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2022 (9) TMI 804 - AT - Insolvency and BankruptcyValidity of Auction held by the Liquidator, without proper Notice to Shareholders/Stakeholders of the Company - Sale was valid, when Payment from Auction Purchaser is not received within 90 days or not - grant of extension - act of Auctioneer to Sell the Property at Revised and Reduced upset price can be treated as valid or not - selling the entire Assets of the company when Sale of a part of the Assets of the Company would have been sufficient to discharge the liability of the company or not - conduct of Auction Proceedings without forming the Committee of Stakeholders, as envisaged under the I B Code, 2016 - review its own order by Adjudicating Authority. Whether the Auction held by the liquidator, without proper Notice to the Shareholders/Stakeholders of the Company is valid in accordance with the IBBI Rules and Regulations, 2016? - HELD THAT - The auction held without notice shall be invalid, as the language of the abovementioned Regulation seems to be a clear direction and mandatory - it is noted that the IBBI (Liquidation Process) Regulations, 2016 (Liquidation Regulations) as it stood before the amendment dated 25th July 2019, provided that the Liquidator shall Liquidate the Corporate Debtor (CD) within a period of two years from the Liquidation Commencement Date (LCD). Keeping in mind the principle of time value as enshrined in the BLRC report, the said time limit was reduced to one year vide amendment dated 25.07.2019. This Tribunal find that the required Notice was issued correctly by the Liquidator in accordance with the Rules, as provided in I B Code, 2016, and there was no infringement of rights of the Appellant. There are no error in the impugned order on this issue. Whether sale was valid when payment from the Auction Purchaser is not received within 90 days? - Can any extension be granted for the same? - HELD THAT - The extension was granted due to the Covid-19 lockdown. The order passed by the Adjudicating Authority stands valid on the grounds that almost all functioning were restricted during Covid-19 outbreak, vide Order dated 05.05.2020 - Moreover, the property was said to be in subsistence of attachment of Income Tax Department, and due to the same, the Registrar was not registering the property in the name of the Successful Bidder and subsequently the Adjudicating Authority directed the Income Tax Department to issue a NOC, and then the property was registered successfully in name of Successful Bidder - There are no error on the part of the liquidator. The Adjudicating Authority correctly gave the impugned order on this issue. Whether the act of Auctioneer to Sale the property at revised and reduced Upset Price can be treated as valid? - HELD THAT - Time value in any commercial transaction is of paramount importance. It is the onerous responsibility of the Liquidator to ensure maximum realisation of the property and therefore, it is expected that he shall take decisions in the sale of the property to Auction, based on the Commercial Wisdom as being done in case of Corporate Insolvency Resolution Process by the Committee of Creditor. In catena of Judgment of the Hon ble Supreme Court of India, it has been clearly held that the Adjudicating Authority or the Appellate Authority, need not to dwell upon the Commercial Wisdom of the Committee of Creditors. Although, there is no scope for the Liquidator to be treated at par with the Committee of Creditors, however we need to recognise the Commercial Wisdom of the Liquidator in conduct of an Auction to realise Maximum Value - the act of Liquidator stands to be valid as the process was conducted in accordance with the IBBI Rules and Regulations, especially as per Rule 4A and 4B, the Liquidator has power to reduce the Reserve Price by 25% for subsequent action. There is no error in the impugned order w.r.t. this aspect. Whether the Liquidator was justified in selling the entire assets of the company when sale of a part of the Assets of the company would have been sufficient to discharge the liability of the company? - HELD THAT - The liability was not even the 1/10th and could have been satisfied with only selling some particular part of the property and there was no need to sell the whole property. Whether the Liquidator was justified in conducting the Auction Proceedings without forming the Committee of Stakeholders, as envisaged under the I B Code, 2016? - HELD THAT - Retrospective effect is restricted and prohibited in Law, and are not enforceable in the rule of Law. This Tribunal, therefore do not find any error in the Impugned Order, on this ground. Whether the Adjudicating Authority can review its own order? - HELD THAT - The Applicant filed an Appeal to NCLT to review and revise their order regarding commencement of Liquidation Proceeding, here arises the principle of Res judicata the principle that a cause of action may not be pursued further once it has been judged on the merits. Finality is the term which refers to when a court renders a final judgment on the merits - the Adjudicating Authority was right in taking a decision that it has no power to Review/Recall its own order. This Tribunal, is of the considered opinion that no ground is made out for any interference by this Tribunal - Appeal dismissed.
