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TMI Blog2020 (1) TMI 276X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal would have been dismissed. Thus, there is no iota of doubt that the appellant's monetary claim and claim of lien were to be decided afresh by the liquidator. The approach of the liquidator in forming such belief/ opinion is contrary to the factual position as evident from the grounds of appeal and findings of the Tribunal. It is a settled position that findings and prayers are intertwined and ultimate decisions is relevant. Hence, in the facts of the case as discussed above such presumption is not justified. Further the liquidator is obliged to work subject to the directions of the Adjudicating Authority as provided in Section 35(1) of IBC, 2016. It is further noteworthy that liquidator is a quasi judicial authority as against RP who is merely the administrative authority. As per section 40 of the IBC, 2016 the Liquidator can adjudicate upon claims made by the creditors whereas in case of CIRP this power exists only with the COC. It is also noteworthy that as far as secured creditor is concerned, the moratorium ends immediately after completion of CIRP so that such secured creditor if wishes so, then it can realise its security interest on its own and and not pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been fixed was that deposit of 10% of amount as earnest money deposit (EMD). In our view, when sale of such a huge plant at very large site is involved, the background of the bidder is very important and their past experience of participation in such kind of auction and completing the auction transaction in a smooth manner is of utmost importance. However, in the present case, this criteria has not been appeared to have been followed. The financials of the second bidder do not support the credential even for depositing of 10% EMD. The IBC,2016 has prescribed roles of it's different constituents. The roles of COC, RP and liquidator have already been discussed herein before, hence, not repeated. The jurisdiction of Adjudicating Authority has been prescribed in various specific sections. For example under section 19(2) of the IBC,2016, the Adjudicating Authority can direct the suspended Board of Directors to provide necessary cooperation to IRP/RP. Another example is approval of resolution plan under section 31 of the IBC,2016 which is circumscribed by the provisions of section 30(2) of the IBC, 2016 and it has been repeatedly held that commercial wisdom of COC is supreme a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods/equipments through auction has been challenged. It was decided that both petitions shall be disposed of together as common facts and contentions are involved. 2) The relevant facts, in brief, are that the appellant and the corporate debtor signed Letter of Award on 28.06.2010 for supply and erection of plant and machinery in accordance with terms and conditions Of notice inviting tender and letter of award. In May, 2016 appellant initiated Arbitration proceedings against the corporate debtor for recovery of its dues under LOA. Subsequently, the corporate debtor was admitted under CIRP under section 7 on 22.12.2017. The appellant submitted its claim in Form-B before the IRP/RP.Due to failure of CIRP, liquidation proceedings were initiated and liquidator was appointed, who published public notice of liquidation process on 13.10.2018. The appellant filed its claim before the liquidator in Form-C. The appellant claimed statutory charge/lien on the plant and machinery erected by the appellant at the project site and on unused material both in form B and C. On 23.11.2018 liquidator sought additional information and clarifications in respect of claim filed by the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hold with effect from 27.04.2012. The appellant also invoked arbitration clause. However, due to moratorium u/s 14 of IBC, 2016 being imposed, arbitration proceedings became stand still. 4) Ld. Counsel submitted that on 12.03. 2019, the liquidator filed its reply to the petition filed by the appellant on 17.01.2019 wherein such claims of the appellant were denied. The said appeal was listed for final arguments before this Tribunal on 11 .04.2019, however, just one day before i.e. 10.04.2019, the liquidator initiated the process of auction of all the assets of the corporate debtor including the plant and machinery lying at the Project site. Ld. Counsel submitted that the liquidator as a custodian held the assets of the corporate debtor in trust for the benefit of all the creditors including the appellant and the liquidator was duty bound to disclose these facts to the Tribunal. It was also pleaded that the liquidator initiated the auction process in spite of knowing fully well that no auction could have been initiated or pursued till the Tribunal had taken final view in respect of it's claim. 5) Ld.Counsel drew our attention to the order of the liquidator dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d easily be identified at the project site and ascertained from the invoices made available to the respondent and, therefore, liquidator's observations that claim was vague were devoid of merits.lt was also pleaded that the appellant's claim was based upon lien under Sales of Goods Act, 1930 and statutory charge under the Transfer of Property Act, 1882, hence, any reference or absence of reference in the LOA was irrelevant and had no bearing on the present claim. It was further contended that rejection of the claim of the appellant by the liquidator on the ground that there existed no agreement in regard to lien/ charge between the appellant and the corporate debtor deserved to be set aside. 