debt amounting to not less than five per cent. of the total outstanding debt as per the latest audited financial statement. (5) A notice under sub-section (3) along with all the documents in such form as may be prescribed shall also be sent to the Central Government, the income-tax authorities, the Reserve Bank of India, the Securities and Exchange Board, the Registrar, the respective stock exchanges, the Official Liquidator, the Competition Commission of India established under sub-section (1) of section 7 of the Competition Act, 2002, if necessary, and such other sectoral regulators or authorities which are likely to be affected by the compromise or arrangement and shall require that representations, if any, to be made by them shall be made within a period of thirty days from the date of receipt of such notice, failing which, it shall be presumed that they have no representations to make on the proposals. (6) Where, at a meeting held in p....
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....inety per cent. value, agree and confirm, by way of affidavit, to the scheme of compromise or arrangement. (10) No compromise or arrangement in respect of any buy-back of securities under this section shall be sanctioned by the Tribunal unless such buy-back is in accordance with the provisions of section 68. (11) Any compromise or arrangement may include takeover offer made in such manner as may be prescribed: Provided that in case of listed companies, takeover offer shall be as per the regulations framed by the Securities and Exchange Board. (12) An aggrieved party may make an application to the Tribunal in the event of any grievances with respect to the takeover offer of companies other than listed companies in such manner as may be prescribed and the Tribunal may, on application, pass such order as it may deem fit. Explanation.-For the removal of doubts, it is hereby declared that the provisions of section 66 shall not apply to the reduction of share capital effected in pursuance of the order of the Tribunal under this section." 14. This Tribunal while confirming the Order of the Adjudicating Authority, which has approved Liquidation, keeping in view the observations ....
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..... On failure, as observed above, steps should be taken for outright sale of the 'Corporate Debtor' so as to enable the employees to continue. 20. Both the appeals are disposed of with aforesaid observations and directions. No cost." (Emphasis Supplied) 15. At the outset, we address to the issue raised by the Appellants/Erstwhile Directors of the 'Corporate Debtor', the Workmen and M/s. PGI Global that the Liquidator had not made the publication of advertisement calling for EOI internationally and hence marred prospective buyers across the globe from participating, and has acted arbitrarily without adhering to the directions of this Tribunal. 16. For better understanding of the case on hand, the chronological sequence of events is detailed as hereunder:- * 14.01.2019 The first Respondent was appointed as Liquidator of the 'Corporate Debtor' vide Order dated 14.01.2019. * 14.05.2019 One of the shareholders of the 'Corporate Debtor' preferred an Appeal namely Company Appeal (AT) (Insolvency) No. 195 of 2019 before this Tribunal against the Liquidation Order, which was upheld (with the aforenoted directions to the Liquidator as specified in para 13). * 12.06.2019 The Liquid....
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....nt and Holding Inc., without EMD. * 02.11.2019 The Liquidator requested M/s. Geotech to submit a compliant 'Scheme', but there was no response. * 07.01.2019 The Liquidator received 'Schemes' from (a) Green Saphire Horizon LLP, (b) Samudraratna Innovations Private Limited (c) One Four Square Trading Company, but all these Companies failed to submit a final 'Scheme' compliant as per Section 230 of the Companies Act and all failed to deposit the EMD. * 08.11.2019 M/s. Capitaledge Investment Limited sought extension of 6 weeks for filing the 'Scheme' for the 'Corporate Debtor'. * 11.11.2019 M.A.3702 of 2019 was filed by the Liquidator since no compliant 'Scheme' under Section 230 of the Companies Act, 2013, was received by the Liquidator and no EMD was deposited, seeking directions from the Adjudicating Authority to initiate Liquidation by sale of assets, collectively as a yard in parcel of assets etc. * 19.11.2019 M.A.3897 of 2019 was filed by SRDIPL inter alia seeking to alter its EOI dated 08.09.2019 and reduce the EMD amount and also to extend the period of submission of proposal. * 02.01.2020 Taking into consideration the request fro....
