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TMI Blog2024 (9) TMI 625X X X X Extracts X X X X X X X X Extracts X X X X ..... r alia that directions be issued to the Liquidator, Sri Lakshmi Hotel Private Limited to stall all proceedings in respect of the e-auction conducted by him on 23rd December, 2019, to work on an alternative manner of dividing the property put to auction and sell only a part of the land and for grant of sufficient time to make payment to the financial creditor. (ii) Company Appeal No. 339 of 2021 (subject matter of Civil Appeal No. 9060 of 2022) arose from the common order dated 17th November, 2021 passed by the Adjudicating Authority on an Interim Application5 seeking recall of its order dated 05th May, 2020 passed on an application6 filed by the appellant. (iii) Company Appeal No. 343 of 2021 (subject matter of Civil Appeal No. 9061 of 2022) filed by the appellant on 27th October, 2021 under Section 61 of the Insolvency and Bankruptcy Code, 20167 against order dated 05th May, 2020 passed by the Adjudicating Authority allowing an application moved by the successful bidder, M/s KMC Speciality Hospitals (India) Limited8 for extension of time to deposit the balance sale consideration after the Central/State lockdown was lifted. All the aforesaid appeals were dismissed by the Tribunal u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the Liquidator engaged two Registered Valuers to give an estimate of the valuation of the subject property. The Valuers submitted their Reports as follows: S.No. Name of the Valuer Tax Value Liquidation Value 1. Ms. Vijayalakshmi Rs.48,03,00,000 Rs.40,82,57,000 2. Mr. R.S. Babu Rajendran Rs.48,48,00,000 Rs.38,00,00,000 Average Liquidation Value for the purpose of E- auction Upset Price Rs.39,41,28,500 Based on the above Reports, the Liquidator arrived at the average value of the subject property, i.e., Rs.39,41,28,500/- (Rupees Thirty nine crore forty one lakh twenty eight thousand five hundred only) and scheduled an auction on 25th November, 2019, with a reserve price set at the above figure. Vide letter dated 08th November, 2019, the appellant objected to fixation of the reserve price. The Liquidator replied to the said communication and turned down his objections. He also requested the appellant to nominate a person in the Stakeholders Committee, which the appellant failed to do. 6. When the Liquidator did not receive any bid in the first auction, he published a notice scheduling a second auction on 23rd December, 2019. This time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds taken by the Auction Purchaser for extension of time was that the Income Tax Authority had passed an order attaching the auctioned property. The said application was allowed by the Adjudicating Authority3, vide order dated 05th May, 2020 and the time granted for depositing the balance sale consideration was deferred till the lockdown was lifted by the Central Government/State Government, respectively. 9. Dissatisfied with the aforesaid order, the appellant filed a Company Appeal16, after 19 months, on 27th October, 2021. Well before that, the Auction Purchaser paid the balance sale consideration in respect of the auctioned property on 24th August, 2020 and a Sale Deed was executed by the Liquidator in favour of the Auction Purchaser on 28th August, 2020. One month after completion of the sale transaction, the appellant filed an application on 25th September, 20205, seeking recall of the order dated 05th May, 2020, passed by the Adjudicating Authority and challenging the execution of the Sale Deed. By virtue of the common order dated 17th November, 2021, the Adjudicating Authority dismissed both the applications filed by the appellant, one for stalling the e-auction that was con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It was further submitted that the order passed by the this Court and relied on by the Auction Purchaser in GPR Power Solutions Pvt. Ltd. v. Supriyo Chaudhuri19, as also the order dated 02nd March, 2020 and the order dated 12th May, 2020 passed in Civil Appeal No. 1902 of 202020, could not have enured to its benefit for the reason that the said orders applied to filing of petitions, applications, suits, appeals or other proceedings within the prescribed period of limitation. Citing the decision in Sagufa Ahmed v. Upper Assam Polywood Products Pvt. Ltd.21 learned senior counsel submitted that the order passed by this Court on 23rd March, 2020 in Suo Moto Writ Petition (Civil) No. 3/2020, was only intended for the benefit of vigilant litigants who were prevented from initiating proceedings within the period of limitation due to the pandemic and the lockdown. The Auction Purchaser was not a litigant before the Court and could not have availed of the said order. The Auction Purchaser was neither required to approach the Adjudicating Authority, nor to file any petition before the Tribunal for remitting the balance sale consideration. 