TMI Blog2021 (2) TMI 1179X X X X Extracts X X X X X X X X Extracts X X X X ..... other conditions to be fulfilled etc. From the submissions it is noted that the Applicant never denied payment of balance sale consideration neither on account of incapable, financial difficulty, nor willful nonpayment but on the other hand because of the specific clarification issued by the Respondent, time taken by GIDC as discussed above and finally on account of COVID 19 situation and Regulation 47 A of IBBI Regulation etc. It is also noted that the Applicant had made payment of ₹ 1,57,46,696/- on 25.06.20202 towards interest under protest. The submissions of the Applicant is acceptable. The delay in payment of balance sale consideration cannot be attributed to the Applicant, successful bidder. The interest burden thus cannot be fastened on him. The Applicant is not liable to pay interest as claimed by the Respondent. Therefore, an amount of ₹ 1,57,46,696/- paid towards interest by the Applicant under protest is to be refunded/adjusted by the Liquidator within 30 days from the date of this order - Application allowed. - I.A. No. 1036/MB/C-II/2020 in C.P (IB) No. 294/MB/C-II/2018 - - - Dated:- 12-2-2021 - Janab Mohammed Ajmal, Hon'ble Member Judicial And M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and is leasehold from GIDC and is subject to sub-division of said Plot. Lot 2 was described as under: Part of Plot no. 825 of Jhagadia GIDC, Bharuch in the village, Dadheda, Jhagadia Taluka, Bharuch District, Gujarat having a total land area of 28.57 acres / 1,15,632 sq. mt. or 12,44,656 sq.ft. This land is leasehold from GIDC and is subject to sub-division of the said Plot. The Freehold land for Lot 2 was described as under: Survey No. - 67 + 73 + 74 + 4A + 4B of Village Dadheda, Jhagadia Taluka, Bharuch District, Gujarat having a total land area of 20.10 acres / 81,326 sq. mt. These are the freehold land parcels. The Leasehold land under Lot 1 and Lot 2 is part of common Plot of land being Plot No. 825, of Jhagadia GIDC, Bharuch in the village, Dadheda, Jhagadia Taluka, Bharuch District, Gujarat which was acquired by the Corporate Debtor on leasehold basis from Gujarat Industrial Development Corporation ( GIDC ). Accordingly, for the purpose of transfer of Leasehold land comprised in Lot 1 and Lot 2, it was necessary to complete sub-division of the said Plot No. 825 from GIDC into the separate leasehold lands as described in Lot 1 and Lot 2 above. Accordin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r shall apply for subdivision of GIDC Plot after issuance of LoI to the Successful Bidder/s and such Bidder/s shall pay the amount of sub-division charges within 10 days from the date of demand. In case, the bid succeeds only for one of the Lot no. 1 or for Lot no.2, the Successful bidder shall initially pay full amount of sub-division charges and said Successful Bidder shall be given due set off for the excess amount, in subsequent final payment Article 13 (B) of the E-Auction Memo further provides that, if the bid succeeds for only one of the Lots, then the successful bidder shall bear the entire sub-division charges and will get proportionate set off while making the final payment for the Lot it won. 6. The Applicant states and submits that from a reading of the provisions of the E-Auction Notice and the E-Auction Memo, the Applicant was of the bona fide view that the balance sale consideration towards the purchase of assets comprised in Lot 1 and / or Lot 2 was payable upon the Respondent completing the sub-division of the said Leasehold land from GIDC. This view of the Applicant was further strengthened by Article 13(B) which provided that if the bid succeeds only for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y is attributable to sub division of Leasehold Land, shall be waived off. 11. Applicant submits that in view of the clarifications provided by the Respondent, the Applicant submitted its bid on January 16, 2020 for the assets being (a) Part of Plot No. 825 of Jhagadia GIDC, Bharuch in the village Dadheda, Jhagadia Taluka, Bharuch District, Gujarat having leasehold land 28.57 acres/1,15,632 sq. mt. (subject to sub-division), and (b) Survey No. 67 + 73 + 74 + 4A + 4B of Village Dadheda, Jhagadia Taluka, Bharuch District, Gujarat having a total freehold land area of 20.10 acres/81,326 sq. mt- listed, as Lot 2 of the E-Auction Notice and the E-Auction Memo (the Concerned Assets ). The Applicant emerged as the successful bidder for the auction purchase of the Concerned Assets (comprising of Freehold land and Leasehold land for Lot 2) for a sum of ₹ 43,43,00,000/- (Rupees Forty-Three Crores and Forty-Three Lakhs Only) (the sale consideration). 12. Accordingly, the Respondent issued a LoI dated January 18, 2020 to the Applicant. As per the LoI, the Applicant was required to pay the balance sale consideration together with the applicable GST and sub-division charges within 90 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... port in respect of plot no. 825 was still not provided to them, amongst other pending actions on the part of the Respondent. 18. Vide e-mail dated April 07, 2020, the Respondent / Liquidator informed the Applicant that sub-division of the land is in progress and that survey report of Plot No. 825 is not received. 19. Owing to the pandemic, a nationwide lockdown was imposed by the Government of India w.e.f. March 24, 2020. The lockdown continued till May 31, 2020. Regulation 47A was introduced in the Regulations, by way of Notification No. IBBI/2020-21/GN/REG060, dated April 20, 2020 (w.e.f. 17.4.2020), whereby the period of lockdown imposed by the Central Government in the wake of Covid-19 outbreak was not to be counted for the purposes of computation of the timeline for any task that could not be completed due to such lockdown, in relation to any liquidation process. 