7) Ld.Counsel thereafter contended that provisions of Sale of Goods Act, 1930 and Transfer of Property Act, 1882 were not contrary to the provisions of IBC, 2016 and therefore, such provisions were to be read in harmonious manner and consequently, provisions of section 238 of IBC, 2016 were not applicable. For this proposition, he relied two decisions of the Hon'ble Supreme Court in the case of Central Bank of India Vs State of Kerala others (2009) 4 Supreme Court Cases ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicant. It was also pleaded that no claim of such lien was made during CIRP. The learned Liquidator also took us through his order dated 03.06.2019 and placed strong reliance on the reasons given therein. 9) The Ld. Counsel for the appellant, in the rejoinder, submitted that both in Form-B and Form-C that claim of lien/ security interest had been made.He drew our attention to pages 60, 61 of General Conditions of Contract and 96,97 containing special conditions of the contract of NIT published to state that possession was not given. It was also vehemently argued that the claims made by the liquidator regarding plant and machinery being part of its fixed assets register and, charge of banks were not substantiated by the learned Liquidator by bringing cogent materials/ evidence on record. He further pleaded that if the events were analysed in chronological order then conduct of the Liquidator could not be said to be and bonafide. 10) Ld. Counsel for the Respondent No.2, the auction purchaser, submitted that in C.A. (IB)No.792/KB/2019, auction purchaser had not been made a party,hence, any decision in regard to C.A.(IB) No.792/KB/2019 should not impact him adver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vidence was brought on record by the appellant on the basis of which lien and/or charge on the assets in question could have been said to be created in favour of the appellant and, in such a situation, entire claim of the appellant was liable to be rejected. It was also pleaded that Regulation 21 of IBBI (Liquidation Process), Regulations,2016 had statutory force and existence of security interest, thus, could be acknowledged only in the manner prescribed therein and as stated earlier there being no registration of any lien/ charge as contemplated under section 77(3) of the Companies Act,2013, the claim of the appellant, BHEL was liable to be disregarded. Thereafter, he referred to the provisions Of Section 238 of IBC, 2016 to contend that provision of Sale of Goods Act, 1930 were not applicable as the possession of the goods/material/equipments supplied by appellant had already been vested in the Corporate Debtor. Similarly, provisions of section 55(4)(b) of Transfer of Property Act, 1882 were also not applicable in regard to erected plant and machinery.The learned senior counsel further pleaded that in case of bonafide purchaser having no notice of any claim or encumbrance or lia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s by making claim of non-existence lien over the said goods.The learned senior counsel further contended that purchaser was not at all concerned with the issue relating to distribution of sale proceeds and, therefore, issue of lien which was relevant only for the purpose of distribution of sale proceeds under section 53 of IBC,2016 could not in any way affect the valuable right of the purchaser.He further submitted that in case it was found that their exist a charge/ lien then also such situation would result only into over sale proceeds/ right to receive payments as opposed to any rights over the underlying property. For this proposition, he relied on the following judicial decisions:- 1. Raj Lingam Vs. Somanna (died) Others AIR (1967) AP 7 @ p₹ 5-6 dated March 26, 965, 2. Dattatreya Shankar Mote Others Vs. Anand Chintaman Datar others (1974) 2 SCC 799 @ p₹ 14,17 and 24 dated October 3, 1974. 16) The Ld. Senior Counsel, thereafter, referred to provisions of section 35(1) (b) and 35(1)(f) of IBC,2016 and contended that the liquidator was duty bound to take the possession of the assets of the corporate debtor i.e. company in liquidatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the material on record. 21) The issue involved in this petition is regarding the status of the appellant i.e. whether appellant is a secured creditor or unsecured Operational Creditor. As per appellant, it is secured operational creditor and the basis for such claim is that it has got lien and charge in respect of goods sold and lying in its possession and used in erection of plant and machinery as per the provisions of Sections 45 to 48 of Sale of Goods Act, 1930 and Section 55(4)(b) of the Transfer of Property Act, 1882 respectively. During the course of hearing a specific query was posed by the Bench as to whether in view of provisions of section 238 of IBC,2016, such provisions of Sales of Goods Act, 1930 and Transfer of Property Act, 1882 would be applicable or not. As per the learned counsel, these provisions are not contrary to any provisions of the IBC,2016, hence, such provisions were to be read in harmonious manner and, consequently, provisions of these Acts would be applicable to decide the claim of the appellant. This proposition leads us to search into the scheme and specific provisions of IBC,2016 and Regulations made thereunder to find out whether there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been used, whereas in this definition not only the word created but provided has also been used. In our considered view, this is so because in case of financial transactions generally security is provided, whereas in case of operational transactions security is created in terms of the specific arrangement between the parties. Thus, the intent is to cover both types of creditors. 