2025 (3) TMI 973 - AT - IBC

Extension of timeline for the successful bidder to pay the balance sale consideration beyond the 90-day period prescribed by the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations 2016 - HELD THAT - The Hon ble Supreme Court in V.S. Palanivel vs. P. Sriram CS Liquidator Etc. 2024 (9) TMI 625 - SUPREME COURT itself had occasion to consider the power of the Adjudicating Authority in reference to extension of time for deposit of the balance consideration. The Hon ble Supreme Court held that the Adjudicating Authority exercised statutory powers under Section 35 read with Rule 11 of the NCLT Rules for extending the time. Thus Hon ble Supreme Court itself did not find any fault in the order of the Adjudicating Authority extending the time of payment after expiry of time of payment prescribed. As noticed above an application filed by successful bidder/ successful auction purchaser for extension of time was allowed by the Adjudicating Authority on 05.05.2020 which was challenged by the Appellant in Company Appeal (AT) (Ins.) No.343 of 2021 which came to be dismissed on 16.09.2022 - The law laid down by the Hon ble Supreme Court clearly comes to the aid of the successful bidder in the present case. Adjudicating Authority having extended the time for deposit of the amount which deposit was made and thereafter application was filed for approval of the sale which has also been granted by the Adjudicating Authority. Conclusion - While the provisions of Clause 12 of Schedule 1 are mandatory the Adjudicating Authority has the discretion to extend the timeline for payment under certain circumstances exercising its statutory and inherent powers. There are no ground to interfere with the impugned orders - appeal dismissed.

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment were:

1. Whether the Adjudicating Authority erred in extending the timeline for the successful bidder to pay the balance sale consideration beyond the 90-day period prescribed by the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations 2016.

2. Whether the suspended director of the corporate debtor had the locus standi to challenge the orders of the Adjudicating Authority regarding the extension of time and approval of the sale.

3. Whether the order approving the sale of the corporate debtor as a going concern to the successful bidder was valid under the circumstances.

ISSUE-WISE DETAILED ANALYSIS

1. Extension of Time for Payment of Balance Sale Consideration

Relevant Legal Framework and Precedents: The relevant legal framework includes the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations 2016, particularly Schedule 1, Clause 12, which mandates that the highest bidder must pay the balance sale consideration within 90 days. The provision is deemed mandatory, as emphasized in the judgments of "Potens Transmissions & Power Pvt. Ltd. vs. Gian Chand Narang" and the Supreme Court's decision in "V.S. Palanivel vs. P. Sriram, CS, Liquidator, Etc."

Court's Interpretation and Reasoning: The Court acknowledged that Clause 12 is mandatory and typically does not allow for extensions beyond 90 days by the liquidator. However, the Adjudicating Authority exercised its statutory powers under Section 35 of the Insolvency and Bankruptcy Code (IBC) and Rule 11 of the NCLT Rules to extend the time for payment, which was within its jurisdiction.

Application of Law to Facts: The Adjudicating Authority allowed the successful bidder to make the payment beyond the stipulated period, considering the circumstances and ensuring the balance payment was made with interest.

Treatment of Competing Arguments: The appellant argued that the extension was against the mandatory nature of the regulation, while the successful bidder and liquidator contended that the extension was justified and within the Adjudicating Authority's powers.

Conclusions: The Court concluded that the Adjudicating Authority's decision to extend the time was valid and within its powers, as supported by the Supreme Court's interpretation of similar provisions.

2. Locus Standi of the Suspended Director

Relevant Legal Framework and Precedents: The locus standi of a suspended director in challenging liquidation proceedings is typically limited unless they can demonstrate a direct interest or prejudice.

Court's Interpretation and Reasoning: The Court noted that the suspended director did not participate in the e-auction and had no direct stake in the outcome of the sale, as their resolution plan had already failed, leading to liquidation.

Application of Law to Facts: The appellant's challenge was primarily seen as an attempt to create hurdles in the liquidation process rather than a legitimate grievance.

Treatment of Competing Arguments: The appellant's arguments were countered by the successful bidder and the liquidator, who emphasized the appellant's lack of participation and interest in the auction process.

Conclusions: The Court found that the suspended director lacked the locus standi to challenge the orders, as they had no direct interest in the sale proceedings.

3. Approval of Sale as a Going Concern

Relevant Legal Framework and Precedents: The sale of a corporate debtor as a going concern is governed by the IBC and the Liquidation Process Regulations, which aim to maximize asset value and ensure stakeholder interests are protected.

Court's Interpretation and Reasoning: The Court recognized that the successful bidder had fulfilled the payment obligations as per the extended timeline and that the liquidator's application for sale approval was in compliance with the regulations.

Application of Law to Facts: The Adjudicating Authority approved the sale after ensuring all procedural requirements were met, including the payment of interest for the delayed period.

Treatment of Competing Arguments: The appellant's contention that the sale should not have been approved was outweighed by the compliance and fulfillment of conditions by the successful bidder.

Conclusions: The sale approval was deemed valid, with the Court upholding the Adjudicating Authority's decision to grant certain reliefs and concessions to the successful bidder.

SIGNIFICANT HOLDINGS

Core Principles Established: The judgment reinforced the principle that while the provisions of Clause 12 of Schedule 1 are mandatory, the Adjudicating Authority has the discretion to extend the timeline for payment under certain circumstances, exercising its statutory and inherent powers.

Final Determinations on Each Issue: The appeals were dismissed, affirming the validity of the Adjudicating Authority's orders to extend the payment timeline and approve the sale, and confirming the lack of locus standi for the suspended director to challenge these proceedings.

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