TaxTMI 
TaxTMI 
2025 (11) TMI 960
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...., Ms. Kirti Talreja for Respondent No.1 (RP). Mr. Shyam Mehta, Sr. Advocate with Mr. Udit Mendiratta, Mr. Shivkrit Rai, Ms. Apeksha Singh, Advocates for Respondent No.1 (SMSPL) JUDGMENT Per: Barun Mitra, Member (Technical) The present is a set of two appeals filed under Section 61 of Insolvency and Bankruptcy Code 2016 ('IBC' in short) which arises out of the Order dated 20.12.2024 (hereinafter referred to as 'Impugned Order') passed by the Adjudicating Authority (National Company Law Tribunal, Kolkata Bench, Court-I) in I.A. (IB) No. 447/KB/2024, I.A. (IB) No. 586/KB/2024 and I.A. (IB) No. 995/KB/2024 in C.P. (IB) No. 23/KB/2019. By the impugned order, the Adjudicating Authority has disallowed IA No. 447 filed by the Liquidator by directing the Liquidator to issue fresh Swiss Challenge Notice in the private sale of the assets of the Corporate Debtor with the bid of OASPL as the anchor bid and EMD fixed on standard norms. IA Nos. 586 and 995 of 2024 filed by SMSPL has been disposed of on the above terms. Aggrieved by the impugned order, two separate appeals have been preferred by Orissa Alloy Steel Pvt. Ltd. ("OASPL" in short) and SM Steels and Power Limited ("SMSPL" in....
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....02.2024, their offer would be discussed. • In the 19th SCC meeting held on 20.02.2024, negotiations took place between the SCC and the representatives of OASPL wherein OASPL was requested to revise its offer to Rs. 265 Cr.; make EMD of Rs. 150 Cr. and participate in an auction process to be held by way of Swiss Challenge Process where OASPL would be the 'anchor bidder' with the right to match any higher bid. OASPL agreed to the above stipulations of the SCC. OASPL requested that physical possession of the plant be handed over upon full payment of the sale consideration without waiting for the Adjudicating Authority approval which however was not agreed to. • The SCC members in 19th meeting voted in favour of OASPL's bid with 80.33% majority. The voting line was kept open for REC which needed internal approval in order to cast the vote. • OASPL requested permission to submit the EMD in the form of a bank guarantee. • On 22.02.2024, the Liquidator after SCC consultation issued a public notice which was published in various newspapers announcing a Swiss Challenge auction for the sale of Corporate Debtor as a going concern on a privat....
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....pproval by the Adjudicating Authority. The LoI was unconditionally accepted by OASPL. • Ten days after conclusion of the Swiss Challenge Process, on 16.03.2024, SMSPL sent a letter and an email to the Liquidator expressing its interest for participating in the private sale process and willingness to submit a higher bid. SMSPL also requested that its EoI be considered for participation in the sale of the Corporate Debtor as a going concern on an "as is where is" basis. • Within two days of sending its offer to the Liquidator, on 18.03.2024, SMSPL filed IA No. 586/KB/2024, before the Adjudicating Authority seeking the following reliefs: i. A direction to the Liquidator to accept the EOI submitted by SMSPL; ii. A direction to the Liquidator to conduct a bid auction process for the private sale of Corporate Debtor as a going concern on an "as is where is" basis; iii. A stay on the auction conducted on 05.03.2024; iv. A stay on the execution of the LOI issued pursuant to the auction held on 05.03.2024; v. Cancellation of any sale confirmation or sale certificate issued in furtherance of the auction held on 05.03.2024....
