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TMI Blog2022 (2) TMI 1177X X X X Extracts X X X X X X X X Extracts X X X X ..... -auction process and the Respondent No. 2 has acquired all its assets and liabilities but through the impugned order dated 18.05.2020 passed by Ld. Adjudicating Authority has rejected the prayer for directions to Respondent No. 2 to make the payment of claim to the Applicant (Appellant herein). The sale as a going concern or as is where is whatever there is basis can be only with assets and not liabilities. As per the Regulation 32A of IBBI (Liquidation Process) Regulations, 2016, the Liquidator is authorized to sell a company on a going concern basis - the Oriental Bank of Commerce is the sole Financial Creditor and confirmed relinquishment of its security interest over Respondent No. 1, current and non-current assets, by its email dated 05.10.2019 sent to Respondent No. 3 and the Oriental Bank of Commerce higher in priority to all the 8 Operational Creditors of Respondent No. 1 including the Appellant. So, they paid the entire amount of INR 18,45,86,646 towards 13.17% of the admitted debt to Respondent No. 1 sole Financial Creditor. There is no merit in the Appeal. The Appeal is hereby dismissed. - Company Appeal (AT) (Insolvency) No. 607 of 2020 - - - Dated:- 25-2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 018 initiated the Corporate Insolvency Resolution Process (for short IBC) against the Respondent No. 1 Company. iv) The Appellant submitted his proof of claims under FORM-B, being an Operational Creditor before the Interim Resolution Professional (for short IRP) along with an affidavit and the documents required to furnish the prove of claim for an amount of ₹ 5,49,73,699/- which includes ₹ 3,43,21,069/- due as Principal amount and ₹ 2,06,52,630/- due as interest on the delayed payment as agreed by the Corporate Debtor, thereafter, the IRP has admitted the claim by the Appellant. v) Further case is that the Minutes of the Second Meeting of the Committee of Creditors dated 23.10.2018 clearly admits the claim of the Appellant/Operational Creditor under the Agenda 4, for a total sum of ₹ 5,49,73,699/- (Annexure A-4 at page 71 to 82 of the Appeal). vi) The CIRP process was being conducted, since there was no Resolution Plan received till 15.04.2019, the Committee of Creditors in its meeting held on 25.04.2019 passed the resolution with 100% voting rights approving the liquidation of Respondent No. 1 Company/Corporate Debtor. The Ld. Adjudicating Authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olders Committee, the going concern sale process in the present matter can be followed under Regulation 45(3) (a) with Regulation 32A and 33(1) of the Liquidation Process Regulation, 2016. 6. It is further submitted that since the Corporate Debtor has been sold as a going concern, therefore, it should own both of its assets and liabilities. The Ld. Adjudicating Authority relied decision on the Bank of India Vs. Southern Online Biotechnologies Ltd. has observed that any liability prior to E-auction during the liquidation process would not be applicable to the person who is purchasing the Corporate Debtor as a going concern. 7. It is further submitted that in the present case no stakeholders committee was formed and the Ld. Adjudicating Authority on its own had allowed the sale of Corporate Debtor as a going concern in the terms of amended regulations. When the auction purchaser is taking benefit of purchasing the Corporate Debtor as going concern, its assets and liabilities should also be owned by it. 8. The Learned Counsel for the Appellant further in the additional Written Submissions submitted that the Ld. Adjudicating Authority has completely overlooked Regulation 39C o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liquidation process claiming that he is entitled to his dues for which he has lodged his claim before the Liquidator. 