TaxTMI 
TaxTMI 
2025 (2) TMI 217
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.... going concern through private sale method. The Adjudicating Authority by the impugned order allowed the Application. Aggrieved by which order, this Appeal has been filed. 2. Brief facts necessary to be noticed for deciding this Appeal are: (i) By an order dated 03.01.2020, liquidation process commenced against the CD - Essar Power (Jharkhand) Ltd. and Respondent No.2 was appointed as the Liquidator. (ii) The Liquidator initiated e-auction process for sale of CD. Upto 18th e-auction held on 24.04.2024, only two residential units of the CD could be sold. Certain assets of the CD was lying with the Kolkata Port Trust. On an Application filed by Board of Trustee for Kolkata Port Trust seeking permission of the Tribunal to direct sale of assets of the CD lying with Kolkata Port Trust, the Adjudicating Authority passed an order on 31.07.2024 directing sale of assets by the Liquidator. (iii) On 02.08.2024, the Appellant sent a letter to the Liquidator showing interest in the assets of the CD. The Liquidator replied the letter of the Appellant providing the information sought for, after obtaining confidentiality undertaking. (iv) A meeting was held o....
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.... (ix) After the order dated 11.12.2024, the Liquidator issued an advertisement on 26.12.2024 (E-Auction sale notice under Swiss Challenge Mechanism). Several Expression of Interest ("EoI") were received and on request made, a further Notice was issued. On 21.01.2025, the e-auction scheduled for 22.01.2025 was deferred and informed to be held on 29.01.2025 from 03:00 PM to 04:00 PM. (x) The Appellant aggrieved by the order dated 11.12.2024, granting permission to the Liquidator has filed this Appeal. 3. The Appeal was heard on 22.01.2025, on which date, the learned Counsel appearing for the Liquidator prayed for time to bring the SCC Minutes of 30.09.2024 on the record. In pursuance of the order dated 22.01.2025, an affidavit on behalf of the Liquidator has been filed dated 25.01.2025 bringing on record the Minutes of 36th and 39th meeting of the SCC. The Liquidator in the affidavit has also stated about the process adopted by the Liquidator for conducting the Swiss Challenge Mechanism. 4. We have heard Shri Abhijeet Sinha, learned Senior Counsel for the Appellant and Shri Abhishek Anand, learned Counsel for Respondents. 5. Shri Abhijeet Sinha, learned Senior C....
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....No.5745 of 2024 was filed, which Application was allowed by the Adjudicating Authority. It is submitted that the Appellant has never given any commercial offer to the Liquidator, although it was corresponding with the Liquidator with effect from 02.08.2024. No other interested party having given any offer, offer given by OASPL was considered and approved by Stakeholder's Consultation Committee. The Swiss Challenge Mechanism gives opportunity to all, including the Appellant to participate and is intended to maximize the value of the assets of the CD. No exception can be taken to the Swiss Challenge Mechanism. The Liquidation has received EoIs from several intending parties and Swiss Challenge Mechanism is to be conducted on 29.01.2025. It is submitted that there is no error in the order of Adjudicating Authority, granting permission to the Liquidator. 7. We have considered the submissions of learned Counsel for the parties and have perused the record. 8. As noted above, the Liquidator has conducted at least 21 e-auctions for sale of assets of the CD. However, no assets of the CD could be sold, except two residential units. An offer was received from OASPL dated 26.09.2024 for ....
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.... (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." 10. The Liquidator after receiving the offer from OASPL, placed the said offer for consideration before the Stakeholder's Consultation Committee in its meeting held on 30.09.2024. The Minutes of the meeting has been brought on the record along with affidavit filed by the Liquidator. At Item No.14, details of offer received from OASPL has been noticed and discussed. It is useful to extract following part of the Minutes, which is as follows: "14. To take a note of the offer received from one of the Prospective Investors and decide the way forward, in relation to the sale of assets of the Corporate Debtor: Liquidator apprised the members that, an offer has been received from one of the prospective investors, namely, Orissa Alloy Steel Private Limited (Rashmi Group) for acquiring the Corporate Debtor on a Going Concern Basis excluding the assets of the Corporate Debtor lying at KoPT. The Liquidator also stated that, th....
