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2022 (5) TMI 919

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..... de, 2016 and further to direct the 2nd Respondent to issue a fresh e-auction process taking all steps germane for the purpose of perfect competition in the bidding process. 2. The present IA No. 52 of 2022 is filed under Section 42 R/w. 60(5)(c) of IB Code, 2016 seeking the following relief a. To grant stay of all further proceedings of confirmation of the 3rd E-auction bid initiated under invitation of expression of interest to submit bid in respect of sale of IVRCL Ltd. (Under liquidation) as a going concern by notification dt. 20.11.2021 by the 2nd Respondent in favour of Sri Ponguleti Prasad Reddy, Promoter of M/s. Raghava Water and Raghava Construction. 3. Brief facts of the case as submitted by the Applicant are as follows: a) That the 2nd respondent herein published a notification "Invitation for Expression of Interest" to submit bids for IVRCL Ltd., under liquidation as a going concern, fixing the e-auction on 04.10.2019. In the said notification, it was clearly mentioned in paragraph 5 that the entire section 29A of the Code, 2016, was extracted as a prohibition of the relatives from participating. Further, in paragraph 10, EMD was fixed at Rs. 5 Crs. only when the r .....

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..... tructions and IVRCL was promoted by Sri E. Sudhir Reddy and his brother Sri E. Sunil Reddy. The present successful bidder Sri Ponguleti Prasad Reddy is a close relative of Sri E. Sunil Reddy. It is also learnt that Sri E. Sunil Reddy's daughter is married to the son of Sri Ponguleti Prasad Reddy, thus, the present bid as entertained by the 2nd respondent is impermissible and the 2nd respondent is having complete knowledge of the said fact and he violated Sec. 29A of Insolvency and Bankruptcy Act, 2016. Thus, the entire process under the 3rd Invitation for Expression of bid issued on 20.11.2021 is vitiated for deliberate violation of the provisions of 29A of Insolvency and Bankruptcy Act, 2016. c) That the first respondent herein owed more than Rs. 14,000 Crs. to the Financial and other creditors. When the first bid was called for, M/s. Gabs Mega Corporation Ltd. backed out from the bid after due deliberations by writing a letter to the Tribunal as well as the liquidator that the Company's assets were overpriced by Rs. 450 Crs. and it should be brought down to Rs. 1200 Crs. Having rejected the request of M/s. Gabs Mega Corporation Ltd. the 2nd respondent herein issued re-t .....

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..... vested to re-own the Company, without there being any competition by means of elimination of other bidders by not giving sufficient time for payment of EMD. 4. Counsel for Respondent filed counter stating as under:- a) That the Applicant has no locus to file the captioned Application as the Applicant has not submitted any bid for acquiring the Corporate Debtor as a going concern in liquidation. b) That the Applicant would have had locus to file the captioned Application if it had submitted its bid as per the Third E-Auction Process Information Document and such a bid were rejected by the Liquidator. In view of the aforesaid, I submit that the Applicant is not an aggrieved party who's bid has been rejected by the Liquidator and is approaching this Adjudicating Authority in that regard. The Applicant is merely trying to prejudice the mind of this Adjudicating Authority and delay and derail the liquidation process of the Corporate Debtor. c) That the present Application ought to be dismissed at the outset for being not maintainable. d) That the reserve price for the Third E-Auction Process was fixed at Rs. 1200 Crore and EMD Amount was fixed at Rs. 50 Crore after discussi .....

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..... her prospective Bidders. In fact, it was only the Successful Bidders who submitted their EoI along with documents in compliance to the pre-bid qualifications/requirements as well as the EMD of Rs. 50 Crore, within the stipulated timeline viz. 10.12.2021, as per the Third E-Auction Process Information Document. In view of this, the Liquidator accepted the bid of the Successful Bidders in accordance with the applicable law and the e-auction process document, as their bid was compliant with the same; h) That M/s. Raghava Constructions (India) Private Limited ("RCIPL") did not submit its EMD or even participate in the third E-Auction Process. That as per the documents submitted by the Successful Bidders, RCRIPL was merely a 'technical associate' of the Successful Bidders and that the Successful Bidders had submitted its EoI and EMD within the stipulated timelines. Thus, the averment made by the Applicant that the bid of RCIPL represented by Mr. Ponguleti Prasad Reddy was entertained by the Respondent No. 2, is ex facie false, misleading and baseless and has not been supported by any evidence. i) That the Successful Bidders even submitted a disclosure affidavit on their elig .....

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..... Brother's son, it cannot be held that the Successful Bidders are barred under Section 29A of the Code. p) Moreover, the Applicant has provided no particulars to establish its case that the Successful Bidders are barred under Section 29A of the Code. 5. Heard. Perused the record. 6. The Applicant herein has preferred this Applications, inter-alia, seeking to stay the further proceedings and to declare the 3rd E-auction process initiated under invitation for expression of interest to submit bid in respect of sale of IVRCL Ltd. under liquidation as going concern by notification dt. 20-11-2021 by the 2nd Respondent herein accepting the bid of Sri Ponguleti Prasad Reddy, Promoter of M/s. Raghava Water and Raghava Constructions and directing him to deposit the balance of bid amount as arbitrary, illegal, and violative of Section 29(A) of Insolvency and Bankruptcy Code, 2016 and further seeking to direct the 2nd Respondent to issue a fresh e-auction process taking all steps germane for the purpose of perfect competition in the bidding process. 7. It is contented by the Applicant that the successful auction purchaser who has purchased the Corporate Debtor as a going concern is a r .....

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..... ial creditor of the corporate debtor and is a related party of the corporate debtor solely on account of conversion or substitution of debt into equity shares or instruments convertible into equity shares or completion of such transactions as may be prescribed, prior to the insolvency commencement date Explanation II.-- For the purposes of this clause, where a resolution applicant has an account, or an account of a corporate debtor under the management or control of such person or of whom such person is a promoter, classified as non-performing asset and such account was acquired pursuant to a prior resolution plan approved under this Code, then, the provisions of this clause shall not apply to such resolution applicant for a period of three years from the date of approval of such resolution plan by the Adjudicating Authority under this Code; (d) has been convicted for any offence punishable with imprisonment- (i) for two years or more under any Act specified under the Twelfth Schedule; or (ii) for seven years or more under any law for the time being in force: Provided that this clause shall not apply to a person after the expiry of a period of two years from the date of h .....

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..... hall apply to a resolution applicant where such applicant is a financial entity and is not a related party of the corporate debtor: Provided further that the expression "related party" shall not include a financial entity, regulated by a financial sector regulator, if it is a financial creditor of the corporate debtor and is a related party of the corporate debtor solely on account of conversion or substitution of debt into equity shares or instruments convertible into equity shares 4[or completion of such transactions as may be prescribed], prior to the insolvency commencement date;) Explanation II--For the purposes of this section, "financial entity" shall mean the following entities which meet such criteria or conditions as the Central Government may, in consultation with the financial sector regulator, notify in this behalf, namely:-- (a) a scheduled bank; (b) any entity regulated by a foreign central bank or a securities market regulator or other financial sector regulator of a jurisdiction outside India which jurisdiction is compliant with the Financial Action Task Force Standards and is a signatory to the International Organisation of Securities Commissions Multilate .....

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