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TMI Blog2023 (1) TMI 1052X X X X Extracts X X X X X X X X Extracts X X X X ..... another by intervenor could not have concluded the sale of the Corporate Debtor without giving an opportunity to the liquidator to take steps for private sale. In the present case, the facts clearly indicate that the liquidator has not embarked upon private sale process nor had sought any permission from the Adjudicating Authority to proceed with the private sale. Thus, private sale procedure by the liquidator was not in place to know as to whether there are other interested bidders who are interested to acquire the Corporate Debtor by means of private sale. Without giving opportunity to the liquidator to take steps to sell the assets of the Corporate Debtor by private sale, the Adjudicating Authority itself has taken two bids and confirmed the sale, which according to us, is not the proper procedure for maximisation of the assets of the Corporate Debtor. We are unable to uphold the order of the Adjudicating Authority dated 16.06.2022 confirming the sale in favour of the Respondent No.2 on the basis of bids received by the Respondent No.2 and one intervenor before the Adjudicating Authority. The order passed by the Adjudicating Authority approving the private sale of the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cated that the revaluation is required to be done. It was also noticed in the minutes that the offer price of Rs.50 to Rs. 60 Crores is on a lower side than the expected amount of realization. The Liquidator stated before the Stakeholders Consultation Committee that suggestions shall be examined and fruitful action be taken. On 12.05.2022, the Respondent No.2- Laser Solar LLP submitted a proposal to the Liquidator for acquisition of the unsold assets of the Corporate Debtor by way of private sale for a sum of Rs.50.05 Crores. The Liquidator by e-mail dated 13.05.2022 informed the Respondent No.2 that offer of Rs. 50.05 Crores is well below the last reserve price published. Therefore, the offer was not acceptable. The Respondent No.2- Laser Solar LLP after rejection of his offer by the Liquidator filed an I.A. No. 469 of 2022 before the Adjudicating Authority. 2. During pendency of the above Application M/s. Jindal Stainless Limited has also submitted a proposal dated 04.06.2022 to acquire the Corporate Debtor as a going concern by way of private sale which offer was also rejected by liquidator by e-mail dated 06.06.2022. Thereafter, M/s. Jindal Stainless Limited filed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he other Respondents. 5. Learned Counsel for the Appellant challenging the impugned order submits that the Adjudicating Authority exceeded its jurisdiction in asking the only two Applicants who were before the Adjudicating Authority to submit their bids and on the basis of the said bid has confirmed auction of assets of the Corporate Debtor. It is submitted that the IBC provides manner and procedure for liquidation and as per Section 33, it is the liquidator who has to conduct the sale of the assets either by public auction or by private sale. For conducting private sale, procedure is prescribed under Schedule-I of the IBBI (Liquidation Process) Regulations, 2016. For conducting a private sale also, a manner and procedure is prescribed. Liquidator has not conducted any private sale as per the IBBI (Liquidation Process) Regulations, 2016 and the Adjudicating Authority could not have itself conducted the private sale and confirmed the private sale. The last reserve price of public auction was about Rs.181 Crores. The confirmation of the sale in favour of the Respondent No.2 by the Adjudicating Authority is not in accordance with the manner and procedure prescribed in the IBC. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rivate bid for which there is no bar in law. It is submitted that the Liquidator has already issued sale certificate to the Respondent No.2. Respondent No.2 has taken the possession of the assets of the Corporate Debtor and is running the Corporate Debtor and incurring expenses. 8. We have heard Learned Counsel for the parties and perused the record. 9. The manner and procedure under which liquidator shall proceed to auction/ sell the assets of the Corporate Debtor has been provided in the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016. Regulation 32 provides for sale of assets . Regulation 32-A provides for sale as a going concern . Regulation 33 deals with mode of sale . Regulation 33 which is relevant for the present case is as follows:- 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 (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondent No.2 has given an offer to the liquidator on 12.05.2022 to acquire the assets by way of private sale of Rs.50.05 Crores which offer was rejected by the Liquidator on 13.05.2022 and it was thereafter Respondent No.2 filed an Application being I.A No. 469 of 2022 before the Adjudicating Authority where making following prayers:- a. An order directing the Respondent to allow the Applicant to accept the offer of the Applicant and sale and transfer the Corporate Debtor through a private sale on a going concern basis in accordance with the provisions of the Code and the relevant regulations made there under. b. Ad Interim order restraining the Respondent to proceed with any auction in respect of the assets of the Corporate Debtor. 