TMI Blog2022 (10) TMI 96X X X X Extracts X X X X X X X X Extracts X X X X ..... resent facts of the case, the Liquidator/Appellant issued corrigendum extending time not an addenda. Irrespective of nomenclature of the Notification, the purport of the Notification if taken as it is, the Notification dated 24.08.2021 i.e., by the corrigendum is intended to extend time for submission of documents of EMD and change of date and time of Auction. Admittedly, the Liquidator received no documents of EMD till expiry of time limited in the Original Notification dated 24.06.2021 and thus nobody intends to participate in the e-Auction Process. Therefore, it is the duty of the Liquidator to afford an opportunity to inspect the Corporate Debtor enabling the participant or interested bidders to submit the EMD Application, as participation in the e-Auction Process is to maximize the Assets of the Corporate Debtor. On account of failure to fix date and time for inspection of Corporate Debtor by the interested bidders before conducting the Auction, possibility for submission of documents of EMD to participate in the e-Auction would not arise normally, thereby the questions of maximization doesn t arise hence it is a matter of serious material irregularity, which vitiates the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enor. For the Respondent No. 4 : Mr. Sudhanshu Prakash, Ms. Neha Tandon and Sabyasachi Roy Chaudhary, Advocates for R-4. For the Respondent No. 6 : Mr. Abhijeet Sinha, Mr. Kumarjit Bannerjee, Mr. Gaurav Gupta and Mr. Saikat Sarkar, Advocates for R6. JUDGEMENT [ Per ; Hon ble Mr. Justice M. Satyanarayan Murthy ] 1. These Appeals have been filed challenging the Order passed by the Learned Adjudicating Authority (National Company Law Tribunal, Kolkata Bench) dated 02.03.2022 passed in I.A. 830/KB/2021, I.A. 848/KB/2021, I.A. 962/KB/2021, I.A. 963/KB/2021 and I.A. 969/KB/2021 in C.P. (IB) No.1542/KB/2018. By the Order impugned in the Appeal, set aside the entire e- Auction Process conducted by the Liquidator on 13.09.2021, directed the Liquidator to initiate fresh bidding process for sale of the Assets of Corporate Debtor and complete the entire process within specified time from the date of Order, inviting fresh bids and according an opportunity to the interested bidders. 2. The Balaji Metals/ Operational Creditor filed petition to initiate Corporate Insolvency Resolution Process and the same was admitted by the Learned Adjudicating Authority, however, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 8.60 cr. and participated in the e- auction held on September 13, 2021. IV. The bidding process started from Rs. 86.00 cr. In the course of bidding, the applicant made four bids in excess of other bidder. The last registered bid of the applicant was standing at Rs.87.75 but at this point the applicant faced the connectivity issue and the applicant was unable to proceed further in the bidding process and there were interruptions and buffering. V. Applicant has further stated the last registered bid of Rs.87.75 crores. made: by the applicant and the Snaefell Heights made. a bid of Rs.88 crores which, in excess by Rs.25 lakh to the bid given by the applicant. As a counter to the bid of they the applicant wanted to make a bid for Rs.88.25 crores but because of some connectivity issue the applicant was unable to register the increased bid of Rs.88.25 crores. VI. The issue relating to the network connectivity of the applicant during the bidding process was brought to the notice of the liquidator at 4pm by an email and upon consideration the liquidator decided to reschedule the bidding process. However, the connectivity issue persisted and in spite of best efforts the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssets of the Corporate Debtor. i. The Applicant claims to be part of O.P. Jindal Group and one of the India's leading business houses. The Applicant is in business in sectors such as energy, infrastructure, cement, paints, sports and venture capital. ii. Balaji Metals ('Operational Creditor') had initiated insolvency proceedings against the Corporate Debtor being CP (IB) No.1542/KB/2018 under Section 9 of the Code. The Corporate Debtor was admitted to the CIRP vide order dated December 11, 2019. iii. Pursuant to the order of admission, the IRP took over the management of the Corporate Debtor. iv. In 15- COC meeting held on April 3. 2021, the CoC decided to request this Adjudicating Authority for an order of liquidation of the Corporate Debtor. Subsequently, on April 30, 2021 the order of liquidation was passed by this Adjudicating Authority and Mr. Raj Singhania was appointed as the liquidator. v. On August 24, 2021 the liquidator issued an E- Auction Process Information Document towards the sale of the Corporate Debtor and the E-Auction was conducted on September 13, 2021 and the LOI was issued to the highest bidder i.e. Snaefell Heights. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the meantime, one of the bidders, M/s. Chinar Steel, who participated in the e-auction process, mentioned the matter before the Hon'ble NCLT, Kolkata Bench on 16.09.2021, wherein the Liquidator was also present. On the queries raised by the Hon'ble Bench, the Liquidator apprised them about the entire process. The Liquidator said that he has received one e-mail for extension of time which he allowed, but is not in a position to confirm if at all there was any technical issue later on during the process. The Hon'ble Bench then enquired from the Liquidator whether *he has any objection if a re-auction is conducted, to which the Liquidator replied that if the said re-auction starts at a value higher than. the highest bid given, inasmuch as the same would maximize proceeds from auction of Corporate Debtor as a going concern, and take care of the interest of all the stakeholders, he would not have any objection if an Order to such effect is passed by the Hon'ble Bench. iv. The Hon'ble Bench directed the Liquidator to file an application for conducting re-auction giving reasons and justification for the same and not to declare Successful Bidder or issue LOI to HI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ective bidder, had no notice or knowledge of the said extension of time for participation in the e-auction till 13.09.2021and was, as such, unable to submit the EMD and consequently participate in the e-auction process. The Applicant/ Prospective Bidder became aware of the said extension recently. iv. Upon becoming aware of the same, the Applicant wrote an email to the Liquidator and UCO Bank and Indian. Bank (erstwhile Allahabad Bank), being the members of the Stakeholders Committee of the Corporate Debtor, requesting to conduct the auction again and allow it to participate in the said auction. However, no response to the same has been received. Therefore, the Applicant is constrained to file the present Application. 9. The allegations made in all these Interlocutory Applications are identical but on different grounds. However, the endeavor of the Applicants is to get the Auction held on 13.09.2021 be set aside. 10. During the course of argument, Ld. Counsel appearing for the applicants submitted that the Applicant/s challenge the auction proceedings held by the Liquidator of Gontermann Peipers India Limited for sale of its assets and properties. The Applicants were i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Liquidator was directed to consider re-auction and was further directed not to declare the successful bidder or issue any LoI to the H/1, bidder in the meantime till such time the proposed application of the Applicant was listed for consideration. 15. It is submitted that the application was filed on 17 September, 2021, and the Respondents were duly served. 16. It is submitted that on 28 September, 2021, the application was considered, admitted and the Respondents were directed to file their Affidavit. From the Liquidator's Reply Affidavit to the Application, it is apparent that no steps had been taken by the Liquidator between the period from 13.09.2021 to 31.10.2021. However, a purported LoI appears to have been issued by R1 in favour of R 2 on 02.11.2021. 17. It is argued that in the facts of the present case and as a participating bidder whose Earnest Money of Rs.8.60 Crores still remains deposited, it is respectfully stated that in the interest of justice and towards maximization of the value of the assets of the Corporate Debtor and also in the interest of all stakeholders, the Applicant's higher bid of Rs.93 Crores be accepted and the Sale be confirmed i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same was entertained in the presence of the Liquidator. 21. It is submitted that in the present applications, the Applicant seeks to set aside the sale held on 13th September, 2021, reconsider its higher bid and alternatively, re-auction of the assets of the Company in Liquidation. 22. The Appellant/Raj Singhania, the Liquidator contended that the Public e- Auction is held and the highest bid is received and the property is sold in a Public Auction in favour of the highest bidder, such sale cannot be set aside on the basis of the offer made by the third parties, subsequently, and that too when they did not participate in the Auction Proceedings and made any offer is only for the sake of making it. The Liquidator further contended that the Liquidation Notification was published for sale of the Corporate Debtor as a Going Concern in the Business Standard , all India Edition and AajKal , a vernacular Bengali Newspaper on 24.08.2021 and also uploaded the e-Auction Process Information Document at the e-Auction portal and website of the Corporate Debtor . As per the terms of Sale Notice dated 24.08.2021, the Reserve Price for the proposed e- Auction was Rs.86Crore with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtual Mode for suggestion on future course of action. While so, one of the Applicants, who participated in the e-Auction Process mentioned the matter before the Adjudicating Authority on 16.09.2021, wherein in the presence of Liquidator and the Liquidator apprised the Adjudicating Authority about the entire process in free and fair manner in which the entire Auction Process was carried out. On the issue of Applicant s contention regarding the technical glitch, the Liquidator apprises the Adjudicating Authority that he has received email for extension of time which he allowed but he was not in a position for confirming. Upon hearing the parties, the Adjudicating Authority proceeded to only direct the Liquidator to consider if the Liquidator would want to file an Application for conducting re- Auction upon citing reasons and justification for the same and not to declare Successful Bidder or issue LOI to H1 bidder, till proposed Application impugning the Auction Process was listed before the Bench for consideration. 25. The Liquidator received copies of Applications filed under Section 60(5) of the Insolvency and Bankruptcy Code (hereinafter referred to as IBC ) before the Adjudic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Anil Goel Ors. Comp. App. (AT) (Ins.) No. 22/2020 , Arun Kumar Jagatramka Vs. Jindal Steel Power Limited (2021) 7 SCC 474 , Circular bearing reference no. IP(CIRP)/006/2018, Prakash Chandra Kapoor Anr. (referred Supra), Ekambareswara Rao Manne Vs. Gonugunta Madhusudhan Rao, Liquidator C.P. (IB) No. 265/9/HDB/2017 and in Binani Industries Limited Vs. Bank of Baroda (2018) SCC OnLine NCLAT 521 . On a strength of the Principal laid down in the Judgement, Learned Counsel for the Respondent No. 3 in Comp. App. (AT) (Ins.) No. 264/2022, supported the Order of the Tribunal. The Learned Counsel for the other Respondents particularly Chinar Steel Segment Centre Private Limited, HR Commercials Private Limited, JSW Steel Limited, Rahul Roy Chowdhary, DTC Projects Pvt. Ltd. and Snaefell Heights LLP etc., the Applicants in the Interlocutory Applications also supported the Order. 