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.....04.2024, ACRE also responded by denying the allegations of collusion made by SMSPL. • On 17.04.2024, Liquidator sent email to SMSPL stating that he was making inquiries into the allegations of collusion. • On 19.04.2024, SMSPL sent an email to the Liquidator, inter alia, calling upon the Liquidator to immediately suspend the entire Swiss Challenge private sale process until the disposal of IA 586, alleging that the private sale process was tainted. • On 21.04.2024, a Legal Notice was issued by SMSPL to ACRE and its directors for fraudulent assignment of debt from Asset Reconstruction Company (India) Limited ("ARCIL") in relation to Corporate Debtor on 05.02.2024. On 21.04.2024 SMSPL also wrote to Liquidator regarding collusion and fraud committed by Rashmi Group through ACRE in the liquidation sale of Corporate Debtor. It was alleged that the successful bidder OASPL was a part of Rashmi Group. It was also alleged that CIMMCO and ACRE are owned, controlled and promoted by the Patwari family who are promoters of Rashmi Group. • On 24.04.2024, SMSPL submitted before the Adjudicating Authority that they are willing to deposit the EMD....
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.... as anchor bid. The OASPL had therefore submitted the EMD of Rs. 150 Cr. in two tranches on 23.02.2024 and 26.02.2024. A Public Announcement date 21.02.2024 was issued by the Liquidator inviting bids for sale of the Corporate Debtor as a going concern by way of SCM. The Liquidator had also reached out to several players in the steel industries to participate in the SCM to enable value maximisation. The Liquidator had also filed an IA No. 447 of 2024 before the Adjudicating Authority on 24.02.2024 seeking permission of the Adjudicating Authority to conduct the private sale through SCM with the OASPL's offer as the anchor bid. On 06.03.2024, a LOI was issued by the Liquidator to the OASPL as successful bidder which was made subject to approval of the Adjudicating Authority. However, before the Adjudicating Authority could take any decision on IA No. 447 of 2024, the SMSPL had filed IA No. 586 of 2024 seeking directions of the Adjudicating Authority for acceptance of its EoI and for permission to participate in the private sale process of the Corporate Debtor though the time-lines as mentioned in the Public Announcement had already expired. At this stage SMSPL did not challenge the de....
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.... such circumstances, when there was no ostensible reason to restart a process which has attained finality, the annulment of the legally concluded Swiss Challenge process by the Adjudicating Authority was an action taken beyond their jurisdiction which was impermissible in law. 6. When SMSPL had neither participated either in the nine auctions conducted earlier nor took part in the private sale process which was published in well-known newspapers having wide circulation, they had no locus to interfere in the private sale process at this belated stage. SMSPL had neither made any EMD nor given any bid offer which clearly indicates that SMSPL was an opportunistic litigant. When SMSPL as a commercial party did not come forward and act within the timelines mentioned in such public announcement, such a party cannot be allowed to challenge the legally concluded liquidation sale process. It was therefore contended that their applications have been erroneously allowed by the Adjudicating Authority which goes against the timeliness of the liquidation proceedings as mandated by Regulation 44 of LPR. It was emphatically asserted that though the locus of SMSPL had been questioned, the Adjudic....
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....on of defrauding anyone's rights. Further, the Liquidator had approached more than 300 entities to participate in the auction which validates the transparency of the process undertaken. It was submitted that OASPL and ACRE were held by distinct and separate shareholders. The issue of related party raised by the SMSPL lacked basis since OASPL was neither a related party of the Corporate Debtor nor was it related to the Liquidator and hence the applicability of proviso to Regulation 33(2) of the LPR did not arise. The Adjudicating Authority despite holding that any inference on any collusion between OASPL, Liquidator and ACRE cannot be undertaken in a summary proceeding, yet it has made unwarranted observations on the alleged nexus amongst them. It was also contended that the Adjudicating Authority had transgressed into the commercial wisdom of the SCC in holding that the EMD of Rs. 150 Cr. was restrictive and arbitrary since this had been decided by the SCC by requisite majority to eliminate non-serious bidders. 9. Making submissions on behalf of the Liquidator, Shri Niranjan Reddy Ld. Sr. Counsel submitted that the Liquidator had submitted IA No. 447 of 2024 under Regulation 33(....