25) It is further noted that definition of security interest is inclusive and expansive as it includes mortgage, charge, hypothecation, assignment and encumbrance as well as any other agreement or arrangement securing payment or performance of any obligation of any person . The crucial part is inclusion of creation or/provision of interest through agreement or arrangement between the parties. 26) The definition of term security interest uses different terms which have been defined in other Sections of the IBC,2016, hence, we would glance through them in brief manner. The term property is defined in section 3(27) of IBC, 2016 and is reproduced as under.- Property includes money, goods, actionable claims, land and every description of property situated in India or out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reating meaning thereby that such creation is a result of an action by the parties consciously or explicitly. To explain it further, in our view, a security interest that arise due to operation of law or due to any event other than a deliberate act of creation or provision by the parties will not be covered the under definition of secured creditor as well as of security interest as given in IBC,2016. 30) Thus, when all these terms are read together,there remains no doubt that IBC, 2016 provides a specific mechanism in regard to what is security interest and how such security interest is created/provided for. Accordingly, we hold that provisions of Sales of Goods Act, 1930 or Transfer of Property Act, 1882 relied on by the appellant are inconsistent or contrary to specific provisions Of IBC, 2016, hence, not applicable. The inconsistency is apparent because on same set of facts two different conclusions are resulting under different statutes. The principle of harmonious construction is applied when there is no such inconsistency and the result is in furtherance to the object to the Act or Code whereunder proceedings are being adjudicated or decided. Accordingly, we rej ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithout recourse and no liability of BHEL which was to be valid till the end of the Contract period. Thus, payment of BHEL stood secured. However, as stated earlier such LC Clause has been deleted subsequently. It is also to be noted that as per letter of award contract for the subject BTG package indicating details terms and conditions had to be signed between the parties shortly as informed to us no such contract has been signed so far. Thus, this LOA becomes a binding document and in such LOA no clause regarding possessory lien or interest/ right or claim both in the material supplied and erected, has been created. We have also gone through the terms and conditions of NIT wherein matters relating to insurance as well as possession/custody/ supervision have been dealt with but there exists no Clause as regard to lien/charge in respect of unpaid consideration. We have gone through the general conditions of the contract as well as special condition of the contract and in such conditions also there does not exist any provision for creation of lien/charge in favour of the appellant in respect of goods supplied and used in erection of the plant and machinery. This fact also been highli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Central Registry of Securitisation Asset Reconstruction and Security Interest of India; 37) From the perusal of the above Regulation, it is evident that this regulation comes into play only when status of a creditor has been ascertained as a secured creditor and not before that. Secondly, in the said clause word may has been used and, therefore, it is not mandatory and other modes can also be used to prove security interest. Thirdly, Regulations need to be consistent with the provision of IBC, 2016 as prescribed in Section 240 Of the IBC,2016. While rejecting the claim of the appellant, we have referred to definitions of the term transaction Section 3(33) of the IBC, 2016 and transfer section 3(34) of the IBC, 2016.1n addition to these terms, the term charge has been prescribed in section 3(4) of the IBC,2016, which reads as under :- Charge means an interest or lien created on the property or assets of any person or any of its undertakings or both, as the case may be, as security and includes a mortgage . 38) This definition is identical to the definition of this term given in Section 2(16) of the Companies Act,2013. However, as per prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the provisions of other Acts/ Laws even when such provisions are also of the nature of limited non-obstante provisions. Thus, we reject this contention of Liquidator and Auction purchaser . 39) In this regard, we also consider it relevant to reproduce Regulation 20 Of IBBI (Voluntary Liquidation Process), Regulation 2016, as under:- 20. Proving security interest. The existence of a security interest may be proved by a secured creditor on the basis of - (a) The records available in an information utility; (b) Certificate of registration of charge issued by the Registrar of Companies; (c) Proof Of registration of charge with the Central Registry Of Securitisation Asset Reconstruction and Security Interest of India; or (d) Other relevant documents which adequately establish the security interest. 