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....sly be subject to approval of the Hon'ble NCLT. The authorized representative of ICICI Bank Limited stated that with an intent to maximize the value of assets and to safeguard the interest of all the stakeholders of the Corporate Debtor, a Swiss Challenge Mechanism or equivalent process would be essential. On a separate note, the SCC also requested that, subject to discussion, negotiations on the commercials and other relevant terms of the offer of Orissa Alloy in the present meeting and prior to the same being put for e-voting for SCC consideration and the time involved in circulation of minutes and voting and the fact that mid-week holiday owing to Gandhi Jayanti and weekend on account of Durga Festivities week, Orissa Alloy is requested that the validity period of the original or revised offer, if any be extended by a period of ten days which is currently expiring on October 06, 2024. The authorised representative of Orissa Alloy stated that, the validity period of the original or revised offer, if any would be extended by a period of seven days excluding the date of the offer which would end on Tuesday, October 08, 2024." 12. The Agenda Item was put to vote and Resolution No....
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.... b) That this Hon'ble Tribunal be pleased to pass an order granting permission to sell the Corporate Debtor on a Going Concern Basis excluding the assets of the Corporate Debtor lying at KoPT; c) That this Hon'ble Tribunal be pleased to pass an order granting permission to the Liquidator to sell the Corporate Debtor on a Going Concern Basis excluding the assets of the Corporate Debtor lying at KoPT through private sale method by carrying out Swiss Challenge Mechanism or any other equivalent process wherein the Right of First Refusal would be given to OASPL to match the highest bid; and d) For such other reliefs as this Hon'ble Tribunal may deem fit in the facts and circumstances of the present case." 14. The Adjudicating Authority after noticing the prayers had made following observations while allowing the Application: "Mr. Abhishek Anand, Ld. Counsel for the Liquidator present in Court and states that the proposal is filed after approval of the SCC which is recorded at page 170 & 173 of the application in the meeting held on 30.09.2024 (voting concluded on October 07, 2024). He further states that they have already received several....
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....to consider and approve their offer and not opt for Swiss Challenge. The request made by the OASPL was considered and declined. The Authorised Representative of the ICICI Bank stated that with an intent to maximize the value of assets and to safeguard the interest of all the stakeholders of the CD, a Swiss Challenge Mechanism or equivalent process would be essential. Thus, the SCC deliberated on Swiss Challenge Mechanism and decided to adopt Swiss Challenge Mechanism with Right to First Refusal to OASPL, which is clear from the Minutes of the Meeting dated 01.10.2024 as extracted above. Swiss Challenge Mechanism is a method for discovering the maximum price, which can be offered by the Applicants. The submission of the Appellant that Swiss Challenge Mechanism is against the principles of natural justice and does not provide for transparency has no substance. In Swiss Challenge Mechanism all Applicants, who comply with the terms and conditions of process documents, are entitled to participate and Swiss Challenge Mechanism gives opportunity to all competitors and thus provides transparent process. We do not find any substance in submission of the Appellant that Swiss Challenge Mechan....
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....ts of the CD and has written to the Liquidator asking various details. The Liquidator had no jurisdiction to place the offer of OASPL before the SCC in the Meeting dated 30.09.2024, nor the offer to OASPL giving Right to First Refusal, required approval, which is against the equal participation. 21. In the Minutes of the Meeting dated 30.09.2024 of the SCC brought on the record, it is clear that in the Minutes it was recorded that there was only Orissa Alloy, who has submitted offer for private sale, whereas the other prospective investors seem to have not submitted any offer till date. Only offer which was received was by the Orissa Alloy. As noted above, there have been 21 e-auctions, but the assets could not be sold inspite of 21 e-auctions held. The liquidation order was passed in 2020 and more than four years have elapsed without any successful e-auction. The Liquidator received offer from OASPL of Rs.67 crores, which was promptly placed before the SCC. The SCC in the Minutes have noticed that no other prospective investor has given any offer. In the affidavit filed by the Liquidator, it has been mentioned that the Appellant has not given any formal commercial offer. 22.....
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....the offer of OASPL was approved by SCC. We do not find any error in giving Right of First Refusal to OASPL, who was the only entity, who has given offer and the offer was with the above condition. We, thus, do not find any substance in the submission of the Appellant that OASPL ought not to have been given Right of First Refusal. Hon'ble Supreme Court in R.K. Industries (supra) in paragraph 66 as extracted above has also recognized the Right of First Refusal to an anchor bidder, who is originator of proposal. 25. Learned Counsel for the Appellant has also submitted that Liquidator cannot exercise wide and unlimited powers in conducting the sale of assets of the CD. The power and jurisdiction of the Liquidator are regulated by IBC and 2016 Regulations. The powers vested and the duties cast upon the Liquidator have been subjected to directions of the Adjudicating Authority under Section 35. The present is a case where Liquidator filed an Application seeking direction under Regulation 35(h) of the Regulations and the Adjudicating Authority has approved such prayer. When Adjudicating Authority has granted the approval, it cannot be said that the Liquidator exercised any unguided or ....
