2023 (7) TMI 266 - AT - Insolvency and Bankruptcy

Difficulty faced by the Successful Auction Purchaser of Corporate Debtor as Going Concern - Scope of E-Auction documents, conditions and agreements - Discharge of past statutory dues and liabilities including tax dues - Liquidation of Corporate Debtor - HELD THAT - When the process document clearly contemplated such consequences the said consequences shall ensue on sale as going concern and if any roadblocks come into ways of successful resolution applicant, necessary directions, clarifications can very well be issued by the Adjudicating Authority on an Application filed under Section 60(5)(c) of the Code - Further the process document clearly contemplated that transfer of ownership of the corporate debtor shall take place by way of writing off entire existing shareholding of the corporate debtor and issuance of fresh equity shares to the successful bidder. The share shall be included in the name of Successful Bidder and will not be issued in any other name. In view of the subsequent facts and notices brought on record by the Appellant and other terms and conditions of the process document as extracted, the ends of justice will be served in granting liberty to file an Application before the Adjudicating Authority claiming reliefs/concessions/directions which may be necessary for operationalisation of the Corporate Debtor as per terms and conditions of the process document. While granting such liberty to the Appellant it is observed that law is well settled, a successful bidder who is declared as successful bidder of sale as going concern can seek access of the Adjudicating Authority and may pray for necessary directions in accord with and in consonance with the process document in the liquidation proceedings. In result, appeal partly allowed and it is held that applicant s prayers i.e. relief/concessions/directions needs consideration by the Adjudicating Authority for which liberty granted to the Applicant to make a fresh Application containing prayers which may be commensurate and in accord with terms and conditions of the process document of e-auction process document. Appeal disposed off.

Summary

Issues Involved:
1. Challenge to the Order dated 02.12.2022 by the Adjudicating Authority.
2. Entitlement of the Successful Bidder to seek reliefs, concessions, and directions necessary for operationalizing the Corporate Debtor as a going concern.
3. Applicability of the clean slate theory in the sale of a corporate debtor as a going concern under Regulation 32A of the Liquidation Regulations, 2016.

Summary of Judgment:

1. Challenge to the Order dated 02.12.2022 by the Adjudicating Authority:
The Successful Bidder filed an appeal against the order dated 02.12.2022 by the National Company Law Tribunal, New Delhi, which disposed of I.A. No. 3207 of 2022. The Adjudicating Authority directed the ROC to change the status of the corporate debtor from under liquidation but did not grant other reliefs and concessions sought by the appellant.

2. Entitlement of the Successful Bidder to Seek Reliefs, Concessions, and Directions:
The appellant, selected as the highest bidder in the e-auction, submitted a bid of INR 91 Crores and received a Sale Certificate dated 22nd June 2022. The appellant sought directions for fulfilling and actualizing the sale of the corporate debtor as a going concern. The Adjudicating Authority observed that the successful auction purchaser is entitled to seek appropriate relief from the respective departments in accordance with the law. The appellant argued that the reliefs were necessary to affect the takeover on a clean slate basis and that statutory authorities were not accepting settlement of claims under Section 53 of the Insolvency and Bankruptcy Code, 2016, without judicial order.

3. Applicability of Clean Slate Theory:
The Liquidator supported the appellant's claims but noted that some reliefs were not permissible under the Code. The Liquidator questioned whether the clean slate theory, applicable in the approval of a Resolution Plan, also applies to the sale of a corporate debtor as a going concern under Regulation 32A. The Tribunal noted that the e-auction process document clearly stipulated that all liabilities as of the cut-off date would be settled under Section 53 of the Code. The Tribunal emphasized that necessary directions and clarifications could be issued by the Adjudicating Authority under Section 60(5)(c) of the Code to resolve any roadblocks in the successful resolution of the corporate debtor.

Conclusion:
The Tribunal granted the appellant liberty to file a fresh application before the Adjudicating Authority for reliefs, concessions, and directions necessary for operationalizing the Corporate Debtor in accordance with the terms and conditions of the process document. The appeal was partly allowed, and the appellant was directed to submit a fresh application with specific prayers commensurate with the e-auction process document.