2022 (11) TMI 1310 - Tri - Insolvency and Bankruptcy

Seeking permission to withdraw from the e-auction process being held by the respondent the liquidator - claiming refund of EMD - HELD THAT - The applicant had offered to purchase the corporate debtor as a going concern as per the sale notice dated 08.04.2021. In the sale notice, it has been mentioned that Option/Block A (Corporate Debtor as a going Concern)- All assets of the Corporate Debtor ass on a going concern basis as per Regulation 32A of IBBI (Liquidation Process) Regulations, 2016. Option/Block B (Slump Sale Basis)- 4 operational plants located at Kanchipuram-TN, Viskahakapatnam-AP, Varsana-GJ, Jaipur-RJ, and select operational financial assets pertaining to the 4 plants. - So, the applicant s bid was for four operational plants of the corporate debtor. As on today, those plants which were in operation are closed down. The situation is not at all attributable to the applicant because the assets/plants are still in possession of the liquidator. It is also admitted fact on record that when the sale notice was published and bids were called, ED had not attached any assets then e-auction was held on 09.04.2021 whereas provisional attachment came to be passed thereafter on 02.12.2021. So, this situation is also not attributable to the applicant who is the successful bidder herein. We are dealing with this application under section 60(5)(C) of the IBC, 2016 because it is a question of fact and the law relating to the process of liquidation of the corporate debtor. The stark facts on record are that the liquidator is not in a position to give the custody of assets of the corporate debtor to the applicant or give possession of the corporate debtor as a going concern to the applicant in spite of him being declared as a successful bidder and the applicant being deposited a sum of Rs. 30 crores with the liquidator. The Liquidator cannot withhold the amount for an indefinite period till proceeding under PMLA Act, 2002. The applicant is permitted to withdraw from E-auction process held on 09/04/2021 - the liquidator is directed to pay the applicant a sum of Rs. 30,00,00,000/- together with interest accrued thereon within two weeks from today - application allowed.

Summary

Issues Involved:
1. Withdrawal from the e-auction process.
2. Refund of the Earnest Money Deposit (EMD).
3. Impact of Enforcement Directorate's (ED) provisional attachment on the sale process.
4. Jurisdiction to permit withdrawal from the e-auction process.

Issue-wise
Detailed Analysis:

1. Withdrawal from the e-auction process:
The applicant, M/s. Lucky Holdings Private Limited, sought permission to withdraw from the e-auction process of M/s. PSL Limited, the corporate debtor, citing the liquidator's inability to hand over possession of the assets due to the ED's provisional attachment. The applicant argued that the corporate debtor's status had changed from a going concern to a closed unit, which was not the condition when they participated in the auction. The Tribunal noted that the liquidator was not in a position to hand over the assets due to the ED's attachment and allowed the applicant to withdraw from the e-auction process.

2. Refund of the Earnest Money Deposit (EMD):
The applicant requested a refund of the EMD of Rs. 30 crores deposited with the liquidator. The Tribunal considered the ruling in Popatrao Vyankatrao Patil v. State of Maharashtra, where the Supreme Court held that a bidder is entitled to a refund if the contract is frustrated due to reasons not attributable to the bidder. The Tribunal found that the delay and inability to hand over the assets were not attributable to the applicant. Therefore, the Tribunal directed the liquidator to refund the EMD, retaining Rs. 5 lakhs towards process costs.

3. Impact of Enforcement Directorate's (ED) provisional attachment on the sale process:
The liquidator had received summons from the ED to attach the assets of the corporate debtor under the PMLA Act, 2002. The liquidator challenged this in the Delhi High Court, which initially allowed the sale to proceed. However, the ED's subsequent provisional attachment order and the Division Bench's status quo order created uncertainty. The Tribunal noted that the applicant participated in the auction when no provisional attachment was in place and that the liquidator had given the impression that the assets were immune to PMLA proceedings. This situation was not attributable to the applicant, justifying their withdrawal and refund request.

4. Jurisdiction to permit withdrawal from the e-auction process:
The liquidator argued that allowing the applicant to withdraw would amount to a review of the Tribunal's earlier order confirming the sale, which is beyond its jurisdiction. The Tribunal distinguished this case from the cited precedents, noting that the application was under section 60(5)(C) of the IBC, 2016, dealing with liquidation processes. The Tribunal concluded that it had the jurisdiction to permit the withdrawal due to the liquidator's inability to deliver the assets as a going concern.

Conclusion:
The Tribunal allowed the applicant to withdraw from the e-auction process and directed the liquidator to refund the EMD of Rs. 30 crores with accrued interest, retaining Rs. 5 lakhs for process costs. The decision was based on the liquidator's inability to hand over the assets due to the ED's attachment, which was not attributable to the applicant. The Tribunal exercised its jurisdiction under section 60(5)(C) of the IBC, 2016, to address the specific circumstances of the liquidation process.