2023 (11) TMI 907 - AT - Insolvency and Bankruptcy

Prayer for certain reliefs and concession consequent to going concern sale in the liquidation proceeding of Corporate Debtor - prayer to stay the e- Auction process/ sale process of the Corporate Debtor till fresh bids are invited for re-auction - direction to liquidator for maintenance of status quo - waterfall mechanism - HELD THAT - Appellant, who was stakeholder of only 0.734% in the total value of stakeholders of the Corporate Debtor, was part of the Committee of Creditors and participated in the liquidation process by filing its claim, which was accepted. The Appellant has been distributed the proceeds of the liquidation as per the entitlement under Section 53 of the IBC. At no point of time, prior to holding of auction, i.e., 04.04.2022, any kind of objection was raised by the Appellant to the reserve price or against valuation obtained in the liquidation process by the Liquidator. It was only after the auction was over and Successful Bidder was declared, for the first-time letter dated 26.05.2022 was written to the Liquidator by the Appellant calling for relevant information. It is clear that all that Appellant wanted was to stay the process of auction and sale of the Corporate Debtor. Auction having already completed on 04.04.2022, there was no occasion to stay the auction. Further process of Sale was to be undertaken as per the Liquidation Regulations. when the Successful Resolution Applicant has deposited the entire amount, issuance of Sale Certificate was as per the Liquidation Regulations, in which no objection can be raised by the Appellant. There are no merit in any of the substance raised by learned Counsel for the Appellant in this Appeal to question the impugned order dated 11.11.2022. It is further relevant to notice that order dated 11.11.2022 is an order granting reliefs and concessions to Successful Auction Purchaser, when the sale of the Corporate Debtor is as going concern, the Successful Auction Purchaser is entitled to receive certain reliefs and concessions to run the Corporate Debtor as going concern. Appeal dismissed.

Summary

Issues Involved:

1. Validity of the auction process and reserve price determination.
2. Alleged collusion and misconduct by the Liquidator.
3. Reliefs and concessions granted to the Successful Auction Purchaser.
4. Participation and objections of the Appellant.

1. Validity of the auction process and reserve price determination:

The Appellant contended that the reserve price of Rs.548.46 crores set for the e-auction held on 04.04.2022 was significantly lower than the actual value of the Corporate Debtor, Sterling Biotech Limited, as per a Valuation Report obtained by Andhra Bank. The Appellant argued that the Corporate Debtor was sold at a throwaway price, which was not in line with the objective of the Insolvency and Bankruptcy Code (IBC) to maximize the value of the Corporate Debtor. The Liquidator, however, provided detailed responses, explaining that the reserve price was fixed based on valuations obtained in accordance with the IBBI (Liquidation Process) Regulations, 2016. The Tribunal found that the reserve price was set as per the Valuation Reports received by the Liquidator during the liquidation process and that no objections were raised by other stakeholders, including major public sector banks.

2. Alleged collusion and misconduct by the Liquidator:

The Appellant alleged that the Liquidator had connived with the Successful Auction Purchaser, Perfect Day INC, and had not conducted the liquidation process in accordance with the Liquidation Regulations. The Liquidator refuted these allegations, detailing the transparent and regulated process followed, including the extensive marketing and publication efforts to invite bids. The Tribunal noted that the Appellant, holding only 0.734% share in the pool of Secured Financial Creditors, raised objections without any substantial evidence. The Tribunal found no basis for the allegations of collusion or misconduct against the Liquidator.

3. Reliefs and concessions granted to the Successful Auction Purchaser:

The Appellant argued that the reliefs and concessions granted to the Successful Auction Purchaser were in deviation from the Process Document and that such opportunities should have been disclosed to all bidders. The Tribunal observed that the reliefs and concessions were essential for transferring the Corporate Debtor as a going concern and were granted to enable the Successful Auction Purchaser to run the Corporate Debtor on a clean slate basis. The Tribunal found that the non-mention of potential reliefs and concessions in the Process Document was inconsequential.

4. Participation and objections of the Appellant:

The Appellant, a stakeholder in the Corporate Debtor, participated in the liquidation process and filed its claim, which was accepted. The Appellant raised objections only after the auction was completed and the Successful Bidder was declared. The Tribunal noted that the Appellant did not raise any objections to the reserve price or the auction process before the auction date. The Tribunal also highlighted that the Appellant's application (IA No.3138 of 2022) seeking to stay the auction process was filed much later and was dismissed by the Adjudicating Authority as misconceived and devoid of merits. The Tribunal concluded that the Appellant's objections were unsustainable and dismissed the appeal.

Conclusion:

The Tribunal dismissed the appeal, finding no merit in the Appellant's submissions regarding the reserve price, allegations against the Liquidator, and the reliefs and concessions granted to the Successful Auction Purchaser. The Tribunal upheld the auction process and the Liquidator's actions as compliant with the relevant regulations and transparent.