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TMI Blog2022 (10) TMI 96X X X X Extracts X X X X X X X X Extracts X X X X ..... austubh Prakash and Mr. Satvik Issar, Advocates for R-3. For the Respondent No. 4 : Mr. Sudhanshu Prakash, Ms. Neha Tandon and Sabyasachi Roy Chaudhary, Advocates for R-4. For the Appellant : Mr. Anup Kumar, Ms. Neha Jaiswal, Mr. Shivam Kumar, Ms. Shruti Singh & Mr. Sumit Ranjan, Advocates. For the Respondent No. 1 : Mr. Mainak Bose, Mr. Anand Sukumar and Mr. Bhupesh Kumar Pathak, Advocates for R-1. For the Respondent No. 3 : Mr. Kaustubh Prakash and Mr. Satvik Issar, Advocates for R-3. For the Intervenor : Mr. H.P. Sharma, Sr. Advocate with Mr. Satish Rai and Mr. Akhil Shankhwar, Advocates for Intervenor. For the Respondent No. 4 : Mr. Sudhanshu Prakash, Ms. Neha Tandon and Sabyasachi Roy Chaudhary, Advocates for R-4. For the Respondent No. 6 : Mr. Abhijeet Sinha, Mr. Kumarjit Bannerjee, Mr. Gaurav Gupta and Mr. Saikat Sarkar, Advocates for R6. JUDGEMENT [ Per ; Hon'ble Mr. Justice M. Satyanarayan Murthy ] 1. These Appeals have been filed challenging the Order passed by the Learned Adjudicating Authority (National Company Law Tribunal, Kolkata Bench) dated 02.03.2022 passed in I.A. 830/KB/2021, I.A. 848/KB/2021, I.A. 962/KB/2021, I.A. 963/KB/2021 and I.A. 969/KB/2021 in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion and giving further effect to e auction held on 13-09-2021. II. Alternatively, Respondent No. 1 be directed to hold Re-auction. It has been stated, applicant was an interested bidder and participated in the bid, submits that on enquiry about the e-auction process, the applicant came to know that by a corrigendum published on September 08, 2021, the last date for submission of the EMD was extended till September 11, 2021 and the e-auction was scheduled for September 13, 2021 from 2pm to 4 pm. III. As an interested bidder, the applicant deposited the EMD amount of Rs. 8.60 cr. and participated in the e- auction held on September 13, 2021. IV. The bidding process started from Rs. 86.00 cr. In the course of bidding, the applicant made four bids in excess of other bidder. The last registered bid of the applicant was standing at Rs.87.75 but at this point the applicant faced the connectivity issue and the applicant was unable to proceed further in the bidding process and there were interruptions and buffering. V. Applicant has further stated the last registered bid of Rs.87.75 crores. made: by the applicant and the Snaefell Heights made. a bid of Rs.88 crores which, in excess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Direction for cancellation and, setting aside of the B- auction Information Process Document dated August 24, 2021 and E-auction dated September 13, 2021. II. Cancellation and setting aside of entire E auction dated 13-09-2021 and the LOI issued by the Liquidator to Snaefell Heights. III. Direction on the liquidator to conduct a fresh bidding for the sale of the Corporate Debtor as a going concern. IV. Interim Order directing the liquidator and Snaefell Heights to maintain status Quo as regard to the assets of the Corporate Debtor. i. The Applicant claims to be part of O.P. Jindal Group and one of the India's leading business houses. The Applicant is in business in sectors such as energy, infrastructure, cement, paints, sports and venture capital. ii. Balaji Metals ('Operational Creditor') had initiated insolvency proceedings against the Corporate Debtor being CP (IB) No.1542/KB/2018 under Section 9 of the Code. The Corporate Debtor was admitted to the CIRP vide order dated December 11, 2019. iii. Pursuant to the order of admission, the IRP took over the management of the Corporate Debtor. iv. In 15- COC meeting held on April 3. 2021, the CoC decided to r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... LOI to the HI bidder till disposal of this IA. i. Applicants states that as per the e-auction, Snaefell Heights was the highest bidder with the bid of Rs. 88 Crores. However due to some technical issue M/s. Chinar Steel could not put his bid of Rs.88.25 Cr and the same was communicated to the liquidator. ii. The Applicant approached the liquidator praying. that the Corporate Debtor be sold as a going concern because of 500 workmen and employees. iii. In the meantime, one of the bidders, M/s. Chinar Steel, who participated in the e-auction process, mentioned the matter before the Hon'ble NCLT, Kolkata Bench on 16.09.2021, wherein the Liquidator was also present. On the queries raised by the Hon'ble Bench, the Liquidator apprised them about the entire process. The Liquidator said that he has received one e-mail for extension of time which he allowed, but is not in a position to confirm if at all there was any technical issue later on during the process. The Hon'ble Bench then enquired from the Liquidator whether *he has any objection if a re-auction is conducted, to which the Liquidator replied that if the said re-auction starts at a value higher than. the highest b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;going concern' till 13.09:2021 and the e-auction which was originally scheduled to be held on 09.09.2021, came to beheld on 13.09.2021. Pertinently, the prospective bidder, namely Nortech, along with all intending prospective bidders were permitted to participate in the E-auction. iii. Notably, this was done so as to ensure maximization of the value of the Corporate Debtor. However, the Applicant herein, who is a prospective bidder, had no notice or knowledge of the said extension of time for participation in the e-auction till 13.09.2021and was, as such, unable to submit the EMD and consequently participate in the e-auction process. The Applicant/ Prospective Bidder became aware of the said extension recently. iv. Upon becoming aware of the same, the Applicant wrote an email to the Liquidator and UCO Bank and Indian. Bank (erstwhile Allahabad Bank), being the members of the Stakeholders Committee of the Corporate Debtor, requesting to conduct the auction again and allow it to participate in the said auction. However, no response to the same has been received. Therefore, the Applicant is constrained to file the present Application." 