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TMI Blog2021 (3) TMI 556X X X X Extracts X X X X X X X X Extracts X X X X ..... orporate Debtor viz. Topworth Pipes & Tubes Private Limited was put under Corporate Insolvency Resolution Process (CIRP) by an order dated 11/12/2018 of this Bench. 3. In the absence of a Resolution Plan, this Bench on 12/06/2020 passed an order for liquidation of the Corporate Debtor under Section 33 of the Code. 4. The Liquidator invited bids for the sale of the Corporate Debtor as a 'going concern' by an E-auction process memorandum dated 13/10/2020. The Liquidator published first addendum to the E-auction process memorandum on 29/10/2020 and second addendum on 03/11/2020. 5. The E-auction process memorandum states that the sale of the Company is on 'going concern' basis in accordance with the provisions of the Code, Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 (Liquidation Process Regulations) and the E-auction process information document. It further states that the sale of the Company is proposed to be done on "as is where is basis", "as is what is basis", "whatever there is basis" and "no recourse basis" and the proposed sale of the Company on going concern basis does not entail transfer of any other title, except the title which the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le to be Resolution Applicant. 8. The Liquidator issued an Addendum dated 29/10/2020 to the Eauction process document wherein the key timelines were mentioned. The Liquidator issued another Addendum dated 03/11/2020 to the main E-auction process document wherein the key highlights of the asset sale process mentioned in the Eauction process document dated 13/10/2020 is replaced as below- Version dated: October 13th, 2020 Corporate Debtor Topworth Pipes & Tubes Pvt. Ltd. Asset Lot # Block 1 Asset Lot: Brief description: Khopoli Unit (As a going concern) Details of assets are available in the asset sale memorandums available on the Primus's website listed at (http://www.primusresolutions.in) and shall also be uploaded on the Eauction portal www.right2vote.in Auction Commencement date and time November 2nd, 2020 at 12 pm Auction closure date & time November 2nd, 2020 at 3 pm Reserve Price Rs. 152 Crores Refundable Earnest Money Deposit: Rs. 15.20 Crores Minimum bid increment amount: Rs. 5 Lakhs The Company proposed to be sold on a "going concern" basis, as per the order of the Adjudicating Authority on June, 12th 2020. Accordingly, Corporate Debto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 days from the payment of the last instalment, wherein in these 90 days, all the ancillary processes as mentioned in the agreement shall be executed and implemented by the Liquidator and the bidder. The said executions include but are not restricted to distribution of the purchase consideration to the various stakeholders, extinguishment of shares of the Corporate Debtor, issuance of fresh equity shares to the bidder, execution of novation deeds which the relevant counter parties to novate the contracts executed by the Corporate Debtor, employee related agreements and contracts, etc. b. Confirmation of sale: On payment of the 100% of the bid amount, and any applicable GST/Taxes, registration fees, etc. the successful bidder shall be issued the letter for confirmation of sale. The confirmation of sale is subject to the necessary approvals and processes, if any, towards various statutory and non statutory authorities which includes but is not restricted to Securities and Exchange Board of India, Bombay Stock Exchange, National Stock Exchange, The Directorate General of Foreign Trade, Income Tax, GST Department, Factory Inspector, MPCB, etc. 10. On 11/11/2020, the Applicant s ..... 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Paragraph 2 above may be permitted to pay/adjust the Sale Consideration in the following manner (i) INR 40,00,00,000/- (Indian Rupees Forty Crores only) by way of investment into the equity shares of the Corporate Debtor; and (ii) the balance amount of INR 150,90,00,000/- (Indian Rupees One Hundred and Fifty Crores and Ninety Lakhs only) in the form of unsecured debt; (b) a direction be issued that immediately upon payment of the entire Sale Consideration, the Applicant (or the entities as mentioned in Paragraph 2 above, as the case may be) get all the rights, title and interest in the whole and every part of the Corporate Debtor, including but not limited to contracts, free from security interest, encumbrance, claim, counter claim or any demur, and the Sale Consideration shall be distributed by the Liquidator in terms of the Section 53 of the Code; (c) a direction be issued that on and from the Date of Acquisition, all the claims or demands made by, or liabilities or obligations owned or payable to any actual or potential creditors of the Corporate Debtor including the Government Dues (including but not limited to liabilities, interest and penalties, duties, etc. on account o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uals be permitted to act as Directors of the Corporate Debtor duly appointed under the provisions of the Companies Act, 2013, and direct the Registrar of Companies to do all such acts, deeds and things that are necessary to appoint the following individuals as directors of the Corporate Debtor, who are individuals recommended by the Applicant, in order to enable the Corporate Debtor to file relevant returns required by applicable law: Name of the Proposed Directors DIN Mr. Satyapal Jain 00011774 Mr. Gaurav Jain 00077770 Mr. Sampat Bhudeka 02796982 (j) a direction be issued that all subsisting consents, licenses, approvals, rights, entitlements, benefits and privileges whether under law, contract, lease or license, granted in favour of the Corporate Debtor or to which the Corporate Debtor is entitled to shall, notwithstanding any provision to the contrary in their terms and irrespective of the commencement of the insolvency/liquidation proceedings under the Code, in relation to the Corporate Debtor be deemed to continue without disruption, for the benefit of the Corporate Debtor and all additional licenses, registrations and consents required by the Corporate Debto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bility of the Corporate Debtor to claim incentives under the Package Incentive Scheme, as framed by the Government of Maharashtra, shall be extended for a period of 5 (five) years from the Date of Acquisition; (r) the bid submitted by the Applicant should be considered to be a resolution plan under Section 79 of the Income Tax Act, 1961; (s) Other or further order or orders be passed and/or direction or directions be given as this Hon'ble Tribunal may deem fit and proper. 