40) As compared to Regulation 21 of IBBI (Liquidation Process) Regulations, 2016, a noticeable difference exists by virtue of Clause(d) of the aforesaid Regulation 20 which provides that other relevant documents can adequately establish the security interest. As stated earlier that Regulation 21 of IBBI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leted and Plant is taken over by the corporate debtor. It is also pertinent to mention that Plant has not been taken over by the corporate debtor as the contract got abandoned in between. The insurance clause also mentions that the liability for insurance lies with the Contractor. A letter written by the Managing Director of the corporate debtor on 23.03.2016 to the GM, BHEL copy of which is placed at pages 216 and 217 paper book Volume-Il in CA(IB) No.684/KB/2019 dated 23.03.2016 also states the same position not only as regard to possession but also states that risk and reward were also lying with the contractor, which is applicant. The relevant portion Of this mail is reproduced as under:- Please note that all the materials are in BHEL's custody at site and are lying there entirely at the risk of BHEL and in the absence of any preservation, the condition of the materials is deteriorating. VPL reiterates that BHEL remains solely and fully responsible for the condition and safety of equipment/ materials, as well as insurance thereof, in BHEL's custody, including the materials that have already been erected at site, till such time the same is completely erected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icant would had a right under Section 52 of the IBC as a secured creditor read with proviso to Regulation 32 of IBBI (Liquidation process) Regulations, 2016 and, therefore, any auction could not be initiated unless the applicant had relinquished its security interest in the liquidation estate. It was vehemently argued that liquidator in the present case, accepted the claim of the applicant at ₹ 572 Crores, whereas reserved price was arrived at 23.30 crores, which was roughly 4% of the total claim of the applicant alone and it was also not clear that which of the assets of the applicant were valued and which were left out. The learned counsel further contended that issuance of sale certificate on 20.05.2019 without complying with the directions of this Authority given in it's order dated 10.05.2019 virtually amounted to contempt. Such action created strong doubts on the bonafides of the liquidator as hearing on 29.05.2019 was an empty formality for the reason that subsequent to issue of sale certificate no decision in favour of the applicant could have been possible at all. It was also prayed that there existed no circumstances which could justify such action of liquidator ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and took 50% of the said value to arrive at the liquidation value. No basis for such huge depreciation was provided. Whereas other valuers provided expected life at 40 years and 60 years. Further, there is absolutely no basis provided in the report. There is no clarity what quantity has been taken into consideration for valuation. Nor any valuation is done for office furniture fixtures, viz. ACs AImirahs etc. nor any valuation is done for computers etc. or any other moveable asset. 4. The valuation was only for the P M mentioned in the Fixed Assets Register. No material supplied by BHEL was valued. 5. Valuation was for the P M mentioned in the Fixed Assets Register and also for the erected portions (assumption is based on the original cost taken for the calculation as that is close to the quantity used for erection). 48) In support of his claims, the Learned counsel drew our attention to page no.23 of additional affidavit filed by the applicant on 23.09.2019 containing part E of Valuation Report done by Adroit and submitted that the total quantity of Boiler Turbine and Generator was shown much less as against quantity actually supplied by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tructure, Boiler Tower and ESP Electrostatic Precipitator which shown as part of plant and machinery, whereas the same were shown as part of building in the sale notice dated 11.04.2019. These structures were sold on the basis of per sq. meter instead of per metric ton. In this regard, he referred to the relevant pages of Auction notice as well as sale certificate and in particular drew our attention to pages 57,113 and 189 to 193 of the reply filed by the auction purchaser and additional affidavit filed by applicant containing copy of sale notice. 51) The 3 rd line of argument was that since liquidator was holding the liquidation estate in a fiduciary capacity for the benefits of all the creditors in terms of provisions of section 36(2) of the I.B. Code hence, it was his duty to protect the interest of all creditors in the best possible manner. This being so and when fairness of his conduct was challenged, then, the onus was upon the liquidator to show that transaction was done in perfectly fair and reasonable manner. For this proposition, he placed strong reliance on the order of the Hon'ble Supreme Court in the case of Krishna Mohan Kul Vs. Pratima Maity (2004) 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 35(2) read with Regulation 5(3) of IBBI (Liquidation Process) Regulations, 2016. f. The Tribunal had right to set aside auction process and direct auction purchaser to restore the status quo ante. In this regard, he placed reliance on the decision of the Hon'ble Supreme Court in the case of Kavita Trehean Vs. Balsara Hygiene Products Ltd. (1994) 5 S. C.C. 380, wherein the Hon'ble Court had held that whenever the justice of the case demands court had inherent power to make restitution. He also placed reliance on the decision