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2022 (8) TMI 835 - AT - Insolvency and BankruptcyNon-production of Additional Documents/ Additional Evidence - Party negligent in preferring the documents and not filing the same, despite knowledge at appropriate time - screenshots - admissible evidence or not - It is the plea of the 1st Respondent that Applicant/Appellant has exhibited its Legal Bias and the Fraudulent Actions are visible from the Reports filed by the 2nd Respondent - failure to establish any reason for not bringing the Additional Documents/Evidence before the Adjudicating Authority at the appropriate time - HELD THAT - In the instant case, the Appellant has come out with a plea that the Respondents No. 1 and 2 have joined together in declaring the 3rd Respondent as the Successful Highest Bidder. The Appellant before the Adjudicating Authority had relied upon the screenshots, which were System generated to fall back upon its contention that the auction was closed at 05 43 17 hours (Indian Standard Time) which was not accompanied by a Certificate as per the ingredients of Section 65B (4) of the Indian Evidence Act, 1872. As a matter of fact, it is evident from the Bid History, that the Bids Sum was made known as Rs.17,80,00,000/-. On 21.01.2021, the snapshots of the screen were taken at 05 43 17 hours (Indian Standard Time), which is not backed up by a furnishing of Certificate, as per Section 65B (4) of the Indian Evidence Act. In reality, the onus is upon the Appellant/Applicant to ascertain the Equipment / System through which the snap shots were generated and a Certificate ought to have been filed by the Appellant / Applicant in terms of Section 65B of the Indian Evidence Act, 1872, coupled with the Information Technology Act, 2000. Unfortunately, the Appellant had not produced the Certificate in question, as per the requirement of aforesaid Acts before the Adjudicating Authority. Sections 65A and 65B of the Indian Evidence Act, 1872 are brought in, under Schedule II to the Information Technology Act, 2000. Section 5 of the Indian Evidence Act, 1872, provides that an evidence can be given regarding only facts that are at issue or of relevance. Section 136 of the Indian Evidence Act, 1872, empowers a Judge to determine on admissibility of evidence, in a given case. The contents of Electronic Record may be proved as per Section 65B of the Indian Evidence Act, 1872. In the present case, it is brought to the fore from the System generated Log Report that the Appellant had logged in at 17 37 20 hours. It placed its Bid at 17 37 34 hours. The Appellant logged in at 17 57 59 and for nearly 20 minutes and 25 seconds, had logged out for a considerable time (there being no activity on its part), of course in breach of the E-auction terms and conditions - One cannot ignore the important fact that as per the E-auction conditions, the Auction screen ought not be shared with any Third Party and in fact, the Third Party Application ZOOM was active / operated at the time of Auction Process and also that various other Applications were running at the same time during active Auction. During the period of inactivity for about 20 minutes, the 3rd Respondent had increased the Bid by Rs.10,00,000/- to Rs.17,90,00,000/-. The 3rd Respondent had placed its Bid at 17 41 01 hours. Indeed, the Appellant s last Bid at 17 37 34 hours for Rs.17,80,00,000/-. It cannot be gainsaid that Schedule I Mode of Sale (under Regulation 33 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations 2016, Serial No. 10, it is mentioned as If the Liquidator is of the opinion that an auction where bid amounts are not visible is likely to maximize realizations from the sale of assets and is in the best interests of the creditors, he may apply, in writing, to the Adjudicating Authority for the permission to conduct an auction in such manner . It is to be borne in mind that the 1st Respondent/ Liquidator had not resorted to the recourse of preferring an Application, based on the ground that the Bid Sums were not discernible, as per the stand taken on behalf of the Appellant/Applicant. A charge of Fraud must be substantially proved as laid and when one kind of Fraud is charged, another kind of Fraud cannot be substituted - A party guilty of fraud can insist of his rights under the Contract, when the Party defrauded insists on the Performance of Contract. As a matter of fact, the term Material means Real and not merely Formal and Academic, as opined by this Tribunal. An Irregularity which may be termed as Material, ought to be such as it affects the ultimate decision of the given Proceedings or Case. As far as the present case is concerned, the Appellant/Applicant had admitted that Yes, I am getting logged out frequently (vide Vol. II Page 237 - translated version of the Transcript from Hindi in Preliminary Reply Affidavit of R2 / Linkstar Infosys Private Limited to I.A. No. 74/2021 in CP/508/IB/2017), which is certainly an unfavorable circumstance against it. Admissions are admissible even though they are self harming. Admission is substantive evidence Pro Prie Vigore. In law, it is impermissible for an Unsuccessful Bidder in Auction (after taking part in the Auction) to question the validity and legality of whole Auction Process, especially after the completion of the Auction Sale. Under the pretext of maximisation of value from the Sale of Assets, the Appellant/Applicant is not to be permitted to question the Auction Sale, when the 3rd Respondent had made payment of full balance sum, in the teeth of Process Memorandum on 15.02.2021 and 16.02.2021, respectively and that the 1st Respondent/Liquidator was to act as per Clause 13 Schedule I of Regulation 33 of Liquidation Regulations. In the instant case, after the conclusion of Auction Sale, the same was acted upon and the fact of the matter is, the amount received was disbursed, in terms of the Waterfall Mechanism, as per Section 53 of the I B Code, 2016. This Tribunal on the basis of surrounding facts and circumstances of the case, keeping in mind of the prime fact that if a validly conducted E-Auction Process in a fair and transparent manner is to be set at naught by this Appellate Tribunal, then there will be no sanctity to the Sale that was concluded to and in favour of the 3rd Respondent (of course in accordance with Law), who had admittedly paid the sale consideration and applied for Renewal of Licenses before the concerned Authorities and the whole process of E-auction cannot be revisited, comes to a consequent conclusion that the impugned order dated 18.03.2021, passed by the Adjudicating Authority in dismissing the IA No.74 of 2021 in CP/508/IB/2017 is free from legal infirmities Appeal dismissed.
