TMI Blog2020 (9) TMI 990X X X X Extracts X X X X X X X X Extracts X X X X ..... t be debarred or legal technicalities cannot be allowed to come in its way. Further, when liquidator is having an opportunity to approach this Authority in case of collusion, but when the maximization of value of assets is apparently not happening, though may or may not exist, any other interested party can certainly approach this Authority under sections 60(5)(a) / 60(5)(c) of IBC, 2016. Such person, in our considered view, cannot be rendered remedyless. It is apparent that there is a departure from the earlier concept of supremacy of Committee of Creditors as the decisions of Committee of Creditors now can be looked upon in the light of preamble to IBC, 2016 and Committee of Creditors may be required to reconsider the resolution plan to achieve such objectives. In our considered view, this rationale also applies to the decisions of liquidator - the decisions of the liquidator can certainly be looked upon by this Authority when such decisions are not in consonance with the stated objectives of IBC, 2016. In the present case, as stated earlier, e-auction was taken only once. Only one bidder has participated and that too, bid at a reserve price. This bid has been accepted by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tioned that application is being filed under Section 7 of the Insolvency and Bankruptcy Code, 2016 ( IBC, 2016 ) which is not the case as the Corporate Debtor is already under liquidation. In fact, the application has been filed under Section 60(5) of IBC, 2016 for declaring the e-auction held on 11th June 2019 as void and to set aside the same. It has further been prayed that the applicant be allowed to submit a counter bid so that best price could be made available to the Corporate Debtor. 2. This application was earlier heard on 24th February 2020 and interim order was passed on that date to enable the applicant to prove its bona fide and seriousness by submitting a proposal and depositing 25% of the proposed amount on the condition that the same would be forfeited if the applicant was subsequently declared successful bidder and failed to implement its bid. 3. During the course of hearing on 03.03.2020, the Ld. Counsel along with the applicant appeared. He submitted proof of deposit of ₹ 3.87 crores, being 25% of the bid amount of ₹ 15.5 crores proposed by the applicant. Being satisfied on the aspect of seriousness of the applicant and keeping in mind the objec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value of the property. Hence, it being a case of inadequate consideration squarely fell within the ambit of the ratio of said decision and, hence, liable to be quashed. 5. The Ld. Counsel for the successful bidder appeared and submitted that the present applicant did not participate in the e-auction and now it had come without pointing out any fraud or irregularity being practised in the auction process, hence, it had got no locus now to challenge the closed process. It was further contended that the successful bidder matched the reserve price and deposited ₹ 1.44 crores as per the terms and conditions of invitation for expression of interest. Hence, it could not be said that there was a case of inadequacy of price and, therefore, the decision relied on by the applicant was not applicable. It was further contended that if in such manner the applications were entertained, then, there would remain no sanctity of auction process. Strong reliance was placed on the decision of the Hon'ble NCLAT in the case of SBI vs. Maithan Alloys Ltd. And Ors. in Company Appeal (AT)(Insolvency) No. 1245-1247 of 2009. 6. The Ld. Liquidator, on the other hand, contended that if new appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to consult the stakeholders, though such consultation may not be binding. As far as role and powers of this Authority are concerned, section 60(5) of IBC is relevant. For our purposes, clause (a) of this sub-section empowers this Authority to entertain or dispose of any application or proceeding by or against the corporate debtor or corporate person. As per clause (c) of this sub-section, this Authority can entertain or dispose of any question of priorities or any question of law or facts, arising out of or in relation to the insolvency resolution or liquidation proceedings of the corporate debtor or corporate person under this Code. Thus, these general powers exist. Apart from this, specific powers have been given in different sections in relation to different aspects as per the context of that situation. Having said so, it is not in dispute that unlike section 31, no mechanism has been prescribed specifically for confirmation of asset sale under liquidation by this Authority. However, in case of private sale, approval of this Adjudicating Authority is a must. It is further to be noted that section 60(5)(c) is a residuary provision and it