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TMI Blog2021 (12) TMI 82X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the certificate of sale in favour of R-1 in compliance with the directions of the Learned Adjudicating Authority. All steps taken by the Liquidator in compliance with the impugned Order will stand reversed subject to the outcome of this Appeal - there is no concluded contract till the bid is accepted. Before there was a concluded contract, it was open to the bidders to withdraw their bids. Public auctions are held to get the best possible price. Once those aspects are recognised, there appears to be no basis for contending that the owner who had offered to sell them cannot decline to accept the highest bid if he thinks that the price offered is inadequate. It is clear that the learned Adjudicating Authority proceeded on the wrong assumption, i.e. the sale was successfully concluded; therefore, arriving at the wrong conclusion that the sale has been successfully concluded; could not have been cancelled by the learned Liquidator - It is well-settled law laid down by Hon'ble Supreme Court in the catena of decisions that the successful bidder in the auction sale does not acquire any vested right in law to enforce the auction, more particularly, when the auction notice confers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts in question. d. There cannot be endless wait to get the best price for assets especially when there is no material to support a conjecture that there may be a better price for the assets etc. Based on above observations, the Adjudicating Authority has asked the liquidator to send communication to the successful bidder requiring him to deposit the balance sale consideration within the time specified in the e-auction notice. 4. The Appellant-Bank has raised the issue that even if some bidder is highest, it does not amount to that the auction has successfully been completed. They have also raised the issue that sale may not be completed to the highest bidder even if full amount is received. The bidding terms and conditions has given absolute authority to the liquidator to accept or reject any or all bids or cancel the e-auction at any stage. The Highest bidder does not get a vested or acquired right in law. 5. The learned Counsel for the Appellant liquidator placed reliance on the following rulings; Hon'ble Supreme Court in case of Purxotoma Ramanata Quenim v. Makan Kalyan Tandel, (1974) 2 SCC 169 at page 175 wherein it is held that; 11. In State of Orissa v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... those provisions has not been challenged before us. Under Section 29(2) the Government had power to dispose of any of the exclusive privileges mentioned in Section 22 either by auction or otherwise as it may by general or special Order direct. That being the amplitude of the power of the Government, we fail to see how the Government can be said to have conferred on itself arbitrary power under clause (6) of its Order made on 6 January, 1971, when it provided that: 'No sale shall be deemed to be final unless confirmed by the State Government who shall be at liberty to accept or reject any bid without assigning any reason therefor?' Even apart from the provisions of Sections 22 and 29, this Court took the view that the power retained by the Government under clause (6) reproduced above was not unconstitutional. It was observed in this context (at p. 44, para 13): Even apart from the power conferred on the Government under Sections 22 and 29, we fail to see how the power retained by the Government under clause (6) of its Order, dated 6 January, 1971, can be considered as unconstitutional. As held by this Court in Cooverjee B. Bharucha case [AIR 1954 SC 220 : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the tender. It is well settled that so long as the bid has not been accepted, the highest bidder acquires no vested right to have the auction concluded in his favour (vide Laxmikant v. Satyawan [Laxmikant v. Satyawan, (1996) 4 SCC 208], Rajasthan Housing Board v. G.S. Investments [Rajasthan Housing Board v. G.S. Investments, (2007) 1 SCC 477] and U.P. Avas Evam Vikash Parishad v. Om Prakash Sharma [U.P. Avas Evam Vikas Parishad v. Om Prakash Sharma, (2013) 5 SCC 182 : (2013) 2 SCC (Civ) 737] ). Further, in case of HUDA v. Orchid Infrastructure Developers (P) Ltd., (2017) 4 SCC 243: (2017) 2 SCC (Civ) 545 : 2017 SCC OnLine SC 64 at page 255 Hon'ble Supreme Court has held that; 13. It is a settled law that the highest bidder has no vested right to have the auction concluded in his favour. The Government or its Authority could validly retain power to accept or reject the highest bid in the interest of public revenue. We are of the considered opinion that there was no right acquired and no vested right accrued in favour of the plaintiff merely because his bid amount was highest and had deposited 10% of the bid amount. As per Regulation 6(2) of the 1978 Regulations, allotment lett ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he competent Authority and it amounts to a concluded contract in relation to the plot in question; and whether the plaintiff could have maintained the suit in the absence of a concluded contract? Considering the aforesaid questions, this Court has discussed the matter thus: (SCC pp. 195-97, paras 30-31) 30. In support of the said proposition, the learned Senior Counsel for the defendant, Mr Rakesh Dwivedi has also placed reliance upon another decision of this Court in State of U.P. v. Vijay Bahadur Singh [State of U.P. v. Vijay Bahadur Singh, (1982) 2 SCC 365] . The learned Senior Counsel has rightly placed reliance upon the judgment of this Court in Rajasthan Housing Board case [Rajasthan Housing Board v. G.S. Investments, (2007) 1 SCC 477] which reads as under: (SCC p. 483, para 9) '9. This being the settled legal position, the respondent acquired no right to claim that the auction be concluded in its favour and the High Court clearly erred in entertaining the writ petition and in not only issuing a direction for consideration of the representation but also issuing a further direction to the appellant to issue a demand note of the balance amount. The direction re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ight to equality and fair treatment. The terms of the invitation to tender are not open to judicial scrutiny as they lie in the realm of contract. No bidder is entitled as a matter of right to insist the Authority inviting tenders to enter into further negotiations unless the terms and conditions of notice are provided for such negotiation. 