17. The Respondent / Liquidator in his reply stated that the Prayer in Clause (a) is in consonance with the letter and spirit of the Eauction Memorandum and he has no objection to the said prayer. 18. The Respondent submits that he has filed Second Progress Report dated 10/10/2020 with the Registry of the Tribunal pursuant to the Regulation 15(1)(b) of the Liquidation Process Regulations and the same is extracted below: "I say that all the secured financial creditors have relinquished their security interest in liquidation estate of the Corporate Debtor. The aforesaid position has also been recorded in the Second Progress Report dated October 10, 2020 submitted by the Liquidator to this Hon'ble Tribunal pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t), wherein the committee examined the term "going concern" as below: "The phrase 'as a going concern' imply that the Corporate Debtor would be functional as it would have been prior to the initiation of CIRP, other than the restrictions put by the Code." 23. It is beneficial to refer Para Nos. 7 & 8 of the Round Table of Insolvency and Bankruptcy Board of India held with the stakeholders on 21/05/2018, referring to the case of Gujarat NRE Gujarat NRE - NCLT KOLKATA BENCH: C.P. (IB) No. 182/KB/2017 , wherein a note was published by IBBI defining "going concern" as below: "7. 'Going Concern' means all the assets, tangibles or intangibles and resources needed to continue to operate independently a business activity which may be whole or a part of the business of the corporate debtor without values being assigned to the individual asset or resource." In view of this, the following options are submitted for consideration: a. The corporate debtor may be sold as a going concern, as provided in the extant regulations. As the Company survives, there will be no need for dissolution of the Company in terms of section 54 of the Code. The assets along with all attendant claims, lim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orate Debtor is extinguished and the acquirer takes over the undertaking with the assets, licenses, entitlements etc. The undertaking includes the business of the Corporate Debtor, assets, properties and rights etc. excluding the liabilities. However, in this case the assets that are included in the E-Auction Memorandum only have to be taken over by the Applicant. 26. The Corporate Debtor survives, only the ownership is transferred by the Liquidator to the purchaser. All the rights, titles and interest in the Corporate Debtor including the legal entity is transferred to the purchaser. After the sale as a 'going concern', the purchaser will be carrying on the business of the Corporate Debtor. 27. As far as the Liquidator is concerned, when the sale consideration is received from the bidder / purchaser, the same will be distributed to the Creditors in accordance with Section 53 of the Code. Since the amount is paid to the Creditors in terms of the Code, the liabilities of the Corporate Debtor towards the Creditors are treated as settled and the purchaser takes the assets free of any encumbrances or whatsoever. 28. In the normal parlance "going concern" sale is transfer of assets a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n'. Hence there is no impediment for the sale of the Corporate Debtor as a 'going concern'. 34. As a consequence to the above discussions and on perusal of the pleadings and submissions made by the learned senior counsel for the Applicant the following order is passed: (a) Prayer (a) is allowed. The Applicant is permitted to bring in Rs. 40 crores as share capital and Rs. 150.90 crores as unsecured debt towards payment of sale consideration. (b) The Applicant shall get all the rights, title and interest over whole and every part of the Corporate Debtor, including but not limited to contracts free from security interest, encumbrance, claim, counter claim or any demur. The sale consideration, when received, shall be distributed by the Liquidator in terms of the Section 53 of the Code. Prayer (b) is accordingly allowed. (c) The Applicant shall not be responsible for any other claims / liabilities / obligations etc. payable by the Corporate Debtor as on this date to the Creditors or any other stakeholders including Government dues. All the liabilities of the Corporate Debtor as on date stand extinguished, as far as the Applicant is concerned. (d) Any proceedings pending against th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (m) All the assets specified in the E-auction memorandum shall continue to be the assets of the Corporate Debtor on making the payment of the balance sale consideration to the Liquidator by the Applicant. (n) The Liquidator is directed to provide all support and assistant to the Applicant for the smooth functioning of the Corporate Debtor to complete the acquisition. (o) The Liquidator and Applicant shall be at liberty to take all the steps required to make accounting entries for the smooth transmission and clearing the balance sheet. (p) The Liquidator is directed to ensure completion of pending filings with the Registrar of Companies, Income Tax Authorities and any other Government / Statutory Authorities. (q) The Corporate Debtor is entitled to get the benefits of brought forward losses, if any, subject to permission of the appropriate authority if so entitled under the relevant provisions of the Income Tax Act, 1961. (r) The Corporate Debtor may apply for incentives under the Package Incentive Scheme, framed by the Government of Maharashtra, subject to eligibility and other norms as provided in the said Scheme. (s) As far as the prayer for considering the bid submitted b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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