overrides contrary provisions of any other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le Supreme Court, in the case of Committee of Creditors of Essar Steel India Limited Through Authorised Signatory vs. Satish Kumar Gupta and Others, in Civil Appeal No. 8766-67 of 2019, has observed as under: 54. This is the reason why Regulation 38(1A) speaks of a resolution plan including a statement as to how it has dealt with the interests of all stakeholders, including operational creditors of the corporate debtor. Regulation 38(1) also states that the amount due to operational creditors under a resolution plan shall be given priority in payment over financial creditors. If nothing is to be paid to operational creditors, the minimum, being liquidation value - which in most cases would amount to nil after secured creditors have been paid - would certainly not balance the interest of all stakeholders or maximize the value of assets of a corporate debtor if it becomes impossible to continue running its business as a going concern. Thus, it is clear that when the Committee of Creditors exercises its commercial wisdom to arrive at a business decision to revive the corporate debtor, it must necessarily take into account these key features of the Code before it arrives at a comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the liquidator can certainly be looked upon by this Authority when such decisions are not in consonance with the stated objectives of IBC, 2016. 12. Now, the process of asset sale needs a little elaboration. As per section 35(1)(f) of IBC, 2016, liquidator is empowered to sell the movable and immovable properties of the corporate debtor in such manner as may be specified. The term specified has been defined in section 3(32) of the IBC, 2016 means specified by Regulations made by the Board under this Code and the term specify shall construe accordingly. 'The Board', as per section 3(1), means Insolvency Bankruptcy Board of India established under sub-section (1) of section 188. As per section 240 of the Code, the Board is empowered to make Regulations/Rules consistent with this Code so that provisions of this Code could be effectively implemented. In pursuance of this scheme, Liquidation Process Regulations, 2016 have been made and notified. Chapter VI of such Regulations deals with the realization of assets. As per regulation 32, various forms have been prescribed for sale of assets. Regulation 33 governs mode of sale. As per Regulation 33(1), the liquidator i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2016 at the relevant point of time (11th June, 2019) as under: SCHEDULE I MODE OF SALE (Under Regulation 33 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 1. AUCTION (1) Where an asset is to be sold through auction, a liquidator shall do so in the manner specified herein. (2) The liquidator shall prepare a marketing strategy, with the help of marketing professionals, if required, for sale of the asset. The strategy may include - (a) releasing advertisements; (b) preparing information sheets for the asset; (c) preparing a notice of sale; and (d) liaising with agents. (3) The liquidator shall prepare terms and conditions of sale, including reserve price, earnest money deposit as well as pre-bid qualifications, if any. (4) ---------------------------------------------------------------------------- (5) The liquidator shall make a public announcement of an auction in the manner specified in Regulation 12(3): Provided that the liquidator may apply to Adjudicating Authority to dispense with the requirement of Regulation 12(3)(a) keeping in view the value of the asset intende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 10 Crores approx. Thus, there exists not only contravention of the preamble to the Code and Regulations made thereunder but also an irregularity/deviation. In this view of the matter, the decision of the Hon'ble NCLAT relied on by the successful bidder is not applicable. In the present case, liquidation is under process and other asset i.e., plant and machinery remains to be disposed of. Hence, for this reason also, the decision of the Hon'ble NCLAT relied on by the corporate debtor is not applicable as timeliness of the liquidation are not affected adversely because of new bidder owing to cancellation of earlier auction and declaring the applicant as successful bidder. The said decision is also not applicable for the reason that in the present case new bid is at much higher value as well as a condition has been imposed that if the new bidder does not honour its commitment, such deposit shall stand forfeited which was not the case there. 17. Apart from this, the decisions relied on by the applicant in that case pertain to general situations and not a situation covered under IBC, 2016. IBC, 2016 is a complete Code in itself and as per provisions of section 238 of the IB ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