7. The Appellant has also stated that Liquidator is suppose to conduct multiple rounds of auction to maximise the realization from the sale of assets and merely on account of a person or party having been declared as highest bidder the sale cannot be awarded to the bidder. The highest bidder can also participate in multiple rounds of auctions. 8. The Respondent No.2-Liquidator of the corporate debtor has submitted that the reserve price for the CD (Corporate Debtor) Mirzapur Asset was ₹ 10 Crores against the capital cost of ₹ 17.30 Crores and written down the book value of ₹ 8.59 Crores. He has also stated that CDs Lucknow Asset with a capital cost of ₹ 9.28 Crores and written down book value of ₹ 2.45 crores were sold at ₹ 14.79 Crores against reserve price of ₹ 8.5 Crores. While Mirzapur Assets i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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.-(1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e transparent, and the highest bid at any given point shall be visible to the other bidders. (10) If the Liquidator is of the opinion that an auction where bid amounts are not visible is likely to maximise realisations from the sale of assets and is in the best 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 maximise the realisation from the sale of the assets, and to promote the best interests of the creditors. [(11-A) Where the Liquidator rejects the highest bid in an auction process, he shall intimate the reasons for such rejection to the highest bidder and mention it in the next progress report.] [(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 sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le under Regulation 32, including manner of sale, pre-bid qualifications, reserve price, amount of earnest money deposit, and marketing strategy: Provided that the decision(s) taken by the Liquidator prior to the constitution of consultation committee shall be placed before the consultation committee for information in its first meeting.] (2) The composition of the consultation committee under sub-regulation (1) shall be as shown in the Table below: Class of Stakeholders Description Number of Representatives (1) (2) (3) Secured financial creditors, who have Where claims of such creditors Number of creditors in the relinquished their security interests under Section 52 admitted during the liquidation process is less than 50% of liquidation value category, subject to a maximum of 2 Where claims of such creditors admitted during the liquidation process is at least 50% of liquidation value Numb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee of creditors made under sub-regulation (1) of Regulation 39-C of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, before the consultation committee for its information. (9) The consultation committee shall advise the Liquidator, by a vote of not less than sixty-six percent of the representatives of the consultation committee, present and voting.(10) The advice of the consultation committee shall not be binding on the Liquidator: Provided that where the Liquidator takes a decision different from the advice given by the consultation committee, he shall record the reasons for the same in writing [and mention it in the next progress report].] 11. Regulation 33(3) of the Liquidation Process Regulation casts a duty upon the Liquidator not to proceed with the sale in the circumstances mentioned therein. Regulation 33(3) is not an exhaustive provision applicable only in the specific circumstances stated therein. Thus, it cannot be said that the Liquidator can cancel an auction only if Regulation 33(3) is attracted. Clause 1(11) of Schedule-I specifically authorises a Liquidator to conduct multiple round ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and Order dated 12 August 2021 has only relied upon clause 12 of Schedule 1 of the Regulations 2016 to hold that clause 12 does not vest any discretion in the learned Liquidator to cancel the auction. However, while arriving at the above conclusion, the Learned Adjudicating Authority has failed to consider that clause 11 of the Schedule 1 authorises the Liquidator to conduct multiple rounds of the auction to maximise the realisation from the sale of assets and promote the creditors' best interest. Therefore, unless the power to cancel the auction is read into the conjoint reading of clauses 11, 12 and 13, the provisions in Clause 11 cannot be implemented. 17. An auction sale is not completed under Clause 12 merely because the person has been declared the highest bidder. Instead, the sale is concluded only on full payment of the amount envisaged under Clause 13 of Schedule 1. 18. Therefore, given the settled position in law as stated above, the learned Liquidator in a stage between Clause 12 and Clause 13 of Schedule 1, and given the provisions contained in Clause 3(K) of the sale auction notice, was entitled to cancel the auction. 19. Thus, it is clear that the learn ..... X X X X Extracts X X X X X X X X Extracts X X X X
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