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2025 (6) TMI 431 - AT - IBCSale of the business of the Corporate Debtor instead of sale of the Corporate Debtor as a going concern - HELD THAT - It will be worthwhile to determine what was the date of 10th meeting of SCC. In the memo preferred by the Appellant before the Ld. Adjudicating Authority the certified true copy of the minutes of the said meeting has been provided in the said copy the date of meeting has been mentioned as 18.03.2023. However the Appellant claims that it is a typographical error and it should be 18.03.2024. The claim appears to be correct as the date of 3rd SCC meeting was 16.05.2023 where decision was taken by SCC in the Resolution - 7 of the minutes to go ahead with issue of e-auction notice for sale of the Corporate Debtor as a going concern. This being the case 10th SCC meeting could not have possibly been held on 18.03.2023 and therefore correct date of 10th SCC meeting should be 18.03.2024 which Ld. NCLT has overlooked. The Ld. Adjudicating Authority has held that the request of conversion of sale of Corporate Debtor as a going concern under Regulation 32(e) into a sale of business(s) of the Corporate Debtor as a going concern under Regulation 32(f) of the IBBI (Liquidation Process) Regulations 2016 was nothing but an afterthought of the Applicant that since the Corporate Debtor had only one business that is dairy processing there would be no material difference between the sale of Corporate Debtor as a going concern and the sale of a business of the Corporate Debtor as a going concern that the relief relating to rights and title in the Business of the Corporate Debtor has already been given in its order dated 02.09.2024 in IA(IBC)/310(CHE)/2024 and that since in the order dated 02.09.2024 the liquidator has been directed to file necessary application for closure of the liquidation process of the Corporate Debtor it is clear that the Corporate Debtor was ordered to be sold as a going concern by the order dated 02.09.2024 and there is no ambiguity which needs to be clarified and according rejected the application. The observation made in para 36 of the impugned order that as the Corporate Debtor and its business are being sold as a going concern the Liquidator is mandated to file an application for the closure of the liquidation process with required forms and documents will not act as a bar to grant the relief prayed for. Mere filing of an application by the Liquidator for closure of the liquidation proceedings will not curtail the right of exercise of inherent powers by the Tribunal for meeting the ends of justice particularly when it does not have any adverse bearing on the rights of any of the parties and when the Respondents are at a consensus that the relief of modification as prayed for in application deserves to be granted owing to the decision taken in the 10th Stakeholders Consultation Committee of the Corporate Debtor M/s. GHO Agro Private Limited and that if the said clarification to the order of 02.09.2024 is allowed they may not have any grievances as such. Conclusion - The order dated 02.09.2024 would be treated to be modified to the extent that the Corporate Debtor has been sold as a going concern in accordance with Regulation 32(f) of the IBBI (Liquidation Process) Regulations 2016. The impugned order stands quashed - appeal allowed.
The core legal questions considered in this appeal revolve around the interpretation and effect of orders passed by the Adjudicating Authority (NCLT) concerning the sale of a Corporate Debtor under the Insolvency and Bankruptcy Code, 2016 (I&B Code). Specifically, the issues include:
Issue-wise Detailed Analysis 1. Interpretation of the Order dated 02.09.2024: Sale of Corporate Debtor vs. Sale of Business as a Going Concern The legal framework involves the provisions of the I&B Code, 2016, and the IBBI (Liquidation Process) Regulations, 2016, particularly Regulation 32 which governs the sale of assets during liquidation. Regulation 32(e) contemplates sale of the Corporate Debtor as a going concern, while Regulation 32(f) contemplates sale of the business of the Corporate Debtor as a going concern. The Appellant contended that the order dated 02.09.2024 permitted only the sale of the Corporate Debtor as a going concern, but the actual resolution of the 10th SCC meeting authorized the sale of the business of the Corporate Debtor as a going concern. The Appellant sought clarification/modification to align the order with the SCC resolution. The Adjudicating Authority had rejected this clarification application, holding that the sale of the Corporate Debtor as a going concern was completed, the sale certificate was issued, and there was no ambiguity requiring clarification. It further held that the request for conversion from Regulation 32(e) to 32(f) was an afterthought and that the SCC resolution did not bind the sale already concluded. The Court observed a contradiction between the orders dated 16.04.2024 and 02.09.2024: the former allowed sale of business as a going concern under Regulation 32(f), while the latter ordered closure of liquidation proceedings post sale of Corporate Debtor as a going concern. The Court noted that the sale of the business of the Corporate Debtor as a going concern would not materially differ from sale of the Corporate Debtor itself, given the Corporate Debtor had only one business. On this issue, the Court concluded that the order dated 02.09.2024 should be construed as permitting the sale of the business of the Corporate Debtor as a going concern in accordance with Regulation 32(f), thereby allowing the requested clarification. 