TMI Blog2020 (3) TMI 164X X X X Extracts X X X X X X X X Extracts X X X X ..... and Bankruptcy Board of India liquidation process regulation 2016, provides for the mode of liquidation. Regulation 32 of Insolvency and Bankruptcy Board of India Liquidation Process Regulation 2016 the liquidator should originally sell the Corporate Debtor through an auction and private auction is permitted only in certain classes of assets which are of perishable nature, assets likely to deteriorate in value if not sold immediately, if it is sold at a higher price than the Reserve Price of a failed auction etc. Hon'ble Supreme Court has already observed in Valji and Khimji Company v. Official liquidator of Hindustan nitro product (Gujarat) limited and others. [ 2008 (8) TMI 562 - SUPREME COURT ] where bids were received and were opened in the Court. The highest bid was that of the appellant M/s. Valji Khimji Company amounting to ₹ 3.51 crores. With the consent of the learned advocates representing the secured creditors, the said bid was accepted and the sale was confirmed on 30-7-2003. The Court directed the appellant to deposit 25% of the purchase price i.e. ₹ 63,98,000/- within 30 days from the said day and to deposit the balance amount within the next t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the following reliefs: (a) To set aside the impugned order dated 25-9-2019 passed in CA (IB) NO. 796/KB/2019 in CP (IB) No. 176/KB/2018 by the National Company Law Tribunal, Kolkata Bench. (b) To set aside the impugned order dated 23-10-2019 passed in CA(IB) No. 1366/KB/2019 in CP(IB) No. 176/KB/2018 by National Company Law Tribunal, Kolkata Bench. (c) To set aside the impugned order dated 06-11-2019 passed in CA(IB) No. 293/KB/2019, CA(IB) No. 1165/KB/2018, CA(IB) No. 615/KB/2019, CA(IB) No. 625/KB/2019, CA(IB) No. 755/KB/2019, CA(IB) No. 883/KB/2019, CA(IB) No. 957/KB/2019, CA(IB) No. 1345/KB/2019 in CP(IB) No. 176/KB/2018 by National Company Law Tribunal, Kolkata Bench. (d) Pass an order directing the 1st Respondent to complete the sale transaction by paying the balance Sale Consideration; (e) Pass an order imposing heavy penalty of ₹ 17,06,25,000/- being 25% of the bid amount upon Respondent Nos. 2 to 4 for derailing and delaying the sale proceedings conducted by the 5th Respondent/Liquidator. (f) To pass ad interim ex-parte orders in terms of prayer (a), (b), (c), (d) (e) may be granted; (g) Pass such other orders as this Hon'ble Appellate Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s defined under section 45-I(c) of RBI Act **NBFC as defined under section 45-I(f) of RBI Act Note: 1. The aforesaid financial parameters to be certified by Auditor/Independent Chartered Accountant 2. Management shall also certify the same in addition to submission of supporting documents. In case of bidding as a consortium: Lead member must hold at least 51% equity in the consortium. All other members would need to have a minimum stake of 20% each in the consortium. In case the consortium is body corporate, Tangible net worth (TNW) of consortium shall be calculated as weighted average of individual member's INW (value of negative TNW members shall be considered as Nil). In case the consortium is of FIs/Funds/PE Investors/NBFCs/Any other applicants the minimum AUM of consortium shall be calculated as weighted average of individual member's AUM OR Committed funds available for investment/deployment in Indian companies shall be calculated as weighted average of individual member's committed fund to investment/deployment in Indian companies. No Change in lead member or any member whose financials have been used to meet the criteria set out herein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... site amount during June, 2019. It was submitted that on 3rd July 2019 Respondent No. 2 to 4 forming a consortium challenged the e-auction in which the above said bidder i.e M/s Maithan Alloys Limited declared successfully and paid the requisite amount. 5. The Appellant had granted credit facility/loans to the Corporate Debtor and an amount of ₹ 469.29 Cr. approximately remained outstanding as on 31-12-2017. The Financial Creditor that is SBI filed an application under Section 7 of the IBC and the same was admitted by NCLT on 9-3-2018 and Corporate Insolvency Resolution Process was initiated. 6. The Resolution Professional as C.O.C made all efforts till February 2019 to affect resolution of the Corporate Debtor within the frame work of IBC. 7. NCLT also extended time on a few occasions in order to achieve resolution of the Corporate Debtor. However no resolution could be found and therefore NCLT vide its order dated 12-2-2019 directed liquidation of the Corporate Debtor as a going concern and appointed R-5 as the liquidator. 