14. It is further submitted that sale as a going concern or as is where is whatever there is basis can be only with assets and not liabilities. As per the Regulation 32A of IBBI (Liquidation Process) Regulations, 2016, the Liquidator is authorized to sell a company on a going concern basis. Accordingly, the e-auction notice clearly enumerates sale of the Corporate Debtor as a going concern . In this case, the sale as a going concern basis has been further defined by the clause as is where in whatever there is basis which defines a going concern sale and if both are read together then it signifies a sale of only assets and not liabilities. In this context, it is well settled and has been upheld in numerous proceedings/decisions that the sale of the company as a going concern is without previous liabilities or encumbrances. The said decisions had passed in the case of Official Liquidator, High Court Vs. Ujjain Nagar Palika Nigam and Ors., (2009) SCC Online Cal. 322 at para 12 14 and Jamshedpur Cements Ltd. Vs. Adityapur Industrial Area Development Au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quidator upon receiving the claims verified and collated the same and prepared the lists of stakeholders. Subsequently, upon taking custody and control of all the assets of the Corporate Debtor, the Liquidator prepared the asset memorandum and put up the Corporate debtor on sale. Therefore, any proceeds out of sale will be governed under the provisions of Section 53 of the IBC. 17. It is further submitted that in the present case, the total amount of claims received from all stakeholders was 162.67 crores out of which 151.78 crores were admitted. The sale of the Corporate Debtor was for consideration of 18.45 crores and as per the waterfall mechanism prescribed under Section 53 of the Code, the same has been appropriated towards the debt of the Financial Creditors. Therefore, the Operational Creditors including the present Appellant is not entitled to any payment. Based on these submissions the Appeal is fit to be dismissed. Submissions on behalf of the Respondent No. 2 18. The Learned Counsel for the Respondent No. 2 during the course of argument and in his Reply Affidavit submitted that merely because the Respondent No. 2 purchased the Respondent No. 1/Corporate Debt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concern. 22. It is further submitted that the sale proceeds were released on 25.11.2019 and sale certificate dated 26.11.2019 was issued to Shiv Shakti Inter Globe Exports Private Limited. The sale proceeds were then distributed in accordance with section 53 of the IBC. Accordingly, the entire amount of INR 18,45,86,646 was paid towards 13.17% of the admitted debt of Respondent No. 1 sole Financial Creditor, Oriental Bank of Commerce. 23. It is further submitted that it is settled law that when the sale proceeds of a Corporate Debtor are duly distributed in the order of priority and in the manner prescribed by Section 53 of the IBC, no creditor of the Corporate Debtor can claim any share in such proceeds contrary to its rank in the order of priority under Section 53 of the IBC. 24. It is further submitted that Oriental Bank of Commerce was Respondent No. 1 sole Financial Creditor and confirmed relinquishment of its security interest over Respondent No. 1 fixed, current and non-current assets, by its email dated 05.10.2019 sent to Respondent No. 3. Therefore, as a secured creditor having relinquished security as per Section 52 of the IBC, the Oriental Bank of Commerce rank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of claim to the Applicant (Appellant herein). The sale as a going concern or as is where is whatever there is basis can be only with assets and not liabilities. As per the Regulation 32A of IBBI (Liquidation Process) Regulations, 2016, the Liquidator is authorized to sell a company on a going concern basis. E-auction notice clearly enumerates sale of the Corporate Debtor as a going concern is without previous liabilities or encumbrances which is supported by the decisions passed in the case of Official Liquidator, High Court Vs. Ujjain Nagar Palika Nigam and Ors., (2009) SCC Online Cal. 322 at para 12 14 and Jamshedpur Cements Ltd. Vs. Adityapur Industrial Area Development Authority and Ors. (2011) SCC Online Cal 1098 : (2011) 164 Comp Cas 72 at para 26 which are quoted hereinabove. The Oriental Bank of Commerce is the sole Financial Creditor and confirmed relinquishment of its security interest over Respondent No. 1, current and non-current assets, by its email dated 05.10.2019 sent to Respondent No. 3 and the Oriental Bank of Commerce higher in priority to all the 8 Operational Creditors of Respondent No. 1 including the Appellant. So, they paid the entire am ..... X X X X Extracts X X X X X X X X Extracts X X X X
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