12. In the Application, the Respondent No.2 was praying for a direction to liquidator to accept the offer of the Respondent No.2 and transfer the Corporate Debtor through a private sale on a going concern basis in accordance with the provisions of the Code. The manner and procedure of conducting the private sale is governed by Regulations and the liquidator is empowered to conduct sale of the assets by means of private sale in the manner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate Limited and Ors.- 2022 SCC OnLine SC 1124 . In the above case, Stakeholders Consultation Committee adopted the Swiss Challenge Process for sale of the assets of the Corporate Debtor. The second Swiss Challenge process was initiated where certain bids were received by the liquidator which was not completed. In second Swiss Challenge process, one H.R. Commercials Private Limited filed an I.A challenging the bid process in second Swiss Challenge process where interim order was passed. The Appellant- R.K. Industries filed an Appeal before the Appellate Tribunal which Appeal was disposed of directed the Adjudicating Authority to decide the I.A filed by H.R. Commercials Private Limited . NCLT has passed an order permitting the liquidator to go for private sale of the assets of the Corporate Debtor which order was challenged by R.K. Industries in the Appeal which was dismissed. In the above context, the Hon ble Supreme Court had occasion to consider the provisions of Sections 33 35 of the Code as well as the Regulations 32, 33 and Schedule-I of the IBBI (Liquidation Process) Regulations, 2016. The Hon ble Supreme Court after noticing the aforesaid provisions laid down in par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll the assets through auction thereby meaning that in peculiar facts and circumstances, the Liquidator may directly go in for a Private Sale. To avoid the pitfalls of disposing of the assets by conducting a Private Sale for the Pittance, Regulation 33 has prescribed some stringent conditions that the Liquidator is under an obligation to comply. The said pre- conditions are that (i) the asset is perishable; (ii) the asset is likely to deteriorate in value significancy if not sold immediately; (iii) the asset is sold at a higher price than the reserved price of the failed auction; and (iv) the Adjudicating Authority (NCLT) must grant prior permission for such a sale. The proviso appended to Regulation 33(2) of the Liquidation Regulations places yet another embargo to the effect that when the Liquidator intends to sell the assets of the Corporate Debtor by way of a Private Sale to a related party of the Corporate Debtor, his relative party or any professional appointed by him, it is mandatory to obtain prior permission of the Adjudicating Authority (NCLT). Even the mode of sale has been regulated under the Liquidation Regulations for both, a public auction and a Private Sale. All the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugh direct negotiations 53. To put it otherwise, an Anchor Bidder has no vested right beyond the ROFR, being the origination of the proposal. It must be borne in mind that the Swiss Challenge Process is just another method of private participation that has been recognized by this Court for its transparency [Refer Ravi Development (supra)]. Ultimately, the IBC has left it to the discretion of the Liquidator to explore the best possible method for selling the assets of the Corporate Debtor in liquidation, which includes Private Sale through direct negotiations with the object of maximizing the value of the assets offered for sale. 15. In the present case, Respondent No.2 who was the Applicant making an offer to acquire the assets of the Corporate Debtor was at best an offeror whose offer was required to be tested with any other willing interested person and the Adjudicating Authority ought to have asked the liquidator to conduct the private sale and give opportunity to others to compete since the maximisation of the assets of the Corporate Debtor is the object of the IBC. Merely on the basis of one application and other by an intervenor, the Adjudicating Authority could not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to uphold the order of the Adjudicating Authority dated 16.06.2022 confirming the sale in favour of the Respondent No.2 on the basis of bids received by the Respondent No.2 and one intervenor before the Adjudicating Authority. An opportunity has to be given to the Liquidator to explore the possibility of conducting a private sale to elicit any higher offer for the assets of the Corporate Debtor than to one given by the Respondent No.2. We also are of the view that in event no higher offer comes in a process which is undertaken by the liquidator in pursuance of this order to one which has been given by the Respondent No.2, the Respondent No.2 be allowed to retain the Corporate Debtor. Ends of justice be served in disposing this Appeal with following directions:- (i) The order dated 16.06.2022 passed by the Adjudicating Authority approving the private sale of the Corporate Debtor by private treaty in favour of Respondent No.2 is set aside. (ii) The liquidator is permitted to conduct a private sale of the assets of the Corporate Debtor by adopting Swiss Challenge Method treating the bid offered by the Respondent No.2 as an Anchor Bid. (iii) The Liquidator shall issue public n ..... 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