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TMI Blog2022 (3) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... /2019 had inter alia directed closure of liquidation process of the Corporate Debtor K.T.C. Foods Private Limited without dissolution of K.T.C. Foods Private Limited. The Appellant is aggrieved by the impugned order as much as the Ld. Adjudicating Authority has denied the sale of the Corporate Debtor as a going concern to the Appellant without any liabilities including contingent liabilities and with immunity from existing litigations, if any, against the Corporate Debtor. The Ld. Adjudicating Authority has also denied the extinguishment of the remaining unpaid liabilities of the Corporate Debtor after distribution of the proceeds of the sale of Corporate debtor as a going concern as per the order of priority provided in Section 53 of the Insolvency and Bankruptcy Code, 2016 (for short IBC) as well as waiver from all the past non-compliances of the Corporate Debtor under applicable laws for the period prior to the e-auction. 2. The facts giving rise to this Appeal are as follows: i) The Appellant - 'M/s Shiv Shakti Inter Globe Exports (P) Ltd.' is a company registered under the provisions of the Companies Act, 1956 and was incorporated on 10.10.2012. The Operational Creditor name ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at 24.63 Crores and liquidation value at 18.45 Crores. vii) The liquidation estate of the Corporate Debtor was formed by the Liquidator after relinquishment of the Security Interest on the Assets by the only secured stakeholder who submitted their claim under the process being Oriental bank of Commerce. viii) On 05.11.2019, the Liquidator issued sale notice for invitation of expression of interest for e-auction of the K.T.C. Foods Private Limited as per Regulation 32(e) Liquidation Process Regulation 2016 wherein the last date for submission of Requisite Forms, Affidavits, Declaration etc., by prospective Bidders was scheduled on 11.11.2019, however, on receipt of several enquiries from other prospective bidders, the last date was extended till 18.11.2019 which was also last date for submission of earnest money deposits. ix) That during the period 11.11.2019 to 18.11.2019 four Expressions of Interest were stated to be received and all prospective bidders were found to be in compliance under Section 29A of the Code. The Appellant herein, being the one of the bidders, also submitted the earnest money deposit of Rs. 1 Crore along with its bid on 18.11.2019. x) The e-auction was co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Code, 2016, the remaining unpaid outstanding liabilities of the Corporate Debtor shall be extinguished; d. Extinguishment of ownership of the equity shares of the existing equity shareholders and allotment of fresh shares of the Corporate Debtor in favour of M/s Shiv Shakti Inter Globe Exports Private Limited, the Successful Bidder; e. All consequences of past non-compliances of the Corporate Debtor under applicable laws for the period prior to this E-Auction shall be waived; f. Any other directions which the Hon'ble National Company Law Tribunal, Kolkata Bench may deem fit in the facts and circumstances of the matter." xiii) Vide order dated 18.05.2020, the Ld. Adjudicating Authority has held which is hereunder; " Therefore, reading Section 54 of the Code with Regulation 32(e) of the Liquidation Process Regulations 2016, we consider it fit to direct closure of the liquidation process of K.T.C. Foods where it is being sold a going concern without directing dissolution of K.T.C. Foods." Hence this Appeal. Submissions on behalf of the Appellant 3. The Learned Counsel for the Appellant during the course of argument and in his memo of Appeal along with Written Submissions s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liabilities being a part of the undertaking, as that will be a case of business transfer and not a case of liquidation. 8. It is further submitted that it has never been the intention of the Code that the purchaser of the Corporate Debtor as a going concern would be liable to the past or contingent liabilities of the Corporate Debtor. Without prejudice, if the contention is accepted, then it would mean that the Corporate debtor after completing the cycle, from CIRP to liquidation, would still be at the same position. 