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....e Liquidator's conclusion that he had no reason to believe that there was no collusion between ACRE and OASPL. Further, it was contended that it would be wrong to say that ACRE had been steering and maneuvering the sale process on its own to the detriment of others. It was pointed out that while the minimum voting percentage of the SCC that was required to advise the Liquidator is 66%, pertinently, ACRE has a voting share of 60.65% which is less than the required 66%. Clearly, though ACRE has a significant voting share in the SCC, it could not and did not decide or resolve or advise on its own without the support of the other SCC members. 12. On the allegation that truncated timelines had been drawn up, it was stated that the LPR at Schedule-I for private sale does not provide for timelines and that timelines were to be decided in consultation with the SCC. Since the SCC had exercised its wisdom on the time-lines, it was non-justiciable and not open to question. It was also denied that the Process Document was issued belatedly since the eight bidders who had evinced interest in the Swiss Challenge and had sought the Process Document had been provided the same and no complaints h....
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....rower and receipt of proceeds from the sale of the assets in liquidation. That ACRE had been doing their due diligence and taking decisions in the exercise of commercial wisdom, it was submitted that ACRE had pointed out that the offer of OASPL was below the reserve price if discounted by 10% as compared to the last failed e-auction. Had ACRE acted in a manner which was to unduly help OASPL in the auction, ACRE would also not have proposed further negotiation of commercials with OASPL. It is because of the stand taken by ACRE that the other members of the SCC also prevailed upon OASPL to increase the amount of EMD to ensure the seriousness of OASPL. Further, it is pertinent to note that when the Liquidator requested SCC members to reconsider whether Swiss Challenge is to be followed or the revised offer given by OASPL could be straightway put for e-voting, it is ACRE which had insisted on running a Swiss Challenge. This shows that ACRE was always looking at maximization of asset value and fair price discovery. It was also pointed out that when the OASPL's negotiated offer of Rs. 265 Cr. including EMD of Rs. 150 Cr. was approved, the same was done with 80.33% majority which showed t....
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.... Process. The Adjudicating Authority had also rightly set aside the Public Notice for private sale dated 21.02.2024 which had been published on 22.02.2024. However, the impugned order erred in retaining anchor bidder status of OASPL, for not restraining Rashmi Group from the auction process and in not replacing the Liquidator despite apparent collusion with ACRE and OASPL. 17. It was submitted that the Regulation 33(2)(d) of the LPR mandated prior permission of the Adjudicating Authority to sell assets of the Corporate Debtor by means of private sale. In support of their contention, reliance has been placed on the judgment of this Tribunal in Bhavik Bhimjyani Vs. Uday Vinodchandra Shah in CA (AT) (Ins) No. 1584 of 2023. It was submitted that the Liquidator had not obtained prior permission from the Adjudicating Authority as required under Regulation 33(2)(d) before initiating the process of private sale. In the present case, permission was sought after issue of Public Announcement of Swiss Challenge process on 22.04.2024 and after concluding the Swiss Challenge process. The impugned judgment had correctly held that in the present case since the entire process of selection of anc....
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....ns which dissuaded genuine bidders. The proposal to conduct the private sale by Swiss Challenge process was to create an illusion for better price discovery. When the procedure being adopted was meant to favour one bidder in an arbitrary and malafide manner, the Adjudicating Authority could always prevent such private sale. Since, the entire sale process was vitiated by fraud and collusion, the Adjudicating Authority had rightly set aside the private sale. 20. The entire process of auction has been opaque and restrictive. The interested bidders were not even given access to the Process Document and were expected to submit bids and provide EMD of Rs. 150 Cr. within an extremely brief period. While it is the Process Document which specified the documents which required to be made available to the Liquidator along with the date for such compliance, the Process Document was dated 29.02.2024 while the last date of submission of eligibility documents was 27.02.2024. This would have precluded genuine bidders from submitting their bids. This goes to show that the Process Documents were prepared in a manner that other prospective bidders would not be able to meet the timelines for submis....
