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2022 (6) TMI 715 - Tri - Insolvency and BankruptcyValidity of proposed private sale conducted by the liquidator - mode of sale - HELD THAT - From the facts of the case in hand, it is observed that the applicant-Ex Promoters have not participated in the auctions on 28.08.2019, 27.09.2019, 18.10.2019 and 21.09.2020. It is also observed that the applicant has failed to submit any bid for the auction dated 27.01.2021 in compliance with the direction of this Tribunal dated 25.01.2021. These responses or these lack of responses from the applicants cast serious doubt over their actual intention with regard to the bidding of the corporate debtor. Their subsequent offer of approximately Rs.80 Crores falls way below the reserve price of the last failed auction on 27.01.2021 at Rs.96.02 Crores - The applicant has failed to make out a case that there has been any infringement of these Sections and Regulations on the part of the Liquidator - Application dismissed. Seeking directions to be issued to liquidator for the sale of corporate debtor as a going concern and to consider the bid of the applicant - HELD THAT - The applicant s plea that a different approach should be adopted for MSME is also not tenable as the applicants are clearly hit by the provisions of Section 29-A of the Code. In any case, the period for issuing any direction to the Liquidator to sell the corporate debtor as a going concern is over as private sale has already taken place in compliance with the provisions of the relevant Sections of the Code and in the related Regulations made thereunder. No case has been made out by the applicants-Ex-Promoters that there has been any violation of the provisions of the Code in the private sale effected by the Liquidator - Application dismissed. Seeking to issue necessary direction to the Liquidator to sell the Corporate Debtor i.e. M/s Supreme Tex Mart Limited (STML) as a going concern in liquidation - HELD THAT - As clarified in the order pertaining to the earlier two IA Nos.227/2021 and IA No.228/2021, private sale has already taken place in the present case in compliance with the provisions of the relevant provisions of the Code and Regulations made thereunder. It is also seen from the records that the Liquidator has made adequate efforts and attempts to sell the corporate debtor as a going concern through open public auction. No case has been made out in the present application that there has been any short-coming on the part of the Liquidator in this regard - there is no merits in the application and the same is dismissed. Seeking to constitute a Consultation Committee of stakeholders as required under Regulation 31-A of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 - seeking restraint on Liquidator from taking any decision with regard to sale of liquidation of estate of the corporate debtor - HELD THAT - The Insolvency and Bankruptcy Board of India, in exercise of the powers conferred by Clause (t) of sub-Section (1) of Section 196 read with Section 240 of the Insolvency and Bankruptcy Code, 2016 (31 of 2016) has introduced Regulation 31A in the Liquidation Process Regulation, 2016. It is also noted that there is no mention of the retrospective application of the provisions in the relevant notification. It is also settled law that all laws are presumed to be prospective unless the Legislature unequivocally expresses its intent for the operation of such provisions retrospectively - Though, in the present case, there is a change in the present Liquidator who was was appointed w.e.f. 01.11.2019, i.e. after the introduction of Regulation 31-A of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 in the statute book, but the applicability of provisions relates to the date of liquidation order and not to the date of appointment of the new Liquidator. Furthermore, it is noted that the liquidation process is a time-bound process and any delay caused by introduction of new procedure would result in huge depreciation of the assets under liquidation leading to a lesser recovery of public money owed to the Public Sector Banks. Any such interpretation resulting in delay will be against the objectives of the Code. Regulation 31A of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 is not with retrospective effect - Application dismissed. Seeking issuance of appropriate directions to the Liquidator to immediately constitute Consultation Committee of stakeholders as required under Regulation 31A of the IBBI (Liquidation Process) Regulations, 2016 - HELD THAT - The provisions of Regulation 31A of the IBBI (Liquidation Process) Regulations, 2016 are not with retrospective effect. Thus in the present case, Stakeholder Consultation Committee (SCC) cannot be allowed to be constituted - Application dismissed.
Issues Involved:
1. Legality of the private sale conducted by the Liquidator. 2. Eligibility of Ex-Promoters to participate in the bidding process. 3. Constitution of Stakeholders Consultation Committee under Regulation 31A of the IBBI (Liquidation Process) Regulations, 2016. 4. Validity of the private sale of corporate debtor’s assets. 5. Consideration of the corporate debtor as a going concern in liquidation. Detailed Analysis: 1. Legality of the Private Sale Conducted by the Liquidator: In IA No.227/2021, the applicants, Ex-Promoters of M/s Supreme Tex Mart Limited, challenged the private sale conducted by the Liquidator. The Tribunal noted that the Liquidator had made repeated attempts to sell the corporate debtor through public auctions, which failed due to lack of bidders. The private sale was conducted in compliance with Regulation 33 of the IBBI (Liquidation Process) Regulations, 2016, which allows private sales under specific conditions. The Tribunal found no merit in the application and dismissed it, stating that the Liquidator had followed the prescribed procedures. 2. Eligibility of Ex-Promoters to Participate in the Bidding Process: In IA No.228/2021, the Ex-Promoters sought directions to allow them to bid for the corporate debtor as a going concern. The Tribunal reiterated that the Ex-Promoters were ineligible to bid under Section 29-A of the IBC, 2016, as they were declared willful defaulters. The Tribunal also emphasized that the Ex-Promoters did not have any vested right to be preferred over other bidders. The application was dismissed, and the Tribunal found no violation of the Code by the Liquidator. 3. Constitution of Stakeholders Consultation Committee: In IA No.285/2021, the State Bank of India sought the constitution of a Stakeholders Consultation Committee (SCC) under Regulation 31A of the IBBI (Liquidation Process) Regulations, 2016. The Tribunal held that Regulation 31A, introduced on 25.07.2019, does not have retrospective effect and thus does not apply to liquidation processes commenced before this date. The Tribunal emphasized that applying the regulation retrospectively would delay the liquidation process and reduce asset recovery. The application was dismissed. 4. Validity of the Private Sale of Corporate Debtor’s Assets: In IA No.536/2021, M/s Bluechip Worldwide Yarn Private Limited contested the private sale of the corporate debtor’s assets and sought to purchase the debtor as a going concern. The Tribunal noted that the Liquidator had made sufficient efforts to sell the corporate debtor through public auctions before proceeding with the private sale. The Tribunal found no shortcomings in the Liquidator’s actions and dismissed the application, confirming the validity of the private sale. 5. Consideration of the Corporate Debtor as a Going Concern in Liquidation: In IA No.536/2021 and related applications, the applicants argued for the sale of the corporate debtor as a going concern to maximize value and protect employee interests. The Tribunal acknowledged the benefits of selling the corporate debtor as a going concern but noted that the Liquidator had already conducted multiple unsuccessful auctions for this purpose. The Tribunal dismissed the applications, stating that the Liquidator had complied with the relevant provisions of the Code and Regulations. Conclusion: The Tribunal dismissed all applications, upholding the Liquidator’s actions and the private sale conducted. The Tribunal confirmed that the Ex-Promoters were ineligible to bid under Section 29-A of the IBC, 2016, and that Regulation 31A of the IBBI (Liquidation Process) Regulations, 2016, does not apply retrospectively.
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