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....eiss filed an Appeal before this Tribunal seeking direction before the Adjudicating Authority to pass Order in I.A.3702 of 2020 and this Tribunal disposed of the Appeal on 08.12.2020 directing the Adjudicating Authority to accord top priority and dispose of the matter within one week. * 14.12.2020 M/s. Skein Corporation filed an Application before the Adjudicating Authority that it is ready to pay Rs.32 Crores/- and grant further time to file its 'Scheme' for an amount of Rs.3200 Crores/-. * 18.12.2020 I.A.3702 of 2019 was pronounced. * 08.01.2021 A Settlement Letter was sent to all the employees and workmen to settle their dues for the Liquidation period till 08.01.2021 and the same has been acknowledged by the employees. A team of 130 people has been identified by the management and officers of the shipyard who would be re-engaged by the 'Corporate Debtor' on a short-term basis to facilitate the process of the Liquidation. Two valuers have also been appointed in accordance with the regulations for conducting the valuation of the 'Corporate Debtor'. * The material on record evidences that 2 years has lapsed since initiation of the Liquidation of the 'Corp....
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....bsp; Learned Counsel placed reliance on the aforenoted email to buttress his argument that M/s. PGI Global, did not have any account in India and the Company admits that they have participated in the proceedings and sought for request for extension of last date of registration which further goes to prove that M/s. PGI Global cannot now state that they were not given sufficient opportunity to put in their proposal. It is pertinent to mention that M/s. PGI Global is not a party before the Adjudicating Authority and has directly preferred an Appeal here. 20. It is also seen from the record that the contentions of the Appellants/Directors/ M/s PGI Global that the proposal of M/s. Skein Corp. India was deliberately not considered by the Liquidator, is not acceptable as the record shows that no potential sponsor had submitted/deposited any amount towards EMD as directed by the Adjudicating Authority. 21. As regarding the proposal of the Proposed Intervener in I.A. 2346 of 2021, the Liquidator has clearly submi....
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....ainst the company for damages. And so also where the company has partly manufactured materials, it may be proper to carry "on the business so far as may be necessary to complete the manufacture, if by so doing a loss will be avoided or a sale effected." (Emphasis Supplied) Whilst the aforesaid case primarily dealt with the legality of certain 'dispositions' made post the winding up order to ensure that the company was run on a 'going concern' basis to preserve its value, in the case of M.C.T.M. Chidambaram Chettiar Vs. The Official Receiver, High Court, we note of an instance where the assets of the Madras Chemical Industries Ltd, which was in the process of being wound up, was ordered to be sold as a going concern. 26. Regulation 2B of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016, is as follows:- 2B. Compromise or arrangement.-(1) Where a compromise or arrangement is proposed under section 230 of the Companies Act, 2013 (18 of 2013), it shall be completed within ninety days of the order of liquidation under sub-sections (1) and (4) of section 33: [Provided that a person, who is not eligible under the Code to submit a....
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....f 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. (Emphasis Supplied) At this juncture, it is relevant to peruse Section 35 of the Code which deals with the 'Powers & duties' of a Liquidator: 35. Powers and duties of liquidator.- (1) Subject to the directions of the Adjudicating Authority, the liquidator shall have the following powers and duties, namely:- (a) to verify claims of all the creditors; (b) to take into his custody or control all the assets, property, effects and actionable claims of the corporate debtor; (c) to evaluate the assets and property of the corporate debtor in the manner as may be specified by the Board and prepare a report; (d) to take such measures to protect and preserve the assets and properties of the corporate debtor as he considers necessary; (e) to carry on the business of the corporate debtor for its beneficial liquidation as he considers necessary; (f) subject to section 52, to sell the immovable and movable p....