9. The allegations made in all these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause from suitably making its offer during the auction process, the matter was immediately mentioned before this Adjudicating Authority upon notice for the Liquidator on 16th September, 2021. The Liquidator in his Affidavit has unequivocally admitted the said fact at paragraph 'm' at page 7. 14. It is stated that it has also been admitted that based on the oral directions of this Adjudicating Authority, the Liquidator was directed to consider re-auction and was further directed not to declare the successful bidder or issue any LoI to the H/1, bidder in the meantime till such time the proposed application of the Applicant was listed for consideration. 15. It is submitted that the application was filed on 17 September, 2021, and the Respondents were duly served. 16. It is submitted that on 28 September, 2021, the application was considered, admitted and the Respondents were directed to file their Affidavit. From the Liquidator's Reply Affidavit to the Application, it is apparent that no steps had been taken by the Liquidator between the period from 13.09.2021 to 31.10.2021. However, a purported LoI appears to have been issued by R1 in favour of R 2 on 02.11.2021. 17. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Applicant wishes to make a bid of Rs.93 crores to purchase the assets and properties of the Company in Liquidation and further undertakes to improve its offer, if required. 20. It is further submitted that though much has been said on the said email but the fact remains that the auction process, immediately upon its completion was brought to the notice of the Tribunal by the applicant and the fact that the same was entertained in the presence of the Liquidator. 21. It is submitted that in the present applications, the Applicant seeks to set aside the sale held on 13th September, 2021, reconsider its higher bid and alternatively, re-auction of the assets of the Company in Liquidation." 22. The Appellant/Raj Singhania, the Liquidator contended that the Public e- Auction is held and the highest bid is received and the property is sold in a Public Auction in favour of the highest bidder, such sale cannot be set aside on the basis of the offer made by the third parties, subsequently, and that too when they did not participate in the Auction Proceedings and made any offer is only for the sake of making it. The Liquidator further contended that the Liquidation Notification was publish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... minutes time and again both the bidders submitted further bids. The e-Auction Process concluded with the last bid being placed at 4:49 PM by M/s. Sanefell Heights LLP for an amount of Rs.88Crores/-. 24. Subsequently, the Liquidator immediately proceeded to issue Notice for conducting of meeting of the Stakeholders' Consultation Committee on 15.09.2021 for meeting to be held on 16.09.2021 through Virtual Mode for suggestion on future course of action. While so, one of the Applicants, who participated in the e-Auction Process mentioned the matter before the Adjudicating Authority on 16.09.2021, wherein in the presence of Liquidator and the Liquidator apprised the Adjudicating Authority about the entire process in free and fair manner in which the entire Auction Process was carried out. On the issue of Applicant's contention regarding the technical glitch, the Liquidator apprises the Adjudicating Authority that he has received email for extension of time which he allowed but he was not in a position for confirming. Upon hearing the parties, the Adjudicating Authority proceeded to only direct the Liquidator to consider if the Liquidator would want to file an Application for conductin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... btor' as 'a Going Concern' as per Corporate Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016, and that the alleged illegality pointed out by the Petitioners is not material irregularity, it is only an accidental. 30. The Learned Counsel for the Respondents supported the Order in all respects while placing reliance on 'Bharat Heavy Electricals Ltd.' Vs. 'Anil Goel & Ors.' Comp. App. (AT) (Ins.) No. 22/2020, 'Arun Kumar Jagatramka' Vs. 'Jindal Steel & Power Limited' (2021) 7 SCC 474, Circular bearing reference no. IP(CIRP)/006/2018, 'Prakash Chandra Kapoor & Anr.' (referred Supra), 'Ekambareswara Rao Manne' Vs. 'Gonugunta Madhusudhan Rao, Liquidator' C.P. (IB) No. 265/9/HDB/2017 and in 'Binani Industries Limited' Vs. 