2022 (8) TMI 1115 - AT - Insolvency and Bankruptcy

Rejection of Auction Bids - pre-bidding qualifications - HELD THAT - The documentary evidence on record establishes that the Appellant herein contended before the Learned Adjudicating Authority that pre-bidding qualification will not bind the bidders and sought for relief to be granted under the eligibility criteria at Clause 1.15 of the tender document. Having sought for participating in the bidding process, the contention that pre-bid qualification will not bind the bidders is erroneous as such a situation would only negatively affect the efforts of the Liquidator to maximize the value of the asset and would moreover delay the proceedings as all and sundry would participate in the bidding process. Secondly, the record evidences that the email was resent on 09.12.2021 and even otherwise on 11.12.2021 at 7 25 PM, the Liquidator confirmed the eligibility of the Appellant in respect of one property based on his turnover and his net worth. Having participated in the bidding process, the conduct of the Appellant in turning around and stating that the eligibility criteria is erroneous, without challenging the said condition in any appropriate forum, is truly misconceived. This Appeal is partly allowed only modifying the amount of cost imposed from Rs.9Lakhs/- to Rs.2Lakhs/- to be paid within one week from the date of this Order.

Summary

Issues:
Appeal against Impugned Order imposing cost of Rs.9 Lakhs on Appellant for misconceived litigation under Section 61 of the Insolvency and Bankruptcy Code, 2016.

Analysis:
1. The Appellant challenged the imposition of a cost of Rs.9 Lakhs by the Adjudicating Authority as arbitrary, citing Rule 149 of the NCLT Rules 2016 and arguing that the cost should be set aside. The Appellant participated in a bid for auctioning properties of the Corporate Debtor in Liquidation, but faced rejection based on turnover and net worth criteria. The Liquidator allowed the Appellant to bid for one property after subsequent emails and communications. The Appellant contended that the Adjudicating Authority erred in imposing the cost without considering the Appellant's eligibility for at least one property.

2. The Respondent/Liquidator maintained that the Appellant was eligible for one property only and had multiple opportunities to prove eligibility. The Liquidator allowed the Appellant to bid for one property, but the Appellant filed an application seeking to cancel the bid on the day of the bid. The Respondent argued that the Appellant's contention regarding bid terms and eligibility criteria was misconceived, as the Liquidator had the authority to modify bid terms to maximize stakeholder value. The Respondent asserted that the Adjudicating Authority was justified in imposing the cost of Rs.9 Lakhs.

3. The documentary evidence revealed that the Appellant disputed the pre-bidding qualification binding bidders and sought relief under the eligibility criteria in the tender document. The Appellant's conduct in challenging eligibility criteria after participating in the bidding process was deemed misconceived. The Adjudicating Authority criticized the Appellant for wasting time and energy by engaging in frivolous litigation, leading to the imposition of the cost.

4. The Tribunal acknowledged the Adjudicating Authority's concerns regarding frivolous litigation but reduced the cost from Rs.9 Lakhs to Rs.2 Lakhs in the interest of justice. The Appeal was partly allowed, modifying the cost to be paid within one week. The Tribunal directed the Registry to upload the Judgment on the Tribunal's website and provide a copy to the Adjudicating Authority promptly.