8. The liquidator called for bid for e-auction in newspaper on 10-5-2019. The reserve price was fixed at ₹ 80 Cr. The detailed terms and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale price of the Corporate Debtor, Impex Metal and Ferro Alloys Limited. II. The applicants shall make payment of bid amount in following manner:- (a) 15% of the offered amount being sum of ₹ 70,00,00,000/-(Rupees Seventy Crores only) to be paid by the applicant immediately upon acceptance of offer by the Liquidator. (b) 20% of the offered amount (mentioned above) be paid within one months thereafter; and (c) The balance 65% of the offered amount shall be paid by the Applicant to the Liquidator within a period of 90 days from the date of acceptance of the offer. III. Upon receipt of the entire bid amount, the Liquidator to hand over possession and custody of all assets of the Corporate Debtor along with the managements as is and where is basis and file final report IV. In case the applicants commit default in making payment as per time schedule mentioned above, their bid shall be treated as a cancelled and any amount deposited by them against the bid shall stand forfeited. V. CA(IB) No. 796/KB/2019 is disposed. VI. Other pending applications in this matter are listed for further consideration on 26-11-2019. 12. Thereafter on 23-10-2019 NCLT pas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peared ld counsel for CA (IB) No 1345/KB/2019 appeared Ld. Counsel for CA for CA (IB) No 1165/KB/2018 appeared Ld. Counsel for CA (IB) No. 1366/KB/2019 appeared. Ld. Counsel for Maithan Alloys Ltd. appeared. Ld. Counsel for TUF Metallurgical Pvt. Ltd. Million Link (China) Investment Ltd. appeared. Ld. Counsel for Mortex (India) appeared. Heard Ld. Counsel for the earlier Successful Bidder, namely Maithan Alloys Ltd. Heard Ld. Liquidator. Heard Ld. Counsel for the Financial Creditor i.e.. SBI. In this proceeding, on 29-4-2019, an order of liquidation of the Corporate Debtor is already passed. Liquidator was directed to sell the Corporate Debtor as a going concern. It appears from record that during process of liquidation, the Liquidator received one bid from M/s. Maithan Alloys Limited. In pursuant to the public notice, the said bidder had given offer of ₹ 68 Crore. Bid was accepted by the Liquidator and that bidder deposited sum of ₹ 17,06,25,000 (Rupees Seventeen Crore Six Lakh Twenty Five Thousand Only) i.e. 25% of the total price with the Liquidator. It is further seen from the record that when the Liquidator was in process to sell the Corporate Debtor to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are not complying the order passed by this Authority, they shall be dealt with separately but only for this reason the Liquidator cannot withhold the amount deposited by Maithan Alloys Ltd. Hence, we direct the Liquidator to pay back sum of ₹ 17,06,25,000/- (Rupees Seventeen Crore Six Lakh Twenty Five Thousand Only) along with interest agreed thereon within 7 days from today. It is informed at bar that SBI also filed some more CA. That CA and all other pending CAs to be placed together for further consideration on 25-11-2019. 14. It is submitted by the Appellant: (a) No allegations of mala fide or arbitrariness on the part of the Liquidator has either been alleged by R2 - R4 or noted by the NCLT. (b) In the absence of any provision either under the IBC or the Liquidation Regulations enabling the NCLT to interfere with a public auction by the Liquidator, the NCLT totally erred in interfering with the sale which stood concluded in favour of the 1st Respondent. (c) It is submitted, that IBBI (Liquidation Process) Regulations, 2016 contemplate that only when the sale is a private sale permission of Adjudicating Authority is needed under certain circumstances. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In para 51, it was made clear by Hon'ble Supreme Court that except on the grounds of fraud and irregularity, there cannot be an intervention in public auction. Futhermore, a successful bidder contractual obligation arising out of the offer made by the bidder and accepted by the liquidator. III. In Datta v. The state of Maharashtra, [2020] 1 BomCR 392, A Division of the Hon'ble Bombay High Court held as under: In view of the law laid down in the case of VedicaProcon Pvt Ltd. (supra) and above referred principles and safeguards emerged from various judgements, we have no hesitation to hold that if all the said principles and safeguard are satisfied and if there is nothing to suggests any collusion or fraud, the auction proceeding may not be reopened only on the ground that subsequent to the finalization slightly higher offer is received, than the auctioned price to the sale of the property in the liquidation. Thus, in view of the fact that except allegation of fraud and collusion, no evidence in that regard brought on by any of the petitioners, we are of the considered view that this is not a fit case to reopen the auction proceedings only because slightly higher o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ake the payments within 30 days and not as regards the obligation of the liquidator to conclude the sale in the said period. (b) The delay, if any was due to the erroneous approach of the NCLT to entertain an oral offer of R2 - R4 made in Court and the same cannot be a ground to completely overlook the public auction conducted in accordance with law. 18. However, the Respondent No. 1 have made following submissions: (a) That a Financial Creditor of Corporate Debtor was no way involved during (CIRP) Corporate Insolvency Resolution Process and has no locus standi to file the present appeal. The respondent has also made following submissions:- (b) Bid