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TMI Blog2022 (9) TMI 804X X X X Extracts X X X X X X X X Extracts X X X X ..... direction and mandatory - it is noted that the IBBI (Liquidation Process) Regulations, 2016 (Liquidation Regulations) as it stood before the amendment dated 25th July 2019, provided that the Liquidator shall Liquidate the Corporate Debtor (CD) within a period of two years from the Liquidation Commencement Date (LCD). Keeping in mind the principle of time value as enshrined in the BLRC report, the said time limit was reduced to one year vide amendment dated 25.07.2019. This Tribunal find that the required Notice was issued correctly by the Liquidator in accordance with the Rules, as provided in I B Code, 2016, and there was no infringement of rights of the Appellant. There are no error in the impugned order on this issue. Whether sale was valid when payment from the Auction Purchaser is not received within 90 days? - Can any extension be granted for the same? - HELD THAT:- The extension was granted due to the Covid-19 lockdown. The order passed by the Adjudicating Authority stands valid on the grounds that almost all functioning were restricted during Covid-19 outbreak, vide Order dated 05.05.2020 - Moreover, the property was said to be in subsistence of attachment of Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... find any error in the Impugned Order, on this ground. Whether the Adjudicating Authority can review its own order? - HELD THAT:- The Applicant filed an Appeal to NCLT to review and revise their order regarding commencement of Liquidation Proceeding, here arises the principle of Res judicata the principle that a cause of action may not be pursued further once it has been judged on the merits. Finality is the term which refers to when a court renders a final judgment on the merits - the Adjudicating Authority was right in taking a decision that it has no power to Review/Recall its own order. This Tribunal, is of the considered opinion that no ground is made out for any interference by this Tribunal - Appeal dismissed. - Company Appeal (AT) (CH) (Ins) No. 336 of 2021 Company Appeal (AT) (CH) (Ins) No. 339 of 2021 Company Appeal (AT) (CH) (Ins) No. 343 of 2021 - - - Dated:- 16-9-2022 - Mr. V.S. Palanivel, Share Holder/ Ex-Managing Director Versus Mr. P. Shriram, CS, Liquidator, M/s Sri Lakshmi Hotels Pvt. Ltd. , Mr. V.S. Palanivel, Share holder/ Ex-Managing Director, M/s Sri Lakshmi Hotels Pvt. Ltd. Versus Mr. P. Shriram, CS, Liquidator, M/s Sri Lakshmi Hotels Pvt. Ltd., M/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in this Judgment. Brief Facts: 2. Shri Lakshmi Hotel Private Limited was incorporated on 27.10.1972 and there were four shareholders i.e. Appellant, his wife, his son and his daughter-in-law. The company purchased a property situated at Old No. 3A, New No. 27, Alexandria Road, Cantonment, Tiruchirappalli-620001. The total extent of the property is 67,533 sq. ft. and the company was carrying on the business of running a hotel and a bar in the said premises. This property is only immovable asset of the company till auction of the said property. 3. The company took loan from M/s Shriram City Union Finance Ltd ( Financial Creditor ) for an amount of Rs. 1,50,00,000 on 03.04.2006 through loan agreement @ 12% interest and was to be repaid within one year. The company took another loan form same Financial Creditor for an amount of Rs. 7,25,000/- on 03.07.2006. Thus, total loan availed was Rs. 15,72,5,000/. Subsequently, dispute arose between both the parties on alleged unilateral interest rate hike by Financial Creditor which compelled company in non-payment of EMIs. Financial Creditor filed a claim petition before sole arbitrator for Rs. 2,21,08,244/- along with 12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the `Upset price at Rs.29,95,96,375/-. Whereas, the purported market value of the property, was more than Rs.100 Crore. The `Appellant further stated that there was no requirement to sell the entire property of the company for paying only limited sum, to the Financial Creditor. According to the Appellant, the property of the company could have been divided and only the minimum portion of property could have been sold to pay the outstanding dues of the Financial Creditor. 10. Further, as per Appellant the `Successful Bidder ought to have paid the balance amounts on or before 22.03.2020. The auction purchaser having not paid the said amounts on or before 22.03.2020, the Liquidator should have forfeited the amount already deposited and the Auction should have been cancelled. However, the liquidator had not communicated the same to an `Auction Purchaser and had colluded with the `Auction Purchaser , in order to defraud the company. 