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TMI Blog2022 (3) TMI 1444X X X X Extracts X X X X X X X X Extracts X X X X ..... ate For Successful Bidder Mr. Joy Saha, Sr. Advocate, Mr. Rishav Banerjee, Advocate, Mr. Ritoban Sarkar, Advocate, Ms. Madhuja Barman, Advocate, Ms. Tanvi Luhariwala, Advocate, Ms. Sandhya Iyer, Advocate,. Mr. Rishabh Chandra, Advocate For JSW Steel Limited Mr. Kumarjit Banerjee, Advocate, Mr. Raj Singhania, PCA For Liquidator Mr. Mainak Bose, Advocate, Mr. Rahul Auddy, Advocate For Chinar Steel ORDER Per: Rohit Kapoor, Member (Judicial) 1. The Court is convened by video conference today. 2. Corporate Debtor Gontermann-Peipers (India) Limited is under liquidation vide order dated April 30, 2021 passed by this Adjudicating Authority and Mr. Raj Singhania, was appointed as Liquidator. Applicants in these IAs filed under section 60(5) of the Insolvency and Bankruptcy Code, 2016 read with Rule 11 of the National Company Law Tribunal Rule, 2016, seek setting aside of the e-auction held on September 13,2021 by the liquidator. 3. Before we proceed further, the brief facts and contentions of applicants as contained in each these IAs are summarised as under, I.A. 830 of 2021 This is an Interlocutory Application filed by Chinar Steel Segment Centre Private Limited ('Applican ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2021 This is an Interlocutory Application filed by HR Commercials Private Limited ('Applicant') against Raj Singhania, Liquidator of Gontermann- Peipers (India) Limited ('Liquidator') and Snaefell Heights LLP ('Snaefell Heights') praying for as follows; A. The E-Auction process for the sale of the Assets of the Corporate Debtor be set aside/quashed, B. Re-auction of assets, C. Allow it to participate in auction process, i. In this IA it is stated that the Applicant on September 10, 2021 came to learn that pursuant to the liquidation order dated April 30, 2020 the liquidator on August 24, 2021 has published an e-auction sale notice, and September 07, 2021 was the last date to submit EMD. ii. The Applicant is based in Mumbai and belatedly came to know about the advertisement published by the Liquidator. Under these circumstances, the Applicant was unable to apply and submit the documents and EMD within the specified period. iii. The Applicant is an interested party for purchasing the assets of the Corporate Debtor. iv. Later, on September 13, 2021 the Applicant came to know that the e-auction was not held on September 09, 2021 but rather on September 13, 2021 and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eptember 13, 2021 and the LOI was issued to the highest bidder i.e. Snaefell Heights. vi. The Applicant further submits that in order for the Corporate Debtor to go as a going concern, it is necessary that the liquidator should have restricted bidders only to steel industry. The liquidator failed to appreciate that selling of the Corporate Debtor to a real estate company will defeat the very object of the Code. vii. The Applicant is the only participant who had submitted the compliant resolution plan. The Applicant was always interested in acquiring the Corporate Debtor as a going concern and reviving its steel business but could not participate in the E-Auction process. viii. The successful bidder is an LLP incorporated in the year 2019 with a turnover for the Financial Year ending on March 31, 2019, Match 31, 2020 and Match 31, 2021 as NIL. ix. The liquidator has failed to do a proper due-diligence and to verify as to how an LLP with Rupees One Lakh as the Capital will be able to continue the Corporate Debtor as a going concern. x. There are also two prospective bidders who could not submit their bid and have filed an intervention application. The Applicant also submits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers, he would not have any objection if an Order to such effect is passed by the Hon'ble Bench. iv. The Hon'ble Bench directed the Liquidator to file an application for conducting re-auction giving reasons and justification for the same and not to declare Successful Bidder or issue LOI to H1 bidder till such application is disposed of. v. The representative of workers and employees present in the meeting also requested that in the interest of the workers and employees the Liquidator should go for re-auction and there is a possibility that some engineering concern will participate in the process and if successful, they can run the corporate debtor's undertaking as a going concern and saving the livelihood around 500 workers / employees. vi. The applicants state that JSW is a leading steel manufacturing company in the country. The applicants have come to know that JSW is interested to take over the corporate debtor and run the factory by employing those 500 workers/employees who became jobless due to liquidation. In this regard the applicants had fruitful discussions with JSW and have appreciated their bonafide intention. vii. Hence, this application praying for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Liquidator of Gontermann Peipers India Limited for sale of its assets and properties. The Applicants were interested bidders. 