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TMI Blog2022 (9) TMI 686X X X X Extracts X X X X X X X X Extracts X X X X ..... (AT) (Ins) No. 513 of 2022 has been filed against the order dated 22.03.2022, by which the order of stay has been extended. The first Impugned Order dated 28.2.2022 is hereinafter referred to as Impugned Order - 1 and Impugned Order dated 22.3.2022 is hereinafter referred to as Impugned Order - 2 respectively. Thus through this judgment, we will dispose of CA(AT) (Ins.) No.513 of 2022 and CA(AT) (Ins.) No.514 of 2022. 2. In brief, Corporate Insolvency Resolution Process (in short 'CIRP') of the corporate debtor was initiated vide order dated 28.06.2017 and the Appellant herein was appointed as the Interim Resolution Professional (in short 'IRP'). The Appellant was appointed as Resolution Professional (in short 'RP') of the Corporate Debtor in the first meeting of CoC dated 27.07.2017. The Adjudicating Authority passed the order dated 22.01.2018 to initiate liquidation of the Corporate Debtor i.e. Roofit Industries Limited and the Appellant was appointed as the Liquidator. It is alleged that the Appellant as Liquidator of the Corporate Debtor, conducted a first e-auction on 01.12.2020 for the sale of immovable property viz. Plot No. B-15, Mirjole Block, MIDC, Opposite MSWC, Ratnag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, the Respondent filed another I.A No. 868 of 2021 on 20.04.2021. In view of the fact that the Respondent had failed to deposit the full sale consideration, the e-auction was cancelled by the Appellant on 23.04.2021 and forfeited the CMD of the Respondent deposited towards e-auction of December, 2021 and March 2021. It is claimed by the Appellant that on cancellation of offer to Respondent, the property was sold by the Appellant for a sum of Rs. 2.77 Crores to M/s Survival Technologies Pvt. Ltd. The Respondent in the meanwhile filed a Writ Petition No. 1200 of 2021 before the Hon'ble Bombay High Court seeking stay of the prospective e-auction. The Writ Petition filed by the Respondent was dismissed on 06.05.2021 and liberty was granted to pursue his application for relief before the Adjudicating Authority. 4. Aggrieved against the order of the Hon'ble High Court, the Respondent filed SLP(C) No. 7051 of 2021 before the Hon'ble Supreme Court against the Appellant, IBBI and Survival Technologies Pvt. Ltd. but the same was dismissed on 29.06.2021. 5. It is further stated by the Appellant that the purchaser, namely, Survival Technologies Pvt. Ltd. through a letter dated 13.12.2021ask ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In order to place the proper context of the impugned orders, he has referred to the first round of e-auction held in December, 2020, wherein Pavan Enterprises became the successful bidder and was told to make full payment of the sale amount. He has further submitted that Pavan Enterprises sought extension of time for a period of 75 days through letter dated 16.12.2020 in accordance with the clause 4.1 of the 'Terms and Conditions' of the e-auction to deposit the balance of the sale amount but he failed to do so in the extended time period that was provided to him and with the result the e-auction was cancelled with forfeiture of the Caution Money Deposit (in short 'CMD'). 10. The Learned Counsel for Appellant has further submitted that the second round of e-auction took place in March 2021 in which Pavan Enterprises was again adjudged the highest, and therefore, the successful bidder. The Learned Counsel for Appellant has further submitted that Pavan Enterprises sought extension of time vide letter dated 2.4.2021 for a period of 15 days to complete the full payment and agreed to pay interest @ 12% p.a. on the amount, as he could not get financial assistance from the bank which h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. He has argued that the Respondent wanted to thwart the effort being made by the Liquidator for auction-sale of the property, and in pursuance of such an objective, prior to the holding of the e-auction, it (Respondent Pavan Enterprises) caused publication of a public notice in the edition dated 23.2.2022 of the newspaper "Ratnagiri Times" informing the public that a case IA No. 868 of 2021 was pending regarding the said property in NCLT Mumbai thereby informing and warning the prospective buyers even though Pavan Enterprises did neither have a stay order for the e-auction in its favour nor it was desirable to obstruct the action of the Liquidator. The Learned Counsel for Appellant has claimed that in the above-mentioned situation, when the Respondent has been seeking extension of time and is unable to deposit the requisite balance sale amount due to probable difficulty in obtaining bank finance, the conduct of the Respondent is highly improper. He has stated that in the first round of e-auction Pavan Enterprises was granted 90 days' time period to deposit the balance of sale consideration and again given 15 days' time extension which was in accordance with clause 4.1 of the Term ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound by the advice of Stakeholders Consultation Committee and has full and independent authority to give extension of time to the Respondent for depositing the balance sale consideration. 17. The Learned Counsel for Respondent has argued that since he has already paid substantial amount against the sale consideration, he is willing to deposit the balance amount and in view of his willingness he had approached the Adjudicating Authority by filing IA No. 868 of 2022 and in the interest of justice, the Adjudicating Authority has granted ad-interim stay to the process of fresh e-auction. He has, thus claimed that the said stay is in the interest of justice and for protecting his rights and therefore, there is no error in the order dated 28.2.2022 and later in the order dated 22.3.2022 which has only extended the stay order, passed in IA No. 868 of 2021 and IA No. 485 of 2022. 