2021 (5) TMI 273 - Tri - Insolvency and Bankruptcy

E-auction for the sale of assets of the Corporate Debtor as a going concern by the Liquidator - seeking permission to the Applicant to pay/adjust the Sale Consideration by way of investment into the equity shares of the Corporate Debtor - HELD THAT - The Liquidator can sell the assets of the Corporate Debtor during liquidation in any of the modes stated in Regulation 32 of Liquidation Process Regulations. The Applicant purchased the Corporate Debtor as a going concern with a view to run the business and that in order to run the Company as a going concern, the Purchaser/Applicant herein is entitled to have certain reliefs stated above. The Liquidator has filed his reply stating that the assets of the Corporate Debtor is ordered to be sold as on going concern as it will fetch more value. The Liquidator also stated that the bid amount is more than the liquidation value. Already Applicant has deposited ₹ 1,07,96,456/-. In order for the Applicant to kick start the business and follow the law laid down under the Companies Act, 2013, it is imperative for the Tribunal to grant necessary reliefs. Since the decision to sell the Corporate Debtor as a going concern is taken by the Liquidator in consultation with the creditors/stakeholders and the proceeds from the sale of assets are going to be utilized for distribution to the creditors in the manner specified under Section 53 of the Code, all the creditors of the Corporate Debtor get discharged and the assets are transferred free of any encumbrances. Permission is accorded to Applicant to pay/adjust the sale consideration of ₹ 109,964,559/- by way of investment into the equity shares of the Corporate Debtor and upon payment of consideration, the following shall be deemed to have occurred and become effective and operative in the sequence and order mentioned - Corporate Debtor shall allot 10,996,456 shares at a face value of ₹ 10/- each to the Applicant and its shareholders which shall constitute 100% of the equity of the Corporate Debtor and such allotment to be made in accordance with Applicable laws - Application disposed off.

Issues Involved:
1. Permission to pay/adjust sale consideration by way of investment into equity shares.
2. Extinguishment of existing shares and delisting of shares.
3. Exemptions from SEBI regulations.
4. Rights, title, and interest over Corporate Debtor.
5. Extinguishment of liabilities and claims.
6. Pending proceedings and non-compliance.
7. Continuation of licenses and approvals.
8. Right to review and terminate contracts.
9. Vesting of assets and intellectual property rights.
10. Recovery of amounts due to Corporate Debtor.
11. Past liabilities and accounting entries.
12. Completion of pending filings.
13. Benefits of brought forward losses.
14. Consideration of bid as a resolution plan under Income Tax Act.
15. Support and assistance from Liquidator.
16. Exemption from taxes and stamp duty.

Detailed Analysis:

1. Permission to Pay/Adjust Sale Consideration:
The Tribunal granted permission to the Applicant to pay/adjust the sale consideration of ?109,964,559 by way of investment into the equity shares of the Corporate Debtor. It was ordered that upon payment, the Corporate Debtor shall allot 10,996,456 shares at a face value of ?10 each to the Applicant and its shareholders, constituting 100% of the equity of the Corporate Debtor.

2. Extinguishment of Existing Shares and Delisting of Shares:
The Tribunal directed the cancellation of all existing shares held by the promoter group and public shareholders prior to the issuance of new shares. The shares of the Corporate Debtor were ordered to be delisted with immediate effect.

3. Exemptions from SEBI Regulations:
The Applicant/Corporate Debtor was exempted under various SEBI regulations, including Regulation 158(2) and Regulation 170 of SEBI (Issue of Capital & Disclosure Requirement) Regulations, 2018, and Regulation 3(2) and Regulation 3(3) of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 and SEBI (Delisting of Equity Shares) Regulations, 2009.

4. Rights, Title, and Interest Over Corporate Debtor:
The Applicant was granted all rights, title, and interest over the Corporate Debtor, including contracts free from security interest, encumbrance, claim, counterclaim, or any demur. The sale consideration, upon receipt, was to be distributed by the Liquidator as per Section 53 of the Code.

5. Extinguishment of Liabilities and Claims:
The Tribunal ruled that the Applicant shall not be responsible for any claims, liabilities, or obligations, including government dues, and that all liabilities of the Corporate Debtor as of the date of the order stand extinguished concerning the Applicant.

6. Pending Proceedings and Non-Compliance:
Any pending proceedings against the Corporate Debtor, except those against erstwhile promoters or former management members, were deemed not to affect the sold assets. Non-compliance with laws, rules, regulations, etc., by the Corporate Debtor was also extinguished concerning the Applicant.

7. Continuation of Licenses and Approvals:
The relief sought for the continuation of licenses, approvals, and entitlements was allowed, subject to the payment of renewal fees from the date of the order to the licensing authorities.

8. Right to Review and Terminate Contracts:
The Applicant/Corporate Debtor was granted the right to review and terminate any contract entered into prior to the date of the order.

9. Vesting of Assets and Intellectual Property Rights:
The assets specified in the e-auction memorandum were ordered to vest with the Applicant upon payment of the consideration. Intellectual Property Rights, including the brand name "KSK," were to remain with the Corporate Debtor, and existing promoters/guarantors were restrained from using or transferring such IPR.

10. Recovery of Amounts Due to Corporate Debtor:
The Applicant/Corporate Debtor was granted the right to recover amounts due from any third party, including related parties, without any set-off of liabilities extinguished.

11. Past Liabilities and Accounting Entries:
The Applicant was not to be held responsible for past liabilities of the Corporate Debtor. The Liquidator and Applicant were directed to ensure necessary accounting entries for smooth transmission and clearing the balance sheet.

12. Completion of Pending Filings:
The Liquidator was directed to complete pending filings with the Registrar of Companies, Income Tax Authorities, and any other government/statutory authorities.

13. Benefits of Brought Forward Losses:
The Corporate Debtor was entitled to the benefits of brought forward losses, subject to permission from the appropriate authority under the relevant provisions of the Income Tax Act, 1961.

14. Consideration of Bid as a Resolution Plan Under Income Tax Act:
The Applicant was advised to approach the concerned authority to consider the bid as a resolution plan under Section 79 of the Income Tax Act, 1961.

15. Support and Assistance from Liquidator:
The Liquidator was directed to provide all necessary support and assistance to the Applicant for the smooth functioning of the Corporate Debtor and completion of the acquisition.

16. Exemption from Taxes and Stamp Duty:
The Tribunal left it open to the Applicant to approach the concerned authorities for exemptions from taxes and stamp duty, noting that the Applicant had purchased the Corporate Debtor as a going concern during liquidation.

Conclusion:
The Tribunal granted several reliefs to the Applicant, facilitating the acquisition of the Corporate Debtor as a going concern, while ensuring compliance with relevant laws and regulations, and addressing the extinguishment of liabilities and claims against the Corporate Debtor.

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