5. In one IA, it had participated in the auction by submitting an EMD of Rs.8.60 Cores. In course of the e-auction, as a participating bidder, the Applicant faced connectivity issues and accordingly, by an email to Respondent No.1 Liquidator, made a request for consideration. Considering the request, though the auction time expired at 16.00 hrs. the time period was extended and during the extended period, a bid of Respondent No.2 of Rs.88.00 Crores was received on the portal which was in excess of the Applicant's last bid of Rs.87.75 Crores. The Applicant wanted to give a higher incremental bid of Rs.88.25 Crores but despite best efforts, due to lack of connectivity and network issues, the Applicant was unable to register the incremental bid of Rs.88.25 Crores. As such, the last bid made by the Respondent No.2 at Rs. 88.00 Crores was not registered by the e-auction portal as the highest bid. 6. It is submitted that an email, written on behalf of the Applicant in IA 962/2021, seeking refund of the EMD, immediately after the auction, has been relied upo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plicant's higher bid of Rs.93 Crores be accepted and the Sale be confirmed in its favour. Alternatively, the assets of the Corporate Debtor, now in liquidation, be reopened and the Applicant and the Respondent No.2 be directed to make their offers as participating bidders to make sure the maximization of value and the assets be sold to the person. 13. It is further evident that the Applicant was a bona fide bidder who has participated in the auction process, but for reasons beyond its control could not lodge a higher bid. It has also been unequivocally admitted what transpired on participated in the auction process, but for reasons beyond its control could not lodge a higher bid. It has also been unequivocally admitted what transpired on 16.09.2021 before this Adjudicating Authority and the oral directions (paragraph (m) at page 7 of his reply affidavit). Strangely enough, the reply affidavit is silent as to why, despite the applicant having offered to give a higher bid which is not only in the interest of the stakeholders of the Corporate Debtor but towards the object of the IBC Code, qua, maximization of value, the Liquidator after 1 and ½ months changed his stand and pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... put the bid and as such, deserves to be dismissed in limine with exemplary costs. 19. It is submitted by the Liquidator that the Liquidator published a notice of sale of the Corporate Debtor as a going concern in the Business Standard, all India Edition and AajKal, a vernacular Bengali Newspaper on 24.08.2021 and also unloaded the e-Auction Process Information Document at the e-auction portal and the website of the Corporate Debtor. Under the terms of the sale notice dated 24.08.2021, the reserve price for the proposed e-auction process was fixed at Rs. 86 crore with EMD of Rs.8.6 crore. The last date of submission of EMD was initially fixed on 07.09.2021 and the e-auction was schedule to be held on 09.09.2021. Although number of intended buyers did show their interest in the proposed auction sale of the Corporate Debtor as a going concern, till the last date of submission of EMD i.e., 07.09.2021, the Liquidator did not receive any EMD from interested buyers. In view of the same, the Liquidator decided to extend the date of e-auction and accordingly he published an addendum (corrigendum) to the earlier e-auction sale notice on 08.09.2021 in the same newspapers and extended the dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evelopments and suggestion on future course of action. 23. It is further submitted that in the meantime, one of the applicants, who participated in the e-auction process mentioned the matter before this Adjudicating Authority on 16.09.2021, wherein the Liquidator was also present. On the queries, raised by this Adjudicating Authority, the Liquidator apprised them about the entire process and the free and fair manner in which the entire e-auction process was carried out. On the issue of applicant's contention regarding technical glitches, the Liquidator apprised this Adjudicating Authority that he has received one e-mail for extension of time which he allowed but was not in a position to confirm if at all there was any technical issue later on during the process. Upon hearing the parties, this Adjudicating Authority proceeded to orally direct, inter alia, the following to the Liquidator:- i. Consider if the Liquidator would want to file an application for conducting re-auction upon citing reasons and justification for the same. ii. Not to declare Successful Bidder or issue LOI to H1 bidder in the meantime till proposed application (s) impugning the auction process are listed be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt from placing its last bid, the Liquidator also obtained a Log report from Linkstar Infosys Pvt. Ltd., the e- Auction service provider. The e-auction service provider furnished the log report of the participants in the e-auction process held on 13.09.2021 and a confirmation to the effect that there was no technical glitch on the part of the e-auction portal during the entire eauction process. Subsequent upon issuance of the order dt. 28.10.2021, the Liquidator proceeded to convene a meeting of the SCC on 30.10.2021. In course of the said meeting, the Liquidator appraised the stakeholders of the various developments, as mentioned hereinabove. 