of the Hon'ble Supreme Court in the case of Chinnammal Ors Vs. P. Arumugham Ors (1990) 1 S.C.C. 513 for the proposition that restitution could be demanded from a person who purchased the property in Court auction being aware of the pending appeal against the decree and in the present case the issue of applicant's claim regarding lien/charge was subjudice and known to the auction purchasers, hence, restitution of the property back to the applicant would meet ends of justice. g. Assuming that there was no collusion but fact that on the date of sale notice applicant's petition no. CA (1B) No. 149/ KB/ 2019 was pendin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rariness were observed. For this proposition, he referred to the decision of Hon ble Supreme Court in the case of J.L. Sultania others Vs Securities and Exchange Board of India and others as reported in AIR 2007 SC 2172 and drew our attention to paras 80 and 81 of the said order. He also referred to the decision of the Kolkata Bench NCLT in the Nicco Corporation Limited and others in Miscellaneous Application No.(IB) 585/ KB/ 2019 vide order dated 25.06.2019 wherein action of the liquidator was found to be valid. He thereafter placed reliance on the decision of the Kolkata Bench in the case of Dr. Syed Sabahat Azim Vs Sahaj-E-Village Limited and others as reported in 2017 SCC Online NCLT 2115 for the proposition that when valuation has been done as per accepted norms then the same could not be challenged where either of the parties was not satisfied. On the aspect of correctness of the valuation reports, he referred to valuation reports obtained during the course of CIRP as well as during the liquidation process to show that physical inspection was done. On enquiry, the recording of physical inspection done by Adroit during CIRP, that specific date of inspection could not be cite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was submitted that the learned counsel submitted that the case was distinguishable on facts as in the present case liquidator was not having any superior authority/dominant position. 61) The Learned Counsel for the liquidator further submitted that present application was an instance of selective picking one points from here and there to build up a case which did not exist in the facts and circumstances. Hence the petition filed by the applicant was liable to be dismissed. He further submitted that the plant had been dismantled, proceeds of sale had already distributed and the applicant being the unsecured Operational Creditor, hence, restitution was not possible, hence, for these reasons auction process could not be cancelled. It was again emphasised that having regard to the nature of assets/materials which had been sold, no restitution was possible in fact, and hence, due to such limitation, the request for restitution was liable to be dismissed. He further stated that case laws relied on the applicant were distinguishable on facts. 62) In the Rejoinder, learned counsel for the BHEL submitted that scope of the arbitration proceedings was in the background of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd to valuation and these discrepancies. The learned counsel also referred to page 193 of the reply of the auction purchaser wherein plant and machinery included the assets which had been shown as part of land and building in sale notice/ E- auction process document and contended that this was major discrepancy/ manipulation which could not happen without any extraneous considerations on the part of the liquidator. The Learned counsel, thereafter submitted photo of the plant and machinery and contended that only two erected machineries i.e. Boiler Tower and ESP (Electrostatic Preceptor) were valued whereas 3rd erected plant/ machinery (TG structure) was not valued at all though it has also been sold. He also submitted that materials were sold at much lessor price and, if the materials supplied by the other vendors/ contractors were also taken into consideration the price fetched/ realised would be much more less and, therefore, it was a perfect case for cancellation of auction. 66) We have considered the submissions made by the parties and have also perused the material on record of this CA as well as CA(IB)No.792/2019. This application raises following questions:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;s Project Site and a statutory charge under the provisions of Transfer of Property Act, 1882 on the goods supplied that have since been erected; and ORDER OF TRIBUNAL This appeal is under section 42 of Insolvency and Bankruptcy Code, 2016(in short, IBC ) is filed by one of the creditors of the Corporate Debtor, ws Bharat Heavy Electricals Limited against the order of the Liquidator, dated 21.12.2018. 7. The point for determination before this Tribunal is whether the order passed by the Liquidator admitting the appellant's claim provisionally needs any interference. My answer to this point is affirmative for following reasons: 7.1. Very recently, the Hon'ble Supreme Court in the ruling of Swiss Ribbons Private Limited -vs- Union of India observed that, It is clear from these sections that when the liquidator determines the value of claims admitted under section 40, such determination is a decision , which is quasi-judicial in nature, and which can be appealed against to the Adjudicating Authority under section 42 of the Code . In view of this, it was necessary for the Liquidator to give suitable reason of his decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as per the rules. II. Liquidator to decide the claim within 30 days of this order. III. CA(IB) No. 149/KB/2019 stands disposed off CP to come up for further consideration along with other pending CAS on 26.06.2019. Certified copy of the order may be issued to all the concerned parties, if applied for, upon compliance with all requisite formalities. 