TaxTMI 
TaxTMI 
TaxTMI 
2025 (7) TMI 1461
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....j, Mr. Vipul Jai, Mr. Monish Surendaram, Advocates for R1. Mr. Sunil Fernandes Sr. Advocate with Ms. Sukhda Kalra, Mr. Nitesh Ramani, Advocates for R2. JUDGMENT ( Hybrid Mode ) Per : Barun Mitra, Member ( Technical ) The present set of appeals filed under Section 61 of Insolvency and Bankruptcy Code 2016 ('IBC' in short) arises out of two Orders both dated 21.01.2025 (hereinafter referred to as 'First and Second Impugned Order') passed by the Adjudicating Authority (National Company Law Tribunal, Mumbai Bench) in CP (IB) No. 1833 of 2017. By the first impugned order, the Adjudicating Authority has dismissed IA No. 1365 of 2023 filed by Mr. Sushil Jejani-Promoter of Corporate Debtor seeking the setting aside of the auction sale conducted by the Liquidator and holding of fresh auction. By the second impugned order, the Adjudicating Authority has dismissed I.A. No. 12 of 2021 filed by Dicksons Overseas Pvt. Ltd.-Successful Auction Purchaser seeking stoppage of the running of 90 days time to make auction sale payment due to force majeure circumstances and stoppage of interest liability. This second impugned order also dismissed IA No. 560 of 2022 filed by Dicksons Overseas Pvt. L....
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....efore the Hon'ble Bombay High Court, challenging the stay on conversion. Hon'ble High Court passed interim order restraining Liquidator from taking coercive action against SAP. * On 29.12.2020, I.A. No. 12 of 2021 was filed by SAP before the Adjudicating Authority making the following prayers: (a) Declare and hold that running of ordinary time of 90 days has been stopped due to force majeure circumstances, hence there is no consequent liability or responsibility on any of the parties ; (b) Declare and hold that the liability of interest also stopped due reasons of force majeure ; (c) Grant time of four weeks after the date of grant of the required permissions to get the sale deed draft adjudicated from the collector of stamps, payment of stamp duty and complete other sale formalities, (d) Issue direction, without prejudice to any of the aforesaid prayers, to explore and initiate the steps for under Regulation 30A as well as under Regulation 32 (e) of the corporate debtor as a going concern. (e) Direct the Liquidator to seek all other permissions and pay relevant fees applicable under all the relevant laws ; * On 28.01.2021, the Government issued a communication liftin....
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....Cr. and has been granted possession along with a sale certificate issued on 21.02.2025. The possession of the subject land was also handed over on 12.03.2025 to the SAP. * The proceeds received from the SAP have been duly disbursed on 12.03.2025 to the Stakeholders by the Liquidator in accordance with the statutory provisions of IBC and applicable regulations. * Aggrieved by the first impugned order, Company Appeal No. 449 of 2025 has been filed by Appellant-Sushil Jejani while aggrieved by the second impugned order, appeals have been preferred by SAP vide Company Appeal Nos. 473, 485 and 463 of 2025. 3. Making his submissions, Shri Gaurav Mitra Ld. Counsel for the Appellant submitted that it is an undisputed fact that M/s Dicksons Overseas Pvt. Ltd. was declared as the Successful Auction Purchaser following which the Liquidator had issued them LoI on 01.10.2020. In terms of the LoI and Regulation 33 of the Liquidation Process Regulations, the SAP was required to remit the balance sale consideration within 90 days i.e. by 29.12.2020. However, as the SAP did not submit the balance sale consideration within a period of 90 days in terms of the auction document, it was contended t....
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.... to belatedly pay the auction amount after a gap of nearly five years. The Appellant has contended that the Adjudicating Authority by permitting 30 days further time-period for the deposit of balance sale consideration at this belated stage did not act in accordance with the statutory provisions of IBC and hence the impugned order is liable to be set aside. It was contended that giving such relief by the Adjudicating Authority to the SAP had no statutory foundation and was contrary to the tenets of IBC. Moreover, the Adjudicating Authority by allowing the SAP to have the subject land on the bid price of 2020 at a time when there has been a steep value escalation, injustice has been caused to the creditors and other stakeholders of the Corporate Debtor. 7. The contentions made by the Appellant was refuted by Shri Sunil Fernandes, Ld. Senior Advocate representing Respondent No.2-SAP and Shri Sandeep Bajaj, Ld. Counsel for the Respondent No.1-Liquidator. As their arguments are found to largely overlap, we have captured them conjointly. It was contended that the legality or integrity of the auction process has not been questioned by any party nor any allegations or claims of irregular....
