2021 (11) TMI 195 - Tri - Insolvency and Bankruptcy

Auction sale - Seeking ratification and ratification of e-auction sale of the Lot 1 assets - HELD THAT - From a perusal of the extract of the Liquidation Regulation as at 01.04.2018 (applicable) and the amended Liquidation Regulation in juxtaposition to each other, it is clear that due to a change in law, the present circumstances requires indulgence of this Tribunal to ratify and allow the Auction Sale of the Lot 1 and Lot 2 assets of the corporate Applicant, since the Applicant herein is not empowered as a Liquidator to accommodate the requests of the successful bidders to pay the balance sale consideration within 90 days as per the amended Liquidation Regulations, when the Liquidation Regulations as at 01.04.2018 (old) is applicable to the present Corporate Applicant Which stipulate a time limit of only 15 days from the date of demand i.e. the signing of the LoI. This Adjudicating Authority not inclined to give benefit of provision of 90 days to pay balance sale consideration as per amended clause 12 of Schedule I of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016. Relying on Circular issued by the IBBI, it is held that benefit cannot be granted as the liquidation order in the proceeding was passed before the amendment dated 25.07.2019 benefit under amended clause 12, could not be granted. Therefore, E-Auction dated 26.02.2021 is null and void as bad in law. Liquidator is directed to get assets valued again and issue fresh E- Auction sale notice in accordance with Liquidation Regulations as at 01.04.2018 (applicable) and complete Auction expeditiously - application disposed off.

Summary

Issues:
1. Application for directions under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 for ratifying e-auction sale of assets.
2. Interpretation of Liquidation Regulations as at 01.04.2018 and its impact on the time limit for payment of balance sale consideration.
3. Validity of an e-auction sale conducted on 26th February 2021.
4. Applicability of the amended clause 12 of Schedule I of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 to a liquidation process commenced before the amendment date.

Analysis:

1. The Liquidator filed an application seeking directions for ratifying an e-auction sale of assets of the Corporate Applicant. The e-auction was conducted for two lots of assets, and after multiple failed attempts, successful bids were received on 26th February 2021. The Applicant highlighted the history of the auction process, including changes in reserved prices and auction dates due to unsuccessful bids in previous attempts.

2. The Applicant argued that the Liquidation Regulations as at 01.04.2018 were applicable to the Corporate Applicant, setting a time limit of 15 days for the highest bidder to pay the balance sale consideration. However, the amended regulations allowed a 90-day period for payment. The Tribunal compared the relevant provisions of the old and amended regulations, emphasizing the need for Tribunal intervention due to the change in law affecting the payment timeline for successful bidders.

3. The Tribunal examined Regulation 33 of the Liquidation Regulations, which outlines the mode of sale for assets. It also discussed the changes in clauses 12 and 13 of Schedule I post-amendment, emphasizing the impact of the substitution on the time limit for payment of balance sale consideration. The Tribunal referred to circulars and notifications to support its interpretation of the regulations and their applicability to the e-auction conducted on 26th February 2021.

4. Based on the interpretation of the regulations and circulars, the Tribunal concluded that the benefit of the provision allowing 90 days for payment of balance sale consideration could not be granted in this case. Citing the circular issued by the IBBI, the Tribunal held that since the liquidation order was passed before the amendment date, the benefit under the amended clause 12 could not be applied. Consequently, the e-auction conducted on 26th February 2021 was deemed null and void, and the Liquidator was directed to revalue the assets and issue a fresh e-auction sale notice in accordance with the regulations applicable at the commencement of the liquidation process.

This detailed analysis of the judgment provides insight into the issues raised, the arguments presented, and the Tribunal's decision based on the interpretation of relevant legal provisions and circulars.