was submitted by R1 on 10-6-2019 along with 10% of the bid amount and a declaration that amounts paid by R1 to would stand forfeited, if R1 failed to comply with the terms of sale in relation to the assets. (c) R5 informed R1 on 12-6-2019 that R1 was declared the highest bidder. On 17-6-2019, R5 requested R1 to deposit 25% of the bid amount and R1 accordingly deposited the Advance on 18-6-2019 and intimated the same to R5 and R5 acknowledged receipt of the Advance from R1 on 20-6-2019. (d) Respondents 2 - 4 filed an app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pted the higher bid proposed by R2 - R4. On 23-10-2019, AA granted an extension of 3 days to R2 - R4 for making payment of the bid amount and also directed R5 to allow R2 - R4 to start work qua the CD; and on 06-11-2019, the AA directed R5 to refund the Advance paid by R1. 21. Liquidator has in compliance of the order dated 06-11-2019 passed by the AA has refunded the Advance. It follows from the above that SBI did not even object to either: a. The proposed sale in favour of R1 expiring by efflux of time, or b. The direction of completing a sale in favour of R2 - R4. 22. Subsequently, the AA has on 26-11-2019 directed R5 to initiate fresh auction process. Such direction for re-auction has also not been challenged. 23. The Respondent have also challenged the appeal as not maintainable on the following ground:- (a) SBI's case is that AA had no jurisdiction to direct R5 to return the Advance paid by R1. The underlying basis for such submission is that the proposed sale was a matter between R5 and a third party (R1). On that basis, the Appellant itself cannot contend it has any locus. (b) CD is now represented by R5. The only entitlement of SBI during the proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f a non-existing contract can be sought for by SBI against R1. (Section 19 20 of The specific relief Act, 1963) (c) Furthermore, SBI has failed to show anywhere from the records that R1 has failed to honour any of its obligation(s) towards deposit of the Advance within the stipulated timelines as set by R5. In fact the Appellant had made payment of the Advance one day before expiry of time i.e., on 18-6-2019. The Appellant was however compelled to stop making further payment upon direction from the AA vide order dated 3-7-2019 (d) As stated herein above, that time was of the essence of the auction process. Therefore, R1 cannot be made a scapegoat for no-objection being raised by SBI, at the appropriate stage, to the interference in the alleged concluded sale in favour of R1; despite being aware of the same. The limited objection raised by R5 and SBI before the AA was regarding the non-payment of Advance and/or the bid amount by R2 - R4. No allegation of misconduct/non-compliance was ever levied against R1. (e) In any event, neither the AA nor this Appellate Tribunal is a civil court; therefore the relief for specific performance sought for by the SBI cannot be granted. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s competence and authority. It was not open to the Arbitrator to rewrite the terms of the contract and award the contractor a higher rate for the work for which rate was already fixed in the contract. The Arbitrator having exceeded his authority and power, the High Court cannot be said to have committed any error in upsetting the Award passed by the Arbitrator with regard to claim No. 4 12. We, thus, find that the High Court did not commit any error in upsetting the Award of the Arbitrator with regard to claim No. 4 in the statement of claim. B. Adjudicating authority or appellate authority is not a civil court: I. Embassy Property Developments pvt Ltd. v. State of Karnataka ors.2019 SCC online SC 1542 29... The NCLT is not even a Civil Court, which has jurisdiction by virtue of Section 9 of the Code of Civil Procedure to try all suits of a civil nature excepting suits, of which their cognizance is either expressly or impliedly barred. Therefore NCLT can exercise only such powers within the contours of jurisdiction as prescribed by the statute, the law in respect of which, it is called upon to administer. Hence, let us now see the jurisdiction and powers conferr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by undertaking fresh exercise, expenditure and at less price. The breach of Clauses 10 and 6 above by Bhaskar Exxols Ltd. and Sankh Impex is established in the matter. Where the parties have deliberately specified the amount of ₹ 6,50,000/- as Earnest Money for each bidder and agreed to stipulation in clause No. 10 above, there can be no presumption that, at the same time, it was intended to allow the bidder responsible for the breach to give a go-by to the sum specified. Here the clause of forfeiture is included in tender document only in the interest of Creditors of the Company and to avoid unnecessary delays in restoring to them their legal dues. The clause is, therefore, in the public interest. The offer made by both the bidders was subject to this condition and by paying earnest Money they also accepted it, it represents a guarantee that the contract will be fulfilled as per its terms and conditions. Said amount is part of the purchase price to be adjusted accordingly