TaxTMI 
TaxTMI 
2025 (5) TMI 2302
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....on treating the process of liquidation as complete and relieve the applicant from the current assignment. c. To direct the landlord Mr. Ravinder Reddy to refund the rent deposit which he is postponing for more than a month. 2. Application 2.1 The CD was admitted into Corporate Insolvency Resolution Process (CIRP) pursuant to a petition filed by the State Bank of India (SBI)- led consortium (Respondent No. 1 herein), by an order dated 10.02.2017 passed by this Authority. Subsequently, on 21.09.2017, the CD was ordered to be liquidated, and the Applicant herein was appointed as the Liquidator. 2.2 The CD had 89 ongoing projects with an estimated valuation of Rs. 300 crores. Some of these projects were being executed through sub-contractors, and the CD had provided Bank Guarantees (BGs) as performance guarantees. The majority of the projects were with Indian Railways, and BGs along with Earnest Money Deposits/Security Deposits totalling Rs. 45 crores were submitted to the Railways. 2.3 The Liquidator apprehended that liquidation of the CD would result in the invocation of BGs by Railway Authorities, thereby imposing a significant financial burden....
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.... 2.11 In this regard, the Liquidator withheld nominal charges for the use of such equipment and retained certain amounts due to shortfalls in royalty payments by M/s. SS Rail Works. As a consequence, SS Rail Works delayed project execution, leading to the termination of its contracts by the concerned railway divisions. 2.12 Mr. Rama Raghava Reddy, a former employee of the CD and subcontractor, issued a letter to the North Western Railway (NWR) expressing disinterest in continuing the assigned work. NWR terminated the contract, despite the CD's commitment to completing the project. Accordingly, the CD retained certain amounts as indemnity under the agreement. Subsequently, the subcontractor initiated proceedings before the NCLT, making the CD and the Liquidator parties to the petition, but excluding the Financial Creditors. 2.13 The Liquidator realized Rs. 20,04,99,000 from the sale of tangible assets. A total amount of Rs. 33,68,72,121, including proceeds from operations, was distributed in accordance with Section 53 of the Insolvency and Bankruptcy Code (IBC). 2.14 The Liquidator advertised the sale of intangible assets including credentials, arbitrat....
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.... (vi) Company Appeal (Ins.) (AT) No. 440 of 2019- Filed against the NWR for arbitrarily terminating contract, is awaiting directions. (vii) Company Appeal (Ins.) (AT) No. 567 of 2019- Filed against the NFR for arbitrarily terminating contract, is awaiting directions. 2.21 Two concrete mixers were sold to M/s. Arch Architects Private Limited in an auction held on 25.06.2019. Despite full payment, the purchaser failed to take possession. The Liquidator informed the purchaser via email of incurring charges of Rs. 30,000. The purchaser responded on 20.11.2021, requesting 7-10 days to take delivery. 2.22 Four properties valued at Rs. 5,36,379 (valuation from three years ago) remain unsold, and fifteen properties are untraceable. A police complaint was lodged with the Deputy Commissioner of Police, District Kaprup, Assam, on 01.03.201 and before the officer in charge of Sonapur Police Station, Assam on 27.02.2021 with respect to the untraceable properties. 2.23 The purchaser, having initially agreed to continue operations from the CD's existing premises, later relocated the equipment. The landlord, Mr. Ravinder Reddy, failed to refund the secu....
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....keep the SCC and Joint Lenders Forum (JLF) adequately informed regarding the liquidation process. A meeting was convened by JLF on 11.02.2022, summoning the Liquidator to provide explanations. Issues discussed included invocation of BGs, pending litigations, unilateral filing of I.A. No. 742 of 2021 without SCC knowledge, and incomplete handover of assets to the successful bidder. The Liquidator finally shared the petition copy on 16.02.2022. 3.9 Despite having knowledge of the proceedings of the SCC meeting held on 09.11.2021 and the absence of express authorization, the Liquidator proceeded to file I.A. No. 742 of 2021. 3.10 In the JLF meeting dated 11.02.2022, unresolved matters were deliberated, including: (a) The disposal of four unsold properties, (b) Clarification on the party responsible for handing over machinery sold to M/s. Arch Architects Pvt. Ltd., among other concerns. 3.11 The Liquidator is yet to provide comprehensive clarity on the above issues, including a complete list of outstanding receivables. 3.12 The Sale Certificate dated 10.03.2022 issued by the Liquidator includes reference to the e-auction notice date....
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....nated projects. Consequently, issuance of a No Objection Certificate (NOC) is not feasible at this stage. 3.21 The Successful Bidder has also requested transfer of deposits and margin monies from Respondent No. 1. These Term Deposit Receipts (TDRs), typically issued from the CD's cash credit account for purposes such as EMDs and BG margins, had mostly been closed prior to the e-auction and adjusted against the CD's liabilities. The Liquidator has not confirmed whether the TDRs form part of the sold assets. 3.22 The JLF, in its meeting dated 19.07.2022, resolved that no further requests of the Successful Bidder would be entertained until the Liquidator provides the necessary clarifications. 3.23 Respondent No. 1 and its consortium lenders are not the members of the party to any of the litigations and moreover, none of the consortium lenders are in possession any of the material supporting documents. 3.24 The Liquidator has withdrawn Rs. 2.49 crores towards remuneration, including Rs. 90.52 lakhs disbursed as fees to subcontractors. However, he now declines to continue pending litigations, which may lead to further losses to the Respondent and cons....
