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2024 (11) TMI 732 - AT - IBCQuashing of e-auction of 31.01.2024 - Seeking consideration of the Scheme submitted by the Appellant - Rejection of the application, thus preferred by the Appellant, whereby his prayer to declare the e-auction conducted on 31.01.2024 as null and void - confirmation of sale of the Corporate Debtor, as a going concern in favour of the Successful Bidder - rejection of prayer for consideration of the Scheme of Arrangements proposed by him under Section 230 of the Companies Act, 2013, without considering its merits - contravention of Section 230 (1) of the Companies Act, 2013 - HELD THAT - With enactment of IBC, the process of Insolvency Resolution has been fast tracked and therefore, the significance of Section 230(1) in addressing the issue of insolvency / sickness has diminished. The follow up process which has been provided under Sub Section (1) of Section 230, would only be necessary to be complied with when the process of Compromise or Arrangement, as envisaged under the Companies Act, 2013, becomes necessary and needs to be carried out. But, that would be only in a situation, when there is a failure on the part of the Liquidator in his attempt to sustain the functioning of the Corporate Debtor as a going concern, as sufficient provisions have been provided under the I B Code, 2016, and the IBBI (Liquidation Process) Regulations, 2016. Further, Regulation 2B under the Liquidation Regulations provides for Compromise / Arrangement within a limit of 90 days from the date of Order of Liquidation. The intent behind such provision is to give a chance for Compromise / Arrangement, before resorting to competitive bidding process for sale of the Corporate Debtor in the manner laid down in Regulation 32 of the said Regulations. In that light, it is only one more instrument in the hand of the Liquidator to keep the Company under Liquidation as a going concern. More important and relevant for the purposes of the instant case, would be the provisions contained under Regulation 32A, which provides for that, where the Committee of Creditors, has recommended the sale of the Corporate Debtor, under Clause (e) or (f) of the Regulation 32 or where the Liquidator is of the opinion that the sale of the Corporate Debtor under 32(e) or 32(f) will maximize the value of the Corporate Debtor, he shall endeavour to sell under such clauses - while taking action under Chapter 6 of Liquidation Process Regulations, dealing with realizations of assets of the Corporate Debtor, selling the Corporate Debtor as a going concern, will have to be the first priority for the Liquidator, in order to meet the objective of the I B Code, 2016, i.e. the Corporate Debtor is to be kept, as a going concern after resolution of the insolvency. As far as the objection raised by the learned counsel for the Appellant with regards to the non-compliance of Clause 12 of Schedule I of the IBBI (Liquidation Process) Regulations, 2016, during the bid process is concerned, it is seen that the same has been taken into consideration by the learned Adjudicating Authority, by recording that minor discrepancies which might have chanced in the process due to inadvertent omission, will not have a very vital bearing over the entire proceedings of e-auctioning, which was held particularly when the Corporate Debtor was being sold as a going concern, and such the inadvertent errors or omissions ought to be ignored when it does not defeat the very object of the provisions contained under the said Regulations 2016 - as it has been reflected by the learned counsel for the Respondent No. 1, that as a consequence of conclusion of the e-auction process, the Successful Bidder, is now in the helm of affairs of the Corporate Debtor and he is operating the Corporate Debtor as a going concern. Accordingly, no cause as such prevails for the purposes of the appellant in the instant appeals. Appeal lack merits and the same are accordingly dismissed.
Issues Involved:
1. Validity of the e-auction process and its declaration as null and void. 2. Consideration of the Scheme of Arrangement submitted by the Appellant under Section 230 of the Companies Act, 2013. 3. Confirmation of the sale of the Corporate Debtor as a going concern. 4. Compliance with the IBBI (Liquidation Process) Regulations, 2016, particularly Regulations 2B, 32(e), 32A, and Clause 12 of Schedule I. Issue-wise Detailed Analysis: 1. Validity of the e-auction process: The Appellant challenged the e-auction conducted on 31.01.2024, seeking its declaration as null and void. The Tribunal found that the e-auction process was conducted in accordance with the relevant regulations and that the Corporate Debtor was sold as a going concern. The Tribunal emphasized that minor discrepancies in the auction process, if any, did not have a substantial impact on the proceedings. The e-auction was deemed valid, and the sale was confirmed as it met the objectives of the I & B Code, 2016. 2. Consideration of the Scheme of Arrangement: The Appellant contended that his Scheme of Arrangement under Section 230 of the Companies Act, 2013, should have been considered before the sale of the Corporate Debtor. The Tribunal held that the Scheme was submitted beyond the 90-day period prescribed by Regulation 2B of the IBBI (Liquidation Process) Regulations, 2016. The Stakeholders Consultation Committee (SCC) had already deliberated and rejected the Scheme due to its lower value compared to the liquidation value and lack of clarity on the source of funds. The Tribunal concluded that the process under Section 230 did not have precedence over the sale of the Corporate Debtor as a going concern. 3. Confirmation of the sale of the Corporate Debtor: The Tribunal confirmed the sale of the Corporate Debtor as a going concern to the Successful Bidder, Mr. Virendra Jain and Mr. Ankit Jain, whose bid was higher than the reserve price. The Tribunal found no legal error in the confirmation of the sale, noting that it aligned with the objectives of the I & B Code, 2016, to maximize the value of the Corporate Debtor and maintain it as a going concern. 4. Compliance with IBBI (Liquidation Process) Regulations, 2016: The Appellant argued that the auction process did not comply with certain provisions of the IBBI Regulations. The Tribunal addressed these concerns, stating that minor procedural errors did not warrant setting aside the e-auction. The Tribunal referred to precedent, emphasizing that substantial compliance with the regulations was achieved and that the overarching goal of maintaining the Corporate Debtor as a going concern was fulfilled. Conclusion: The Tribunal dismissed both Company Appeals, stating that the Appellant's grievances lacked merit. The Tribunal upheld the validity of the e-auction process, the rejection of the Scheme of Arrangement, and the confirmation of the sale of the Corporate Debtor as a going concern. The decision reinforced the precedence of the I & B Code, 2016, over the older provisions of the Companies Act, 2013, in the context of insolvency resolution and liquidation processes.
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