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....the liquidation process in a manner as may be specified by the Board; and (o) to perform such other functions as may be specified by the Board. (2) The liquidator shall have the power to consult any of the stakeholders entitled to a distribution of proceeds under section 53: Provided that any such consultation shall not be binding on the liquidator: Provided further that the records of any such consultation shall be made available to all other stakeholders not so consulted, in a manner specified by the Board. (Emphasis in bold supplied) 28. Regulation 31A speaks of the Constitution of the Stakeholders' Consultation Committee. It reads as follows:- [31A. Stakeholders' consultation committee.-(1) The liquidator shall constitute a consultation committee within sixty days from the liquidation commencement date, based on the list of stakeholders prepared under regulation 31, to advise him on the matters relating to sale under regulation 32. (2)........................................................................... (3) The liquidator may facilitate the stakeholders of each class to nominate their representatives for inclusion in the consultation committee. (4) If t....
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....eiss constitutes 83% of the CoC and seeks that the proposal by 'Pyrotech Scheme' ought to be examined and placed before the Stakeholders Committee for deliberations and further negotiations. 30. As regarding the I.A. Application 2346 of 2021 filed on 21.10.2021 M/s. Goldman Securities Ltd. it was directed by this Tribunal vide Orderdated 28.10.2021 that a copy be served upon the Liquidator latest by 29.10.2021. During the hearing M/s. 'Pyrotech Resources Corp.' sought to intervene and was directed to file a Hard Copy of their Application by 29.10.2021. 31. During the course of final arguments on 16.11.2021 when the Learned Counsel for the Liquidator had submitted that he sought to file a reply for the said Application I.A. 2484 of 2021 in Company Appeal (AT) (Insolvency) No. 140 of 2021 (which was filed on 30.10.2021 during the fag end of the final arguments), an opportunity was given to make his submissions by way of final Additional Written Arguments not to delay the matter pending since a long time. It is pertinent to mention that the Liquidator in his Written Submissions filed on 30.11.2021 stated that he has presented the Application along with the offer of 'Pyrotech' before....
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....e AA Within 75 days of LCD T + 75 12 Reg. 34 Asset memorandum Within 75 days of LCD T + 75 13 Reg. 15 (1), (2), (3), (4) and (5), and 36 Submission of progress reports to AA; Asset Sale report to be enclosed with every Progress Report, if sales are made First progress report Q1 + 15 Q-2 Q2 + 15 Q-3 Q3 + 15 Q-4 Q4 + 15 FY: 1 Audited accounts of liquidator's receipt & payments for the financial year 15th April 14 Proviso to Reg. 15 (1) Progress report in case of cessation of liquidator Within 15 days of cessation as liquidator Date of cessation + 15 15 Reg. 37 (2, 3) Information to secured creditors Within 21 days of receipt of intimation from secured creditor Date of intimation + 21 16 Reg. 42 (2) Distribution of the proceeds to the stakeholders Within 3 months from the receipt of amount Date of Realisation + 90 17 Reg.10 (1) Application to AA for Disclaimer of onerous property Within 6 months from the LCD T+6 months 18 Reg.10 (3) Notice to persons interested in the onerous property or contract At least 7 days before making an application to AA for [disclaimer]. 19 Reg. 44 Liquidation of corporate debtor Within one year T ....
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....ive. (See Sushil Kumar Sen v. State of Bihar [(1975) 1 SCC 774]) 13. ** A procedural law should not ordinarily be construed as mandatory; the procedural law is always subservient to and is in aid to justice. Any interpretation which eludes or frustrates the recipient of justice is not to be followed. (See Shreenath v. Rajesh [(1998) 4 SCC 543: AIR 1998 SC 1827])" 34. Section 32(A)(4) should be read together with Section 35(1)(e) and Regulation 47. What is mandated in the Code in Section 35(1)(e) is to 'carry on business' for its 'beneficial Liquidation'. The Regulation therefore cannot override the objective of 'beneficial liquidation' provided for in Section 35(1)(e) of the Code. 35. We are of the considered view that to achieve 'Beneficial Liquidation' provided for under Section 35(1)(e) and maximisation of the value of assets under Section 53, and having regard to all reasons given below, we find it just & expedient to exercise our inherent powers under Rule 11 of the NCLAT Rules, 2016 to extend the period by six weeks to enable the Liquidator to attempt the Sale as a 'Going Concern' at an appreciable value. * Two years have lapsed since the Liquidation Order was passed by....