Issues Involved:
1. Admissibility of additional documents/evidence at the appellate stage. 2. Allegations of fraud and manipulation in the e-auction process. 3. Compliance with Section 65B of the Indian Evidence Act, 1872. 4. Conduct and fairness of the e-auction process. 5. Maximization of value from the sale of assets. 6. Rights and obligations of the Liquidator under the IBC and Liquidation Regulations. 7. Legal consequences of the Appellant's actions during the e-auction. Issue-wise Detailed Analysis: 1. Admissibility of Additional Documents/Evidence at the Appellate Stage: The Tribunal emphasized that additional documents/evidence, which were not part of the records before the Adjudicating Authority, are inadmissible at the appellate stage. The Appellant's attempt to introduce the Tata Communications Report and the Independent Auditor's Report was dismissed, as these documents were not presented during the adjudication by the Adjudicating Authority. The Tribunal stated, "A mere assertion in the 'Application'/'Petition' is not good enough to establish that in spite of due diligence, additional evidence could not be produced/filed before the 'Adjudicating Authority'." 2. Allegations of Fraud and Manipulation in the E-auction Process: The Appellant alleged fraud and manipulation in the e-auction process, claiming that the 1st and 2nd Respondents colluded to declare the 3rd Respondent as the successful bidder. The Tribunal noted that the Appellant's screenshots were not accompanied by a certificate as required under Section 65B (4) of the Indian Evidence Act, 1872, making them inadmissible. The Tribunal also found no evidence of fraud or manipulation, stating, "In the present case, the auction having been confirmed on 30-7-2003 by the Court it cannot be set aside unless some fraud or collusion has been proved." 3. Compliance with Section 65B of the Indian Evidence Act, 1872: The Tribunal highlighted the importance of compliance with Section 65B of the Indian Evidence Act, 1872, for the admissibility of electronic records. The Appellant's failure to provide the necessary certification rendered the electronic evidence inadmissible. The Tribunal cited the Supreme Court's decision in Arjun Panditrao Khotkar v. Kailash Kushanrao Gorantyal, emphasizing that the certificate is a condition precedent for the admissibility of electronic records. 4. Conduct and Fairness of the E-auction Process: The Tribunal found that the e-auction process was conducted fairly and transparently by the 1st and 2nd Respondents. The Appellant's frequent logouts and simultaneous login from multiple browsers were noted as breaches of the e-auction terms and conditions. The Tribunal stated, "As per the terms and conditions of the 'Auction', the Appellant/Applicant is to follow the rules of the game scrupulously." 5. Maximization of Value from the Sale of Assets: The Appellant argued for a re-auction to maximize the value of the assets. However, the Tribunal found that the e-auction process had already achieved a fair value, and setting aside the concluded sale would undermine the sanctity of the auction process. The Tribunal cited the Supreme Court's decision in Valji Khimji & Co. v. The Official Liquidator, emphasizing that setting aside a confirmed sale based on a subsequent higher offer would create huge problems. 6. Rights and Obligations of the Liquidator under the IBC and Liquidation Regulations: The Tribunal noted that the Liquidator acted in good faith and in compliance with the IBC and Liquidation Regulations. The Liquidator's actions were protected under Section 233 of the IBC, which provides immunity for actions taken in good faith. The Tribunal also emphasized the importance of time sensitivity in the liquidation process, as directed by the Adjudicating Authority. 7. Legal Consequences of the Appellant's Actions during the E-auction: The Tribunal found that the Appellant's actions, including frequent logouts, simultaneous login from multiple browsers, and sharing the auction screen via a third-party application, contributed to its inability to outbid the 3rd Respondent. The Tribunal concluded that the Appellant's inaction and breaches of the auction terms disqualified it from challenging the auction process. The Tribunal stated, "An 'Admission' by a 'Party' is the best piece of evidence which can be pressed into service against him." Conclusion: The Tribunal dismissed the Appellant's appeal, finding no legal infirmities in the Adjudicating Authority's order. The Tribunal emphasized the importance of compliance with legal procedures and the integrity of the e-auction process. The Appellant's failure to adhere to the e-auction terms and conditions, coupled with the lack of admissible evidence, led to the dismissal of the appeal. The Tribunal concluded that the e-auction was conducted fairly and transparently, and the 3rd Respondent was rightfully declared the successful bidder.
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