2021 (12) TMI 740 - AT - Insolvency and Bankruptcy

Liability of transfer fee (as demanded by the West Bengal Industrial Development Corporation Limited.) - it is claimed that sale by Liquidator is involuntary on which no transfer fee is payable - HELD THAT - The transfer fee in respect of transfer made by Liquidator of the lessee assets is liable to be paid and transferee cannot absolve himself from payment of liability to pay transfer fee. An Application was filed by the Appellant to modify the order, praying that direction for payment of transfer fee by the Appellant should be modified. The said Application was specifically rejected by the Adjudicating Authority vide order dated 29th July, 2020. There being specific direction by the Adjudicating Authority for payment of transfer fee by the Appellant and the Appellant having not challenged those orders, cannot be heard in contending that he is not liable to pay transfer fee. Auction of the Sale Assets was already completed on 11th June 2019 and thereafter the Applicant made a request and submitted the higher bid. In the letter quoted, there was specific submission We promise to follow all the conditions of your Auction and we are also ready to pay the transfer charges to WBIDC . The Appellant cannot be now allowed to go back from his statement that he will pay the transfer charges also. Appeal dismissed - decided against appellant.

Issues Involved:
1. Liability of transfer fee in liquidation proceedings.
2. Interpretation of the Invitation for Expression of Interest regarding transfer fee.
3. Applicability of prior orders directing payment of transfer fee.
4. Appellant's commitment to pay transfer charges.

Detailed Analysis:

1. Liability of Transfer Fee in Liquidation Proceedings:

The primary issue addressed was whether the Appellant was liable to pay the transfer fee as demanded by the West Bengal Industrial Development Corporation Limited (WBIDC). The Appellant argued that the sale by the Liquidator was involuntary, and thus, no transfer fee was payable. The Appellant cited various judgments, including the Calcutta High Court's decision in Krishna Das Nandy v. Bidhan Chandra Roy, which held that sales by Liquidators in compulsory winding-up proceedings were involuntary and akin to sales by the court. However, the Tribunal found that the sale by the Liquidator under the Insolvency and Bankruptcy Code (IBC) is considered a sale on behalf of the Corporate Debtor and not an involuntary sale. This conclusion was supported by the Supreme Court's judgments in M/s Parasram Harnand Rao vs. M/s Shanti Parsad Narinder Kumar Jain and Anr., and Cox & Kings Ltd. vs. Chander Malhotra, which held that such sales are voluntary and fall within the scope of applicable transfer fee provisions.

2. Interpretation of the Invitation for Expression of Interest Regarding Transfer Fee:

The Appellant contended that the Invitation for Expression of Interest (EOI) issued by the Liquidator did not explicitly mention the transfer fee under Clause 7.1.12. This clause stated that the purchaser shall bear and pay applicable stamp duties, registration fees, and all other duties payable in connection with the purchase of Sale Assets. The Tribunal interpreted this clause in a business-efficient manner, concluding that "all other duties payable" included the transfer fee. Additionally, the sub-lease deed executed in favor of the Corporate Debtor by WBIDC contained Clause 12.28, which explicitly required the payment of a 10% transfer fee of the prevailing market value.

3. Applicability of Prior Orders Directing Payment of Transfer Fee:

The Tribunal examined prior orders dated 23rd June 2020 and 29th July 2020, where the Adjudicating Authority had directed the Appellant to pay the transfer fee. The Appellant had sought to modify these orders but was unsuccessful. As the Appellant did not challenge these orders, the Tribunal held that the Appellant was bound by the principles of res judicata and could not contest the transfer fee liability again.

4. Appellant's Commitment to Pay Transfer Charges:

The Tribunal noted a letter dated 26th June 2019, wherein the Appellant expressly promised to follow all auction conditions and agreed to pay the transfer charges to WBIDC. This commitment further reinforced the Appellant's obligation to pay the transfer fee, as stated in the letter.

Conclusion:

The Tribunal dismissed the Appeal, affirming that the Appellant was liable to pay the transfer fee as demanded by WBIDC. The Appellant's arguments regarding the involuntary nature of the sale and the interpretation of the EOI were rejected. The prior orders of the Adjudicating Authority and the Appellant's own commitment to pay the transfer charges were decisive in the Tribunal's judgment. The Contempt Case (AT) No.17 of 2021 was also closed with no order as to costs.

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