11. The `Auction Purchaser has approached the Adjudicating Authority in I.A. No. 335 of 2020, seeking `extension of time for making payment, stating that there were various issues, pertaining to the property, due to which, they could not ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. The Learned Counsel also assailed for the `Fixed Reserve Upset Price of Rs. 39,41,28,500/- was revised and reduced as `Reserve Price as Rs.29,95,96,375/-. The Learned Counsel for the Appellant submits that this is a `fraudulent action in collusion by the Respondent Nos. 1 2 and on this ground alone, the impugned order , is liable to be set aside. 21. The Learned Counsel for the Appellant pleaded his case at length and brought out full facts of the case, alleged collusion between Respondent Nos. 1 2 and how the Adjudicating Authority had committed an `error in passing the impugned order dated 17.11.2021. 22. Later, the Learned Counsel for the Appellant also submitted the Notes of Submission coupled with three `Citations , before this `Tribunal and they are (i) Sagufa Ahmed Ors. Vs. Upper Assam Polywood Products Private Ltd. Ors.(2021) 2 SCC 317, (ii) Hero Exports Vs. K. Vasudevan2020 SCC OnLine Mad 5185 and (iii) K. Kayalvizhi Vs. The Bank Manager, Axis Bank, Madras High Court Order dated 28.06.2021 passed in WP Nos. 13341 and 13342 of 2021. 23. Further, the Additional Notes of Submissions with seven Decisions Viz., (i) In Re-Cognizance for extension ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er to `Recall its own order. Non-Constitution of Stakeholders Committee is improper. The Conduct of the Promoter cannot be termed bad or against `Law . Second Respondent is not a `Bona-fide Auction Purchaser . 28. The Learned Counsel for the Appellant pointed out that the last date for balance payment was 22.03.2020 and the lockdown imposed due to COVID-19 had no impact on the present `Auction Proceeding . The Learned Counsel alleged that the First Respondent had submitted wrongly before the Adjudicating Authority that the last date would fall on 25.03.2020, on the basis that the `Demand Letter was issued on 24.12.2019 and same was received by the Second Respondent on 26.12.2019. 29. The Learned Counsel for the Appellant takes a plea that the said letter dated 24.12.2019 cannot be termed as a Demand Letter, as there was no `Demand made by the First Respondent and was only a `Letter of Confirmation that the Second Respondent was the `Highest Bidder . Therefore, in the absence of any specific `Demand , the last date for making the `Payment ought to be computed from the `Closure of Auction , as mandated under Clause 12 of Schedule I to the `Insolvency and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction Purchaser , having failed to pay the balance sale consideration within the period. 37. While rounding up his argument, the Learned Counsel for the Appellant urges this `Tribunal to set aside the ` orders impugned herein passed by the `Adjudicating Authority, (`National Company Law Tribunal , Chennai Bench), as well as set aside the `Sale Deed dated 28.08.2020 (vide registered as Document No. 3551/2020), before the District Registrar, Tiruchirappalli. Respondent s Submissions: 38. The Learned Counsel for the Respondents contended that all the instant three `Appeals are not maintainable. 39. The Learned Counsel assailed the Conduct of the Appellant which was not justifiable right from the initiation of `Corporate Insolvency Resolution Process . In spite of the order of the `Adjudicating Authority dated 08.04.2019 in MA.No.300 of 2019, the physical possession of property of the `Corporate Debtor and other records of the `Corporate Debtor were not handed over to the 1st Respondent. Subsequently, the `Adjudicating Authority vide its order dated 13.11.2019 in MA/1127/2019, had directed the `suspended management to extend co-operation and handover the `Asset ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter of Standard Surfa Chem India Pvt Ltd vs Kishore Gopal Somani [2022 SCC OnLine NCLAT 305] wherein, it was held that in view of lockdown / restrictions in the State of Tamil Nadu (though not Central Government as envisaged under Reg. 47A of Liquidation Regulations) time was extended beyond 90 days to the `Successful Auction Purchaser , to pay the `balance sale consideration . 46. The Learned Counsel for the Respondents brought out that under extreme covid situation of Tamil Nadu, expecting the `Liquidator to receive payment or to effect registration of the property at a SRO in Trichy (Liquidator and successful Bidder live / have their office in Chennai) was uncalled for. 47. The Learned Counsel for the Respondents also stated that due to the extra-ordinary circumstances of COVID outbreak, even the NCLT s functioning was restricted from the 2nd week of March 2020 vide Notification in Page No. 182 of the 1st Respondent s counter in CA (AT) (Ins) 339 of 2021. 48. The Learned Counsel for the Respondents emphasised that the Income Tax Department issued NOC for lifting of the prohibition order of property of hotel only on 27.08.2020 and thereafter, the sale was registered. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osed from 24.03.2020 onwards. 57. After considering the extra-ordinary circumstances, the Adjudicating Authority , deferred the `Time Period granted for depositing the `balance sale consideration till the lockdown is lifted by the `Central/State Government respectively. 