2023 (3) TMI 804 - AT - Insolvency and Bankruptcy

Sale of the Corporate Debtor, as a Going Concern, by means of a Private Sale - Seeking to consider the Proposal of the Petitioner / Appellant, for Swiss Challenge Method - wanton omission, breach and collusion, in between the Parties, in Compliance of the Order - it is the stand of the Petitioner / Appellant that the Offer of the Petitioner / Appellant, is more than the value offered by the 2nd Respondent, before the 1st Respondent, and that the Appellant s Proposal dated 08.11.2021, to purchase the Corporate Debtor / Company, as a Going Concern, is much beneficial to the Stakeholders Committee and Economy, at large. HELD THAT - It must be borne in mind that the Proposals of one M/s. Galaxy Freight Systems and the Proposal of the 2nd Respondent / G C Logistics India Private Ltd., was placed before the Stakeholders Consultation Committee, and MA No.122 of 2021, was filed by the 1st Respondent / Liquidator, for a Swiss Challenge Auction, to be held, which was allowed, by the Adjudicating Authority, through its Order, passed on 11.03.2022. In the Swiss Challenge Auction, which took place on 06.04.2022, in which, the 2nd Respondent, was named as a Successful Bidder, and it satisfied the payment of Rs.44,64,00,000/-. Further, the purchase of the Corporate Debtor, as a Going Concern, by the 2nd Respondent, was allowed, by the Adjudicating Authority, through its Order, passed in IA(IBC)/1018/CHE/2022 in main CP/759/IB/CB/2018. In so far as the present case is concerned, it is brought to the fore that the New Management of the Corporate Debtor, had issued two communications dated 02.02.2023, whereby and whereunder, the 2nd Respondent had announced a Welcome Bonus, to all the employees of the Corporate Debtor. Also that, the Sale Proceeds, received in Full, from the 2nd Respondent, was distributed to the Stakeholders, as per the ingredients of Section 53 of the Code - Not resting with the above, this Tribunal, keeping in mind of a primordial fact that the Petitioner / Appellant, is not a Stakeholder, in the Liquidation Process of the Corporate Debtor, and in any event, has no substantial interest in the Corporate Debtor, comes to a cocksure conclusion that the Petitioner / Appellant, has no vested interest in the Corporate Debtor, and in view of the fact that the entire Management, was handed over to the 2nd Respondent and the entire Sale Proceeds, were distributed to the Stakeholders, the Leave sought for by the Petitioner / Appellant, to prefer the instant Comp. App (AT) (CH) (INS.) No. 33 of 2023, before this Tribunal, is not acceded to. Appeal dismissed.

Summary

Issues Involved:
1. Validity of the Petitioner/Appellant's Proposal and Allegations of Collusion.
2. Locus Standi of the Petitioner/Appellant.
3. Compliance with Swiss Challenge Method and Liquidation Process.

Summary:

1. Validity of the Petitioner/Appellant's Proposal and Allegations of Collusion:
The Petitioner/Appellant submitted a proposal on 08.11.2021 to purchase the Corporate Debtor as a Going Concern for Rs. 80 Crores. The Adjudicating Authority directed the Liquidator to consider this proposal through the Swiss Challenge Method. The Petitioner/Appellant alleged wanton omission, breach, and collusion among the parties in compliance with the order dated 11.03.2022. The Petitioner/Appellant claimed that their offer was more beneficial to the stakeholders and the economy than the 2nd Respondent's offer. However, the Tribunal noted that the Petitioner/Appellant did not attend the meeting on 06.04.2022 to present their bid and made no offer.

2. Locus Standi of the Petitioner/Appellant:
The 1st Respondent/Liquidator argued that the Petitioner/Appellant had no locus standi as they were not a stakeholder in the liquidation process and had not pursued their proposal actively. The Tribunal agreed, noting that the Petitioner/Appellant was not a party to the original proceedings and had not taken steps to object to the sale of the Corporate Debtor. The Tribunal concluded that the Petitioner/Appellant had no vested interest in the Corporate Debtor.

3. Compliance with Swiss Challenge Method and Liquidation Process:
The Tribunal observed that the Swiss Challenge Method was conducted transparently, with the 2nd Respondent being the successful bidder, paying the full consideration of Rs. 44,64,00,000/-. The sale as a Going Concern was allowed, and the sale proceeds were distributed to the stakeholders as per Section 53 of the I & B Code, 2016. The Tribunal referenced the Supreme Court's decision in Ravi Development v. Shree Krishna Prathisthan & Ors., which upheld the Swiss Challenge Method's transparency and fairness.

Result:
The Tribunal dismissed IA No. 124 of 2023, stating that the Petitioner/Appellant had no substantial interest in the Corporate Debtor and the sale proceeds had already been distributed. Consequently, the main appeal, Comp. App (AT) (CH) (INS.) No. 33 of 2023, was also rejected, and the connected pending IAs were closed.