18. We note that the first round of e-auction took place in December, 2020 and Pavan Enterprises was adjudged as the successful bidder and that since Pavan Enterprises was unable to deposit the requisite amount within stipulated time period, he sought an extension of time from the Liquidator, which was granted b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15 days. The liquidator, in keeping with the situation and the terms and conditions of the second e-auction, gave a total of 30 days' time to Pavan Enterprises to deposit the bid amount, but he failed to do so. It is a fact that Pavan Enterprises participated in the e-auction based on the terms and conditions for e-auction of 'the property' without any condition and thus bound himself to the various clauses of terms and conditions of e-auction, particularly the time period stipulated therein for depositing the balance purchase price. Moreover, in the order of the Adjudicating Authority dated 16.3.2021 given in IA No. 468 of 2021 (attached at pp. 13-14 of Respondent's reply, Dy. No. 36975 dated 4.7.2022), it was made clear that no further indulgence shall be granted to Pavan Enterprises. 21. This order of NCLT was not challenged and has therefore achieved finality insofar as the participation of Pavan Enterprises in the second round of e-auction is concerned, and also with respect to any time extension for depositing the balance amount. Thus, it is clear that Pavan Enterprises participated in the second e-auction and availed the benefit of a full 30 days' time for payment of balanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pavan Enterprises who was the successful bidder in the second e-auction, had committed itself to making full payment by 21.4.2021 and therefore to engage in litigation through IA no. 868/2022 and IA no. 485.2021 was highly improper on the part of Respondent, and obtaining the order of ad-interim stay dated 28.2.2022 when it was precluded from doing so was clearly abuse of the judicial process. We also note that the Respondent approached Hon'ble High Court at Bombay to seek extra time of 45 days to deposit the balance consideration, which was not acceded to, and the petitioner was given liberty to move the NCLT for hearing of its Interlocutory Application. 24. We also take note of the fact that the Respondent experienced difficulty in depositing the balance of sale consideration after the first round of e-auction and could not deposit the requisite amount after committing itself to doing so. We also note that after making an offer to Survival Technologies in the second round of e-auction, due to delay in getting possession of the said property caused to protracted litigation by Pavan Enterprises. Survival Technologies sought cancellation of the e-auction sale after having made pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd NCLAT. The orders of the NCLT and NCLAT make it abundantly clear that despite the grant of sufficient time, the appellant has not been able to comply with the terms of the Resolution Plan. Since 9 October 2020, despite the passage of almost five months, the appellant has not been able to deposit an amount of Rs 50 crores. Time is a crucial facet of the scheme under the IBC.8 To allow such proceedings to lapse into an indefinite delay will plainly defeat the object of the statute. A good faith effort to resolve a corporate insolvency is a preferred course. However a resolution applicant must be fair in its dealings as well. The appellant has failed to abide by its obligations. In that view of the matter, we see no reason or justification to entertain the Civil Appeal any further. The consequence envisaged under the order of this Court shall accordingly ensue in terms of the forfeiture of the amount of Rs 20 crores. As a consequence of this order, the management shall revert to the liquidator for taking steps in accordance with law. The Civil Appeal is accordingly dismissed." 27. The Respondent has referred to clause 12 of Schedule 1 under Regulation 33 of the Liquidation Process ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as clearly abused the process of law to gain undue advantage and thereby caused a delay in the culmination of the liquidation process. Our opinion is strengthened by the fact that the first round of e-auction took place in December, 2020 and further rounds of e-auction of the same property went on till March, 2022, which is lapse of a considerable period of time. We also note that the Hon'ble Apex Court in the matter of Kridhan Infrastructure (supra) has also acknowledged that timely completion of the insolvency and liquidation process is the main objective of IBC and should be completed in a time-bound manner as required and stipulated under the IBC. 30. In view of the situation and the conduct of the Respondent as discussed in detail above, we are of the view that a fine of Rs. One Lakh should be imposed on the Respondent for abusing the process of law thereby causing delay in the liquidation process, and seeking to subvert the basic objective of IBC. This fine shall be deposited in Prime Minister's Relief Fund within 30 days of this order. We also direct that the respondent shall pay to the Liquidator an amount of Rs. One lakh as litigation costs incurred by the liquidator in p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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