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TMI Blog2020 (10) TMI 769X X X X Extracts X X X X X X X X Extracts X X X X ..... Debtor, waiver of penalties/other penal actions in relation to non-compliance by the Corporate Debtor etc. are outside jurisdiction of Adjudicating Authority - Further, there are no specific provisions like Section 30 of IBC, 2016 as applicable to approval of resolution plan, hence, in liquidation, approval of sale of assets by Adjudicating Authority cannot empower the buyer of the assets to have such benefits. In this regard, we are further of the view that the moment liquidation is ordered, any proceedings under any law can continue which had been pending before the order of liquidation being passed. This is as per the provisions of Section 33(5) of IBC, 2016. Hence, such pleas made by liquidator are rejected. Sale as a going concern involves transfer of both assets and liabilities or group of assets or liabilities which are clubbed together. The purpose of such clubbing is that the business entity should continue along with its employees. Further, sale of a going concern essentially involves slump sale wherein no specific values are assigned to individual assets and undertaking is sold as a whole along with the liabilities. However, in the present case, only tangible asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authorities will not be entitled to withdraw such benefits and incentives due to change in ownership. It has also been stated that existing equity shares shall stand extinguished and fresh shares shall be allotted to Geosoft Distributors Private Limited. 2. The relevant facts are that Corporate Insolvency Resolution Process ( CIRP ) was initiated on 12th April, 2017. Present Liquidator had been appointed as Resolution Professional ( RP ). On failure of CIRP, Liquidation Order was passed on 15th December, 2017. Eight Progress Reports have been filed by the Liquidator. Valuation was done and report from both the Valuers were received on 12th April, 2018. Stakeholders' meetings were also held. In the meantime, on 25th April, 2019, a letter of demand for ₹ 5,27,32,581.20 had been received by Corporate Debtor from the Excise department. On 3rd July, 2019, Liquidator received a quote from Geosoft Distributors Private Limited for taking over the Corporate Debtor as a going concern. On 1st August, 2019, Eligibility Undertaking was submitted by the said party which was examined and Due Diligence Report was obtained from a professional agency on 17th September, 2019. 10% of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of various private limited companies and in gold coins -what is current status and valuation of these as liquidation value has been taken as NIL ? (3) There were short term advances to be recovered in cash and kind unsecured but considered good. The value has been stated as ₹ 36,29,00,683/- as on 6th January, 2018 -what is current status ? (4) Financial statements for 31.03.2018, 31.03.2019 and provisional financial statement as on 30.09.2019. (5) Evidence regarding contacts with other business entities engaged in similar business. (6) Capability of prospective bidder to run the Corporate Debtor as going concern. 5. The Ld. Liquidator submitted that outstanding balances including trade receivables were based on last audited Annual Accounts for financial year 31.03.2014 and subsequent details/information/unaudited accounts including as on date 6.1.2018 were provided by the Corporate Debtor. Accordingly, these figures were worked out. Similar was the case in regard to inventory which got reduced subsequently, and short term borrowings. It has been further submitted that trade receivables increased exponentially from financial year 2013-14, from ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t no evidence of communication with party no. 3 and 4 has been produced. Only one communication from party no. 1, i.e. letter dated 21st December, 2017 has been attached. No response of the liquidator has been attached, particularly, when the said party showed interest to purchase the Corporate Debtor because the Corporate Debtor was having three liquor licences in Kolkata and adjoining areas. As regards the correspondence with the second party, only a mail sent on behalf of the liquidator dated 10th October, 2018 has been attached. Response of the said party, if any, has not been provided. 