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.... 24. Elaborating on the issue of collusion between OASPL and ACRE, it was submitted that though SMSPL had sent communications to the Liquidator on 22.03.2023, 27.03.2024, 04.02.2024, 19.02.2024 and 21.02.2024, the Liquidator did not submit any report to the Adjudicating Authority while Regulation 33(3) of the LPR which clearly mandates the need to seek appropriate orders against the colluding parties. It was submitted that Regulation 33(3) of LPR clearly provides that when a Liquidator finds that the auction suffers from any kind of collusion, the Liquidator is required to approach the Adjudicating Authority for appropriate orders to ensure fair auction process and maximum price discovery. Though there was adequate evidence and reasons for the Liquidator to believe that there was collusion since SMSPL had provided sufficient material yet no action was taken by the Liquidator to furnish a report to the Adjudicating Authority as he was acting in cahoots with ACRE and OASPL. 25. The SMSPL has contended that because of the spectre of serious fraud and collusion being perpetrated they had filed IA No. 995 of 2024. It was submitted that SMSPL had sent e-mails to the OASPL, the Liqu....
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..... 27. Coming to the first issue framed by us on the locus of SMSPL to file this appeal, we would like to first notice the views of OASPL, ACRE and the Liquidator who have all contended that SMSPL did not have locus to maintain IA No. 586 of 2024 before the Adjudicating Authority or pursue the present appeal before this Tribunal. It is their case that the Adjudicating Authority failed to look into the unexplained and inordinate delay on the part of the SMSPL in offering to participate in the private sale process. It was also added that the Liquidator in consultation with the SCC in terms of Schedule-I Regulation 33 of LPR relating to private sale had also prepared a strategy to approach interested buyers. A nationwide public announcement had been made through newspapers having sizable circulation public announcement regarding the Swiss Challenge process. Steps were also taken to reach out to 300 prospective bidders. Further after conduct of the Swiss Challenge process, OASPL was declared as successful bidder. SMSPL, for the very first time, evinced their interest to participate in the bidding process for private sale of the Corporate Debtor on 16.03.2024 which was 10 days after t....
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....be allowed to participate in the private sale process of the Corporate Debtor alongwith willingness to submit a bid higher than the highest bid which had been received in the auction process held on 05.03.2024 in the interest of maximization of the value of assets. SMSPL had also sought from the Liquidator the Process Document as well as the details for furnishing of the EMD to enable them to participate in the sale process of the Corporate Debtor as a going concern on an "as is where is basis." Another letter had been issued on 22.03.2024 to all the members of the SCC by SMSPL in which it was stressed that the reserve price of OASPL was undervalued as the thermal power plants under construction were already at advanced stage. The SMSPL also offered an initial bid amount of Rs. 300.20 Cr. which amount was clearly above the reserve price set by the Liquidator in the public announcement notice of 22.02.2024, though of course this offer was made with two pre-conditions in that the sale be conducted by public auction and EMD kept at 10%. 30. It is also pertinent to note that the 21st SCC meeting held on 26.03.2024 had also taken up for discussion the proposal which had been received....
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.... the SCC members the agenda for discussion on the decision to be taken by the SCC members for whether an opportunity shall be given to SMSPL and other interested participants. The Liquidator requested the SCC members to share their views/votes about the offer. Further, the Liquidator sought views of the SCC members whether fresh public auction shall be conducted upon request of the SMSPL to allow them to participate in such fresh auction process. In response, all the SCC members denied for the fresh sale process. Additionally, representatives of REC and Indian Bank mentioned that an opportunity to participate in existing sale process can be given to SMSPL subject to them agreeing to the terms and conditions like EMD amount, payment terms, etc. of existing private sale process. ..... The representative of REC stated that we have received the offer from SMSPL for a price of INR 300.20 Crore along with 10% EMD, Considering the offer, we can provide a chance to SMSPL to participate in the current Swiss Challenge process. The Liquidator clarified to the SCC members and REC that the present offer from SMSPL mentions about cancelling the private sale process and....
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.... On the other hand, REC and Indian Bank mentioned that they were in favour of extending the timelines to Include them in the current private sale process, thereby allowing SMSPL to participate in the same, but with a condition of submitting the EMD of 150 crores instead of 10% of their offer, and to follow the timelines as per the current private sale process. However, both REC and Indian Bank were also not in favour of cancelling the current private sale process and reinitiating a fresh e-auction. ..... Voting agenda To approve whether the SCC should consider including discuss and negotiate as per its discretion, the new offer submitted by SMSPL to the members of the SCC on March 22, 2024, and to re-open the sale process of the Corporate Debtor. Result (based on the voting of the members attending the SCC meeting): Rejected with 75.08% vote against the agenda item. (Emphasis supplied) It becomes clear from a perusal of the above minutes that the proposal of SMSPL had grabbed the attention of some of the SCC members in light of the fact that the offer was more than that of OASPL and that the Adjudicating Authority not having given its permission to the....