Issues Involved:
1. Validity of Auction without proper Notice to Shareholders/Stakeholders. 2. Validity of Sale when Payment from Auction Purchaser is not received within 90 days and possibility of extension. 3. Validity of Sale at Revised and Reduced Upset Price. 4. Justification of selling entire assets of the company instead of part. 5. Justification of conducting Auction Proceedings without forming the Committee of Stakeholders. 6. Power of Adjudicating Authority to review its own order. Issue-wise Detailed Analysis: Issue No. (I): Validity of Auction without proper Notice to Shareholders/Stakeholders of the Company The Tribunal examined whether the auction held by the liquidator without proper notice to shareholders/stakeholders was valid. The relevant rules under the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016, were considered. The liquidator issued public notices through newspapers for the auctions held on 25.11.2019 and 23.12.2019. The Tribunal found that the liquidator followed the correct procedure and there was no infringement of the appellant's rights. Therefore, the auction was deemed valid. Issue No. (II): Validity of Sale when Payment from Auction Purchaser is not received within 90 days and possibility of extension The Tribunal referred to Regulation 33 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016, which mandates that the highest bidder must pay the balance sale consideration within 90 days. However, due to the COVID-19 pandemic and subsequent lockdowns, the Supreme Court of India extended the period of limitation in all proceedings. The Tribunal found that the extension granted by the Adjudicating Authority was valid, considering the extraordinary circumstances. The liquidator's actions were justified, and there was no error in the impugned order. Issue No. (III): Validity of Sale at Revised and Reduced Upset Price The Tribunal examined whether the liquidator's decision to sell the property at a revised and reduced upset price was valid. The liquidator engaged two registered valuers to determine the property's value, which was set at Rs. 39,41,28,500. The auction was conducted transparently, and the liquidator followed the rules under Regulation 33 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016. The Tribunal upheld the liquidator's decision, finding no error in the impugned order. Issue No. (IV): Justification of selling entire assets of the company instead of part The Tribunal considered whether the liquidator was justified in selling the entire assets of the company when selling a part could have sufficed to discharge the liability. The liquidator's discretion in deciding the mode of sale was supported by Regulation 32 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016. The Tribunal emphasized the liquidator's commercial wisdom and found that the decision to sell the entire property was justified. The impugned order was upheld. Issue No. (V): Justification of conducting Auction Proceedings without forming the Committee of Stakeholders The Tribunal addressed the appellant's contention that the liquidator did not form the Committee of Stakeholders as required by the Insolvency and Bankruptcy Code, 2016. The relevant amendment came into effect on 25.07.2019, after the liquidation process had commenced. The Tribunal noted that retrospective application of the amendment was not enforceable. Therefore, the liquidator's actions were in accordance with the law, and the impugned order was upheld. Issue No. (VI): Power of Adjudicating Authority to review its own order The Tribunal examined whether the Adjudicating Authority could review its own order. The principle of res judicata was considered, which prevents the same issue from being litigated once it has been judged on its merits. The Tribunal referred to Rule 154 and Rule 155 of the NCLT Rules, 2016, which allow for rectification of clerical or arithmetical mistakes but not for review or recall of orders. The Tribunal upheld the Adjudicating Authority's decision that it had no power to review or recall its own order. Conclusion: The Tribunal found no grounds for interference with the impugned orders passed by the Adjudicating Authority. The appeals were dismissed, and the connected interlocutory applications were closed.
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