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2022 (3) TMI 93 - Tri - Insolvency and BankruptcyLiquidation Process - Validity of e-auction proceedings - Whether the sale of the Corporate Debtor as a going concern held on 11.02.2021, is contrary to 32A of IBBI (Liquidation Process) Regulations? If so, whether the impugned sale is liable to be set aside? - HELD THAT - Admittedly, the order of liquidation of corporate debtor in this case has been passed on 04.02.2019. It is pertinent to note that by the date of commencement of liquidation in the case on hand, no time limit was set under IBBI Regulation No 32 for sale of the CD as going concern. The amended Regulation 32A, which has come in to force subsequent to passing of liquidation order in this case i.e., on 27/7/2019, states that, If the liquidator is unable to sell the corporate debtor or its business under clause (e) or (D of regulation 32 within ninety days from the liquidation commencement date, he shall proceed to sell the assets of the corporate debtor under clauses (a) to (d) of Regulation 32 . It is manifestly clear, that the Stakeholders Consultation Committee unanimously and consciously, decided to sell the corporate debtor company as a whole as a going concern, despite being sensitized of the 90 days' time line for sale of the corporate debtor or the business of the corporate debtor as going concern, set under sub clause 4 of IBBI Regulation 32A, by the Liquidator as the minutes of the above meeting clearly disclose that the Liquidator informed the stakeholders about the timeline of 90 days which commences the date of commencement of liquidation, to sell the Corporate Debtor as a going concern - In this undeniable factual backdrop, having carefully examined the contentions of the Petitioner, mostly based on the ruling in re, Sundaresh Bhat, 2021 (9) TMI 927 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI , that, the IBBI Regulation 32A, since held to be an open ended provision relating to procedural besides that the Power of IBBI, under Section 196(1) (p) or (t) to issue guidelines cannot be expanded to interpret the provisions made, the circular dated 26th August, 2019, supra, issued by IBBI, is un sustainable under law consequently, the sale in the instant case since held beyond 90 days from the date of liquidation commencement date is violative of the newly inserted Regulation 32A, as such, on this score alone, the sale is liable to be set aside. Reserve price - HELD THAT - The record placed before us viz. minutes of the Stakeholders Consultation Committee meetings clearly disclose that the Liquidator discussed fixation of reserve price in every meeting and the members of the committee, which admittedly includes the Petitioner herein, have unanimously agreed for the reduced reserve price proposed by the Liquidator. According to the Liquidator, despite the Regulation allowing 25% reduction, the average of the reduced reserve price from time to time was only 8% - in the case on hand, 15 times, the auction has failed and therefore, it became inevitable for the SCC to accept reduction in the reserve price, lest the sale can never happen and further delay result in deterioration of the asset value. On perusal of records it is found that the reduction was around 8%, though the Regulations provide for reduction up to 25%. That apart, the Applicant herein, is part of the committee that agreed unanimously for the reduction in the reserve price from time to time, and allowed the sale notices to be published. There are no reason at all in entertaining the plea of the Petitioner that too, when the sale ultimately fructified pursuant to the 16th sale notice, that the reserve price as fixed was low - also nowhere the petitioner has pleaded as to how cancellation of this sale and a going for a fresh sale of the corporate debtor other than as a going concern, will benefit the Petitioner or the corporate debtor, when the subject sale itself, did not even receive bids until the 16th sale notice. The pleas raised in the application are neither tenable nor substantiated and the same are devoid of any merit or substance. Hence, the application deserves to be dismissed.
Issues Involved:
1. Conformity of the e-auction proceedings with the Insolvency & Bankruptcy Code, 2016 and IBBI (Liquidation Process) Regulations, 2016. 2. Reduction in reserve price during e-auctions. 3. Alleged collusion and discrepancies in the e-auction process by the Liquidator. 4. Legality of the sale of the Corporate Debtor as a going concern beyond the 90-day period stipulated by Regulation 32A. 5. Applicability of the IBBI circular dated 26.08.2019 to ongoing liquidation processes. Issue-wise Detailed Analysis: 1. Conformity of the e-auction proceedings with the Insolvency & Bankruptcy Code, 2016 and IBBI (Liquidation Process) Regulations, 2016: The Applicant challenged the actions of the Liquidator, alleging non-conformity with mandatory provisions of the Code and IBBI Regulations. The Applicant sought various directions from the Tribunal, including the production of records and registers maintained by the Liquidator, an affidavit on the difference in realizable value, and a restraint on concluding the BID from the e-auction dated 15.07.2021. The Tribunal noted that the Liquidator had followed due process by issuing auction notices and conducting Stakeholders Consultation Committee meetings, where the reserve price was discussed and agreed upon. 2. Reduction in reserve price during e-auctions: The Applicant claimed that the Liquidator arbitrarily reduced the reserve price to benefit certain parties. The Liquidator countered by stating that the reduction was within the permissible limit of 25% as per Clause 4 of the IBBI Liquidation Process Regulations, 2016. The Tribunal found that the reduction was around 8%, which was less than the permissible limit. The Tribunal also noted that the Applicant, being part of the Stakeholders Consultation Committee, had agreed to the reduced reserve price in the meetings. 3. Alleged collusion and discrepancies in the e-auction process by the Liquidator: The Applicant accused the Liquidator of collusion with the promoters of the Corporate Debtor and discrepancies in the e-auction process. The Liquidator refuted these allegations, stating that all actions were taken transparently and in compliance with the regulations. The Tribunal found no substantial evidence to support the Applicant's claims and noted that the Liquidator had made all necessary disclosures and filed progress reports within the timeline. 4. Legality of the sale of the Corporate Debtor as a going concern beyond the 90-day period stipulated by Regulation 32A: The Applicant argued that the sale of the Corporate Debtor as a going concern beyond the 90-day period was illegal. The Tribunal referred to the ruling in Sunderesh Bhat and noted that Regulation 32A should be treated as an open-ended provision relating to procedural law. The Tribunal held that the word "shall" in Regulation 32A should be construed as "may," considering the broader objective of the IBC to ensure the revival and continuation of the Corporate Debtor. The Tribunal found that the Stakeholders Consultation Committee had unanimously agreed to sell the Corporate Debtor as a going concern, and the Liquidator had acted accordingly. 5. Applicability of the IBBI circular dated 26.08.2019 to ongoing liquidation processes: The Applicant contended that the IBBI circular dated 26.08.2019, which stated that the amended regulations were not applicable to liquidation processes commenced before 25.07.2019, was not binding on the Tribunal. The Tribunal referred to various rulings, including those of the Hon'ble Supreme Court, and held that the circular was not legally enforceable to interpret the regulations. The Tribunal emphasized that the primary focus of the legislation is to ensure the revival and continuation of the Corporate Debtor. Conclusion: The Tribunal dismissed the application, finding that the Applicant's pleas were neither tenable nor substantiated. The Tribunal held that the Liquidator had acted in compliance with the regulations and the Stakeholders Consultation Committee's decisions. The sale of the Corporate Debtor as a going concern was upheld, and no order as to costs was made.
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