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....hindrance in the participation of prospective bidders including them. The curtailment of time period in submission of documents and in the conduct of due diligence of assets coupled with a restrictive EMD had posed as a hurdle in their participation as a bidder. Apart from the compression in the time period for conduct of auction, non-availability of time to submit eligibility documents had been weighing heavily on the SMSPL which had purportedly kept them out of the fray. 33. We have gone through the issue of compressed timelines and issues relating to opacity in the bid process due to delayed publication of the Process Document in the succeeding paragraphs and find that these constituted germane grounds to feel aggrieved. When similar constraints were raised by SMSPL in IA No. 586 of 2024 in seeking the intervention of the Adjudicating Authority to gain a foothold in the private sale bid, the Adjudicating Authority did not commit any error in entertaining IA No. 586 of 2024. Particularly so because though the Liquidator had completed the sale process, the prior permission of the Adjudicating Authority was still pending as mandated by Regulation 33(2)(d) of LPR. 34. To answe....
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....he mode of sale is a Swiss Challenge process (as per the Process document) under Private Sale as per meaning under the Code and Liquidation Process Regulations. 13. Manner of Obtaining the Process Document The detailed terms and conditions of the sale process are set out in the Process Document, which can be obtained by the bidders by sending an email request at [email protected] 14. Last Date for Submission Of Eligibility Documents 27 February 2024 15. Last Date submission of EMD 29 February 2024 16. Last Date of Bid 05 March 2024 17. Manner of Submitting Bid Interested parties must send in their bid and the EMD Strictly as per format and documents as set specifically under the Process Document and Earnest Money Deposit ("EMD") of Rs. 150 Crores (Indian Rupee One Fifty Lakh Crores only). Broad Process: .... 2. Interested persons must place a bid higher than the Anchor Bid Price of Rs.265 Crores ("Anchor Bid Price") ensuring a minimum incremental amount Rs.1 crore only ("Incremental Amount") with and EMD of Rs. 150 Crores as per process as per the schedule set out above. The detailed terms and conditions rel....
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.... interwoven, the timelines otherwise applicable to a public auction should also have been applicable because the private sale is being conducted by adopting the Swiss Challenge Process. The timelines provided under Schedule-I for "auction" cannot be transposed in the case of "private sale". 41. We now come to the issue of opacity in the manner the Swiss Challenge process was conducted. The Public Announcement at Clause 12 stipulated that the terms of sale would be as per the Process Document and Clause 13 stipulated that the detailed terms and conditions of the sale process was to be set out in the Process Document. Further, Clause 17 of the said announcement also stipulated that the prospective bidders were to send their bid and the EMD strictly in the format as set out under the Process Document. 42. Thus, from the Public Announcement, it becomes clear that the Process Document was to be the foundational document governing the conduct of the private sale. At this stage, therefore it is relevant for us to notice the Process Document. The relevant provisions of the Process Document are as reproduced below: 7. SCHEDULE & STAGES OF SWISS CHALLENGE PROCESS 7.1 ....
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....GE PROCESS STAGES .... 9.2 Submission of Eligibility Documents 9.2.1 All Bidders shall, on or prior to February 27, 2024 ("Document Submission Date") submit the following documents to the Liquidator ("Eligibility Documents"): 9.2.1.1 Cover Letter as per the format in Annexure A; 9.2.1.2 Confidentiality Undertaking as per the format in Annexure B; 9.2.1.3 Affidavit under Section 29A as per the format in Annexure C; 9.2.1.4 Bidder Undertaking as per the format in Annexure D; 9.2.1.5 Authorization for Information Request as per the format in Annexure E; 9.2.1.6 Board Resolution as per the format in Annexure F; 9.2.1.7 Power of Attorney as per the format in Annexure G; 9.2.18 Documents relating to Financial stability and source/ proof of funds. 9.2 Each Bidder is required to submit the Eligibility Documents as provided in Clause 9.2 herein. It is clarified that participation on the Competitive Bidding Date is subject to the Eligibility Documents and the Bid documents being submitted materially in the same formats as provided in this Process Document to the satisfaction of the Liq....
