2022 (5) TMI 919 - Tri - Insolvency and Bankruptcy

Seeking to stay the further proceedings and to declare the 3rd E-auction process initiated under invitation for expression of interest to submit bid in respect of sale of IVRCL Ltd. under liquidation as going concern - relation of the Auction purchaser herein with that of the Corporate Debtor - auction purchaser is a related party or not - 2nd Respondent herein accepting the bid of Sri Ponguleti Prasad Reddy, Promoter of M/s. Raghava Water and Raghava Constructions and directing him to deposit the balance of bid amount is arbitrary, illegal, and violative of Section 29(A) of Insolvency and Bankruptcy Code, 2016 or not - seeking to direct the 2nd Respondent to issue a fresh e-auction process taking all steps germane for the purpose of perfect competition in the bidding process - HELD THAT - It is seen that Sri Ponguleti Prasad Reddy does not fall within ambit of ineligibility as per the provisions of the Section 29A of the IB Code, 2016. Here, the Applicant herein has moved the instant Application upon having failed to submit the requisite documents and EMD within the stipulated time and now by virtue of this Application is trying to make a back door entry by making frivolous allegations and also with an intention to stall the process of Liquidation - In a nutshell, it is clear that the successful bidders are individuals and the next point is that they are not covered under Section 29A of the Code. Application dismissed.

Issues Involved:
1. Legality of the 3rd E-auction process and compliance with Section 29A of the Insolvency and Bankruptcy Code, 2016.
2. Applicant's locus standi to challenge the auction process.
3. Allegations of collusion and manipulation in the auction process.

Detailed Analysis:

1. Legality of the 3rd E-auction Process and Compliance with Section 29A of the Insolvency and Bankruptcy Code, 2016:

The Applicant sought to declare the 3rd E-auction process initiated for the sale of IVRCL Ltd. as arbitrary, illegal, and violative of Section 29(A) of the Insolvency and Bankruptcy Code, 2016. The Applicant contended that the successful bidder, Sri Ponguleti Prasad Reddy, is closely related to the promoters of IVRCL Ltd., thereby violating Section 29A, which prohibits related parties from participating in the bidding process. The Tribunal reviewed the relationship and found that Sri Ponguleti Prasad Reddy did not fall within the ambit of ineligibility under Section 29A. The Tribunal noted that the Liquidator had undertaken due diligence and concluded that the successful bidders were not in violation of Section 29A.

2. Applicant's Locus Standi to Challenge the Auction Process:

The Respondent argued that the Applicant had no locus standi to file the application as they did not submit a bid or the required documents and EMD within the stipulated time. The Tribunal agreed, stating that the Applicant, having failed to participate in the auction process, had no standing to challenge it. The Tribunal emphasized that the Applicant's attempt to challenge the process was an effort to make a backdoor entry and stall the liquidation process.

3. Allegations of Collusion and Manipulation in the Auction Process:

The Applicant alleged that the auction process was manipulated to favor the successful bidder, who is related to the promoters of IVRCL Ltd. The Applicant claimed that the Liquidator engaged in secret meetings and did not announce the bid results as per the published schedule. The Respondent countered these allegations, stating that the successful bidders submitted all required documents and EMD within the timeline, and the bid result announcement was done in accordance with the auction process document. The Tribunal found no evidence to support the Applicant's allegations of collusion and manipulation.

Conclusion:

The Tribunal concluded that the successful bidders were not covered under Section 29A of the Code and that the Applicant, having failed to participate in the auction process, had no locus standi to maintain the application. Consequently, the applications bearing I.A. No. 51 & 52 of 2022 were rejected, with no order as to costs.

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