2020 (1) TMI 236 - AT - Insolvency and Bankruptcy

Liquidation process - Validity of second public action - reduction in reserve price - contention of the Appellant is that the Liquidator reduced the Reserve Price of this asset from 7.24 crore to 6.15 crore with sole objective to favour pre-decided buyer - HELD THAT - In this case, the Liquidator reduced the Reserved Price only by 15%. The Liquidator can reduce the Reserve Price for the reason that the earlier auction for this asset has failed. Therefore, the said contention of the Appellant is without any basis. Wide publicity not given in the second e-auction held on 15.04.2019 - HELD THAT - The Liquidator has publicly advertised the auction notice in the Business Standard circulated in Delhi and Jaipur duly disclosing the asset for auctioning and followed the procedure as laid down in the Regulations 12 of (Liquidation Process Regulation) - there are no merit in the allegation. Reduction in time period - HELD THAT - The Liquidator followed the procedures as contemplated in clause 3 of Schedule I of the Regulations, which provides that the Liquidator shall prepare the terms and conditions of sale, Regulation 2 of Schedule I and the Liquidator shall prepare a marketing strategy with the help of marketing Professionals, if required for sale of the Asset. The strategy may include releasing advertisement, preparing of information sheets for the asset, preparing a notice of sale and liaising with Agents. Moreover, in the code and in the liquidation Regulations, no time limit was specified for the auction process, other than the mode of Sale as prescribed in Schedule I of Liquidation Process Regulations, 2016 - there are no merit in the allegation. The Appellant did not participate in the e-auction and now making vague allegations without any substantial grounds cannot be accepted. As per Regulation 44(1) of the Liquidation Process Regulations, 2016, the Liquidator shall liquidate the 'Corporate Debtor' within a period of two years - there should not be any unnecessary delay and protract the liquidation process for undue advantage of some of individuals or group, which would adversely affect the liquidation process. There are no merit in the appeal - appeal dismissed.

Summary

Issues:
- Allegation of favoritism in reducing reserve price and lack of transparency in auction process
- Allegation of inadequate publicity and shortened time period for bid submission
- Allegation of collusion between buyer and creditor

Analysis:
1. Allegation of favoritism in reserve price reduction and lack of transparency:
The Appellant challenged the second public auction held for the liquidation process of a company, alleging that the Liquidator favored a pre-decided buyer by reducing the reserve price and not disclosing the asset area for maximum bidder participation. However, the Tribunal found that the reduction in reserve price was within permissible limits under the Liquidation Process Regulations. The Liquidator followed the prescribed procedures and advertised the auction notice, hence dismissing the allegation of lack of transparency.

2. Allegation of inadequate publicity and shortened bid submission time:
The Appellant contended that the auction lacked wide publicity and the time period for bid submission was shortened to favor certain buyers. The Tribunal noted that the Liquidator complied with the regulations by advertising the auction notice in a widely circulated newspaper and following the specified timeline for bid submission. The Liquidator's actions were found to be in accordance with the prescribed procedures, and the allegation of inadequate publicity and shortened time period was dismissed.

3. Allegation of collusion between buyer and creditor:
The Appellant raised concerns about collusion between the buyer and creditor, as indicated by a letter from an ex-Director. The Tribunal observed that the Appellant did not participate in the auction despite expressing interest in purchasing the asset at a higher price. The Tribunal emphasized that vague allegations without substantial grounds cannot be accepted. The Liquidator is required to report any collusion to the Adjudicating Authority, but in this case, no evidence of collusion was found. The Tribunal highlighted the importance of timely liquidation without undue delays for the benefit of all parties involved.

In conclusion, the Tribunal did not find merit in the appeal and upheld the order of the Adjudicating Authority. The dismissal of the appeal was based on the lack of evidence supporting the allegations raised by the Appellant and the adherence of the Liquidator to the prescribed regulations and procedures.