27. It is submitted that in the said 3rd meeting of the SCC, the representatives of the financial creditors once again unanimously expressed their satisfaction with the H1 bid amount of Rs.88 Crores received by the Liquidator and suggested that the Liquidator should immediately declare the H1 bidder as Successful Bidder and proceed to issue the LoI. They also mentioned the fact that although the applications for cancellation of e-auction process held on 13.09.2021 and seeking re-auction is filed before this Adjudicating Authority, there has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , withholding the liquidation process on such conjecture and surmise is neither prudent nor keeping with the object and scheme of the Code. If the process is delayed, it is the workers and employees who will be hit most as they have not received a single Rupee since last five years. 30. It is submitted that the Liquidator is a creature of the statute and is bound by the Code and /or Regulations framed thereunder. The Liquidation is a time bound process and more particularly if the Corporate Debtor is to be sold as a going concern as per Regulation 32( e), the time limit at his disposal is very limited. 31. It is submitted that pursuant to the suggestion of the majority of the stakeholder' consultation committee members, and particularly on the unanimous recommendation of the secured creditors of the Corporate Debtor to confirm the H1 Bidder as the successful auction purchaser, the Liquidator issued the letter of intent (LoI) to the highest bidder, viz. M/s Snaefell Heights LLP, in the successfully conducted e-auction process for sale of the Corporate Debtor as a going concern on 02.11.2021. 32. It is submitted that as would be evident from the perusal of the log report obtained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to what has been stated hereinabove, there is no evidence whatsoever furnished by the petitioner substantiating its allegation of any technical glitch and/or veracity of its allegation pertaining to technical glitch and/or connectivity issues faced by it in placing its incremental bid in the e-auction process. As such, the allegations and/or averments made in the petition to this effect should be disregarded in limine. 35.It is further submitted that the petitioner has no locus standi to challenge the instant auction process in any manner whatsoever insofar as it has failed to participate and submit its incremental bid despite extension of time by 30 minutes beyond the stipulated bid period between 2 to 4 PM already extended by the Liquidator in good faith. 36.To I.A. No. 962/KB/2021,it is submitted that the petition is nothing but a desperate ploy to reopen the entire e-auction process and render it litigated by a disgruntled failed bidder who is now seeking to enhance the bid in hindsight. The aforementioned conduct of the intending bidder would also be evident from the fact that the petitioner had waived and relinquished its rights in respect of the auction process by voluntar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith erroneous and factually incorrect statements. It is submitted that the applicant is seeking to aprobate and reprobate in its conscious and deliberate stand that it is the unsuccessful bidder without any dispute or demur. 41.The Liquidator further argued that a perusal of the log report would further show that both applicant and Respondent No.2, the H 1 bidder continued to place incremental bids till 4.49 p.m. within 5 minutes of the last incremental bid, in accordance with swiss bid mechanism without any technical issue. Ld. Counsel further submitted that after facing of the H1 bide of Rs.88 crores by Respondent No.2 at 4.49 p.m, the applicant although still logged into the system, never placed an incremental bid despite being logged into the e-auction portal. Thereafter, the applicant logged off at 4.56 p.m. without placing any incremental bid above H 1 bid of the respondent no.2. 42.It is submitted that this course of event would categorically establish that the applicant was logged into the portal without any technical network issues, till 4.56 p.m., and had adequate to place its incremental bid, but deliberately chose to not do so. It is submitted that any excuse of netwo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rties have made detailed submissions on variety of grounds, as pleaded in their respective IAs, summarised hereinabove with a view to show that the entire E auction by Liquidator is grossly flawed and the same is liable to be set aside followed by holding of a fresh auction in order to maximize the value of assets. A number of judgments of Hon'ble Supreme court and Hon'ble NCLAT have been cited and compilation given to us. 47.Similarly detailed arguments have been advanced on behalf of Liquidator to rebut the contentions of applicants and to show that the liquidator has acted in accordance with law, in best of its wisdom under circumstances, and achieved maximum value of assets put on auction by him strictly according to IBC 2016 and regulations made thereunder as applicable to the process of Liquidation. According to Ld. Counsel for the Liquidator and as per the affidavits filed by him, entire auction has been conducted in a transparent