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....rsion application, in this backdrop it became necessary for the Liquidator to procure necessary permission from the revenue authorities to effectuate the transfer of the immovable property and for putting into effect the sale deed. The Liquidator had not taken any step beyond mere filing of a singular Form for conversion. Thus, it would be wrong to impute motives on the Liquidator of trying to extend any additional benefits to the SAP. 10. It was asserted that the Adjudicating Authority had correctly sized up the fact that on account of development of certain external circumstances which had come in the way of finalising the auction sale, it was justifiable to allow further period of 30 days beyond the permissible 90 days statutory period to the SAP to remit the balance consideration. Reliance was placed on the judgment of this Tribunal in Rajabhau Shinde Vs S.M. Electric Works in CA(AT)(Ins.) No. 826 of 2024 wherein this Tribunal after noticing the judgement of the Hon'ble Supreme Court in V.S. Palanivel Vs P. Sriram 2025 SCC Online SC 559 held that Adjudicating Authority has inherent power to extend the time period given to the auction purchaser to undertake payment. 11. It was....
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....been made that even the E-Auction Process Information Document dated 07.09.2020 placed at page 93 of the Appeal Paper Book ("APB" in short) provided that the sale shall be cancelled if the payment is not received within 90 days. In the present case, the SAP had not remitted the balance payment within the stipulated time-line of 90 days. The auction sale was therefore vitiated by operation of law and liable to be cancelled and it was incumbent upon the Liquidator to act accordingly. 16. To return our findings, we may first look at the regulatory provisions as well as the Auction Process Document basis which the auction sale was conducted to know the time-period within which the balance consideration was required to be paid. 17. Regulation 33 of the Liquidation Process Regulation, 2016 stipulates that the Liquidator shall ordinarily sell the assets of the Corporate Debtor through an auction in the manner specified in Schedule I. When we look at Clause 12 of Schedule I under Regulation 33 of Liquidation Process Regulation, the said Clause reads as under: "(12) On the close of the auction, the highest bidder shall be invited to provide balance sale consideration within ninety days ....
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....ed by Liquidation Process Regulation; Auction Process Document and LoI. From all indications, the answer is in the negative. 23. When we see the first impugned order, we find that the Adjudicating Authority has committed no mistake in also noticing that the balance payment was not remitted by SAP within 90 days. Nevertheless, it held that cancellation of this valid auction sale would go against the principles of IBC. It was also observed that SAP was always willing and ready to pay the entire sale consideration but was prevented from doing so due to the "development of certain external circumstances". Hence, non-payment of balance consideration cannot be viewed as a default in payment on the part of the SAP warranting cancellation of sale. 24. Basis this finding, the Adjudicating Authority gave the SAP 90 days time period to deposit the balance consideration. This liberty given to the SAP has been assailed by the Appellant as illegal and arbitrary and the tenability of their contention is now before us for our consideration. 25. To begin with our analysis, we would like to delve into the issue of "external circumstances" which has been noted by the Adjudicating Authority to conc....
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....NCLT. 5. Considering time is of the essence, we request prompt action from your end. Thanking You (Emphasis supplied) 27. A fourth letter dated 25.12.2020 was sent by the SAP to the Liquidator in which they lamented that the Liquidator had not accepted their offer of escrow account besides submitting proof of sufficient funds in their bank account to meet the balance consideration. The said letter is extracted as under: To, DICKSONS OVERSEAS PRIVATE LIMITED 25.12.2020 CA Prasad Dharap, Hon'ble Liquidator, Jejani Pulp and Paper Mills Private Limited, [email protected] Dear Sir, Execution of Sale Deed in our favour in respect of Jejani Pulp and Paper Mills Pvt Ltd. Reference: Our letter dated 17.12.2020 referring to Staying of conversion process by the Govt of Maharashtra - Force Majeure, Postponement running of time for compliances by either party. Another letter of same date i.e.17.12.2020, referring to the prompt execution of sale deed. In continuation of our letters on the subject and personal discussions we had with you from time to time, we wish to inform you that we are ready and willing to pay simultaneously and get the sale deed execut....
