2022 (6) TMI 721 - AT - Insolvency and Bankruptcy

Direction for maintaining of status quo in relation to the liquidation process of the Corporate Debtor - whether the Respondent violated Order of this Bench dated 20.07.2021 as alleged by the Applicant? - HELD THAT - After filing the Contempt Application dated 02.08.2021 this Tribunal had afforded opportunity to the Respondent to file their Response to the Contempt Application and the Contempt Application has been heard both sides and reserve for Orders. This Tribunal extended the Interim Order dated 20th July, 2021 till 05.07.2022. The Appeal filed by the Applicant on 14.07.2021 and this Tribunal passed Status Quo Order on 20th July, 2021 much later to handing over the possession of property and issuance of sale certificate to the auction purchaser on 03.06.2021. Moreover, the Applicant has not made the auction purchaser a party to the proceedings before this Tribunal. This Tribunal passed the status quo order on 20th July, 2021 and the Respondent/ Liquidator stated that he has implemented the Order of this Tribunal dated 20th July, 2021 with respect to Liquidation Process from the date of passing of status quo order - Further, it is sated that the Respondent/ Liquidator does not have possession or control over the disposed asset of the Corporate Debtor. The Appeal has been filed much later to the sale certificate issued to the auction purchaser and the Applicant has not impleaded the auction purchaser as a party to the proceedings and the status quo order will not be applicable to the auction purchaser and this Tribunal cannot desist the auction purchaser from proceeding with the property which he is in possession in accordance with law, therefore, this Tribunal is of the view that the Respondent has not violated the order of this Tribunal dated 20th July, 2021 nor committed any contempt of this Tribunal - this Tribunal comes with a resultant and irrefutable conclusion that there is no disobedience of the Order of this Tribunal and the Contempt Application filed by the Applicant is frivolous and wasting the precious time of this Tribunal. Contempt application dismissed.

Summary

Issues Involved:
1. Alleged violation of the Tribunal's 'status quo' order by the Respondent.
2. Compliance with the Tribunal's directions by the Liquidator.
3. Legal implications of the sale and transfer of assets of the Corporate Debtor.

Issue-wise Detailed Analysis:

1. Alleged Violation of the Tribunal's 'Status Quo' Order:
The Appellant filed a Contempt Application alleging that the Respondent wilfully violated the Tribunal's 'status quo' order dated 20.07.2021. The Appellant argued that the Liquidator continued with the dismantling and lifting of the plant and machinery of the Corporate Debtor despite the order. The Tribunal had directed maintaining 'status quo' to prevent the liquidation process from rendering the Appellant's bid for the Corporate Debtor as a going concern infructuous.

2. Compliance with the Tribunal's Directions by the Liquidator:
The Respondent contended that they had the highest regard for the Tribunal's orders and had not committed any disobedience. The Respondent explained that the plant and machinery were sold to M/s Umang Enterprises through an e-auction held on 08.05.2021, and the sale certificate was issued on 03.06.2021. The physical possession was handed over to the auction purchaser on the same date. The Respondent argued that the 'status quo' order was passed on 20.07.2021, after the sale and transfer of possession, and thus, they no longer had control over the assets.

3. Legal Implications of the Sale and Transfer of Assets:
The Tribunal noted that the sale and transfer of the plant and machinery to the auction purchaser were completed before the 'status quo' order was issued. The Respondent had complied with the Tribunal's order from the date it was passed, stopping all further proceedings in the liquidation process. The Tribunal observed that the auction purchaser was not made a party to the proceedings, and the 'status quo' order did not apply to the auction purchaser. Therefore, the Respondent could not be held in contempt as they did not have possession or control over the assets after the sale.

Conclusion:
The Tribunal concluded that the Respondent did not violate the order dated 20.07.2021 and had not committed any contempt. It emphasized that for contempt to be established, disobedience must be wilful and intentional, which was not the case here. The Tribunal dismissed the Contempt Application as frivolous and imposed a cost of Rs. 50,000/- on the Applicant, to be paid to the Hon'ble Prime Minister's Relief Fund within one month.

Order:
The Contempt Application No. 01 of 2021 is dismissed with a cost of Rs. 50,000/- to be paid to the Hon'ble Prime Minister's Relief Fund within a period of one month from the date of receipt of the order, and compliance to be reported by filing proof before the Deputy Registrar, NCLAT, Chennai Bench.