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TMI Blog2022 (3) TMI 93X X X X Extracts X X X X X X X X Extracts X X X X ..... Code, 2016 (herein after referred to as Code) and IBBI (Liquidation Process) Regulations, 2016 and sought indulgence of the Tribunal to pass the following reliefs, i) Directions to Respondent No. 1 herein to produce the record before this Tribunal as to how the realizable value arrayed and the same reduced in every auction. ii) Directions to Respondent No. 1 to place the records/registers maintained by him with respect to the e-auctions conducted by him. iii) Directions to Respondent No. 1 to file an affidavit with respect to the difference in realizable value of ongoing concern and realizable value of collective price of individual assets mentioned from item no.2 in all sale notice. iv) Restrain Respondent No. 1 in taking any further actions to conclude the BID with respect to E-auction proceedings dated 15.07.2021 which is in violation of Regulation 32A of Insolvency & Bankruptcy Board of India (Liquidation Process) Regulations, 2016 to sell the Company as "ongoing concern". v) Directions to Respondent No. 1 to place the records and documents submitted by all the bidders with respect to the above e-auction dated 15.07.2021. vi) Directions to Respondent No. 1 to produc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the instant case, the Corporate Debtor is not a going concern company at the time of issuance of notice for e-auction. The Applicant accused the Liquidator of doing so, with an ulterior motive to facilitate the Promoters of the Corporate Debtor or his associates to purchase the assets at a cheap rate. It is stated that the Liquidator instead of taking action to sell the Corporate Debtor or its assets for maximization of the value of CD, had decreased the value as per his whims and fancies and acted against the provisions of the Code. The Applicant has tabulated the e-auction notices issued by the Liquidator and the realization value quoted by him vis-a`-vis the value quoted for asset wise sale, which is as under:- (in crores) S.No. Date of auction Reserve price fixed for ongoing Concern sale Collective reserve price of individual asset mentioned in sale notices Status l. 27.11.2019 72.00 Failed 2 16.12.2019 65.00 Failed 3. 06.01.2020 60.00 Failed 4. 17.02.2020 54.00 Failed 5. 18.08.2020 48.60 86.95 Failed 6. 18.09.2020 39.90 71.51 Failed 7. 20.11.2020 37.91 68.07 Failed 8. 26.12.2020 27.24 55.02 Failed 9. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to section 52, to sell the immovable and movable property and actionable claims of the corporate debtor in liquidation by public auction or private contract, with power to transfer such property to any person or body corporate, or to sell the same in parcels in such manner as may be specified: [Provided that the liquidator shall not sell the immovable and movable property or actionable claims of the corporate debtor in liquidation to any person who is not eligible to be a resolution applicant.] (n) to apply to the Adjudicating Authority for such orders or directions as may be necessary for the liquidation may be specified by the Board; and viii. The above provision is very clear that, the Ld. Liquidator need to take permission either in the form of direction or orders from this Tribunal before taking any action with respect to sale in any manner during the Liquidation Process. This is the statutory command and requirement legislated to avoid arbitrary actions of the liquidator by conducting the sale process in any manner detrimental to the interest of all the stakeholders. An application filed thus will give opportunity for the stakeholders to bring to the notice of the Adjud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... BI has no supervisory or administrative powers vest with it to control any judicial or quasi-judicial body and hence the circular fails for any purpose to adjudicate the matter pending before this Hon'ble Tribunal. xii. Lastly, it is submitted that the Ld. Liquidator is fully aware that, he cannot conduct sale as "ongoing concern" which is one among the Agenda Item (No.5) in 1st Stakeholders Committee (Kindly refer page No.24 of the Application) conducted on 10.10.2019 whereas the circular was issued in 26.08.2019 (Attached as Annexure-II), a fact which was aware and available with the Ld. Liquidator that, fact was informed to the stake holders by him with respect to timelines for sale of the corporate debtor company as going concern. Bringing in the Circular is an afterthought by the Ld. Liquidator as he had enough and more time from 25.07.2019 (the day of the notification amending regulations i.e., 32A of IBBI (Liquidation Process) Regulations) to sell the Corporate Debtor as "Ongoing Concern". xiii. Reliance also has been placed on the following rulings by the Applicant. (1) National Company Law Appellate Tribunal, Delhi Bench's ruling in the matter of Sunderesh Bh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idator stated that as per the Liquidation Regulations, the reserve price will be the realizable/liquidation value only. But the Liquidator along with SBI and IOB fixed higher Reserve Price rather than minimum reserve price, enabling them to raise 183% of the minimum Liquidation value by selling three individual assets in two e-auctions and remaining CD as going concern basis in one of the auctions. (iv) The Liquidator further submits that, Regulation 32A (4) was inserted by Notification No. IBBI/2019-20/GN/REG047 dated 25.07.2019 but the Liquidation order in respect of the Corporate Debtor Company was passed by this Tribunal much prior to the amendment i.e. on 04.02.2019. Hence there is no time line fixed to sell the CD as a going concern