2020 (1) TMI 235 - Tri - Insolvency and Bankruptcy

Liquidation proceedings - Public auction of the assets of the Corporate Debtor - reduction in reserve price - HELD THAT - The changes made by the Liquidator in the second auction in April are in consonance with the power conferred by the Code and the Liquidation Regulations. The Liquidator can reduce the reserve price if the previous auction at the original reserve price has failed. The Code and the Liquidation Regulations do not specify a timeline for the auction process and the same can be framed by the Liquidator in his discretion. It does not seem unreasonable that the timeline was shortened for the auction of one property as compared to the timeline set for the auction of four properties, especially when the information of public auction had been made public during the previous round of auction - The Liquidator has publicly advertised the auction by publishing the auction notice in the Business Standard circulated in Delhi and Jaipur. Further, the condition that the balance sale consideration has to be paid within 15 days is only a procedural provision in Schedule-I and if the Liquidator, for justified reasons deems it fit to increase the period of payment as it would help maximize participation and returns of the auction, then the Liquidator in his discretion can be allowed to do so, especially in light of the power given to the Liquidator to set the timeline of the rest of the process and the other terms and conditions of the sale. Application dismissed.

Summary

Issues Involved:
Violation of auction process in the liquidation proceedings of a Corporate Debtor under the Insolvency and Bankruptcy Code, 2016.

Detailed Analysis:

Issue 1: Violations in the Auction Process
The Applicant objected to the public auction of the assets of the Corporate Debtor conducted by the Liquidator, citing various violations. These included arbitrary reduction of reserve price, lack of disclosure of asset details, shortened timelines for bid submissions and due diligence, absence of site visits, and manipulation of auction process durations. Moreover, the Liquidator extended the payment period beyond the prescribed limit, breaching the Liquidation Regulations.

Issue 2: Liquidator's Response
The Liquidator defended the auction process, stating that only one asset remained for auction due to secured creditors realizing their securities. The Liquidator claimed to have followed due process, advertised the auction, and reduced the reserve price within permissible limits. Additionally, the Liquidator justified the shortened timelines and extended payment period as measures to maximize participation and returns.

Issue 3: Tribunal's Decision
After considering arguments from both parties, the Tribunal found the Liquidator's actions in line with the Code and Liquidation Regulations. The Tribunal emphasized the Liquidator's discretion in setting auction timelines and reserve prices, especially after a failed initial auction. The Tribunal noted that public advertisement was done, and the extended payment period aimed at enhancing participation and returns. The application was dismissed based on the lack of merit in the objections raised.

Additional Observation: Collusion Allegations
The Tribunal highlighted similarities in language between the Applicant's objections and an email from an ex-director, suggesting collusion. While not delving further into this aspect, the Tribunal noted the resemblance and its implications.

In conclusion, the Tribunal upheld the auction process conducted by the Liquidator, dismissing the objections raised by the Applicant. The decision emphasized adherence to legal provisions, the Liquidator's discretion, and the aim of maximizing participation and returns in the auction of the Corporate Debtor's assets.