2023 (2) TMI 103 - AT - Insolvency and Bankruptcy

Approval of acquisition plan submitted by the Respondent Nos. 5 to 8 - rejection of appointment of Independent Forensic Auditor - HELD THAT - Liquidator did not commit any error in making an application to the Adjudicating Authority for approval of the sale and after approval of the sale, inviting the Successful Bidder to deposit the balance bid amount. The sale was approved by the Adjudicating Authority on 11th May, 2022 and within 10 days, Successful Bidder had deposited the entire balance amount. Thus, there is no breach of any provision of Liquidation Regulations, 2016 especially cause 12 of Schedule I. The Successful Bidder has been sold the Corporate Debtor for Rs. 49.95 Crores that is much above the reserve price. Liquidator is entitled to fix the auction price as per the liquidation valuation and the provisions of Liquidation Regulations, 2016. It is not the case of any of the parties that fixing the reserve price on Rs. 51 Crores in the First Auction, there was any challenge to the reserve price. The submission of Learned Counsel for the Appellant that reserve price is less, cannot be accepted. Learned Counsel for the Appellant has also contended that there being higher offer before the Liquidator that is offer made by Gurpreet Singh Vohra of minimum Rs. 62 Crore, same ought to have been accepted and considered by the Liquidator. It is to be noted that offer made by Mr. Vohra was subsequent to auction held for sale of the corporate debtor as a going concern - Submission of Learned Counsel for the Liquidator is that letter written on behalf of Gurpreet Singh Vohra is nothing but letter at the instance of the Appellant which is another attempt to create hurdles in sale of corporate debtor as a going concern. Mr. Gaurav Mitra, Learned Counsel appearing sought to intervene and contend that Mr. Vohra is still ready to offer higher amount. Such request of Mr. Vohra cannot be entertained at this stage. Adjudicating Authority did not commit any error in passing the Order dated 11th May, 2022 approving the Auction of Corporate Debtor as a going concern in favour of Respondent Nos. 5 to 8. The Adjudicating Authority also did not commit any error in rejecting the Application filed by the Appellant praying for appointment of Independent Forensic Auditor for conducting a forensic audit. The said application has rightly been rejected by the Adjudicating Authority. Appeal dismissed.

Issues Involved:
1. Approval of the acquisition plan submitted by Respondent Nos. 5 to 8.
2. Rejection of the application for the appointment of an Independent Forensic Auditor.
3. Compliance with the provisions of the Insolvency and Bankruptcy Code (IBC) and Liquidation Regulations.
4. Validity of the auction sale process and reserve price determination.
5. Consideration of higher offers post-auction.
6. Rights and locus standi of the Appellant (Suspended Director) in the proceedings.

Issue-wise Analysis:

1. Approval of the Acquisition Plan:
The appeal challenged the order dated 11th May 2022, by which the National Company Law Tribunal (NCLT) approved the acquisition plan submitted by Respondent Nos. 5 to 8. The Liquidator had issued a process document detailing the terms and conditions for the bid, including the requirement of adjudicating authority approval. The document was in compliance with the Liquidation Regulations, which empowered the Liquidator to seek such approval. The appellate tribunal upheld the Liquidator's actions, noting that the successful bidder deposited the entire amount within the stipulated time after the NCLT's approval.

2. Rejection of the Application for Independent Forensic Auditor:
The appellant's application for the appointment of an Independent Forensic Auditor was rejected. The application sought to analyze the reduction in the value of the corporate debtor's assets. The tribunal found no merit in this request, stating that valuation had already been done, and the auction process had been completed. There was no occasion for directing any appointment of a forensic auditor at this stage.

3. Compliance with IBC and Liquidation Regulations:
The appellant argued that the successful bidder did not deposit the bid amount within 90 days from the date they were declared the highest bidder, which should invalidate the auction sale. However, the tribunal noted that the process document required the Liquidator to obtain approval from the adjudicating authority before the bidder was obligated to deposit the balance amount. The successful bidder complied with this requirement by depositing the amount within 10 days of the NCLT's approval, thus adhering to the Liquidation Regulations.

4. Validity of the Auction Sale Process and Reserve Price Determination:
The appellant contended that the reserve price was undervalued, especially after the inclusion of intellectual property rights (trademark "Su-Kam"). The tribunal found that the reserve price was reduced from Rs. 51 Crores to Rs. 40 Crores in accordance with the provisions of Schedule I of the Liquidation Regulations after the first auction failed. The successful bid of Rs. 49.95 Crores was above the reserve price, and the tribunal saw no reason to question the Liquidator's valuation.

5. Consideration of Higher Offers Post-Auction:
The appellant highlighted a higher offer of Rs. 62 Crores made by Mr. Gurpreet Singh Vohra after the auction. The tribunal dismissed this argument, noting that the offer was made post-auction and appeared to be another attempt by the appellant to create hurdles in the sale process. The tribunal refused to entertain any new offers at this stage.

6. Rights and Locus Standi of the Appellant:
The appellant, a suspended director, claimed the right to challenge the auction sale approval, arguing that ex-management has a role in maximizing asset value. The tribunal rejected this claim, stating that the appellant had been declared ineligible to submit any resolution plan or scheme of compromise/arrangement by the NCLT, a decision upheld by the Supreme Court. Therefore, the appellant had no locus standi to challenge the auction sale approval.

Conclusion:
The appellate tribunal found no merit in the appeal and dismissed it, upholding the NCLT's order dated 11th May 2022, which approved the acquisition plan submitted by Respondent Nos. 5 to 8 and rejected the application for the appointment of an Independent Forensic Auditor. The tribunal confirmed that all procedures were followed in compliance with the IBC and Liquidation Regulations, and no grounds were found to interfere with the impugned order.

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