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2022 (5) TMI 582 - AT - Insolvency and BankruptcyAuction - permission to pay/adjust the Sale consideration partly by way of investment into the equity shares of the Corporate Debtor and the balance amount in the form of Optionally Convertible Debentures - HELD THAT - On perusal of Clause 1(12) under Schedule I of the Liquidation Process Regulations, 2016, it is clear that 90 days period provided for making the deposit is the maximum period under which the Auction Purchaser had to make the deposit. 2nd Proviso of the Item 12 of the Schedule I provided that sale shall be cancelled if the payment is not received within 90 days. When the Consequence of non-compliance of the provision is provided in the statute itself, the provision is necessary to be held to be mandatory. Item 12 provides that payment is to be made within 90 days and with interest after 30 days at the rate of 12 percent. Non-compliance of 2nd Proviso, sale shall be cancelled if the payment is not received within 90 days. The Adjudicating Authority has rightly observed that in view of the Appellant having not made payment in 90 days, Adjudicating Authority has no option except to allow the Application filed by the Liquidator for cancellation of the sale. The action taken by the Adjudicating Authority is in accordance with the statutory provisions. No error has been committed by the Adjudicating Authority in passing the Impugned Order by allowing the Application filed by the Liquidator and closing the Applications filed by the Appellant - Appeal dismissed.
Issues:
1. Appeal against Order dated 25th April, 2022 passed by the Adjudicating Authority. 2. Failure to make payment by the Auction Purchaser within the specified timeline. 3. Application filed by the Liquidator to cancel the sale of Corporate Debtor. 4. Interpretation of 2nd proviso to Clause 1(12) under Schedule I of the Liquidation Process Regulations, 2016. 5. Adjudicating Authority's decision to allow the Liquidator's application and dismiss the Appeal. Issue 1: Appeal against Order by Adjudicating Authority The Appeal was filed against the Order dated 25th April, 2022 passed by the Adjudicating Authority in response to various applications filed by the parties involved in the sale of the Corporate Debtor through an E-Auction process. Issue 2: Failure to Make Payment The Auction Purchaser failed to make the complete payment within the specified timeline despite depositing the earnest money and a partial amount. The Liquidator filed an application seeking permission to cancel the sale due to the non-payment by the Auction Purchaser. Issue 3: Liquidator's Application The Liquidator filed an application requesting the Adjudicating Authority to cancel the sale of the Corporate Debtor as the Auction Purchaser did not fulfill the payment obligations within the stipulated time frame. The Liquidator also sought permission to conduct a fresh E-Auction for the Corporate Debtor. Issue 4: Interpretation of Proviso to Clause 1(12) The 2nd proviso to Clause 1(12) under Schedule I of the Liquidation Process Regulations, 2016 was crucial in this case. It mandated that the highest bidder must provide the balance sale consideration within ninety days of the demand, with a provision for interest after thirty days and cancellation of the sale if payment is not received within ninety days. Issue 5: Adjudicating Authority's Decision The Adjudicating Authority allowed the Liquidator's application to cancel the sale of the Corporate Debtor due to the Auction Purchaser's failure to make the payment within the prescribed timeline. The Authority found that the Auction Purchaser did not comply with the statutory provisions, leading to the cancellation of the sale. The Authority's decision was based on the mandatory nature of the payment timeline and the consequences of non-compliance as specified in the regulations. In conclusion, the Appellate Tribunal upheld the Adjudicating Authority's decision, stating that the Liquidator's application was rightfully granted, and the Auction Purchaser's attempts to delay the proceedings were not justified. The Appeal was dismissed, affirming the cancellation of the sale of the Corporate Debtor due to non-payment by the Auction Purchaser within the specified period.
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