2019 (12) TMI 1350 - Tri - Insolvency and Bankruptcy

Validity of Valuation report submitted to the liquidator - validity of sale notice - direction to liquidator to pay the cost of the valuers appointed till date - Section 60(5) of the Insolvency and Bankruptcy Code, 2016 - Whether the valuation and the consequential sale notice is in accordance with the provisions of Regulation 35(3) (4) of the IBBI (Liquidation Process), Regulations, 2016? HELD THAT - As per the record the land continues to be the agricultural land as the whooping charges of change of land use amounting to ₹ 8.5 crores due in 2002 were not deposited which were presently ₹ 110 crores. Despite that we granted ten days time to the applicant to produce any evidence before the liquidator/valuers within ten days commencing from 24.04.2019. We also clarified that if no evidence concerning the nature of land was produced then the valuers were to proceed with valuation as per the evidence on record and the liquidator was to proceed with the auction in accordance with the liquidation process regulations. However, no evidence before liquidator/valuers was produced by the applicant. That order was challenged before Hon'ble NCLAT and it was dismissed as withdrawn on 17.05.2019. The order dated 24.04.2019 attained finality and was required to comply with in letter and spirit There is sufficient evidence showing that the land in question is agricultural land irrespective of its use. The revenue record in the form of Jamabandis has been placed on record and presumption of truth attaches to the Jamabandis under the Punjab Land Revenue Act as applicable to Haryana. The Jamabandis are prepared every four years in order to ascertain the proprietorship of the land. The photocopies of the Jamabandis have been placed on record. A perusal of the revenue record shows that the nature of land is Shamlat and it is in possession of M/s. Forging Pvt. Ltd. (Company in Liquidation). These entries are consistent starting from the year 1980-81 to 2000-01. However for the purposes of the rent, cultivator is stating to be paying rent for the factory - The valuers could not have proceeded on the basis that the land in question is industrial land as it would result in misleading the prospective bidder. No potential bidder could have purchased this land as industrial or commercial because there was no conversion of land use and as per the statement of the applicant himself initially the charges for conversion of land amounting to ₹ 8.5 crores were not paid and presently the charges amounted to ₹ 110 crores. The valuers would have been guilty of misconduct had they proceeded on the basis that the land is industrial/commercial in nature. A potential bidder cannot be sold the property as Industrial because it continues to be the agricultural land and in order to convert it into industrial or commercial then huge dues are payable to the state authorities. It must be remembered that when land is converted 'Industrial huge sources provided by the State come under stress which need to be paid. Therefore, we are unable to persuade our self to accept the aforesaid information given under the RTI to the applicant as a proof that the land in question must be regarded as commercial. Validity of sale notice - other submission made by the applicant is that the sale deed for the property in the same vicinity would show that the value of the land of the corporate debtor is more than 120 crores and the same has been ignored by the liquidator - HELD THAT - The fact remains that if the nature of the land is agricultural in record and it has never change its land use then it could not be sold as a commercial/industrial property. In any case the liquidator has done well by issue sale notice describing the land 'AS IS WHERE IS, AS IS WHAT IS AND WHATEVER THERE IS BASIS'. Therefore, there is no substance in the present application. We are further constraint to observe that the sequence of event inclined us to believe that the effort made by the applicant is only to delay the liquidation process without any basis and indulge in baseless litigation endlessly. For the conversion of agricultural land to commercial/industrial huge amount is payable and the valuers and the liquidator could not be expected to treat the land commercial in nature. The liquidation order has been passed on 26.10.2018 and sufficient time has already elapsed. The applicant has successfully delayed it but no further delay would be warranted at the instance of the applicant and the application warrants dismissal. The application is dismissed with cost of ₹ 50,000/- payable to the Prime Minister's Relief Fund - the liquidator is directed to accept the highest bid as the amount stand already deposited and proceed with the liquidation process as per law.

Summary

Issues Involved:
1. Validity of the valuation report submitted by SCS Consultants.
2. Validity of the sale notice dated 15.05.2019.
3. Determination of the land's nature (agricultural vs. industrial).
4. Appointment of new valuers for the land.
5. Payment of costs by the liquidator for valuers appointed to date.
6. Involvement of applicants in valuation deliberations.
7. Allegations of abuse of process by the applicant.

Detailed Analysis:

1. Validity of the Valuation Report Submitted by SCS Consultants:
The application filed by the erstwhile director and shareholder of the Corporate Debtor-Company in Liquidation sought to set aside the valuation report submitted by SCS Consultants, arguing that the valuers incorrectly assumed the land was agricultural rather than industrial. The Tribunal noted that the applicant failed to provide evidence of the land's industrial status within the stipulated time. The valuation was conducted in accordance with Regulation 35 of the IBBI (Liquidation Process) Regulations, 2016, and the liquidator acted within his duties by appointing registered valuers who followed the prescribed standards.

2. Validity of the Sale Notice Dated 15.05.2019:
The sale notice dated 15.05.2019 was challenged on the grounds that the reserve price was too low. The Tribunal found that the liquidator had issued the sale notice on an "AS IS WHERE IS, AS IS WHAT IS AND WHATEVER THERE IS BASIS," which accounted for the land's current status and potential liabilities. The Tribunal dismissed the challenge, noting that the applicant failed to produce any higher bidder or evidence to support a higher valuation.

3. Determination of the Land's Nature (Agricultural vs. Industrial):
The principal argument was whether the land was agricultural or industrial. The Tribunal observed that the applicant had previously claimed the land was agricultural in various legal proceedings. The Tribunal found no concrete evidence of a change in land use to industrial, noting that significant charges for such a conversion had not been paid. The revenue records consistently described the land as agricultural, and the liquidator and valuers could not misrepresent the land's nature.

4. Appointment of New Valuers for the Land:
The applicant sought the appointment of new valuers to ascertain the land's value based on its alleged industrial nature. The Tribunal found that the liquidator had already appointed registered valuers who conducted the valuation following the regulations. No new evidence was provided to warrant a different valuation approach, and the Tribunal upheld the existing valuation.

5. Payment of Costs by the Liquidator for Valuers Appointed to Date:
The applicant requested that the liquidator bear the costs of the valuers appointed to date. The Tribunal did not find any basis to direct the liquidator to pay these costs, as the valuation process was conducted in accordance with the regulations and the liquidator's duties.

6. Involvement of Applicants in Valuation Deliberations:
The applicant sought to be involved in the deliberations with the valuers. The Tribunal noted that the applicant had been given opportunities to present evidence and participate in the process but failed to do so effectively. The Tribunal did not find any merit in involving the applicant further in the valuation process.

7. Allegations of Abuse of Process by the Applicant:
The financial creditor and the liquidator argued that the applicant had a history of abusing the legal process to delay proceedings. The Tribunal reviewed past conduct and found that the applicant had indeed engaged in frivolous and obstructive litigation. The Tribunal dismissed the application with costs, emphasizing that the liquidation process should not be further delayed.

Conclusion:
The Tribunal dismissed the application with costs, directing the liquidator to proceed with the liquidation process as per the law. The valuation report and sale notice were upheld, and the land was determined to be agricultural in nature. The applicant's attempts to challenge the process were found to be baseless and an abuse of the legal system. The Tribunal imposed a cost of ?50,000 on the applicant, payable to the Prime Minister’s Relief Fund.