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....ocument which listed out the eligibility documents was published after 27.02.2024. It is apparent therefore that the Process Document was asking the bidders for submission of eligibility documents by 27.02.2024 when they were made aware of the requisite eligibility documents on 29.02.2024. Thus, the last date to submit eligibility documents had lapsed even before the bidders were made aware of the list of documents that they had to submit. This was tantamount to asking the bidders to perform an insuperable task. 45. The Process Document which was the governing document which detailed each and every step in the sale process was itself not made available, it clearly made the entire private sale process a farcical exercise. When the Process Document itself was not in place, the timelines which were inserted in the public announcement had been rendered redundant, meaningless and otiose. We have come to the irresistible conclusion that the Process Document was prepared in a manner that other prospective bidders were not able to meet the timelines for submission of eligibility documents and make the EMD deposit thus preventing prospective bidders to participate in the right earnest. ....
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....rty to the SCC or the Liquidator to draw up a timeline which was humanly impossible to comply with. While we have no quarrel with the proposition laid down in R.K Industries Vs HR Commercials Pvt. Ltd. (2024) 4 SCC 166 by the Hon'ble Supreme Court that the timelines approved by the SCC members is an exercise of their commercial wisdom and hence non-justiciable, that does not equip the SCC to suggest impractical timelines which in the present case stood expired even before the timeline was set into motion. There is an onerous responsibility on the liquidator to exercise his oversight that unreasonable time- lines does not preclude other bidders. The manner in which the sale process has been concluded without giving time to other bidders to participate can be said to have vitiated the private sale. 49. The statutory provision of IBC and LPR mandates that auction should be undertaken in a transparent manner which could lead to maximization of value realization from the sale for the benefit of creditors/stakeholders. In the present case, the Process Document did not provide reasonable or provide sufficient time to potential bidders to understand the terms and condition of the auctio....
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....ntamount to putting a fait accompli situation before the Adjudicating Authority as it detracted from the requirement of "prior permission" contemplated in Regulation 33(2)(d) of LPR. In support of their contention, reliance was placed on the judgment of the Hon'ble Supreme Court in R.K Industries judgement supra and this Tribunal in Bhavik judgement supra which clearly laid down the need of prior permission of the Adjudicating Authority for conduct of private sale under Regulation 33(2)(d) of LPR. 53. Per contra, it was contended on behalf of the Liquidator that he had correctly filed IA No. 447 of 2024 seeking permission of the Adjudicating Authority on 24.02.2024 immediately after the issue of public announcement. The public announcement and the Process Document also made it clear that no sale was going to be concluded prior to permission having been received from the Adjudicating Authority. Even the LoI which had been issued to OASPL by the Liquidator spelt out that the same was subject to the approval of the Adjudicating Authority. It was therefore asserted that the Liquidator had not violated the provisions of Regulation 33(2)(d) of LPR in any manner. It was pointed out tha....
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....le by auction is the preferred and accepted mode for conduct of liquidation proceeding under IBC. Sub Regulation 2 of Regulation 33 of LRP however caters to private sale and this clearly stipulates that for a private sale to be carried out, the Liquidator has to undertake "prior consultation" of the SCC. Such a private sale is to be conducted by the Liquidator with prior consultation with the SCC only when the asset is perishable or is degradable in value. In all other cases of private sale, in terms of Sub Regulation 2(d), the "prior permission" of the Adjudicating Authority is required to be obtained for a private sale. 56. We are also guided by the judicial precedent laid down by the Hon'ble Supreme Court in R.K Industries judgement supra the relevant paras of which are as reproduced below: "56. When it comes to the mode of sale of the assets of the corporate debtor, whether immovable or movable and other actionable claims, Regulation 33 of the Liquidation Regulations comes into play and states that ordinarily, the liquidator will sell the said assets through auction, as specified in Schedule I(1). Sub-section (2) of Section 33 IBC gives an option to the liquidator t....
