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2022 (4) TMI 887 - AT - Insolvency and BankruptcyWilful disobedience - Contempt against the Liquidator/the Respondent - Section 61 of the Insolvency and Bankruptcy Code, 2016 - HELD THAT - The Order of this Tribunal directing the Liquidator to proceed as per terms of Y Shivaram Prasad (Supra) is dated 21/05/2019. In this interim period it is an admitted fact that there was no Scheme which was formalised under Section 230 of the Act. It is the main case of the Appellant that the Liquidator had acted in breach of the Order dated 29/01/2020 passed by the Adjudicating Authority whereby the Learned Adjudicating Authority has recorded that pending any decision on any proposed Scheme being accepted by the Liquidator, the sale of asset of the Corporate Debtor shall only confirm after due permission from this Bench. An offer of settlement was given by the Financial Creditor on 17/08/2019 with a specific time frame extending upto 31/07/2020. It is clear that despite the extended time granted by the Hon ble High Court of Delhi, wherein time was extended up to 31/07/2020 still the Corporate Debtor did not pay the amount. Admittedly the Scheme under Section 230 of the Act was never formalised; the date extended by the Hon ble High Court of Delhi was only up to 31/07/2020; that more than two years has lapsed subsequent to the Order of this Tribunal; that it is a Section 10 Application under the Code filed by all three Companies together; that the Order dated 15/07/2020 has attained finality, the Liquidator has only complied with the terms of the Order dated 15/07/2020 and lastly there is no Scheme which has been filed till date under Section 230-232 of the Act; it cannot be said that the action of the Liquidator in selling the asset by public auction, be termed as contempt or any breach of the Order of the Adjudicating Authority. Appeal dismissed.
Issues Involved:
1. Contempt of court by the Liquidator. 2. Validity of the Liquidator's actions in selling the assets. 3. Compliance with Section 230-232 of the Companies Act. 4. Adherence to the terms of the One-Time Settlement (OTS) with Karnataka Bank. 5. Applicability of Section 29-A of the Insolvency and Bankruptcy Code (IBC). Issue-wise Detailed Analysis: 1. Contempt of Court by the Liquidator: The appellant, Mr. Manish Jain, filed an application under Section 60(5) of the Insolvency and Bankruptcy Code (IBC) for 'Contempt' against the Liquidator, alleging willful disobedience of the Order dated 08/01/2020. The Adjudicating Authority observed that the appellant had not filed any scheme under Section 230-232 of the Companies Act for two years and hence, the Liquidator's actions could not be considered contempt. The application was dismissed. 2. Validity of the Liquidator's Actions in Selling the Assets: The appellant contended that the Liquidator sold the assets without obtaining permission from the Adjudicating Authority, as mandated by the Order dated 08/01/2020. The appellant argued that the Liquidator sold the assets at a much lower price despite having a buyer willing to pay a higher amount. The Liquidator, however, complied with the Order dated 07/08/2020, which permitted the liquidation of assets. The Adjudicating Authority noted that the Liquidator conducted a public auction and there was no breach of the Order. 3. Compliance with Section 230-232 of the Companies Act: The appellant argued that the Liquidator did not consider a scheme under Section 230-232 before proceeding with liquidation. The Adjudicating Authority found that no scheme was formalized under Section 230 of the Act. The Liquidator convened a meeting with stakeholders but recorded the minutes without the appellant's knowledge. The Adjudicating Authority noted that the appellant did not file a scheme within the extended deadline provided by the Hon’ble High Court of Delhi, and hence, the Liquidator's actions were justified. 4. Adherence to the Terms of the One-Time Settlement (OTS) with Karnataka Bank: The appellant entered into an OTS with Karnataka Bank, agreeing to pay ?30 Crores. Despite making partial payments, the appellant failed to settle the entire amount by the extended deadline of 31/07/2020. The Financial Creditor did not grant any further relaxation. The Adjudicating Authority noted that the OTS offer was subject to approval by NCLT/NCLAT and was contingent on timely payments, which the appellant failed to make. 5. Applicability of Section 29-A of the Insolvency and Bankruptcy Code (IBC): The appellant contended that the Liquidator erroneously recorded that the scheme under Section 230 was not maintainable due to the appellant being ineligible under Section 29-A of the IBC. The Adjudicating Authority observed that the appellant did not produce the MSME Certificate for examination during the stakeholders' meeting. The Liquidator proceeded with the auction as the scheme was not formalized and the appellant was deemed ineligible. Assessment: The Adjudicating Authority concluded that the Liquidator acted in compliance with the Order dated 15/07/2020 and the subsequent public auction was valid. The scheme under Section 230-232 was never formalized, and the appellant failed to adhere to the OTS terms. The Liquidator's actions could not be termed as contempt or breach of the Order. Conclusion: The appeal was dismissed, and the Liquidator's actions were upheld as compliant with the Adjudicating Authority's directives. The appellant's failure to formalize a scheme under Section 230-232 and settle the OTS amount within the stipulated timeframe justified the Liquidator's sale of assets through public auction.
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