7. We have also perused the Valuation Reports. As per the valuation report of M/s. Adroit Technical Services Private Limited, copy of which has been placed at page no. 65, following valuation has been done in respect of various assets: Particulars Fair Market Value (INR) Liquidation Value (INR) Shops located at Kolkata 1,35,44,600 1,03,73,200 Stock of Goods 4,59,036 3,81,040 Financial Assets ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NM 9. Similarly, at page no. 86, valuation of current assets had been shown as under:- S. No. Current Assets Book value as on 6th January 2018 (In INR) Liquidation value (in INR) 1 Inventories 117656901 - 2 Trade receivables 53899725 16196962 3 Cash and cash equivalents 3634753 3850015 4 Short term loans and advances 362918683 - Total 20046977 10. The valuation of trade receivables has been done as under:- S. No. Trade Receivable Book value as on 6th Liquidation value January 2018 (INR) (in INR) 1 Trade receivables outstanding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Liquidation value (Rs.) Non-Current Investments 97,17,418.00 - Deferred Tax Assets 8,25,626.00 - Long Term Loans and Advances 1,79,74,769.00 - Short term Loans and Advances 36,29,18,683.00 - Total 39,14,36,496.00 - Summary of Valuation Valuation of property ₹ 110.74 lakhs Other Assets ₹ 1.14 lakhs Stock ₹ 5.88 lakhs Other Current Asset ₹ 146.58 lakhs Total ₹ 264.34 lakhs 14. It is worth noting that no valuation by any of the valuers of licences/brand owned by the Corporate Debtor has been done although it is being sought to be transferred. 15. Now we will discuss the legal validity of the proposal made by the liquidator. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e liquidator may sell the assets of the corporate debtor by means of private sale in the manner specified in Schedule I when - (a) the asset is perishable; (b) the asset is likely to deteriorate in value significantly if not sold immediately; (c) the asset is sold at a price higher than the reserve price of a failed auction; or (d) the prior permission of the Adjudicating Authority has been obtained for such sale : Provided that the liquidator shall not sell the assets, without prior permission of the Adjudicating Authority, by way of private sale to - (a) a related party of the corporate debtor; (b) his related party; or (c) any professional appointed by him. (3) The liquidator shall not proceed with the sale of an asset if he has reason to believe that there is any collusion between the buyers, or the corporate debtor's related parties and buyers, or the creditors and the buyer, and shall submit a report to the Adjudicating Authority in this regard, seeking appropriate orders against the colluding parties. SCHEDULE-I MODE OF SALE (Under Regulation 33 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016) 1. AUCTION ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st interests of the creditors, he may apply, in writing, to the Adjudicating Authority for its permission to conduct an auction in such manner. (11) If required, the liquidator may conduct multiple rounds of auctions to maximize the realization from the sale of the assets, and to promote the best interests of the creditors. (12) On the close of the auction, the highest bidder shall be invited to provide balance sale consideration within ninety days of the date of such demand: Provided that payments made after thirty days shall attract interest at the rate of 12%: Provided further that the sale shall be cancelled if the payment is not received within ninety days. (13) On payment of the full amount, the sale shall stand completed, the liquidator shall execute certificate of sale or sale deed to transfer such assets and the assets shall be delivered to him in the manner specified in the terms of sale. 2. PRIVATE SALE (1) Where an asset is to be sold through private sale, a liquidator shall conduct the sale in the manner specified herein. (2) The liquidator shall prepare a strategy to approach interested buyers for assets to be sold by private sale. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the entity on a platter to the prospective buyer. In the present case, it is not in dispute that the valuation of the intangible assets i.e. licences has not been done at all. Further, there are financial assets and no effective steps appear to have been made to realise the same. The tax status/details which can easily be available are not on record except a demand of around ₹ 5 Crores by GST Department who stands as an unsecured operational creditor and eligible to get money if available for distribution in terms of provisions of Section 53 of IBC, 2016. From the Income Tax department of around ₹ 1.75 Crores which is net of provision i.e., actual receivable, has also not been taken into consideration. Thus, on the basis of these facts also, the proposal submitted by the Ld. Liquidator is not acceptable. 18. Thus, considering the fact that no valuation has been done over intangible assets and proposal based upon the valuation of tangible assets and its reserve price to transfer the Corporate Debtor as a going concern when associated liabilities is not in consonance with the provisions of the IBC, 2016 read with Regulation made thereunder as reproduced herein above, w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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