20. The Applicant vide e-mail dated April 14, 2020, informed the Respondent / Liquidator that owing to lockdown, the Applicant was facing difficulties in day-to-day business. In view of the unprecedent conditions, the Applicant sought extension of time being 15 days from the date when the lockdown is lifted b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal Order does not provide the amounts due and payable in respect thereof and that the Respondent ought to ascertain the same and that the same needs to be borne and paid by the Liquidator on behalf of the Corporate Debtor. c. The Provisional Order refers to the execution of a certain Deed of Agreement on a stamp paper of ₹ 300 as prescribed by GIDC on account of Plot No. 825 (forming a part of the Concerned Assets) being held on license from GIDC, which has to be executed/ implemented by the Respondent. d. A No-dues Certificate for water charges was to be obtained from GIDC. In this respect, outstanding water charges needed to be ascertained and paid and the process of obtaining such No-dues Certificate has to be initiated by the Respondent. e. GIDC has directed the Respondent to regularize the unauthorized non-violative construction by approving plans from their Executive Engineer, GIDC or Competent Authority concerned, within 30 days. As the Concerned Assets do have any construction thereon, a clarification ought to be obtained by the Respondent from GIDC. f. With respect to the (a) sub-division charges, and (b) concession amount along with interest, the Applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal Order of GIDC owing to which the final order has not been passed till date. The Applicant further, drew the attention of the Respondent to Regulation 47A, whereby the period of lockdown imposed by the Central Government in the wake of COVID-19 outbreak could not be counted for the purposes of computation of the timelines for any task that could not be completed due to such lockdown, in relation to any liquidation process. Accordingly, the Applicant stated that interest @12% p.a. for delay in payment of balance purchase consideration will only be required to be charged and paid after 30 (thirty) days from the: (i) date of final order on sub-division of Plot No. 825 in Jhagadia Industrial Estate; or (ii) last date of period of lockdown imposed by the Central Government, whichever is later. 26. The lockdown imposed by the Central Government came to an end on May 31, 2020. 27. The Respondent vide letter dated June 10, 2020 rejected the request of the Applicant for waiver of interest on account of delay in sub-division and lockdown as requested by the Applicant vide its representation / letter dated May 25, 2020. Further, the Respondent called upon the Applicant to pay t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sional Order clearly specifies that if the conditions contained therein were not fulfilled within one month from the date of the Provisional Order, then the said order shall automatically stand cancelled. It is, solely, the Respondent s obligation to fulfil the conditions mentioned in the Provisional Order. The Applicant vide e-mail dated May 5, 2020 pointed out various discrepancies in computations and sought various clarifications from the Respondent with respect to the conditions in the Provisional Order. However, till date the Respondent has not responded to the e-mail dated May 5, 2020 issued by the Applicant seeking clarifications. It is also pertinent to note here that the Respondent, by email dated April 07, 2020, confirmed that all dues have been paid with respect to Plot No. 825. However, in the Provisional Order, the GIDC has specifically highlighted several outstanding dues in respect of Plot no. 825 and has directed the Respondent to make payment of the dues as a condition precedent to passing the final order to sub-division of Plot No. 825. 33. It is further stated and submitted that the process of conducting a survey of Plot No. 825 took two months for completion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period. However, the Respondent, overlooked the express provisions of Regulation 47A, has, vide its letter dated June 10, 2020, called upon the Applicant to pay interest on the balance consideration till the date of payment thereby charging interest during the lockdown period. Thus, the letter dated June 10, 2020 demanding interest during the lockdown period is clearly illegal and contrary to the provisions of Regulation 47A of the Liquidation Process Regulations. 38. The Applicant states that the Applicant has already paid the EMD which continues to remain with the Respondent till date. The Applicant is seriously prejudiced by the delay on the part of the Respondent in complying with the directions of the GIDC contained in the Provisional Order and the consequent delay in completing the sub-division of Plot No. 825. The Applicant had accepted the LoI issued by the Respondent more than 5 months ago. However, the sale of the Concerned Asset remains inconclusive till date. 39. Aggrieved with the letter dated June 10, 2020, the Applicant filed the present Interlocutory Application. 40. Therefore, in view of the above, the Applicant is approaching this Hon ble Adjudicating Au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ired by the Corporate Debtor on leasehold basis from GIDC. The Applicant through various emails and correspondences, the Applicant conducted due diligence when the Respondent had provided all the information and clarifications as requested by the Applicant. 