manner and after giving due public notice as required under applicable regulation on the day. According to the Liquidator, all the IAs are frivolous and attempt to thwart the entire E auction process for some ulterior motives. After perusal of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duct its own due diligence, investigations and analysis and should also check the accuracy, adequacy, correctness, reliability and completeness of the assumptions, assessments, statements and information contained in this E-Auction Process Information Document and may get independent advice from appropriate sources. The decision to participate in this E-Auction Process shall be strictly at the bidders risk and cost." 52.Overview of the assets and properties of CD is contained at Page-56 of the bidding document. The details of document required to be submitted by the bidder start from Page-61. There is a provision for physical verification and the site visit at Page 62 and also there is a provision for conducting due diligence. The particulars of assets are mentioned at Page-63 of this IA and internal Page-21 of the bidding document. It is further mentioned at Page-72 ,The Intending Bidder (s)) should make their own independent inquiries regarding the encumbrances, title of assets put on auction and claims/rights/dues/affecting the assets and should conduct their own due diligence prior to submitting their bid. The bidding document was accompanied by format of an affidavit to be sw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nfair manner. The extension of auction notice and sale conducted in pursuance to it was done in a slipshod manner by the liquidator. 56.It is apparent from the facts on record, the time of completion of the liquidation process was till April, 2022 (without extension) and why there was so hurry with the liquidator to extend the time only for three days when he was having not even a single bidder in response to its first notice and at the same time inviting bids afresh without affording anyone the opportunity of conducting physical inspection of the huge and high value assets of the company and conducting due diligence and mentioned in earlier notice inviting bids, per se speaks of failure on the part of Liquidator to conduct the sale in fair and in the manner to get the maximum value of the assets. According to the Ld. Senior Counsel, this in itself speaks volumes of arbitrariness on behalf of the liquidator and has caused serious doubts regarding his effort, as claimed by him, to have the best value of these assets under liquidation. According to the applicants, reasonable time should have been granted to conduct the site inspection and due diligence when the liquidator was extend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act requires. It is the receiving parties business to verify, not the delivery party's supply that the further goods are according to contract. 61.Tested on settled proposition of law by Hon'ble Supreme Court, whether the process adopted or decision made is so arbitrary and irrational that the court can say: 'the decision is such that no responsible authority acting reasonably and in accordance with relevant law could have reached', And as held by Hon'ble Supreme Court in Manoj I Naik & Associates vs Official Liquidator on 28 October, 2014 in SLP Nos 34782-34783 OF 2012, "There can be no speck of doubt that the properties of a company under liquidation when sold, there has to be a proper auction, a fair one. It must fetch the maximum price. It takes care of statutory dues, dues of the workmen and the creditors. It has its own public character" And law laid down in "Bank of India v. Enfield Apparels Limited and Ors. (MANU/NC/5994/2020), Pgs. 240 to 246 of Compilation, para 9, 40 "The sanctity of auction process has to be maintained i.e., once it is closed, normally it should not be reopened as generally understood. As stated earlier, generally the same can be done ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as NIL, this aspect when seen in the context of law laid down, 'the decision is such that no responsible authority acting reasonably could have reached', the liquidator could not have ignored this facet of auction, which apparently can have far reaching consequences for CD to continue as a going concern along with its 500 employees and incurring other costs. There is a complete silence on this by liquidator or Stakeholder's Committee except for taking technical plea/s to oppose it. We find that there is force in the argument of Ld. Sr. Counsel, that the liquidator did not enter upon due-diligence to verify as to how an LLP with Rupees One Lakh as the Capital will be able to continue the Corporate Debtor as a going concern and pay to its 500 employees. Having authorization to conduct multiple auctions and while having time in his hand and with a view to get best possible offer, when he did not receive even a single bid initially, it was imperative on the part of the liquidator to have extended the auction by reasonable time to enable the intending bidders to participate in the process and place their bids in accordance with terms of original notice inviting bid; C. Upon the b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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