2020 (8) TMI 452 - AT - Insolvency and Bankruptcy

Liquidation proceedings - case of appellant is that the Tribunal failed to appreciate the statutory provision as also the fact that the Liquidator had reduced the price below 75% of the reserved price bypassing the provisions of Regulation 33 (2) and without obtaining permission from the Tribunal - HELD THAT - The liquidation estate comprising of Nicco House admittedly does not belong to the Appellant and in its capacity as tenant, the Appellant having no right, title or interest in Nicco House other than the right of occupation in accordance with the terms of Lease Agreement does not fall within the ambit of Operational Creditor under Section 5(20) of the I B Code . It is absurd to assert or even to suggest that by using the demised premises as a tenant, the Appellant was rendering any services so as to bring its claim within the fold of operational debt . The argument raised on this score being fallacious is rejected. Insofar as the liquidation proceedings are concerned, it is for the Liquidator to form the liquidation estate in relation to the Corporate Debtor as mandated under Section 36 of the I B Code which include assets over which the Corporate Debtor has the ownership rights. The Liquidator is required to access any information systems for the purpose of admission and proof of claims and identification of the liquidation assets relating to the Corporate Debtor , receive and collect the claims of the creditors within 30 days of commencement of the liquidation process, verify such claims and finally either admit or reject the claim either in whole or in part. The determination of valuation of claims, as mandated by Section 41 of the I B Code , falls within the domain of the Liquidator who is supposed to follow the Regulations framed by the Insolvency and Bankruptcy Board of India in this regard. It has rightly been held to have no locus standi under Section 47(1) of the I B Code to seek any direction against the Liquidator as regards alleged undervalued sale transaction. That apart, it appears that the Appellant has taken varying stands mutually exclusive and inconsistent. Claim of compensation in its capacity as tenant is incompatible with its lately projected claim of being an operational creditor qua the Corporate Debtor . Both stands can t co-exist. Without having a locus, the Appellant has been interfering with the process of liquidation and thwarting the liquidation process which ultimately will have deleterious effect on the rights of those who are found entitled to the benefit of the distribution of sale proceeds of liquidation proceedings. The role played by the Appellant, as the chequered history of the case unfurls, is unwarranted. Re-agitating the same matter time and again in different rounds and lately under self-assumed status of being an operational creditor clearly at variance with the Appellant s admitted status as tenant of Nicco House . The appeal is frivolous and devoid of any merit. The view taken by the Tribunal does not suffer from any legal infirmity or factual frailty - Appeal dismissed.

Summary

Issues:
Challenge of actions of liquidator, Locus standi of the appellant, Allegations against the liquidator, Reduction of property price, Barred by principle of res judicata, Forum shopping, Appellant's claim as an operational creditor, Liquidation proceedings, Role of the liquidator, Appellant's interference in liquidation process, Appellant's varying stands, Appellant's status as tenant and operational creditor.

Analysis:
The judgment involves the Appellant challenging the actions of the liquidator, who was appointed in a liquidation proceeding of a Corporate Debtor. The Appellant claimed to be an Operational Creditor and contested the liquidator's decision to sell a property below the reserved price without obtaining permission. The Tribunal dismissed the Appellant's application, stating that the liquidator's actions were in accordance with the Insolvency and Bankruptcy Code (I&B Code) regulations. The Appellant was also accused of making baseless allegations against the liquidator and was fined. The Appellant appealed, arguing that the Tribunal failed to appreciate statutory provisions and the reduction in property price without proper procedure.

The judgment delves into the factual background of the case, highlighting the dispute over the sale of 'Nicco House' by the liquidator. The Appellant objected to the sale, claiming unauthorized construction and undervaluation. The Tribunal's order, based on successive value reports, supported the liquidator's actions. The Appellant's challenges in the High Court and the Appellate Tribunal were unsuccessful. The liquidator's execution of a Deed of Conveyance was also contested by the Appellant.

The judgment addresses the Appellant's claims and the liquidator's duties in the liquidation process. It emphasizes that the Appellant, as a tenant, does not qualify as an Operational Creditor under the I&B Code. The liquidator is responsible for forming the liquidation estate, verifying claims, and valuing assets. The Appellant's interference in the liquidation process was deemed unwarranted, especially given the conflicting claims made by the Appellant regarding compensation and operational creditor status.

The judgment concludes that the Tribunal's decision was legally sound, dismissing the appeal. However, the costs imposed on the Appellant were waived due to the fire incident at 'Nicco House.' The judgment upholds the Tribunal's order but removes the cost penalty. It clarifies the Appellant's status as a tenant and the lack of merit in the appeal, emphasizing the importance of adhering to the legal framework in liquidation proceedings.