9. The Ld. Counsel for the Appellant relied on a judgment in the case of "State of Gujrat Vs. OL of kengold (India) Ltd. reported in MANU/GJ/0353/2008" which is held as under: " 37 ..... In view of this discussion and applying the law to the questions posed before the Court, the Court in its humble opinion takes the view that the applicants - auction purchasers and the Official Liquidator are right in their perception that the auction purchasers are not liable to discharge any of the liabilities pertaining to the pre-liquidation period of the Company in liquidation and all these attachments which are made on the assets of the Company in liquidation are required to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that in order to achieve effective revival of the Corporate Debtor after its sale as a going concern, the details of all its assets and liabilities are required to be included in the information memorandum so that its prospective purchasers are aware of the liabilities that they may have to face and provide for. In the present case, the Appellant is aggrieved by belated claims made against the Appellant after purchasing Respondent No. 1 company as a going concern, pertaining to Respondent No. 1 purported liabilities prior to its sale, when these claims were not even submitted with Respondent No. 2 in the prescribed form either during Respondent No. 1's CIRP or at the liquidation stage. The Respondent No. 2 respectfully submits that these claims cannot be foisted upon the Appellant. This is in view of the legislative intent to freeze/extinguish all claims so that the liquidation purchaser starts on a "clean slate" and is "not flung with any surprise claims", as held by the Hon'ble Supreme Court in the case of "Ghanashyam Mishra and Sons Private Limited Vs. Edelweiss Assets Reconstruction Company Limited in Civil Appeal No. 8129 of 2019" at paragraphs 60, 61 and 86. As such, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of law is echoed in various other decisions including the Hon'ble NCLT, Mumbai's orders in Gaurav Jain Vs. Sanjay Gupta in IA No. 2264 of 2020 in CP (IB) 1239/MB/2018 and in M/s. Elecon Engineering Company Limited Vs. M/s. Enviiro Bulkk Handling Systems Private Limited in IA No. 741 of 2021 in CP (IB) No. 1319/MB/2017. Even so, the impugned order has erroneously disallowed Respondent No. 2's prayer for extinguishment of Respondent No. 1's past liabilities and other consequential reliefs in the present case, which is essential to ensure its effective revival as a going concern. 18. It is further submitted that in the above Appeal of the Appellant deserves and ought to be allowed by this Hon'ble Tribunal and Respondent No. 1's sale as a going concern ought to be upheld with the necessary consequential directions (sought as prayers (c) and (e) in C.A. No. 1189 of 2019 in the Company Petition) for extinguishment of Respondent No. 1's past/remaining unpaid outstanding liabilities (including contingent liabilities) prior to its sale as a going concern, after payment of sale proceeds distributed in accordance with Section 53 of the IBC and waiver of all its past non-compliances under ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lations, 2016 appointed a third valuer as approved by the Members of the CoC in the third meeting of CoC on 12.03.2019 being Crest Capital Group Private Limited and in compliance with Regulation 35(1) of the CIRP Regulations 2016, considered the average of estimates of the values. As per the summary of the valuation the fair value is fixed at 24.63 Crores and liquidation value at 18.45 Crores (Annexure P-4 at page 81 of the Appeal). On 05.11.2019, the Liquidator issued sale notice for invitation of expression of interest for e-auction of the K.T.C. Foods Private Limited as per Regulation 32(e) Liquidation Process Regulation 2016 wherein the last date for submission of Requisite Forms, Affidavits, Declaration etc., by prospective Bidders was scheduled on 11.11.2019, however, on receipt of several enquiries from other prospective bidders, the last date was extended till 18.11.2019 which was also last date for submission of earnest money deposits. During the period 11.11.2019 to 18.11.2019 four Expressions of Interest were stated to be received during the period and all prospective bidders were found to be in compliance under Section 29A of the Code. The Appellant herein, being th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant who has purchased the 'Corporate Debtor Company' as a 'going concern'. It is significant to mention that the second Respondent/Liquidator has specifically submitted that even these claims by the Uttar Haryana Bijili Vitran Nigam were not submitted in the prescribed form either during the CIRP Process or at the Liquidation stage. We are of the considered view that at this stage subsequent to the sale of the 'Corporate Debtor Company' as a 'going concern', these claims cannot be foisted upon the Appellant. The scope and objective of the Code is to extinguish all claims specifically the ones which were not even made during the CIRP or in the Liquidation stage, to aid the purchaser of the Company as a 'going concern' to start on a 'clean slate'. The Hon'ble Supreme Court in 'Ghanshyam Mishra & Sons Pvt. Ltd.' Vs. 'Edelweiss Asset Reconstruction Company Ltd. & Ors.', Civil Appeal No. 8129 of 2019 and in 'CoC of Essar Steel India Ltd.' Vs. 'Satish Gupta & Ors.' (2020) 8 SCC 531 has laid down the proposition that the purchaser of the Company even in the Liquidation stage cannot be burdened with past liabilities when it is not mentioned in the 'Sale Notice'. 22. It is no longer Res ..... X X X X Extracts X X X X X X X X Extracts X X X X
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