2022 (5) TMI 638 - Tri - Insolvency and Bankruptcy

Seeking permission to Liquidator i.e. the Applicant to cancel the Sale of Corporate Debtor as a going concern - seeking grant of further time to the Applicant to conduct a fresh E-Auction in the matter of the Corporate Debtor as a going concern - HELD THAT - Keeping in view of the fact that more than seven months has passed since the last date of conclusion of sale, we are left with no option but to allow the application of liquidator to cancel the sale of corporate debtor in favour of auction purchaser in view of failure of the auction purchaser to make payment in terms of 2nd proviso to Clause 1 (12) under Schedule I of the IBBI (Liquidation Process) Regulations, 2016. The Liquidator is permitted to cancel the sale and to proceed in accordance with law. As regards the request of Ld. Counsel for the Liquidator to conduct a fresh e-auction in the matter of corporate debtor as a going concern, it is noticed that the earlier c-auction has failed on account of the failure on the part of the auction purchaser to pay the balance amount and Liquidator has taken all the steps in accordance with law promptly therefore he is not at fault. Application allowed.

Summary

Issues Involved:
1. Payment and adjustment of sale consideration by the successful bidder.
2. Rights, title, and interest transfer to the successful bidder.
3. Extinguishment of claims, demands, liabilities, and obligations.
4. Status change of the Corporate Debtor in official records.
5. Reconstitution of the Board of Directors.
6. Continuation of licenses, approvals, and contracts.
7. Writing off liabilities and adjusting financial statements.
8. Extension of time for payment of balance consideration.
9. Cancellation of sale due to non-payment and conducting a fresh e-auction.

Issue-wise Detailed Analysis:

1. Payment and Adjustment of Sale Consideration:
The applicant, Potens Transmission & Power Private Limited, sought permission to pay the sale consideration of INR 73 Crore in two parts: INR 50 Crore as equity investment and INR 23 Crore as Optionally Convertible Debentures. This request was part of their broader application for seeking various reliefs related to the acquisition of the Corporate Debtor.

2. Rights, Title, and Interest Transfer:
The applicant requested the Liquidator to ensure that upon payment of the entire sale consideration, they would gain all rights, title, and interest in the Corporate Debtor. This includes contracts and assets free from any encumbrances or claims. The sale consideration was to be distributed by the Liquidator as per Section 53 of the Insolvency and Bankruptcy Code (IBC).

3. Extinguishment of Claims, Demands, Liabilities, and Obligations:
The applicant sought a direction that all claims, demands, liabilities, and obligations, including government dues and penalties related to periods before the acquisition date, be permanently extinguished. They also requested that all pending or future legal proceedings against the Corporate Debtor be deemed withdrawn or dismissed.

4. Status Change of the Corporate Debtor:
The applicant asked for the Corporate Debtor’s status to be changed from 'liquidation' to 'active' in the records of the Registrar of Companies from the date of acquisition.

5. Reconstitution of the Board of Directors:
The applicant proposed the reconstitution of the Corporate Debtor’s Board of Directors as per the Companies Act, 2013, and listed specific individuals to be appointed as directors.

6. Continuation of Licenses, Approvals, and Contracts:
The applicant requested that all existing licenses, approvals, and contracts continue without disruption for the benefit of the Corporate Debtor and that any additional licenses required be provided immediately.

7. Writing Off Liabilities and Adjusting Financial Statements:
The applicant sought directions for the Liquidator to write off all liabilities not payable and adjust the financial statements of the Corporate Debtor accordingly. They also requested that the Liquidator complete all necessary compliance filings up to the date of acquisition.

8. Extension of Time for Payment of Balance Consideration:
The applicant filed another application (IA-4317/2021) seeking an extension of 25 days to pay the balance consideration of INR 54.75 Crore along with interest. They cited the NCLAT judgment stating that the 90-day period for payment is directory, not mandatory.

9. Cancellation of Sale Due to Non-Payment and Conducting a Fresh E-Auction:
The Liquidator filed an application (IA-5255/2021) seeking permission to cancel the sale due to the applicant's failure to make the payment within the stipulated time. The Tribunal allowed this application, permitting the Liquidator to cancel the sale and conduct a fresh e-auction, as the auction purchaser failed to pay the balance amount despite multiple extensions and reminders.

Conclusion:
The Tribunal allowed the Liquidator’s application to cancel the sale and proceed with a fresh e-auction. The applications filed by the successful bidder for various reliefs and extensions were disposed of in line with this decision. The Tribunal emphasized the need to maximize the value of the Corporate Debtor’s assets and proceed in accordance with the law.