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2022 (10) TMI 933 - AT - Insolvency and BankruptcySeeking Liquidation of Corporate Debtor - section 33 of IBC - HELD THAT - From the facts and sequence of events, it is clear that Liquidator conducted seven E-Auction for sale of the Corporate Debtor. Last Attempt being made on 26th February, 2021. Liquidator unable to obtain any bid in the e-Auction, decided to conduct private sale as permissible under the Liquidation Regulation 33 read with Schedule I. There can be no quarrel to the submissions that if there is conflict between the auction process document and the Code or the Liquidation Process Regulations, the provision of the Code and Liquidation Regulations shall prevail. Whether the requirement contained in the process document as well as Letter of Intent are in conflict with the provisions of the Code or Liquidation Regulations? - HELD THAT - The Process Information Document having been issued by the Liquidator which reflects the requirement of approval of the sale by the NCLT which is part of the sale, there is no occasion to question the requirement in the Process Information Document. Even if under Regulation 33 (2) proviso, no prior permission is required for sale in question, there was no prohibition from including such terms of the sale. The reason for containing such terms for sale is not far to seek. Looking to the enormous value of the assets of the corporate debtor and further that e- Auction did not succeed, in event the Liquidator has put a condition for requiring approval of the sale from NCLT, no exception can be taken to the terms of the sale. It is such condition which ensures the transparency and protects the liquidator as well. It is true that if any e-Auction Process a person does not participate, he has no right to make any offer and his Application subsequently to make higher offer has to be rejected but present being case of a private sale and the terms and conditions stipulated approval of the NCLT, the Adjudicating Authority did not commit any error in taking note of the offer made by the Respondent No. 1 who made an offer of initial Rs. 190 Crores and revised offer was Rs. 201 Crores i.e. much higher than the one on which Appellant was declared successful bidder - Present is a case where the Adjudicating Authority has proceeded to pass order relying on the terms of the sale as well as to obtain the object of maximization of the assets of the Corporate Debtor. The exercise of jurisdiction by the Adjudicating Authority in the Impugned Order can not be said to be reliance on any equity jurisdiction. The Adjudicating Authority did not commit any error in passing the Impugned Order. The Impugned Order gives an opportunity to both Appellants and Respondent-Jindal Stainless Limited and other two bidders to participate and Adjudicating Authority has also put condition to deposit Rs. 50 Crores by the Jindal Stainless Limited to ensure the bona fide as a pre deposit of the Jindal Stainless Limited, there are no good ground found to interfere with the Impugned Order in exercise of our Appellate Jurisdiction. Appeal dismissed.
Issues Involved:
1. Validity of the private sale conducted by the Liquidator without prior approval of the Adjudicating Authority. 2. Rights of the highest bidder in the limited e-Auction process. 3. Consideration of a higher bid submitted after the limited e-Auction process. 4. Requirement of NCLT approval for the sale of the Corporate Debtor as a going concern. Detailed Analysis: 1. Validity of the Private Sale Conducted by the Liquidator Without Prior Approval of the Adjudicating Authority: The Liquidator conducted several e-Auctions for the sale of the Corporate Debtor, all of which failed. Subsequently, a private sale process was initiated. The Liquidator issued a Limited e-Auction Process Information Document for a private sale among three bidders, including the Appellant. The Appellant emerged as the highest bidder with a bid of Rs. 177.50 Crores. The Appellant argued that under Regulation 33 sub-regulation 2 proviso, prior approval of the Adjudicating Authority was not required for the private sale as none of the contingencies (related party, his related party, or any professional appointed by the Liquidator) were applicable. The Tribunal noted that the Process Information Document and the Letter of Intent (LOI) issued to the Appellant contained specific conditions requiring approval from the NCLT. The terms of the sale, as per Schedule I, Clause 2 of the Liquidation Regulations, stated that the sale shall stand completed in accordance with the terms of sale, which included NCLT approval. Thus, the Tribunal concluded that there was no conflict between the statutory regulations and the terms of the sale requiring NCLT approval. 2. Rights of the Highest Bidder in the Limited e-Auction Process: The Appellant argued that upon being declared the highest bidder, a vested right accrued in their favor, which could not be taken away by the Adjudicating Authority. The Tribunal referenced the Process Information Document, which stated that the issuance of the Auction Document does not imply that the Liquidator is bound to select a Successful Bidder and that all terms and conditions are subject to the directions of the NCLT. The Tribunal also noted that the sale certificate would only be issued upon full payment and NCLT approval. The Tribunal cited the case of "PNB Sastra Division" where it was held that a successful bidder does not acquire any vested right to enforce the auction until the full payment is made and the sale certificate is issued. Therefore, the Appellant did not acquire any enforceable right merely by being declared the highest bidder. 3. Consideration of a Higher Bid Submitted After the Limited e-Auction Process: Jindal Stainless Limited submitted a higher bid of Rs. 190 Crores after the limited e-Auction process, which was later revised to Rs. 201 Crores. The Appellant contended that this belated offer should not have been entertained. However, the Tribunal noted that since the sale required NCLT approval, the Adjudicating Authority was within its rights to consider the higher bid to achieve the objective of asset maximization under the IBC. The Tribunal emphasized that the Adjudicating Authority's decision to direct a fresh auction between the Appellant, Jindal Stainless Limited, and the other two bidders was in line with the objective of maximizing the value of the Corporate Debtor's assets. The Tribunal also noted that the Adjudicating Authority's order protected the Appellant's interests by allowing them to participate in the fresh auction and confirming the sale in their favor if Jindal Stainless Limited failed to fulfill the pre-deposit condition. 4. Requirement of NCLT Approval for the Sale of the Corporate Debtor as a Going Concern: The Tribunal examined the statutory provisions and the terms of the sale, which required NCLT approval. The Appellant argued that no prior approval was required under Regulation 33(2) for the private sale. However, the Tribunal found that the terms of the sale, as stipulated in the Process Information Document and the LOI, explicitly required NCLT approval. This requirement was consistent with the statutory framework and did not conflict with the IBC or Liquidation Regulations. The Tribunal concluded that the Adjudicating Authority did not err in requiring NCLT approval for the sale and considering the higher bid submitted by Jindal Stainless Limited. The Tribunal dismissed the appeal, affirming the Adjudicating Authority's order to conduct a fresh auction and protect the interests of all stakeholders. Conclusion: The Tribunal upheld the Adjudicating Authority's decision to require NCLT approval for the private sale and consider the higher bid submitted by Jindal Stainless Limited. The Tribunal emphasized the importance of maximizing the value of the Corporate Debtor's assets and ensuring transparency in the liquidation process. The appeal was dismissed, and the order to conduct a fresh auction was affirmed.
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