2020 (9) TMI 363 - Tri - Insolvency and Bankruptcy

Jurisdiction - power of liquidator to sell the immovable properties and actionable claims of the Corporate Debtor in liquidation through public auction or private contract - Regulation 33 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulation, 2016 and Section 53 of the Insolvency and Bankruptcy Code, 2016 - Distribution of Sale Proceeds - HELD THAT - The Adjudicating Authority has the power to permit the private sale subject to certain conditions. In the case in hand since the secured creditors have already given their consent for private sale, this Adjudicating Authority is of the opinion that the request of the Liquidator be considered. Accordingly, the sale of the property of the Corporate Debtor by private treaty is allowed and liquidator is permitted to sell the property i.e. factory structure and sheds for ₹15,00,00,000/- excluding applicable indirect taxes, stamp duty, cess, if any. In view of the provisions of Section 53 of the I B Code, 2016 the liquidator have to act as provided under Section 53 of the Code for which the specific direction is not required from this Adjudicating Authority - In view of the above provisions of Section 35 and Section 53 of the I B Code, 2016 the liquidator is also seeking permission of this Bench to distribute the proceeds of the sale. The liquidator has to arrive at the amount available for distribution after deducting the costs, if any, as required under section 53(1)(a). Further there are no details as to amount payable to labourers in terms of section 53(1)(b)(i). Hence no directions can be given in respect of this prayer at this stage and he has to file application providing all the details preferably by serving a copy to the security interest holders over this asset - Application partially allowed.

Issues Involved:
1. Approval for sale of assets of Facor Steels Limited.
2. Distribution of proceeds from the sale as per Section 53 of the Insolvency and Bankruptcy Code, 2016.
3. Validity of private sale under the Insolvency and Bankruptcy Code.

Issue-wise Detailed Analysis:

1. Approval for Sale of Assets of Facor Steels Limited:
The applicant, acting as the liquidator of Facor Steels Limited, sought approval to sell the assets of the Corporate Debtor through a private contract to R.C. Plasto Tanks and Pipes Private Limited for ?15,00,00,000, excluding applicable indirect taxes, stamp duty, and cess. The applicant justified this request by citing Section 35 of the Insolvency and Bankruptcy Code, 2016, which empowers the liquidator to sell immovable properties and actionable claims of the Corporate Debtor through public auction or private contract. The applicant emphasized the inseparability of the assets of VISCO and the Corporate Debtor, arguing that selling them separately would significantly reduce their value and violate MIDC norms. The secured creditors, holding a first pari passu charge on all the assets of the Corporate Debtor, consented to the sale, with R.C. Plasto offering a price above the liquidation value. The Tribunal acknowledged these points and permitted the sale by private treaty, recognizing the unique situation and the consent of the secured creditors.

2. Distribution of Proceeds from the Sale as per Section 53 of the Insolvency and Bankruptcy Code, 2016:
The applicant requested the Tribunal to allow the proceeds of the sale to be distributed by the liquidator as per Section 53 of the Insolvency and Bankruptcy Code, 2016. Section 53 outlines the order of priority for distributing the proceeds from the sale of liquidation assets, starting with insolvency resolution process costs and the liquidation costs, followed by workmen’s dues, secured creditors, and other specified debts. The Tribunal noted that the liquidator must act according to Section 53 without requiring specific directions from the Adjudicating Authority. However, the Tribunal did not provide detailed directions regarding the distribution at this stage, as the liquidator needed to deduct costs and determine amounts payable to laborers, among other details.

3. Validity of Private Sale under the Insolvency and Bankruptcy Code:
The Tribunal examined Regulation 33 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulation, 2016, which allows the liquidator to sell assets through private sale under certain conditions, such as when the asset is perishable, likely to deteriorate in value, sold at a price higher than the reserve price of a failed auction, or with prior permission from the Adjudicating Authority. The Regulation also prohibits private sales to related parties without prior permission. The Tribunal found that the conditions for a private sale were met, as the secured creditors had consented, and the sale price exceeded the liquidation value. Consequently, the Tribunal approved the private sale, emphasizing the liquidator’s compliance with the regulatory framework.

Conclusion:
The Tribunal partially allowed the application, approving the private sale of the Corporate Debtor’s assets to R.C. Plasto for ?15,00,00,000 and directing the liquidator to distribute the proceeds in accordance with Section 53 of the Insolvency and Bankruptcy Code, 2016. The Tribunal highlighted the necessity for the liquidator to file a detailed application regarding the distribution of proceeds, including costs and laborer payments, to ensure compliance with the statutory provisions.

← Previous Next →