2021 (6) TMI 940 - Tri - Insolvency and Bankruptcy

Revival of company - working of the Company as a going concern - adverse effect on release from the liquidation - Regulation 32 of the Liquidation Process Regulations - HELD THAT - Since the Liquidator has already accepted the bid for ₹ 15.30 Crores and the auction sale of the Corporate Debtor as a going concern is completed on 18.03.2021, no specific order or ratification of the sale is required. The action of the Liquidator is in accordance with the relevant provisions of the Code and consequences thereof would follow according to law. Reiteration by the Tribunal is neither contemplated nor necessary - The promoters are permitted to restructure the Capital account as prayed for. The Liquidator shall distribute the sale proceeds as per Section 53 of the Code - since already the purchase consideration is paid by the Applicants, the Applicants shall not have any more liability as far as the debts of the Corporate Debtor are concerned. The existing share capital of the Corporate Debtor shall stand extinguished - the Applicants are required to approach the Authorities concerned for exemptions, if any, and the said Authorities will decide the issue in accordance with the law.

Issues Involved:
1. Approval and acceptance of the bid for the auction sale.
2. Granting of consequential reliefs as stated in the application.
3. Continuation of the corporate debtor as a going concern.
4. Rights and liabilities of the successful bidders post-auction.

Issue-wise Detailed Analysis:

1. Approval and Acceptance of the Bid:
The Applicants, as successful bidders, requested the Tribunal to approve their bid of ?15.30 Crores for the sale of the corporate debtor, M/s. Enviiro Bulkk Handling Systems Pvt. Ltd., as a going concern. The Tribunal noted that the auction sale conducted on 18.03.2021 was completed, and the Liquidator had already accepted the bid. Therefore, no specific order or ratification of the sale was required, as the action of the Liquidator was in accordance with the relevant provisions of the Insolvency and Bankruptcy Code, 2016 (the Code).

2. Granting of Consequential Reliefs:
The Applicants sought various consequential reliefs for the smooth operation of the corporate debtor post-auction. The Tribunal granted the following reliefs:
- Restructuring of Capital Account: The promoters were permitted to restructure the capital account by canceling existing capital and substituting it with the investment of the bid amount.
- Distribution of Sale Proceeds: The Liquidator was directed to distribute the sale proceeds as per Section 53 of the Code.
- Liability for Debts: The Applicants were absolved of any further liability concerning the debts of the corporate debtor.
- Pending Cases/Proceedings: The Applicants were not responsible for any cases or proceedings pending or decreed against the corporate debtor up to the date of the auction.
- Extinguishment of Existing Share Capital: The existing share capital of the corporate debtor was to be extinguished.
- Status Update in RoC Records: The Registrar of Companies (RoC) was directed to change the status of the company from "Liquidation" to "Active."
- Reconstitution of Board of Directors: The Applicants were allowed to reconstitute the Board of Directors as per the Companies Act, 2013, and make appropriate filings with the RoC.
- Continuation of Licenses and Approvals: All existing licenses, approvals, rights, entitlements, benefits, and privileges were to continue, subject to the payment of statutory dues from the date of the order.
- Review and Termination of Contracts: The corporate debtor was granted the right to review and terminate any contracts entered into before the liquidation order.
- Continuation of MSME Benefits: All benefits availed by the corporate debtor as an MSME company were to continue for the new corporate debtor.
- Exemption from Fees and Taxes: The Applicants were directed to approach the concerned authorities for exemptions on registration fees, stamp duty, and other local levies, which the authorities would decide in accordance with the law.
- Ownership of Assets: The Applicants, as successful bidders, were recognized as the owners of the assets mentioned in the auction sale. Secured creditors were directed to hand over the title documents of the properties covered under the auction sale process by deleting all previous encumbrances.

3. Continuation of the Corporate Debtor as a Going Concern:
The Tribunal emphasized the importance of selling the corporate debtor as a going concern to ensure its functionality post-liquidation. The sale as a going concern implies that the corporate debtor would continue to operate independently, retaining all its assets, licenses, and business authorizations. The Tribunal referred to relevant regulations and judgments to support this approach, highlighting that the corporate debtor would not be dissolved, and its legal entity would survive with the ownership transferred to the successful bidder.

4. Rights and Liabilities of the Successful Bidders Post-Auction:
The Tribunal clarified that the successful bidders would not inherit any liabilities of the corporate debtor, as these would be settled in accordance with Section 53 of the Code. The assets would be transferred free of any encumbrances, and the new owners would carry on the business of the corporate debtor. The Tribunal also noted the advantages of selling the corporate debtor as a going concern, including the retention of the legal entity, continuation of business operations, and the potential for existing employees to retain their jobs.

Conclusion:
The Tribunal allowed the application, granting the requested reliefs to facilitate the smooth transfer and operation of the corporate debtor as a going concern. The decision ensured that the corporate debtor could continue its business operations without the burden of previous liabilities, while the successful bidders were provided with the necessary legal and administrative support to manage the company post-auction.

← Previous Next →