2024 (9) TMI 1322 - AT - IBC

Applicability of clean slate principle only to liabilities prior to the insolvency commencement date or will extend to the date of actual sale of the Corporate Debtor as a going concern - refusal of Adjudicating Authority to grant necessary reliefs and concessions without even considering them and without assigning any reasons - whether the Appellant was entitled to grant of reliefs and concessions not on the date prior to insolvency commencement date, but ought to have been granted the reliefs and concessions till the date of actual sale of the Corporate Debtor as a going concern ? HELD THAT - The reliefs and concessions was granted to the Appellant with regard to declaration that Corporate Debtor shall not be liable on account of any transaction, dealing, or arrangement between it or any other person relating to the period prior to the date of CIRP. We do not find any illegality in the above relief granted to the Appellant prior to the date of CIRP. Insofar as claims of known or unknown, disclosed or undisclosed liabilities, the obligation is up to the cut-off date, i.e. date of commencement of liquidation. The e-auction Notice clearly mention that transactions prior to the cut-off date shall be dealt as per Section 53 of the IBC. Thus, all claims known or unknown on the date of liquidation commencement date has to be dealt as per Section 53. The prayer of the Appellant in this Appeal is to grant reliefs and concessions for all claims and liabilities up to the date of sale by e-auction i.e. 30.03.2023. When the eauction Notice itself does not contemplate grant of any relief from claims and liabilities up to the date of e-auction sale, the Appellant cannot be granted reliefs and concessions, which is not contemplated by e-auction Notice itself. Regulations 12 and 16 contemplate filing of a claim as on the liquidation commencement date. There can be no question of extinguishment of claim up to the date of sale of e-auction of the Corporate Debtor as going concern . When claim itself are as on the liquidation commencement date in the liquidation process, the argument that extinguishment of claims and liabilities should be granted till the date of sale by e-auction is not in accord with the statutory scheme as delineated by IBBI (Liquidation Process) Regulations, 2016 - the prayer of the Appellant that it should have been granted reliefs and concessions up to the date of e-auction sale, cannot be accepted and has rightly not been granted by the Adjudicating Authority. The relief claimed by the Appellant to grant extinguishment of all claims and liabilities up to the date of e-auction, i.e. 30.03.2023, cannot be accepted and Adjudicating Authority by the impugned order has granted reliefs and concessions to which the Appellant was entitled and the reliefs and concessions not granted were in accordance with law and statutory scheme of the liquidation process - there are no error in the order impugned, warranting interference in this Appeal - appeal dismissed.

Summary

Issues Involved:
1. Applicability of the "clean slate" principle.
2. Granting of reliefs and concessions by the Adjudicating Authority.

Detailed Analysis:

1. Applicability of the "clean slate" principle:
The primary issue in this appeal was whether the "clean slate" principle extends only to liabilities prior to the insolvency commencement date or extends to the date of actual sale of the Corporate Debtor as a "going concern." The Appellant argued that all liabilities up to the date of the issuance of the Sale Certificate should be extinguished based on the "clean slate" theory. However, the Respondent contended that the "clean slate" theory applies to a Resolution Plan and not to e-auctions in liquidation proceedings, which are conducted on an "as is where is & as is what is" basis.

The Tribunal noted that the e-auction was conducted under specific terms and conditions, which clearly stated that all known or unknown liabilities as on the liquidation commencement date would be dealt with as per Section 53 of the Insolvency and Bankruptcy Code (IBC). The Tribunal found no illegality in granting relief only for the period prior to the date of CIRP and upheld that all claims known or unknown on the liquidation commencement date must be dealt with per Section 53 of the IBC. Therefore, the Tribunal concluded that the reliefs and concessions sought by the Appellant for liabilities up to the date of the e-auction sale could not be granted as it was contrary to the terms under which the e-auction was held.

2. Granting of reliefs and concessions by the Adjudicating Authority:
The Appellant contended that the Adjudicating Authority erred in not granting all the reliefs and concessions sought in IA No.610 of 2024. Specifically, the Appellant referred to Item Nos. 6, 8, and 9 of paragraph 13 of the impugned order.

- Item No. 6: The Appellant sought a declaration that the Corporate Debtor would not be liable for any transaction or arrangement prior to the date of relief being granted. The Tribunal upheld the Adjudicating Authority's decision to grant this relief only for the period prior to the date of CIRP, noting that the e-auction terms did not contemplate relief for liabilities up to the date of the sale.

- Item Nos. 8 and 9: The Appellant sought waivers for any water and electricity dues of the Corporate Debtor. The Tribunal agreed with the Adjudicating Authority's direction for the Appellant to approach the appropriate authorities, as waiver of such liabilities could not be granted by the Adjudicating Authority and had to be dealt with according to the respective departments.

The Tribunal also addressed the Appellant's concern regarding paragraph 14 of the Adjudicating Authority's order, which stated that any relief and concession not mentioned in the table would be deemed not granted. The Tribunal found this to be a clarificatory statement, ensuring that the Appellant could seek relevant reliefs and concessions from appropriate authorities as per applicable laws.

Conclusion:
The Tribunal dismissed the appeal, affirming that the Adjudicating Authority had granted the reliefs and concessions to which the Appellant was entitled under the law and the statutory scheme of the liquidation process. The Tribunal found no error in the Adjudicating Authority's order that warranted interference.