31. Since the Adjudicating Authority set aside the Order on the ground of material irregularity in holding e-Auction of Corporate Debtor as a Going Concern , this Appellate Tribunal is not required to adjudicate the other contentions and suffice it to examine the irregularity pointed ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lly the Corporate Debtor while maintaining other condition of initial notification as provided in any initial bid documents. It is irrational and unreasonable and fail to conduct the e-Auction in the fair manner and also pointed out that a Successful Highest Bidder is an LLP incorporated in the Year 2019 with a turnover for the FY ending by 31.03.2019, 31.03.2020 31.03.2021 was not considered by the Liquidator while confirming the bid in favour of Snaefell Heights LLP Appellant in Comp. App. (AT) (Ins.) No. 264/2022. 37. It is an undisputed fact that in the e-Auction Notification the Liquidator fixed time for inspection etc., date and time of e-Auction, time for submitting bids and deposit of EMD, date and time of inspection as 07.09.2021 between 10:00 AM and 5:00 PM. Since no bidders submitted their documents along with EMD, the Appellant in Comp. App. (AT) (Ins.) No. 465/2022, the Liquidator issued corrigendum only extending time for submission of EMD and the other documents till 11.08.2021 upto 5:00 PM and e-Auction date was extended till 30.09.2022 between 2:00 PM and 4:00 PM, while maintaining the other conditions of the Notification. The corrigendum is silent as to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duty of the Liquidator to afford an opportunity to inspect the Corporate Debtor enabling the participant or interested bidders to submit the EMD Application, as participation in the e-Auction Process is to maximize the Assets of the Corporate Debtor . But in the corrigendum extending date and time for submission of EMD and fixing time and date for conducting the e-Auction of the Corporate Debtor the other conditions shall remain as it is, that means, the date of inspection as fixed in the Original Notification was remained as it is, though, none inspected the Corporate Debtor within the time prescribed in the Original Notification for inspection. In such case, the intending bidder deprived of their right to inspect the Corporate Debtor to participate in the e-Auction Process for the maximization of Corporate Assets that causes serious prejudice to the Committee of Creditors and depriving the proposed interested bidders to bid the Corporate Debtor in competitive bidding process. 39. On account of failure to fix date and time for inspection of Corporate Debtor by the interested bidders before conducting the Auction, possibility for submission of documents of EMD to p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... debtor under clauses (a) to (d) of regulation 32.] 41. According to Regulation 33, the Liquidator shall order and to sell the assets of the Corporate Debtor to an Auction in a manner specified in the Schedule. Schedule I describes the mode of sale. The first mode is Auction whether an asset is to be sold through an Auction that Liquidator shall do so in a manner satisfied herein: 33. Mode of sale. (1) The liquidator shall ordinarily sell the assets of the corporate debtor through an auction in the manner specified in Schedule I. (2) The liquidator may sell the assets of the corporate debtor by means of private sale in the manner specified in Schedule I when- (a) the asset is perishable; (b) the asset is likely to deteriorate in value significantly if not sold immediately; (c) the asset is sold at a price higher than the reserve price of a failed auction; or (d) the prior permission of the Adjudicating Authority has been obtained for such sale: Provided that the liquidator shall not sell the assets, without prior permission of the Adjudicating Authority, by way of private sale to- (a) a related party of the corporate debtor; (b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sets of corporate debtor . Thus, when a situation of challenge to auction process arises on the ground of assets not being sold at the maximum possible value, then, also in our considered view, auction process can be enquired into and such process can be set aside on this ground also . 44. The principle laid down in the above Judgement are not in controversy and it is evident from Regulation 33 and as per Schedule I, the Liquidator must make every endeavor to get maximum sale price for the benefit of the Committee of Creditors but in the instant case, on account of failure of the Liquidator/Appellant in Comp. App. (AT) (Ins.) No. 465/2022 failure to fix time and date for inspection, deprived the many interested bidders to participate in the bid and consequently failed to maximize the Corporate Debtor such irregularity can be termed as material irregularity which vitiates the entire process of Liquidation. Therefore, the Adjudicating Authority rightly held that the Liquidator committed material irregularity in conducting e-Auction of Corporate Debtor and failed to realize the maximum price on account of such irregularity. 45. The Learned Counsel for the Respondents submit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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