'Bank of Baroda' (2018) SCC OnLine NCLAT 521. On a strength of the Principal laid down in the Judgement, Learned Counsel for the Respondent No. 3 in Comp. App. (AT) (Ins.) No. 264/2022, supported the Order of the Tribunal. The Learned Counsel for the other Respondents particularly Chinar Steel Segment Centre Private Limited, HR Commercials Private Limited, JSW Steel Limited, Rahul Roy Chowdhary, DTC Projects Pvt. Ltd. and Snaefell Heights ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fication was issued strictly adhering to Regulation 32(e) read with Regulation 32A and 33(1) of Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016. 36. The Adjudicating Authority examined the corrigendum and found that no opportunity was given to the prospective bidders in the corrigendum dated 08.09.2021 to inspect physically the 'Corporate Debtor' while maintaining other condition of initial notification as provided in any initial bid documents. It is irrational and unreasonable and fail to conduct the e-Auction in the fair manner and also pointed out that a Successful Highest Bidder is an LLP incorporated in the Year 2019 with a turnover for the FY ending by 31.03.2019, 31.03.2020 & 31.03.2021 was not considered by the Liquidator while confirming the bid in favour of Snaefell Heights LLP Appellant in Comp. App. (AT) (Ins.) No. 264/2022. 37. It is an undisputed fact that in the e-Auction Notification the Liquidator fixed time for inspection etc., date and time of e-Auction, time for submitting bids and deposit of EMD, date and time of inspection as 07.09.2021 between 10:00 AM and 5:00 PM. Since no bidders submitted their documents along with EMD, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 08.2021 i.e., by the corrigendum is intended to extend time for submission of documents of EMD and change of date and time of Auction. Admittedly, the Liquidator received no documents of EMD till expiry of time limited in the Original Notification dated 24.06.2021 and thus nobody intends to participate in the e-Auction Process. Therefore, it is the duty of the Liquidator to afford an opportunity to inspect the 'Corporate Debtor' enabling the participant or interested bidders to submit the EMD Application, as participation in the e-Auction Process is to maximize the Assets of the 'Corporate Debtor'. But in the corrigendum extending date and time for submission of EMD and fixing time and date for conducting the e-Auction of the 'Corporate Debtor' the other conditions shall remain as it is, that means, the date of inspection as fixed in the Original Notification was remained as it is, though, none inspected the 'Corporate Debtor' within the time prescribed in the Original Notification for inspection. In such case, the intending bidder deprived of their right to inspect the 'Corporate Debtor' to participate in the e-Auction Process for the maximization of Corporate Assets that causes s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as a going concern, in consultation with the consultation committee. (4) If the liquidator is unable to sell the corporate debtor or its business under clause (e) or (f) of regulation 32 within ninety days from the liquidation commencement date, he shall proceed to sell the assets of the corporate debtor under clauses (a) to (d) of regulation 32.]" 41. According to Regulation 33, the Liquidator shall order and to sell the assets of the 'Corporate Debtor' to an Auction in a manner specified in the Schedule. Schedule I describes the mode of sale. The first mode is Auction whether an asset is to be sold through an Auction that Liquidator shall do so in a manner satisfied herein: 33. Mode of sale. (1) The liquidator shall ordinarily sell the assets of the corporate debtor through an auction in the manner specified in Schedule I. (2) The liquidator may sell the assets of the corporate debtor by means of private sale in the manner specified in Schedule I when- (a) the asset is perishable; (b) the asset is likely to deteriorate in value significantly if not sold immediately; (c) the asset is sold at a price higher than the reserve price of a failed auction; or (d) the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pened as generally understood. As stated earlier, generally the same can be done only on two grounds i.e., fraud or material irregularity occurred in the process of auction. However, another ground is added by IBC, 2016 i.e., maximization of value of assets of corporate debtor'. Thus, when a situation of challenge to auction process arises on the ground of assets not being sold at the maximum possible value, then, also in our considered view, auction process can be enquired into and such process can be set aside on this ground also". 44. The principle laid down in the above Judgement are not in controversy and it is evident from Regulation 33 and as per Schedule I, the Liquidator must make every endeavor to get maximum sale price for the benefit of the Committee of Creditors but in the instant case, on account of failure of the Liquidator/Appellant in Comp. App. (AT) (Ins.) No. 465/2022 failure to fix time and date for inspection, deprived the many interested bidders to participate in the bid and consequently failed to maximize the 'Corporate Debtor' such irregularity can be termed as material irregularity which vitiates the entire process of Liquidation. Therefore, the Adjudicati ..... X X X X Extracts X X X X X X X X Extracts X X X X
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