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....in regard to providing copies of agreements related to ongoing projects and the details of receivables up to 30.09.2020 4.8 The CD was sold on a going concern basis, along with its assets on an "as is, where is" basis, through an e-auction held on 18.02.2020. Accordingly, access to information related to the CD is crucial for Respondent No. 2. Any amounts received by the CD after the issuance of the sale notice are attributable to Respondent No. 2. Furthermore, payments made by Respondent No. 2 shall be distributed among stakeholders, while the remaining balances and retained amounts related to sub-contractors also rightfully belong to Respondent No. 2. 4.9 Additionally, on 30.10.2021, the SAM branch of the State Bank of India (SBI) instructed its branches to transfer all fixed deposits to the SAM branch, through which the new management of the CD remitted the total sale consideration. 5. Rejoinder to the Counter of Respondent No. 1 5.1 The CD was sold as a going concern. Consequently, the purchaser has stepped into the shoes of the CD and the company has resumed its status as a live entity under the Companies Act, being now represented by a duly appoi....
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....at meeting, it was further decided to include furniture as part of the sale package. 5.8 The status of the Bogibeel project was specifically addressed in the SCC meeting dated 03.02.2020. The project was expressly excluded from the list of assets to be transferred to Respondent No. 2. It is pertinent to mention that the project was entrusted to Hindustan Construction Company (HCC), the work was completed, and all associated BG obligations were discharged. Respondent No. 1 was present at the meeting held with HCC officials in Mumbai. 5.9 Information regarding the implementation of the sale and the disposal of tangible assets was regularly shared with the SCC. Relevant documentation, including the preliminary report, assetwise valuations, sale prices, and purchaser details, is annexed with this rejoinder for reference. 5.10 Lastly, the Liquidator ceased performing any further duties in relation to the CD following the reservation of orders by this Hon'ble Authority in December 2021. 6. Rejoinder to the Counter of Respondent No. 2 6.1 It is denied that the CD was sold in its entirety as a going concern. Rather, a specific bundle of assets-includi....
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....tely Rs.37 crores from Railway billings over a span of five years. The Liquidator drew remuneration in accordance with Regulation 4A of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 for the period from 2018 to 2021. 7.4 The termination of contracts by SS Rail Works triggered the invocation of a Bank Guarantee to the tune of Rs.6 crores. Consequently, the Liquidator retained equivalent funds in accordance with the indemnity clause provided in the contractual arrangement. 8. This Authority, by way of an order dated 12.09.2024, directed the Liquidator to supply information contained in the para nos. 6 to 14 of the counter filed by the Respondent No. 2 and he is further directed to co-operate with the Respondent No. 2 in compliance of statutory requirements. 9. In compliance of the above direction of this Authority, the Liquidator filed a memo. 10. Written Submissions by Respondent No. 1 10.1 The Respondent No. 1 has reiterated the contentions and allegations on the with respect to the non-compliances and non-clarifications regarding the current status of the assets of the CD. 10.2 The Respondent No. 1 categoric....
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....021 seeking his discharge on the ground that the CD stood sold as a going concern. 12.3 Despite the sale having been approved and the assets having been handed over to the purchaser (as evidenced by Panchanama dated 30.09.2021), serious concerns regarding the conduct of the Liquidator have been brought to the attention of this Authority by the Respondents. 12.4 The Liquidator has failed to comply with directions passed by this Authority in I.A. No. 843 of 2020 (order dated 27.10.2020) and I.A. No. 397 of 2021 (order dated 02.09.2021), including filing of returns with the RoC and Income Tax Department, and providing audited/provisional financial statements and project-related documents. 12.5 The Income Tax returns have not been filed since 2017, and RoC filings remain pending since financial year 2013-14. The Liquidator's explanation relying on I.A. No. 169 of 2018 is unconvincing. The said I.A. only pertained to discrepancies in prior audit reports and did not bar the Liquidator from making appropriate statutory filings based on fresh audits. Perusal of the IA No. 169 of 2018 shows that this was filed for the alleged differences in the audit reports prepa....
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....ending since 2013-14. He has not provided clarity regarding the inclusion or exclusion of several properties, including the Bogbeel project, and other machinery/scrap assets. The sale process and post-sale transition lack sufficient documentation and clarity. There exists substantial ambiguity regarding which specific contracts, projects, receivables, and assets were sold and which remain with the CD. The contradictory stands taken by the Liquidator in various SCC meetings and pleadings cast further doubt on the credibility and transparency of the liquidation proceedings. 12.11 The Liquidator has not submitted a complete final report with the necessary annexures as mandated under Regulation 45 of the IBBI (Liquidation Process) Regulations, 2016. Despite drawing liquidation fees amounting to approximately Rs.2.49 crores without the prior approval of the competent authority, no distribution schedule or detailed account of realisations and disbursements has been provided. 12.12 His conduct reflects gross negligence and non-compliance with statutory provisions under Sections 35 and 37 of the Code and Regulations 44 to 47 of the Liquidation Regulations. His evasive ple....