2022 (9) TMI 686 - AT - Insolvency and Bankruptcy

Validity of ad-interim stay granted to the process of fresh e-auction - e-auction of immovable property - HELD THAT - No relaxation in respect of time-line would be provided to the successful bidder in the second round of e-auction. Since this order had achieved finality as it had not been appealed against or modified, Pavan Enterprises could not have been given extension of time-line to what was provided in the e-auction document. Moreover, Pavan Enterprises who was the successful bidder in the second e-auction, had committed itself to making full payment by 21.4.2021 and therefore to engage in litigation through IA no. 868/2022 and IA no. 485.2021 was highly improper on the part of Respondent, and obtaining the order of ad-interim stay dated 28.2.2022 when it was precluded from doing so was clearly abuse of the judicial process - the Respondent experienced difficulty in depositing the balance of sale consideration after the first round of e-auction and could not deposit the requisite amount after committing itself to doing so. In view of the order dated 16.3.2021 passed by the Adjudicating Authority which had achieved finality and also the Terms and Conditions of the second round of e-auction process, it is opined that the Respondent caused a serious obstruction in the sale of the property by preferring an application to obtain stay order to the third round of e-auction through order dated 28.2.2022 which was granted - In view of the facts of the case and the conduct of the Respondent in obstructing the process of liquidation, particularly the e auction of the property despite it being fully aware of the order dated 16.3.2021 in IA No.468 of 2021, it is opined that the Respondent has clearly abused the process of law to gain undue advantage and thereby caused a delay in the culmination of the liquidation process. In view of the situation and the conduct of the Respondent as discussed in detail above, we are of the view that a fine of Rs. One Lakh should be imposed on the Respondent for abusing the process of law thereby causing delay in the liquidation process, and seeking to subvert the basic objective of IBC. This fine shall be deposited in Prime Minister s Relief Fund within 30 days of this order - appeal disposed off.

Summary

Issues Involved:
1. Legality of the ad-interim stay granted by the Adjudicating Authority.
2. Compliance with the terms and conditions of e-auction.
3. Extension of time for depositing the balance sale consideration.
4. Conduct of the Respondent in obstructing the liquidation process.
5. Finality of the order dated 16.03.2021 by the Adjudicating Authority.
6. Timely completion of the insolvency and liquidation process.

Issue-wise Detailed Analysis:

1. Legality of the Ad-Interim Stay Granted by the Adjudicating Authority:
The Appellant challenged the orders dated 28.02.2022 and 22.03.2022, which granted and extended an ad-interim stay on the third e-auction of the Ratnagiri property. The Tribunal noted that the Respondent's actions in seeking the stay were improper and amounted to an abuse of judicial process, given the finality of the earlier order dated 16.03.2021, which had already addressed the issues raised by the Respondent.

2. Compliance with the Terms and Conditions of E-Auction:
The Tribunal observed that the Respondent, Pavan Enterprises, participated in the e-auctions based on the terms and conditions without any objections. The Respondent failed to deposit the balance sale consideration within the stipulated time in both the first and second rounds of e-auction, leading to the forfeiture of the Caution Money Deposit (CMD) by the Liquidator. The Tribunal found that the Liquidator's actions were in accordance with the Liquidation Process Regulations and the e-auction terms.

3. Extension of Time for Depositing the Balance Sale Consideration:
The Respondent sought multiple extensions for depositing the balance sale consideration, citing difficulties in obtaining bank financing. The Liquidator granted extensions as per the terms and conditions, but the Respondent still failed to make the required payments. The Tribunal held that the Liquidator was not obligated to grant further extensions beyond what was stipulated in the e-auction terms and the Liquidation Process Regulations.

4. Conduct of the Respondent in Obstructing the Liquidation Process:
The Tribunal criticized the Respondent's conduct, noting that it had caused delays and obstructed the liquidation process through multiple litigations and public notices warning prospective buyers. The Tribunal emphasized that the Respondent's actions were detrimental to the interests of the creditors and the timely completion of the liquidation process.

5. Finality of the Order Dated 16.03.2021 by the Adjudicating Authority:
The Tribunal highlighted that the order dated 16.03.2021, which allowed the Respondent to participate in the second round of e-auction and clarified that no further indulgence would be granted, had achieved finality. The Respondent did not appeal against this order, and therefore, it was binding. The Tribunal held that the Respondent was precluded from raising issues that were part of this order again.

6. Timely Completion of the Insolvency and Liquidation Process:
The Tribunal underscored the importance of completing the insolvency and liquidation process in a time-bound manner, as mandated by the Insolvency and Bankruptcy Code (IBC). The Tribunal referred to the Supreme Court's judgment in Kridhan Infrastructure Pvt. Ltd. vs. Venkatesan Sankarnarayan & Ors., which emphasized the need for timely resolution and liquidation processes. The Tribunal concluded that the Respondent's actions had caused undue delays and subverted the objectives of the IBC.

Conclusion:
The Tribunal set aside the impugned orders dated 28.02.2022 and 22.03.2022, allowing the Liquidator to proceed with the sale of the Ratnagiri property. The Respondent was fined Rs. One Lakh for abusing the process of law and causing delays in the liquidation process. Additionally, the Respondent was directed to pay Rs. One Lakh as litigation costs to the Liquidator. The Tribunal emphasized the need for timely completion of the liquidation process to protect the interests of the creditors.