69) From the perusal of the prayers made in the petition CA(IB) No.149/ KB/ 2019, it is noted that the appellant had raised the issue of lien/ charge in prayer No. B in a specific manner. Apart from this in prayer A, the appellant had prayed for a direction being given to the liquidator to admit the claim of appellant in terms of Form-C . It is to be noted that in Form C both monetary claim and claim of security interest were made. Further, appeal filed by the appellant was allowed and in para I Il of the order, wherein it has been specifically directed that the liquidator was to pass an appropriate reasoned order by reiecting or allowing/ partly allowing the claim of the appellant as per Rules and to decide the claim within 30 days from the date of this order. The approach of liquidator in decid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith regard seeking a declaration that the Appellant has an unpaid seller's lien under the Sale of Goods Act was not accepted by this Hon'ble Tribunal. Therefore, it is wrong to suggest that the Liquidator acted contrary to the provisions of the Act and failed in his duties as the Liquidator. Page 37,para-19-That the contents of Para 2(t) are wrong and denied. It is most humbly stated that the Liquidator suppressed any material fact from this Hon'ble Tribunal. That it is most humbly reiterated that the auctioning the Plant Machinery was continued as there was no stay granted by the Hon'ble Tribunal and the prayer made by the Appellant seeking declaration against the goods was also not accepted by the Hon'ble Tribunal. Therefore, it is wrong to imply that the conduct of the Liquidator violated provisions of law. Page 38,para-20- That the contents of Para 2(u) are admitted to the extent that the order dated 10.05.2019 was passed by the Hon'ble Tribunal. It is stated that the operation and extent of the said order passed by the Hon'ble Tribunal was limited to the extent that the Liquidator was directed to pass q detailed order and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ectircals Limited (BHEL) filed a claim of ₹ 6,64,98,37,221/- including interest after the liquidation commencernent date, wherein the Liquidator provisionally admitted its claim of ₹ 2,90,01,85,395/- and rejected the amount of interest of ₹ 3,74,96,51,826/-. The Liquidator issued Provisional Claim Admittance Letter, wherein it was stated that no specific contract contract or order has been provided with respect to interest claimed by BHEL. Hence, the same is disputed and rejected. Appeal under Section 42 of the Code was filed by BHEL against this order of the Liquidator. (CA(IB) No. 149/KB/2019 in CP (IB) No. 574/KB/2017). The Hon'ble Tribunal vide its order dated 10.05.2019 remitted back the matter to the Liquidator for rejecting/allowing the claim by passing a reasoned order within 30 days. As directed through the order dated 10.05.2019 the Liquidator invited BHEL to his office for producing necessary documents and to explain the factual matrix of the transaction by BHEL. Accordingly, the representatives of BHEL along with their Attorneys visited the Liquidator's office and explained the flow of transactions and categorizing the large ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not justified. Further the liquidator is obliged to work subject to the directions of the Adjudicating Authority as provided in Section 35(1) of IBC,2016. As per provisions of Section 35(1)(n) of IBC,2016, the liquidator shall apply to the Adjudicating Authority for such orders or directions as may be necessary for orderly liquidation of the corporate debtor and to report the progress of the liquidation process in a manner as may be specified by the Board. Thus, in our considered view, the better option for the liquidator was to take clarification from this Authority, however, instead of doing that, the liquidator proceeded to issue sale certificate on 20.05.2019 and interestingly after issuing such sale certificate, the liquidator required the appellant to give evidences/ submissions in regard to their claim and passed so called reasoned order on 03.06.2019 which, in fact was not of any value in a sense that once a sale certificate had already been issued no different view on the subject could have been taken. Rather this act of the liquidator confirms the fact that he has passed such order on 03.06.2019 just to show that he had complied with the directions of the Tribunal whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... II of IBC,2016. Corporate Insolvency Resolution Process starts with the filing of application under sections 7,9 or 10 of IBC,2016. If admitted by the Adjudicating Authority, appointment of IRP happens. COC in the first meeting is required to approve the IRP as RP or appoint any other person as RP. The RP so appointed can be replaced under section 27 of IBC, 2016 if Committee of Creditors is of the opinion that resolution professional appointed under section 22 was required to be replaced. As against this, the Creditors or other stakeholders have no power to remove or replace the liquidator. The power of Adjudicating Authority under section 34(4) of the IBC,2016 is extremely limited and applicable only in three specified situations which practically means that liquidator once appointed cannot be removed or replaced. 