58. The Learned Counsel for the Respondents mentioned that on 24.08.2020 `Balance Sale Consideration was paid by the `Respondent and thereafter the `Sale Deed was registered in favour of the ₹ 2nd Respondent on 28.08.2020. 59. The Learned Counsel for the Respondents represented that on 06.06.2020 18.06.2020, Letters were sent by the `Liquidator informing the `Appellant that the `E-auction Sale was successfully completed in due compliance with the `Law , but the `Appellant did not take any steps to challenge the extension granted to the ₹ 2nd Respondent , but thereafter, filed an `Application bearing IA in S.R. No. 944 of 2020 seeking to review and recall the Order dated 05.05.2020, which was dismissed vide Common Order dated 17.11.2021. 60. The Learned Counsel for the Respondents cited the following Judgment to support his case and arguments Viz.:- a) Peoples General Hospita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Whether the act of Auctioneer to `Sell the Property at Revised and Reduced upset price can be treated as valid? (IV) Whether the `Liquidator was justified in selling the entire `Assets of the company when `Sale of a part of the `Assets of the Company would have been sufficient to discharge the liability of the company? (V) Whether the `Liquidator was justified in conducting the `Auction Proceedings without forming the `Committee of Stakeholders , as envisaged under the I B Code, 2016? (VI) Whether the `Adjudicating Authority can review its own order? Since, all these issues are independent, it will be worthwhile to examine these issues one by one and we shall proceed accordingly in subsequent discussion. In order to understand the above issue, we will like to refer to the following table: S. No. Date Event 01. 16.10.2019 1st Auction Notice was issued. 02. 22.11.2019 Another Notice issued for the Second Auction to be held on 23.12.2019. 03. 09.12. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Company is valid in accordance with the IBBI Rules and Regulations, 2016? In order to understand the exact issue raised and the implication, it will be imperative to go through the exact rules as provided in I B Code, 2016, on this issue. (i) Following are the relevant Rules provided in the I B Code, 2016: Chapter VI of Regulation 33 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016, prescribe Mode of Sale, the Liquidator shall ordinarily sell the assets of the corporate debtor through an auction in the manner specified in schedule I, which provides for detailed manner as to how an Auction must be proceeded. (2) The liquidator shall prepare a marketing strategy, with the help of marketing professionals, if required, for sale of the asset. The strategy may include- (a) releasing advertisements; (b) preparing information sheets for the asset; (c) preparing a notice of sale; and (d) liaising with agents. (5) The liquidator shall [issue a public notice] of an auction in the manner specified in Regulation 12(3); [emphasis supplied] i. The auction held without notice shall be invalid, as the la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sfer such assets and the assets shall be delivered to him in the manner specified in the terms of sale.] [emphasis supplied] (ii) This Appellate Tribunal passed a Judgment in the case of Standard Surfa Chem India Pvt. Ltd vs. Kishore Gopal Somani vide order dated 09.08.2021, reported in 2022 SCC OnLine NCLAT 305 held that:- a. Para 24- In the instant case, the Appellant, i.e. successful auction purchaser by filing IA 3377 of 2021 dated 25 May 2021, sought an extension of 90 days for making the full payment to complete the auction proceedings. However, before the expiry of the 90 days timeline, the appellant/applicant filed the said Application on the ground of Regulation 47A of Liquidation Process Regulation, 2016. b. Para 25 - Regulation 47A was brought by the amendment in liquidation process regulation by Government Notification dated 20 April 2020 with retrospective effect from 17 April 2020. This Regulation provided that the period of Lockdown imposed by the central government in the wake of the Covid 19 outbreak shall not be counted for computation of the timeline for any task that could not be completed due to such Lockdown in relation to any liquidation pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herent powers of the Tribunal to make such orders as may be necessary for meeting the ends of justice or to prevent abuse of the process of the Tribunal. Section 424 of the Companies Act, 2013. Procedure before the Tribunal and Appellate Tribunal.