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....pondent 2 liquidator approach the stakeholders for consultation. In the meeting held on 28-1-2021, the stakeholders resolved that the prospective bidders, who wished to participate in the private sale of the Dahej material, be encouraged to do so by adopting the Swiss Challenge Process. Pertinently, the first stage of the said process requires selection of an anchor bidder; the second stage entails inviting prospective bidders to submit their bids against the reserve price offered by the anchor bidder. At the third stage, the anchor bidder gets one chance to exercise the RoFR against the H1 bidder by placing a bid higher than the H1 bid. In the event the anchor bidder fails to exercise the RoFR, the said right stands extinguished and H1 bidder would then be declared as successful." When we look at the above judgement, we find that the Hon'ble Apex Court has laid down that there is need of "prior permission" not only for private sale but highlights that there is "yet another embargo" of "prior permission" which is to be sought in case of sale to a related party. Furthermore, the intention of having this stringent condition to protect the assets of the corporate debtor and the int....
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....ctions failed, the Liquidator proceeded to conduct a private sale thereof in compliance with Regulation 33 of the Liquidation Regulations. As such, the principles of sale laid down in the judgments relied herein above are as valid and applicable to the present matter. We have gone through all the judgments placed before us. We do not find any judgments which support the case of liquidation proceedings of similar nature of private sale. We find that all these judgments relate to public auction. The auction which has been resorted to by the Liquidator is by way of private sale, on which no judgment has been cited. Therefore, the facts of the present case are distinguishable. The present case is being governed by statutory provision under Regulation 33 of Liquidation Regulations. As noted earlier by us, these Regulations are mandatory and it is necessary that they are followed scrupulously. It is also necessary for transparency and also ensuring maximisation of recovery. We note that this is missing in the present case. We also note that the Impugned Order has not delved into the issue of Regulation 33." When we look at the above judgement of this Tribunal, we find that that the ob....
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....on conduct of private sale before terms and conditions of the private sale are set up. On the other hand, we find that in the present case by the time the Liquidator had filed IA 447 of 2024 before the Adjudicating Authority, all preliminary steps on the manner of conduct of the private sale stood firmed up. 61. It clearly meant that liquidator should have obtained prior permission of the Adjudicating Authority to the terms and conditions of the private sale rather than thrust on the Adjudicating Authority the outcome of the concluded process. Such conduct would render the impact of word "prior" meaningless. The Adjudicating Authority has not been given an opportunity to apply its mind with regard to the private sale of the Corporate Debtor and the mode and manner of such sale. In the facts of this case, the Adjudicating Authority has not committed any infirmity in holding that the Liquidator has presented before the Adjudicating Authority a fait accompli with regard to approval of the private sale. 62. Furthermore, when we look at the facts of the present case, we find that OASPL was retained as the anchor bidder with reserve price of Rs. 265 Cr. at a time when this bid amou....
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....d by CIMMCO which was a group company of the Rashmi Group. For this funding, CIMMCO in turn had received money from Rashmi Metaliks Ltd. and Orissa Metaliks Pvt. Ltd. which it transferred to ACRE amounting to Rs. 148.25 Cr. which was utilized as assignment consideration paid by ACRE to ARCIL. Upon execution of the Assignment Agreement, ACRE became the majority voting share member of the SCC with 60.65% vote share. It was added that CIMMCO as the 60% security receipt holder in the Trust Fund of ACRE and OASPL have the same beneficial owner which was allegedly the Rashmi Group. Thus, by funding and effecting assignment of the debt of the Corporate Debtor in favour of ACRE, the Rashmi Group defacto stepped into the driver's seat in the SCC as ACRE had 60% voting share member on the SCC. OASPL which was a Rashmi Group entity and ACRE colluded to acquire the Corporate Debtor as a going concern on a private sale basis. 66. To buttress their contention that there was collusion between OASPL, ACRE and the Liquidator, it is the contention of SMSPL that the private sale proposal of OASPL dated 19.02.2024 was placed immediately on 20.02.2024 before the SCC for its consideration which agree....