47. Further it is submitted by Respondent that the Applicant sought clarifications vide their email dated 3rd January 2020, the Applicant sought clarification that balance sale consideration should be payable only upon successful sub-division of land and delay in payment of sale consideration on account of delay in sub-division shouldn t attract any interest. Thereafter vide email dated 9th January 2020, in clear and unequivocal terms it was clarified to the Applicant that successful bidder shall get the property, only upon full payment of balance sale consideration as per terms of the process memorandum and that the interest would be waived if delay is on account of sub-division. The clarification with respect to the interest component was given to the Applicant with the intention that if the delay is on account of Liquidator to apply for the sub-division of land, by no stretch of imagination can it be construed that till th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oI ), the Successful Bidder(s) were mandated to deposit the balance sale consideration within 90 (ninety) days from the date of issuance of LoI, provided that the payments after 30 (thirty) days would attract interest at the rate of 12% p.a. Provided further that the sale shall be cancelled if full payment is not received within 90 (ninety) days. 52. Thereafter having submitted the bid and subsequently having deposited the EMD, the Applicant was required to make the balance payments to the Liquidator as per the terms and conditions of the Process Memorandum within 30 days i.e. 17th February 2020 provided if Balance sale consideration is not paid within 30 days 12% interest would be applicable from the close of the Auction till payment is made and if the payment is not made within 90days which is expiring on 17th April 2020 the sale shall be cancelled and the EMD will be forfeited. 53. Further pursuant to unprecedented difficulties arising out of the nationwide lockdown imposed by the Government of India from 24th March 2020 owing to the Corona Virus Pandemic. Upon the Applicant s request vide letter dated 14th April 2020, the Applicant was granted an extension of time for pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the expiry of the 90 days period i.e. 17th April, 2020. 59. It is submitted that Respondent had filed, applied for sub-division of land immediately upon issue of Letter of Intent to the Applicant on 23rd January 2020. GIDC after applying for sub-division has taken time to survey the land. The delay was on account of GIDC carrying out several surveys of the land, eventually passing a provisional order dated 1st May 2020 for sub-division subject to certain terms and conditions. 60. It is submitted that Respondent had filed an application challenging the provisional order of the GIDC dated 1st May 2020, wherein the GIDC has arbitrarily withdrawn Concession granted to Corporate Debtor when the land was leased to the corporate debtor in the year 2006. GIDC is also charging interest from year 2006 till date on concession given to the Corporate Debtor, which is arbitrary, without any merit and smacks of attempts for unlawful enrichment. GIDC is also charging exorbitant amounts for carrying out sub-division of land without any basis and criteria for charging such exorbitant amounts for sub-division. The Corporate Debtor who is undergoing Liquidation cannot be subjected to pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ided that payments made after thirty days shall attract interest at the rate of 12%; Provide further that the sale shall be cancelled if the payment is not received within ninety days. The Respondent is therefore duty bound to demand the payment immediately upon the auction is closed without any reservations or conditions precedent. 66. It is admitted by Respondent that the Applicant has made the payment of the balance sale consideration on 15th June, 2020. and interest payable thereon to the Respondent on 26th June, 2020 was made under protest. 67. Respondent mention that he had already issued sale certificate in favor of the Applicant herein and the Applicant and Respondent are also in process of finalizing the Sale Deed in favor of Applicant herein. 68. Further it is submitted by Respondent that once again vide letter dated 7th July 2020 he requested the Managing Director / Vice President of the GIDC to not withdraw the concession and also requested to revise the charges levied by the GIDC for sub-division of land. 69. In view of the above, it is prayed that the Respondent has acted bonafidely and in the interest of the Corporate Debtor and as such, the App ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... GIDC. The submission of the Respondent that if any delay on account of the Respondent to apply for subdivision and cannot be construed till the sub division of land is not a tenable, acceptable argument. Because sub division is a basic and necessary function to be completed so that the successful bidder can peacefully enter in to the legally earmarked property. As noted above this process took some time to complete as submitted by the Respondent himself. Therefore, any delay by third party cannot be fastened upon the Applicant and we are inclined to agree with the submissions of the Applicant. The Applicant had also submitted its in-principle consent to buy additional piece of land 12,982 sq mts which was subsequent to the auction process which also shows its bonafide and financial capacity. In view of the above findings we hold that the delay in payment of balance sale consideration cannot be attributed to the Applicant, successful bidder. The interest burden thus cannot be fastened on him. The Applicant is not liable to pay interest as claimed by the Respondent. Therefore, an amount of ₹ 1,57,46,696/- paid towards interest by the Applicant under protest is to be refunded ..... 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