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....t the said account. To prove their bonafide, the SAP was persistently requesting the Liquidator to open an escrow account so that the amount could be deposited. 29. We also notice that the Adjudicating Authority in the first impugned order has also taken into cognizance the Potens Transmission judgement which has been relied upon by the Appellant to contend that failure to remit payment by successful bidder within 90 days warranted cancellation of the auction sale. The Adjudicating Authority has distinguished the facts of this case from the Potens Transmission judgement since in that case the Liquidator had himself pressed for cancellation of auction since successful bidder had not paid within 90 days, while in this case the Liquidator did not have any occasion to find the SAP to be in a position of wilful default. We do not find any material on record to show that Liquidator had any occasion to remind the SAP to pay the balance consideration. We are inclined to agree with the Adjudicating Authority that the ratio of Potens Transmission judgement supra clearly does not come to the rescue of the Appellant in the present factual matrix. 30. We are therefore persuaded to agree with ....
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....der of the auction land. The SAP therefore wrote to the Liquidator to obtain necessary permissions from the concerned statutory revenue authorities for effecting the transfer of the subject land and to register the sale deed. The Liquidator thereafter took up the matter with the competent revenue authority on 03.11.2020 whereinafter the atmospherics changed. 35. Before the necessary permission could be secured by the Liquidator, we notice that the issue of conversion became contentious and got surrounded by a spate of litigations. On 10.12.2020, the conversion process was stayed by the Government through a notification under the Maharashtra Land Revenue (Conversion of Occupancy Class II and Leasehold Lands into Occupancy Class I Land) Rules, 2019 which in turn led to SAP filing W.P. No. 3821/2020 before the Hon'ble High Court challenging the stay on conversion. Hon'ble High Court passed interim order restraining Liquidator from taking coercive action against SAP. On 28.01.2021, the Government issued a communication lifting the stay on land conversion. On 05.07.2021, the Hon'ble High Court extended interim protection to SAP while directing authorities to consider the conversion app....
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....o overcome the exigencies of the situation, the Adjudicating Authority directed the SAP to pay the balance consideration alongwith interest @12% for the entire period of delay within 30 days of the first impugned order. This issue before us is whether this window of 30 days period could have been allowed by the Adjudicating Authority, when this extended period of 30 days is beyond the permissible 90 days statutory period permitted under the Liquidation Process Regulation. 39. It is the case of the Appellant that this extension of time is illegal and arbitrary and militates against the statutory framework of IBC which has laid down a mandatory time-line in this respect. Much emphasis was laid by the Appellant in submitting that it is settled law that the timeline of 90 days is mandatory. Reliance was also placed on the judgment of the Hon'ble Supreme Court in V.S. Palanivel Vs. P. Sriram, 2023 SCC OnLine SC 672 in which it has been held that Rule 12 of Liquidation Process Regulation has to be treated as mandatory in character as it contemplates a consequence in the event of non- payment of balance consideration by the highest bidder within the stipulated time line of 90 days by way....
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....reme Court in "V.S. Palanivel vs. P. Sriram, CS, Liquidator, Etc." (supra) itself had occasion to consider the power of the Adjudicating Authority in reference to extension of time for deposit of the balance consideration. It is useful to extract paragraphs 35.15 and 35.16 of the judgment of the Hon'ble Supreme Court which is as follows:- "35.15 The aforesaid Rule is not to be read in isolation but in conjunction with Section 35 of the IBC that deals with the powers and duties of the Liquidator and states that the Liquidator shall have the powers and duties specified in clauses (a) to (o) of sub-section 1 including the power to sell an immovable/movable property of the Corporate Debtor in liquation by public auction/private sale as per clause (f), subject to the directions of the NCLT. Pertinently, it has been observed in Arun Kumar Jagatramka v. Jindal Steel and Power Limited54 that "the Liquidator exercises several functions which are quasi-judicial in nature and character. Section 35(1) itself enunciated that the powers and duties which are entrusted to the Liquidator are "subject to the directions of the Adjudicating Authority". The Liquidator, in other words, exercises funct....