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....Security Receipts issued are an instrument of investment which can be freely subscribed by any Qualified Buyer under SARFAESI Act which is not disqualified under Section 29A of the IBC. In any case, the vote share of the ACRE was limited to 60.65% while the bid of the OASPL was near unanimously accepted by SCC members with 99.92% voting rights. The entire sale process was conducted in a fair manner under the aegis of the Liquidator in accordance with the provisions under the IBC and based on consultation with all the members of the SCC. The terms and conditions of the private sale through Swiss Challenge including the amount of EMD was carefully deliberated and considered by all the members of the SCC, which are credible banks and financial institutions. It is also amply clear from the minutes of the 19th, 20th, 21st and 22nd meetings of the SCC members that ACRE has not influenced or pressurized or coerced any SCC members in any manner and all decisions were taken by the SCC after extensive deliberations. Therefore, it cannot be alleged that the process was conducted to favor one bidder over other bidders. 69. Submission was pressed that the allegation of fraud has to be substa....
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....the proposed private sale process. In any event, the Liquidator received eight expressions of interest pursuant to the public announcement dated 22.02.2024 and not one of them complained about the quantum of EMD sought. 71. It was also added that the entire proposed private sale process was made subject to the grant of approval from Adjudicating Authority which was also clearly stated in the public announcement and the Process document. Even the LoI issued to OASPL on 06.03.2024 did not mark the consummation of sale as it categorically mentioned that same was subject to the grant of approval from Adjudicating Authority under Regulation 33(2)(c) of the Liquidation Regulations. When there was no defrauding or trampling of rights or interest of a third party, the allegation of collusion doesn't stand. 72. It is the case of the Liquidator that the meaning of the term "collusion" as interpreted by various judicial fora, collusion means a secret agreement for a fraudulent purpose or a secret or dishonest arrangement in fraud of the rights of another. It is a deceitful agreement between two or more persons for some evil purpose, such as to defraud a third person of his rights. E....
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.... faith and cannot be predicated on unsubstantiated doubts. The expression "reason to believe" would imply that it must be based on material on the record. We are inclined to agree with the Liquidator that only when he had "reason to believe", which reason should have been substantiated by material available on record depicting collusion, that as Liquidator he was prohibited from proceeding with the sale. 76. In the present case, we are inclined to agree with the Liquidator that even if ultimate beneficiaries of OASPL and ACRE happened to be common, the allegation of collusion falls as ACRE did not control the requisite majority in SCC. ACRE controlled only 60.65% of SCC votes which was short of the required majority of 66%. That 40% creditors in SCC in addition to ACRE also voted in favour of OASPL shows that there was no foul play on the part of ACRE and OASPL. 77. When we look at the sequence of events in the present case, we find that the letters dated 27.03.2024 and 04.04.2024 alleging collusion received from SMSPL were duly shared with SCC on 16.04.2024. Response had also been elicited on these communications which was received from OASPL on 11.04.2024 and 14.02.2024 and....
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....vate sale for it to participate by voting percentage of 99.92%. The SCC had also advised the Liquidator to continue with the current private sale without conducting any fresh e-auction as requested by SMSPL by voting percentage of 99.92% and decided not to allow SMSPL to participate in the private sale process of the Corporate Debtor by 75.08%. Clearly, none of the above decisions were solely made by ACRE and no amount of the intention to collude would have had any effect if the remaining members of the SCC decided otherwise. Nothing has been placed on record that ACRE had defrauded, coaxed, misled or coerced the remaining members of the SCC to toe its line as each of the other members were separate and distinct entities having their own independent and respective management and decision makers which comprised of public sector banks/financial institutions. Moreover, even if the ultimate beneficial owners of the SR holder of ACRE Trust with respect to the debt of the Corporate Debtor and OASPL were the same, the same is not barred under the IBC or the Liquidation Regulations. 81. To answer the above question, we are of the considered view that the allegation of SMSPL regarding co....