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....cond Swiss Challenge Process only up to the stage of announcement of the highest bidder. R.K. Industries filed an Appeal, which was disposed of with direction issued to NCLT to expeditiously decide IA No.273 of 2021 moved by H.R. Commercials Pvt. Ltd. In the meantime, one Welspun sent an email to the Liquidator, expressing its interest in the Dahej materials as well as land. The request of the Welspun was turned down by the Liquidator, who filed an Application before the Adjudicating Authority praying for direction to consider its offer. The NCLT on 05.07.2021 directed the Liquidator to permit Welspun to inspect the assets of the CD. After the inspection, Welspun hiked its offer for the consolidated assets from Rs.627.50 crores to Rs.650 crores. The SCC in its meeting conducted on 13.08.2021 decided that it would be beneficial if the Dahej material and the shipyard are sold as composite assets to maximise realization to the stakeholders. Welspun sent an email to the Liquidator increasing its offer to Rs.675 crores. The Liquidator apprised the NCLT about the recommendation made by SCC for entertaining the consolidated offer received from Welspun. The NCLT passed an order on 16.08.20....
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....r : Ravi Development [Ravi Development v. Shree Krishna Prathisthan, (2009) 7 SCC 462 : (2009) 3 SCC (Civ) 172] .] Ultimately, IBC has left it to the discretion of the liquidator to explore the best possible method for selling the assets of the corporate debtor in liquidation, which includes private sale through direct negotiations with the object of maximising the value of the assets offered for sale. 67. In the instant case, there was good reason for Respondent 2 liquidator to have halted the Second Swiss Challenge Process midstream and approached the adjudicating authority (NCLT) armed with an offer of Rs 675 crores received from Respondent 7 Welspun who had shown interest in the composite sale of the Dahej assets. In fact, this was all along the preferred choice of Respondent 2 liquidator as can be seen from the fact that when public auctions were conducted by him on five earlier occasions, bids were invited for the composite assets of the corporate debtor. It is a different matter that the earlier e-auctions turned out to be unsuccessful, thus compelling Respondent 2 liquidator to explore other options, including the option to sell the assets in smaller lots. ....
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....g the offer received from Welspun for purchase of materials as well as the land, SCC had decided to go for private sale of consolidated assets. Due to the above reasons, the Liquidator left the process of Swiss Challenge and discontinued the Swiss Challenge Process opting for private sale. The above observation of the Hon'ble Supreme Court was in reference to the facts of that case. There can be no dispute to the proposition that an anchor bidder has no indefeasible right. Anchor bidder has to place first bid, after which other bidders are required to participate and give a higher bid. The present is a case where the OASPL, offer was treated to be a base bid giving right of RoFR and the Swiss Challenge Process was to proceed thereafter, which was fixed for 29.01.2025. The judgment of the Hon'ble Supreme Court in R.K. Industries' case as noted above, in no manner support the submission of the Appellant in the present case that the OASPL could not have been given Right of First Refusal. 28. Shri Abhijeet Sinha, learned Senior Counsel for the Appellant has relied on Discussion Paper issued by IBBI dated 27.08.2021 in its written submission. The Appellant has referred to Discussion ....
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....ulator of insolvency and bankruptcy processes and associated professionals, the Insolvency and Bankruptcy Board of India (IBBI/Board) plays a critical role in promoting a dynamic and responsive regulatory regime for the IBC ecosystem. IBBI as a regulator performs its role under a unique provision that mandates public discussion and economic analysis as precursors before issuance of a regulation. IBBI has been in the forefront of developing research to get detailed analytical and critical exploration of various facets of insolvency ecosystem." 30. When we look into the paragraph 24, as quoted above of the Discussion paper, the said paragraph clearly mentions that Swiss Challenge is a time-tested mechanism and has proven to be highly effective. The Swiss Challenge Mechanism has also been incorporated in hybrid method pertaining to pre-packaged insolvency resolution process. Section 54K of the IBC contemplate the base resolution plan by the Applicant and thereafter other competitive resolution plans are invited in event the base resolution plan is not approved. 31. Another part of Discussion Paper dated 27.08.2021, which is on the subject "Strengthening Regulatory Framework of L....