before the said amendment. (v) With regard to disclaiming the onerous properties as per Regulation 10 (1)(5) of IBBI Liquidation Process Regulation as averred by the Applicant, the Liquidator submits that the properties mentioned therein are secured properties of Kotak Mahindra Bank and the Bank has not relinquished its security to the Liquidation Estate, hence, he does not have any right over the said properties. (vi) The Liquidator further as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cant, Shri S. Ravi, Learned Senior Counsel for Liquidator Shri G. Madhusudan Rao, perused the written submissions and the case law. 7. Point Whether the sale of the Corporate Debtor as a going concern held on 11.02.2021 is contrary to 32A of IBBI (Liquidation Process) Regulations? If so, whether the impugned sale is liable to be set aside? (i) Before we advert to the discussion on the points above, we refer here in certain important and undeniable facts and events. (a) On 04.022019 this Tribunal ordered liquidation of the Corporate Debtor, and appointed the Liquidator. (b) On 06.08.2019 Hon'ble NCLAT in Company Appeal (AT) No. 252 of 2019, directed the Liquidator to first take steps u/s 230 of the Companies Act, read with IBC, before resorting to liquidation of the CD. (c) On 10.10.2019 the Stakeholders Consultation Committee held its first meeting, wherein the petitioner also participated and unanimously agreed to sell the Corporate Debtor as a going concern. (d) On 15/07/2021 after 15 unsuccessful sale notices the 16th sale notice fructified however on a reduced reserve price. (e) On 22.10.2018, Regulation 32 of IBBI (Liquidation Process) (Amendment) Regulations, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erusing the Liquidation Regulations and Clause 12 of Schedule I as was subsequently introduced on 25.07.2019, the substituted Regulation which has been brought by way of amendment does not show that the Regulation is to be applied only prospectively. It is open ended provision relating to procedural law which in no way states that it will not apply to pending liquidation processes on the date of substitution. In our view, the Circular dated 26.08.2019 could not interpret the Regulations in the manner it is done. Power of Board under Section 196(1) (p) or (t) to issue guidelines cannot be expanded to interpreting provisions made. That is job of Courts to interpret and apply law. Reading the Regulation as amended we find it must be held to be applicable to liquidation process which are pending, and the provision can be applied considering stage of the process, irrespective of the date whether the liquidation process started before 25.07.2019 or on or after 25.07.2019 when Clause 12 Schedule I of the Regulations was substituted. This is not to say that sales already cancelled before 25.07.2019 for default of payment under earlier existing clause 12 can be reopened. Liquidators can rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at does a provision enacted by it mean. (See Sanjeev Coke Mfg. Co. v. Bharat Coking Coal Ltd.4)" d) Madras Bar Association Vs Union of India & another in Writ Petition (Civil) No.502 of 2021, where in Hon'ble Supreme Court clarified the Legislation and its functions. (v) Per Contra, Shri S. Ravi Ld. Senior Counsel appearing for the liquidator would contend that, the intention of the legislature has to be understood in a broader perspective and the going concern sale is not barred by the legislature after completion of the prescribed period, rather it only intended in directing the liquidator to explore the options of selling the Corporate Debtor as a going concern mandatorily in the first instance in 90 days since the objective of the code is to revive not to liquidate, after that only the Liquidator has to opt for the sale of individual assets of the CD also. (vi) Ld. Senior Counsel, further submitted that the time line prescribed in Regulation 32A (4) of IBBI, does meet the objectives of the 1B Code, besides the ruling of Hon'ble Supreme Court, in Swiss Ribbons Pvt Ltd vs. Union of India. Supra, wherein it has observed at para 27 that: "What is interesting to note i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... linquished to the liquidation estate. ii. 32A. Sale as a going concern (amended came in to force w.e.f.27/7/2019). (l) Where the committee of creditors has recommended sale under clause (e) or (f) of regulation 32 or where the liquidator is of the opinion that sale under clause (e) or (f) of regulation 32 shall maximize the value of the corporate debtor, he shall endeavor to first sell under the said clauses. (2) For the purpose of sale under sub-regulation (l), the group of assets and liabilities of the corporate debtor, as identified by the committee of creditors under sub-regulation (2) of regulation 39C of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 shall be sold as a going concern. (3) Where the committee of creditors has not identified the assets and liabilities under sub regulation (2) of regulation 39C of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, the liquidator shall identify and group the assets and liabilities to be sold as a going concern, in consultation with the consultation committee. (4) If the liquidator ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder clauses (a) to (d) of Regulation 32". 