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TMI Blog2022 (1) TMI 718X X X X Extracts X X X X X X X X Extracts X X X X ..... A is necessary. With passage of more than 365 days after 9.11.2020 now, we feel that the liquidation of the Corporate Debtor should have been completed by now. Therefore, liquidation of the Corporate Debtor should be done as quickly as possible to ensure that the assets of the Corporate Debtor do not undergo deterioration resulting in loss of their value. The concerns of the stakeholders, who are Appellants in this appeal, are not entirely misplaced and that the liquidation process has gone over a long time with rather sketchy results - the appellants have not been able to convincingly advance their arguments for replacement of the liquidator, particularly when no material irregularities have been found in the functioning of the liquidator. The liquidation process which has now gone on for a long time should be completed as early as possible, if not already completed. The inordinate and unexplained delay between the dates decisions are taken in SCC meetings regarding e-auctions and holding of e-auctions are a cause of concern, and they should be reduced to the minimum. Since the liquidation process has been prolonged and the record of SCC meetings show there is a substanti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to conduct one more round of e-auction. Accordingly, the second e-auction was held on 31.7.2020, wherein a Honda car owned by the Corporate Debtor was sold. The other item which was put up for bidding in the second round of e-auction viz. short term loans and advances could not be sold. 4. The Learned Counsel for Appellants has stated that the Liquidator did not follow the stipulated procedure under IBC in the third and fourth rounds of e-auction and he did not inform the SCC members about the result of the second round of e-auction in time, nor the proposed strategy of sale in the third round of e-auction in time. For instance, the result of the second round of e-auction, which took place on 31.7.2020, was informed to the SCC members in the third SCC meeting on 9.11.2020. It was decided in this meeting to hold third round of e-auction, which took place on 20.3.2021. The result of third round of e-auction was placed for information before the SCC only on 24.5.2021. 5. The Learned Counsel for Appellants has further stated that in the third round of e-auction Corporate Debtor s assets were grouped into five groups namely Groups A, B, C, D and E (refer sale notice attached at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollows: (i) Sale notice of first e-auction published in newspapers on 17.3.2020 and sent to SCC members vide email dated 17.3.2020 of the Liquidator (attached at pg. 46 of reply of Respondent No. 1), (ii) Sale notice of second e-auction published in newspapers on 13.7.2020 and sent to SCC members vide email dated 13.7.2020 of the Liquidator (attached at pg. 47 of reply of Respondent No. 1), (iii) Sale notice of third e-auction published in newspapers on 6.3.2021 sent to SCC members vide email dated 9.3.2021 of the Liquidator (attached at pg. 48 of reply of Respondent No. 1), and (iv) Sale notice of fourth e-auction published in newspapers on 25.8.2021 sent to SCC members vide email dated 26.8.2021 of the Liquidator (attached at pg. 49 of reply of Respondent No.1). 8. Thus, the Ld. Counsel of Liquidator has claimed, the information about various rounds of e-auctions was duly provided to the members of SCC. Moreover, he has urged, the representative of Appellant Paradise Systems was present during discussion in all the meetings of SCC and the minutes of the meetings of the SCC were sent to the stakeholders (minutes of meetings attached at pp. 38 45 of re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction which was carried out in a fully fair and transparent manner, and therefore no case for cancellation of any auction process is made out. 12. We have considered the pleadings and documents submitted by the Appellants and Respondents and also duly considered the oral arguments put forth by respective Learned Counsels. 13. The grounds pleaded in the appeal for replacing the liquidator are that the liquidator did not carryout the process of liquidation insofar as sale of assets through the e-auction is concerned, in a fair and transparent manner. It is also urged in the grounds of appeal that the liquidator did not discuss the process and details of liquidation with the stakeholders as well as Appellants, who are also stakeholders in the liquidation proceedings, with an admitted claim of ₹ 40,32,98,554 in the list of stakeholders version I (attached at pp.67-79 of Appeal Paperbook, Vol.I ). 14. Insofar as constitution of the SCC is concerned, the relevant extract of regulation 31A of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 is as follows 31-A. Stakeholders consultation committee. (1) The liquidator shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s; (b) the assets in a slump sale; (c) a set of assets collectively; (d) the assets in parcels; (e) the corporate debtor as a going concern; or (f) the business(s) of the corporate debtor as a going concern. Provided that where an asset is subject to security interest, it shall not be sold under any of the clauses (a) to (f) unless the security interest therein has been relinquished to the liquidation estate. 32-A. Sale as a going concern. (1) Where the committee of creditors has recommended sale under clause (e) or (f) of regulation 32 or where the liquidator is of the opinion that sale under clause (e) or (f) of regulation 32 shall maximize the value of the corporate debtor, he shall endeavor to first sell under the said clauses. (2) For the purpose of sale under sub-regulation (1), the group of assets and liabilities of the corporate debtor, as identified by the committee of creditors under sub-regulation (2) of regulation 39-C of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 shall be sold as a going concern. (3) Where the committee of creditors has not i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RESOLVED FURTHER THAT the committee hereby agrees to reimburse the said expenses by debiting the bank accounts maintained by the corporate debtor and authorize Mr. Mohan Lal Jain, Liquidator to do all acts, deeds and matters as may be necessary to give effect to this resolution. 21. The minutes of the third SCC meeting record the approval of these resolutions (extract at pp.40-42 of the Reply of Respondent No. 1). Thereafter, the liquidator sent an e-mail dated 17.3.2020 to SCC members, which was actually after the sale notice had been published in newspapers on 17.3.2020. This sale notice (attached at pp. 171-173 of Appeal Paperbook) shows that the assets have been grouped in five groups namely groups A, B, C, D and E. Such a grouping of assets does not seem to have been discussed as it is not recorded in the minutes of meeting of third SCC. 22. In the fourth meeting of SCC held on 24.5.2021,the minutes recorded are as follows (attached at pp. 43 45 of the reply of Respondent No. 1) :- Then, the Chairman informed the Committee that keeping in view of the efforts made for sale of assets under clause (a) to (d) of Regulation 32 of the IBBI (Liquidation Process) Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a going concern. Hence, a period of prescribed time limit for completion of liquidation of 365 days should be counted from the date of 3rd meeting of SCC held on 9.11.2020. Since there was no lockdown enforced by the authorities in the period after 9.11.2020, no exclusion of time under Regulation 47-A is necessary. With passage of more than 365 days after 9.11.2020 now, we feel that the liquidation of the Corporate Debtor should have been completed by now. Therefore, in our view liquidation of the Corporate Debtor should be done as quickly as possible to ensure that the assets of the Corporate Debtor do not undergo deterioration resulting in loss of their value. 26. On the basis of discussion in above mentioned paragraphs about how various rounds of e-auctions have been carried out, we find that the concerns of the stakeholders, who are Appellants in this appeal, are not entirely misplaced and that the liquidation process has gone over a long time with rather sketchy results. We also note the concern of the Appellants that the cost of liquidation is also going up as the liquidation process is getting prolonged. 27. In view of the above discussion and after perusing the do ..... X X X X Extracts X X X X X X X X Extracts X X X X
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