- (1) The Tribunal and the Appellate Tribunal shall not, while disposing of any proceeding before it, or the case may be, an appeal before it, be bound by the procedure laid down in the Code of Civil Procedure, 1908 (5 of 1908) but shall be guided by the principles of natural justice, and subject to the other provisions of this Act or of the Insolvency and Bankruptcy Code, 2016 (31 of 2016) and of any rules made hereunder, the Tribunal and the Appellate Tribunal shall have power to regulate their own procedure. In view of all the above discussions, including Rules, cited Judgments, we do not find any error on the part of the liquidator. The Adjudicating Authority correctly gave the impugned order on this issue. Issue No. (III) Whether the act of Auctioneer to Sale the property at revised and reduced Upset Price can be treated as valid. (i) Following are the relevant Rules are provided in I B Code, 2016: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9,41,28,500 (vi) Thus, from the above table, it is evident that Rs.39,41,28,500/- was `Average of Liquidation Value for the purpose of E-auction Upset Price, which is as stipulated in the relevant Rules. (vii) We also need to appreciate that different property may have different value depending upon location, size of property, economic situation prevailing at the particular time, demand and supply of properties at the relevant time. The sale of distressed assets, more so, if it is along with dispute, may also impact the valuation of the property adversely. Although, many parameters like last `Auction of similar property or notified rates by relevant `Authority of the area etc., also need to be kept in view. However, the fact remain that, when any property is put to `Sale for `Auction , what truly matter is the market response at that time. Only thing, which is required to be ensured that the process was conducted in a fair and transparent manner. This `Tribunal already seen from the Written Submissions and `Averments made during hearing, that the `Liquidator indeed has followed the required norms. Hence, it will be difficult to accept pre-notion of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the company when sale of a part of the `Assets of the company would have been sufficient to discharge the liability of the company. (i) The counsel for the `Applicant in CP No. 336 of 2021, contended that the liability was not even the 1/10th and could have been satisfied with only selling some particular part of the property and there was no need to sell the whole property. It can be argued both ways as stated in CHAPTER VI REGULATION 32 OF IBBI Rules and Regulations 32 [Sale of Assets, etc. The liquidator may sell- (a) an asset on a standalone basis; (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.] (ii) Also, Amendment Regulation 32A describes `Sale as a going Concern; Sub-regulation (1) Where the committee of creditors has recommended sale under clause ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r and uphold the decision of the `Adjudicating Authority on this aspect. [emphasis supplied] Issue No. (V) Whether the `Liquidator was justified in conducting the `Auction Proceedings without forming the `Committee of Stakeholders , as envisaged under the I B Code, 2016? (i) The Liquidator was appointed by the `Adjudicating Authority vide order dated 17.07.2019 and the `Auction has been successfully carried out. The property has been sold, and the Appellant has objected that the `Liquidator did not form `Committee of Stakeholders , as per I B Code, 2016. (ii) We will need to refer to the Amendment, Regulation 31A vide Notification No. IBBI/2019-20/GN/REG047 w.e.f. 25.07.2019 and the Amendment Regulation 31A vide, which states that; 31A (1) - The liquidator shall constitute a consultation committee within sixty days from the liquidation commencement date, based on the list of stakeholders prepared under regulation 31, to advise him on the matters relating to sale under regulation 32. (iii) IBBI vide circular No. IBBI/LIQ/024/2019 dated 26.08.2019 also clarified that the amendment regulations are not applicable to the liquidation processes, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... two views on the subject is not a ground for review. Once a review petition is dismissed no further petition of review can be entertained. Therefore, the `Adjudicating Authority was right in taking a decision that it has no power to `Review /`Recall its own order. 63. Based on the aforesaid qualitative and quantitative discussions and reasons, this `Tribunal , is of the considered opinion that no ground is made out for any interference by this `Tribunal with the Company Appeal (AT) (CH) (Insolvency) No. 336 and 339 of 2021 filed against the common impugned order dated 17.11.2021 passed in MA/120/2020 in CP. No./1140/IB/CB/2018 and SR No. 944 of 2020 in CP. No./1140/IB/CB/2018 respectively and Company Appeal (AT) (CH) (Insolvency) No. 343 of 2021 filed against the impugned order dated 05.05.2020 passed in IA No. 335/IB/2020 in MA No. 689/2019 in CP. No./1140/IB/CB/2018 by the `Adjudicating Authority , (`National Company Law Tribunal , Chennai Bench). Consequently, the `Appeals fail. In fine, the Comp. App (AT) (CH) (Ins.) Nos. 336, 339 343 of 2021 are dismissed. No costs. The connected pending `Interlocutory Applications , if any, are Closed. - - TaxTMI - TM ..... X X X X Extracts X X X X X X X X Extracts X X X X
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