when the bid is accepted by this Court. It is liable for forfeiture when the transaction falls through by reason of the default or failure of the purchaser/bidder. Clauses 10 and 28 of the terms and condi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ited . Upon consideration of the said email and the bid form liquidator was not at all sure as to the who is the bidder and who were its associates. The name of the bidder was written as Typhoon Financial Services Limited and Associates . The EMD was paid by One Sova Electrocasting and the email was sent by one nucleus consultant so that liquidator was not at all certain about the identity and credential for the bidders. It was clear that the bid was being done by consortium but no details of the Members of the consortium as per the terms and conditions of the auction sale. It is further submitted by the liquidator that if the bidder is the consortium, then expression of interest (EoI), confidentiality under taking eligibility undertaking of each of the consortium member was required to be submitted. The only financial eligibility was that a corporate bidder had to have net worth of ₹ 30 Crores and NBFC bidder AUM of ₹ 500 Crores. In present case no document to establish the Financial Creditors of any of the consortium member was submitted. Upon ROC searches conducted by the liquidator it appears that Typhoon was the NBFC whose net worth as on 31-3-2018 was only S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e inform the bidder that he is not allowed to participate in the auction. As appear from the email dated 12-6-2019 issued another mail to liquidator informing that they complied all requisite details and shall sent all document within 4 to 5 days and also requested to participate in the bid. As liquidator obliged to act in accordance with the terms and conditions of sale, liquidator was not at liberty to derogate from the same. It was in any evident to liquidator that the identity of the bidder was not certain, the identity of the consortium was not certain, the identity of the members forming the consortium was not certain, no particulars had been provided to their AUM or net worth as required by the terms and conditions of sale and consequently there was no opportunity whatsoever to independently make an assessment of their credentials or to obtain any measure of satisfaction with regard to their ability or intent to run the company as a going concern. It is in these circumstances, Liquidator was compelled to consider their bid as ineligible to reject the same. In this context it is also relevant to note that the approach of the said bidder, whose identity however remained uncert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of such interest, acted as per the clear mandate of the terms and conditions of sale, and satisfied all eligibility criteria set-forth for its participation. It has, thereafter, upon being declared the successful bidder also acted in depositing the 25% of the sale consideration within the time provided and has also clearly represented to me that it was in as state of readiness to deposit the balance 75% of such sale consideration as well. In the aforesaid facts and circumstances compelled to say that the application is frivolous and mala fide even the application made after the collusion of the auction sale does not disclose the true identity of the member of consortium or their true net worth. The application as such deserved to be and should be dismissed in limine. 27. As far as Respondent 2 to 4 are concerned notices on R-2 and R-3 was served on 27-11-2019 Originally notice was issued to R-2 TO R4 on 18-11-2019 which returned as not delivered, thereafter again notice was sent issued on 2-1-2020,10-1-2020, 22-1-2020,finally e-mail was sent on 27-1-2020. In spite of notice getting served on R-2 and R-3 they have not appeared on 17-12-2019, 7-1-2020, 21-1-2020, 30-1-2020, 31-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts, but no instalment should be less than ₹ 5 lakhs. Accordingly Hon'ble Supreme Court confirmed the auction sale in favour of the Appellant. Conclusion 30. The appeal is, therefore, maintainable in view of the provision of Section 61 (1) of IBC as SBI has a large stake of ₹ 469.29 cr. 31. The Auction is not challenged on the ground of fraud and/or irregularity. 32. There is no provision in the terms and condition of auction to withdraw from the auction process once it is agreed by the successful bidder (R-1) i.e m/s Maithan Alloys Limited. 33. Section 35 (1) (f) of the IBC empowers liquidator to sell the property of the corporate debtor in liquidation by public Auction, Hence there was no need for adjudicating authority to direct the liquidator for considering the proposal of R- 2 to R-4 who has approached the Adjudicating Authority after due date of finalisation of Auction. 34. NCLAT has also held in case of Majit Commecial Llp v. Spm Auto Pvt. Ltd (In Liquidation) CA(AT) (Insolvency) No. 732 of 2019 that objectors are not to be allowed to unnecessary delay and protract the liquidation process for undue advantage of some of individuals or groups ..... X X X X Extracts X X X X X X X X Extracts X X X X
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