2. Validity and Effect of the 10th Stakeholders Consultation Committee Meeting Resolution The 10th SCC meeting resolution was central to the appeal as it purportedly authorized the change in the nature of sale. The certified minutes initially recorded the date as 18.03.2023, which the Appellant asserted was a typographical error, contending the correct date was 18.03.2024. This was supported by the chronology of prior SCC meetings and related documents, including a letter to the liquidator dated 16.02.2024 and the liquidator's signature dated 01.04.2024 on the resolution. The Adjudicating Authority had cast doubt on the genuineness of the 10th SCC meeting due to the erroneous date and concluded that the SCC resolution was not binding on the sale already completed. The Court found this reasoning flawed, accepting the Appellant's explanation that the date was a typographical error and that the meeting was indeed held on 18.03.2024. The Court emphasized that the resolution of the SCC, as the representative body of stakeholders, should be given due weight and effect. Thus, the Court held that the 10th SCC resolution was valid and binding for the purposes of clarifying the nature of the sale, and the Adjudicating Authority's doubt was misplaced. 3. Application of Regulation 32(e) vs. 32(f) of IBBI (Liquidation Process) Regulations, 2016 The distinction between Regulation 32(e) and 32(f) was pivotal. Regulation 32(e) contemplates sale of the Corporate Debtor as a going concern, whereas Regulation 32(f) contemplates sale of the business of the Corporate Debtor as a going concern. The Appellant argued that the sale was to be under Regulation 32(f), consistent with the SCC resolution and prior orders. The Adjudicating Authority rejected this, holding that since the Corporate Debtor had only one business, the difference was immaterial and that the sale under Regulation 32(e) was already concluded and final. The Court, however, accepted the Appellant's argument that the sale under Regulation 32(f) was the correct description and that the order dated 02.09.2024 should be clarified accordingly. The Court reasoned that such clarification would not affect the rights or liabilities of any party and was consistent with the SCC decision and prior orders. 4. Scope of the Adjudicating Authority's Inherent Powers under Section 60(5) of the I&B Code The Appellant contended that even after the liquidator filed the application for closure of liquidation proceedings, the Adjudicating Authority retained inherent powers under Section 60(5) of the I&B Code to modify or clarify orders to meet ends of justice. The Appellant sought to invoke this power to insert the expression "sale of business of the Corporate Debtor as a going concern" to give effect to the SCC resolution. The Adjudicating Authority had held that the closure application barred such modification. The Court disagreed, holding that filing of the closure application did not curtail the Tribunal's inherent powers to clarify or modify orders where no prejudice was caused to any party and justice so required. The Court emphasized that the respondents themselves did not oppose the modification and recognized that it would not materially affect any legal rights or liabilities. 5. Treatment of Competing Arguments and Evidence The Court carefully considered the conflicting contentions: the Adjudicating Authority's emphasis on finality of sale and issuance of sale certificate versus the Appellant's reliance on SCC resolutions and regulatory provisions. The Court found merit in the Appellant's contentions, especially given the consensus of the respondents not to oppose the clarification. The Court also addressed the alleged afterthought argument by the Adjudicating Authority, rejecting it as unfounded given the contemporaneous documents and prior orders supporting the Appellant's position. Conclusions The Court allowed the appeal, quashed the impugned order to the extent it rejected the clarification application, and directed that the order dated 02.09.2024 be treated as modified to reflect that the Corporate Debtor was sold as a going concern under Regulation 32(f) (sale of business of the Corporate Debtor as a going concern). The Court held that such clarification was consistent with the SCC resolution, prior orders, and did not prejudice any party. Significant Holdings "Merely a resolution of SCC as that taken in 10th SCC meeting would not have a binding effect, on the sale of the Corporate Debtor as a going concern, and the subsequent issuance of the sale certificate" - held by the Adjudicating Authority was rejected by the Court upon proper scrutiny of the evidence. "Mere filing of an application by the Liquidator for closure of the liquidation proceedings will not curtail the right of exercise of inherent powers by the Tribunal for meeting the ends of justice particularly when it does not have any adverse bearing on the rights of any of the parties." "The order dated 02.09.2024, would be treated to be modified to the extent that the Corporate Debtor has been sold as a going concern in accordance with Regulation 32(f) of the IBBI (Liquidation Process) Regulations, 2016." The core principles established include the recognition of the binding nature of SCC resolutions in liquidation proceedings, the applicability of Regulation 32(f) for sale of business as a going concern, the scope of the Adjudicating Authority's inherent powers to clarify orders post liquidation closure application, and the importance of giving effect to stakeholder decisions to ensure just outcomes.
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