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.... the auction. 43. Given this backdrop, we are of the considered view, that it is settled law that it is open to the Adjudicating Authority to exercise its inherent powers under Rule 11 to grant extension of payment as long as it is satisfied that sufficient grounds exist. We also notice that Adjudicating Authority in its order allowed further time to the SAP in view of certain external circumstances having developed but also simultaneously directed the SAP to make additional payment to balance out equities. 44. Thus, to answer the first two inter-related questions, we are of the considered view that ordinarily the time-line of 90 days specified in Regulation 33 of Liquidation Process Regulations needs to be adhered to for making payment by the successful bidder. However, it is well settled law that if it comes to the notice of the Adjudicating Authority that extraordinary circumstances have arisen which has impeded the conduct of auction process, it can allow further time to the successful bidder as a special measure in exercise of its inherent powers. Further since the Palanivel judgment supra does not define in specific terms as to the circumstances in which the time extension ....
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....r not to insist on the balance payment. The Liquidator deferred the enforcement of the statutory consequences of default which was contrary to the regulatory framework of IBC and therefore committed a serious irregularity. 48. Per contra, it is the contention of the Liquidator that this was not a case where the SAP was not willing to pay or that it was not equipped to pay the balance consideration. As Liquidator, he however had no occasion to forfeit the EMD or cancel the auction because of court restraint orders and other litigation pending before the Adjudicating Authority. Initially there was an interim order of the Hon'ble Bombay High Court in WP No. 3821 of 2020 which directed the Liquidator to refrain from coercive action against the SAP. Liquidator has contended that he was further constrained by the fact that both the Appellant and the SAP had preferred separate applications before the Adjudicating Authority which were pending adjudication. Hence the surrounding developments were such that the Liquidator was not in a position to take any precipitate action either by permitting the opening of an escrow account or cancelling the auction sale. 49. In the present case, we are....
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.... been a value escalation of the subject land. Neither do we propose to get into any fishing and roving enquiry to find out whether there has been any material increase or decrease in the value of the property post auction. We wish to confine ourselves to the question as to whether there has been any material irregularity or illegality in the conduct of the auction. 52. The other contention raised by the Appellant is that the Liquidator had exceeded his power in trying to convert the status of the land from Class-II to Class-I. It was pressed that the auction notice by the Liquidator indicated that the auction was conducted on "as is where is", "as is what is" and "whatever there is basis" and "no recourse basis". Submission was also made that the SAP was fully aware of the title conditions at the time of filing the bid and therefore could not have claimed conversion of the status of subject land as a pre-requisite for depositing the balance sale consideration. Since the sale of land was on "as is where is basis", there was no cogent reason for the Liquidator to have approached the Regulatory Authorities for conversion of land. The Liquidator thus went beyond the call of his duties....
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....ifiable on the part of the Liquidator to have filed the conversion application since the revenue authorities recognised only the Liquidator as the lawful authority qua the assets of the Corporate Debtor to file such an application. 55. Further at that point of time, it appears that the SAP and the Liquidator were both under the impression that the LoI contemplated conveyance of the title of the land which would not be possible without the conversion application. As Maharashtra Land Revenue Code (MLRC) provided that the holder of the land, i.e. the Liquidator alone who could legally apply for such conversion, by making the conversion application the Liquidator was acting in furtherance of the spirit and essence of the auction notice. Furthermore, even if the auction was on "as is where is basis", the Liquidator could not have bypassed the regulatory permissions. Prima-facie, we are satisfied that the intent of the Liquidator behind filing of the conversion application was compliance of law, even though, there may have been an error of judgment on the part of the Liquidator to have acted on the presumption of the need to file conversion application as a precursor for transfer of own....