74) Further, we find that role of RP is more of a administrator and his powers and duties are under complete superintendence/ subject to approval of COC in respect of commercial decisions during CIRP. Resolution plan also requires approval of the Committee of Creditors. As per settled judicial position, commercial wisdom of COC is supreme and intervention by A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t use these to cause an undue gain or undue loss to itself or any other person. As per this regulation, asset memorandum is to be prepared. As per sub regulation (3) reports/ minutes referred to in sub regulation (1) could be shared with a stakeholder subject to other provisions of these regulations. In the present case, the appellant has raised the contention that he was not provided any asset memorandum or valuation reports. This plea was negated by the liquidator on the basis of regulation 34(5) of IBBI (Liquidation Process),Regulations, 2016 which states that asset memorandum shall not be accessible to any person during the course of liquidation unless permitted by the Adjudicating Authority. In present case, the liquidator suo motu did not share asset memorandum with the appellant who is undoubtedly a stakeholder. No doubt such obligation in law does not exist and even the appellant had not applied for asset memorandum/ valuation reports earlier but provided if he would have applied, as per provisions of regulation 34(5) read with regulation 5(3), this would not have been made available to him in the normal course and only option remained available to appellant was t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 35(1)(f) and proviso to Regulation 32 of IBBI ( Liquidation process) Regulations, 2016. It is important to note this proviso has been added with effect from 22.10.2018 to align regulations with the substantive provisions. 77) It is also noteworthy that as far as secured creditor is concerned, the moratorium ends immediately after completion of CIRP so that such secured creditor if wishes so, then it can realise its security interest on its own and and not putting his secured as security into liquidation estate. The moratorium for other parties may continue as per the provisions of section 33 (5) of IBC, 2016. Thus, security interest becomes a central point in the liquidation proceedings. 78) From the perusal of the above discussion, it would be evident that CIRP is driven by Committee of Creditors, whereas liquidation is driven by liquidator. The liquidator has got immense powers. Although, he is subject to the direction by the Adjudicating Authority but normally no intervention/ monitoring of day to day functioning of liquidator is envisaged in the IBC,2016 or Regulations made thereunder. The liquidator is suppose to function as trustee of the creditors. He w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in issuing sale certificate before deciding the claim of security interest of appellant is not correct because on that date there was a possibility that there could be a security interest of the applicant and, if that would have become a reality, unless security interest was relinquished under section 52, such asset could not have formed part of liquidation estate at the very outset. We further hold that order of Tribunal has not been understood by the liquidator in it's true spirit. 82) Now, we will be take up question No.2, which reads as under: Whether there exists a case for cancellation of auction? Whether restitution as claimed by the applicant can be made and any mechanism is prescribed for enforcement of such claim in IBC, 2016? 83) In this regard, in our view, it is important to reproduce the facts narrated by the applicant which would be relevant for arriving at final conclusion. The same are reproduced as under:- 4.18- C.A.(I.B.) No. 149/2019 was listed for final arguments before this Hon'ble Tribunal on 11.04.2019. Respondent No. 1 was present and chose to represent himself in person. It is relevant to note here that, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spondent No. 1 was duty bound to take all steps in compliance of the order/directions of this Hon'ble Tribunal dated 10.05.2019 and was duty bound to discharge his obligations strictly in terms of the IBC, Code and the Regulations. Instead, in gross violation of the order/directions of this Hon'ble Court dated 10.05.2019, the Respondent No. 1 showing scant respect to the said order/ directions, acting surreptitiously and in connivance with the Respondent No. 2, on 20.05.2019 confirmed the auction sale of the entire plant and machinery at Project Site and issued a Certificate of Sale' in favour of the Respondent No.2. On the fact of it, the entire act of confirmation of sale is an act in willful defiance of this Hon'ble Tribunal's directions and is contemptuous in nature. It is relevant to note here that Respondent no. 1 s decision/ act of going ahead with the auction sale and issuing 'Certificate of Sale' made Applicant's claim qua lien/ charge infructuous. 4.23- As part of a large design, after issuing a 'Certificate of Sale' merely as an eyewash on 27.05.2019, Respondent No. 1 issued an e-mail dated 27.052019 to the Applicant stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he purported auction notice dated 10.04.2019 and the purported certificate of sale dated 20.05.2019 was issued in respect of Plant Machinery including the Plant Machinery over which the Applicant has a lien and/or charge. However, Respondent No. 1 refused to cease and desist from removing the plant and machinery over which the Applicant has a lien and/or charge from the Project Site. 4.27- It is submitted that the acts of Respondent No. 1 amount to gross professional misconduct, are contemptuous in nature and are in the teeth of the order dated 10.05.2019 passed by the Hon'ble Tribunal in C.A.