10. (i). The 1st Stakeholders Consultation Committee Meeting was held on 10.10.2019, in which meeting the Applicant also took part. Under the agenda item No. 5, it stated as follows: - Item-5: Discussion on the reserve price for the company as a whole as a going concern or asset-wise Liquidator apprised the stakeholders about the fair value, realisable value and liquidation value as defined in the IBC, 2016. Liquidator informed the stakeholders that as per amendment to the liquidation process regulations, 2016 under regulation 32A, 'the Liquidator shall identify and group the assets and liabilities to be sold as a going concern, in consultation with the consultation committee". Liquidator discussed with the stakeholders about the sale as a going concern and all the stakeholders unanimously agreed to sell the Corporate Debtor as a going concern as one of the separate line items only. The stakeholders advised the Liquidator to issue the sale notice for sale of the Corporate Debtor as a going concern and also for the divisions and other assets of the Corporate Debtor. Liquidator also informed the stakeholders about the timeline of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s undeniable factual backdrop, having carefully examined the contentions of the Petitioner, mostly based on the ruling in re, Sundaresh Bhat, supra, that, the IBBI Regulation 32A, since held to be an open ended provision relating to procedural besides that the Power of IBBI, under Section 196(1) (p) or (t) to issue guidelines cannot be expanded to interpret the provisions made, the circular dated 26th August, 2019, supra, issued by IBBI, is un sustainable under law consequently, the sale in the instant case since held beyond 90 days from the date of liquidation commencement date is violative of the newly inserted Regulation 32A, as such, on this score alone, the sale is liable to be set aside, we are unable to subscribe to the above submission of the Ld. Counsel for the Petitioner, for the reasons we state hereunder: (a) The Petitioner, is a member of the Stakeholders Consultation Committee which has unanimously and consciously accepted for the sale of the corporate debtor company as a whole as a going concern, despite being sensitized by the of the liquidator about the 90 days' time line for sale of the corporate debtor or the business of the corporate debtor, set under sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tatute seeks to achieve". (g) In Gvindlal Chhaggan Lal Patel vs The Agricultural Produce Market 1976 AIR 263, Hon'ble Justice Chandrachud, Y.V. has held that, "But the little complexity that there is in this matter arises out of a known phenomenon, judicially noticed but otherwise disputed, that sometimes the legislature does not say what it means. That has given rise to a series of technical rules of interpretation devised or designed to unravel the mind of the law-makers. If the words used in a statute are ambiguous, it is said, consider the object of the statute, have regard to the purpose for which the particular provision is put on the statute-book and then decide what interpretation best carries out that object and purpose. The words of the concluding portion of section 6(1) are plain and unambiguous rendering superfluous the aid of artificial guide-lines to interpretation. But the matter does not rest there. The appellant has made an alternative argument that the requirement regarding the publication in Gujarati in a newspaper is directory and not mandatory, despite the use of the word "shall". That word, according to the appellant. really means "may". "Maxwell, Cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er herein, Hon'ble NCLAT, while holding that, "Reading the Regulation as amended we find it must be held to be applicable to liquidation process which are pending, and the provision can be applied considering stage of the process, irrespective of the date whether the liquidation process started before 25.07.2019 or on or after 25.07.2019" .... further categorically held that the "Liquidators can rely on the amendment at the time of issue of Auction Notice being issued, irrespective of date of liquidation order of Adjudicating Authority". (Emphasis is ours), thereby clearly indicating that it is discretionary but not mandatory for the Liquidator to apply sub rule 4 of Regulation 32A, at the time of issuance of the sale notices in the cases of the present nature. Furthermore, Hon'ble NCLAT, in the above appeal ultimately held that: "The Liquidator would be at liberty to apply and enforce amended Clause 12 of Schedule I of the Liquidation Regulations to the liquidation process even though initiated before 25.07.2019", which once again confirms that the liberty has been conferred on the liquidators whether to apply or not the Regulation under 32A, in cases where the Liquida ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iable business." 13. As regards the reserve price, it may be stated that in terms of Clause 4 Schedule-I of IBBI Liquidation Process Regulations, 2016, the Liquidator is entitled to reduce the reserve price up to 25% whenever the auction fails. The record placed before us viz. minutes of the Stakeholders Consultation Committee meetings clearly disclose that the Liquidator discussed fixation of reserve price in every meeting and the members of the committee, which admittedly includes the Petitioner herein, have unanimously agreed for the reduced reserve price proposed by the Liquidator. According to the Liquidator, despite the Regulation allowing 25% reduction, the average of the reduced reserve price from time to time was only 8%. 14. It may be stated that it is natural that when there are no bids to take the property in auction at a particular minimum reserve price, the auction fails and unless the reserve price is altered suitably as per the norms, there might be no fresh bids. As already stated, in the case on hand, 15 times, the auction has failed and therefore, it became inevitable for the SCC to accept reduction in the reserve price, lest the sale can never happen and furth ..... 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