(I.B.)No. 149/KB/2019 The decision of Respondent No. 1 dated 31.12.2018 was set aside by this Hon'ble Tribunal, still, Respondent No. 1, audaciously went ahead with the auction sate of all the assets including the Plant and Machinery supplied by the Applicant and proceeded with the purported sale of the Plant Machinery without deciding the claims of the Applicant, including the lien and charge held by the Applicant. As such, the purported sale of the Plant Machinery has caused grave prejudice to the rights of the Applicant. 4.28- Moreover the clandestine man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spute with this proposition but on the face of it, we find that there exist inconsistencies and contradictions in various documents produced before us,hence, a case of improper valuation is made out. 87) We also find that inconsistencies exists in the sale of plant and machinery. It is noted that assets were divided into four blocks. The auction has been done of plant and machinery and furniture and fixtures. Some of the plant and machinery as advertised in auction notice were classified under the head land and building in the valuation reports. However, in the sale certificate these appears to have been sold as plant and machinery, although no bids were received for land and buildings. It is also observed that the steel structure on the land foundation has been sold on per sq.meter Civil structure basis as against being sold as scrap/ plant and machinery. 88) We also find that section 25(2)(h) of IBC,2016 prescribes norms for preparation of information memorandum and evaluation matrix having regard to the complexities involved in a particular case. Though, such requirement is not applicable in the course of liquidation process, unless corporate debtor or its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceeds, if any, would not go to the applicant as claims of the secured creditors would to be met first. In our view, this would further complicate the matter and result into prolonged litigation which is not justified in the context of economic legislation like IBC, 2016. 92) Apart from this, there exists a need to analyse the conduct of the applicant as a commercial person because in our considered view, enforcement of a right is also linked to its own conduct in a sense that what you are demanding should be justified in the background of your own approach/ actions. TO elaborate this, we have to go back to discussion as to how the contract has been executed i.e. the applicant has executed the contract on the basis of LOA only and no formal contract was signed. The provision of LC has been waived without securing its payment either due to financial constraints and no protection has been made for the situation of default including the willful default. The valuation reports during CIRP have not been asked for in spite of being an invitee in the meetings of COC. Such valuation reports were also not asked for nor any formal request was made in regard to obtaining of asset ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty can decide the matters relating to preferential transactions, under-valued transaction, frauds etc. In addition to this under section 42, the Adjudicating Authority can decide an appeal filed by the aggrieved party by the decision of the liquidator as regard to its claim. The jurisdiction under section 60(5) of the IBC,2016 also exists which is undisputedly a residual jurisdiction. For the sake of ready reference, this provision is reproduced as under :- 60(5) Notwithstanding anything to the contrary contained in any other law for the time being in force, the National Company Law Tribunal shall have jurisdiction to entertain or dispose of- (a) any application or proceeding by or against the corporate debtoror corporate person; (b) any claim made by or against the corporate debtoror corporate person, including claims by or against of its subsidiaries situated in India; and (c) any question of priorities or any question of law or facts, arising out or in relation to the insolvency resolution or liquidation proceedings of the corporate debtor or corporate person under this Code. 97) The residuary jurisdiction vested in Tribunal thro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lifting of goods/ materials, plant and equipment etc. which have been auctioned and sale certificate has been issued and not yet lifted. As stated earlier, it has been alleged that goods belonging to the applicant has also been lifted whereas the same has been denied by the liquidator. Hence, to avoid any dispute in future the liquidator is directed to allow the lifting of goods after giving due notice of the same to the applicant who shall authorise its representative to oversee the lifting of material. The Auction purchaser is also directed to lift only that material which is cleared by applicant henceforth. The applicant is directed to accord it's approval without any delay. In any case, if approval is not done by the applicant of any such request within two days from the date of request made, the approval shall be deemed to have been granted. 99) We also consider it to mention that the applicant/ appellant filed written notes on 04.12.2019, after 10 days of conclusion of hearing though no directions were given to submit written notes. Accordingly, we have directed the Registry to return the same. Be that as it may, the applicant has cited decision of the Chennai ..... X X X X Extracts X X X X X X X X Extracts X X X X
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