12. It was next canvassed on behalf of the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of claims by creditors to the resolution professionals. For this reason, it would be erroneous to state that extension could apply only to litigants before courts and Tribunals, as sought to be urged by the other side. The decisions in Standard Surfa Chem India Private Limited v. Kishore Gopal Somani24 and Prakash Chandra Kapoor v. Vijay Kumar Iyer25 were cited by learned counsel to argue that timelines prescribed under the IBBI Regulations, 2016 are directory and not mandatory in character. Learned counsel submitted that reliance placed by the appellant on C.N. Paramasivam (supra) to contend that the timeline of 90 days is absolute, is misplaced for the reason that the provisions governing the Debt Recovery Tribunal26 and the Adjudicating Authority are not pari materia. Learned senior counsel submitted that unlike DRT's, Adjudicating Authority has special inherent powers under Rule 11 of the National Company Law Tribunal Rules, 201627. Furthermore, even in cases initiated under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act28, this Court had granted extension to an Auction Purchaser to deposit the balance sale consideration i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Purchaser proceeded to construct a 200-bed Mother and child hospital at the auctioned property after demolishing the existing building on which a sum of Rs.1,70,00,000/- (Rupees One crore and seventy lakhs only) has been invested. The said hospital is now complete and fully functional and is stated to cater to the needs of seven surrounding districts in the area. 16. Coming next to the submission made on behalf of the appellant that the order of attachment issued by the Income Tax authorities in respect of the auctioned property is not a relevant consideration when it came to depositing the balance sale consideration by the Auction Purchaser within 90 days, learned senior counsel for the Auction Purchaser sought to urge that sale of properties that are the subject matter of Income Tax attachment orders, must be treated on a different footing. Such sale transactions cannot be completed because of the bar placed under the Income Tax Act, 196132. A specific reference in this regard has been made to Sections 222 and 281 read with Rule 48 Part-III, Schedule 2 of the IT Act. Several decisions of the Adjudicating Authority33 have been cited by the learned senior counsel to canvass that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted that without prejudice to the above submission, in the event this Court is of the opinion that the provisions of Rule 12 of Schedule I of the IBBI Regulations, 2016 are mandatory and the Adjudicating Authority was not empowered to extend the timelines for paying the balance sale consideration, then this Court may exercise its powers under Article 142 of the Constitution of India to do complete justice but the auction sale may not be set aside. E. ARGUMENTS ADVANCED ON BEHALF OF THE RESPONDENT NO.1 - LIQUIDATOR 20. Mr. C.U. Singh, Senior Advocate appearing on behalf of the respondent No.1 - Liquidator supported the arguments advanced by learned senior counsel for the Auction Purchaser. He submitted that the appellant has made unfounded allegations regarding valuation of the subject property at Rs.39,41,28,500/- (Rupees Thirty nine crore forty one lakh twenty eight thousand and five hundred only). The said allegations were responded to by the Liquidator, vide letter dated 15th November, 2019 clearly stating inter alia that the reserve price was based on the average liquidation value arrived at by the registered Valuers. Contradicting the claim of the appellant that the subj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding the time until the lifting of the lockdown by the Centre/State Government. The balance sale consideration was deposited by the Auction Purchaser on 24th August, 2020. On receiving the said amount, the Liquidator had settled the outstanding claim of the Income Tax Department on 27th August, 2020 whereafter, the Income Tax attachment was lifted and the Liquidator executed and registered the Sale Deed in favour of the Auction Purchaser on 28th August, 2020. It was pointed out that the appellant decided to challenge the order dated 5th May, 2020 passed by the Adjudicating Authority, 14 months after the Sale Deed was executed and registered in favour of the Auction Purchaser, which shows his non-seriousness. Further, learned counsel cited the decision in Pioneer Urban Land and Infrastructure Limited and Another v. Union of India and Others37, wherein it has been held that the timeline prescribed in Sections 7(5), 9(5) and 10 (4) of the IBC are directory and not mandatory in character. 23. Learned counsel for the Liquidator supported the submissions made on behalf of the Auction Purchaser on the aspect of extension of the period of limitation and submitted that the expressions "lit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot mandatory, learned senior counsel for the appellant submitted that the decisions cited by the respondents to substantiate the said submission, are distinguishable on facts. It was contended that this Court has itself held in Pioneer Urban Land and Infrastructure Limited (supra) that the timelines mentioned in Sections 7(5), 9(5) and 10(4) of the IBC are directory in nature because they do not provide for any consequence if the period so mentioned is exceeded. However, the word used in Rule 12 of Schedule I under Regulation 33 of the IBBI Regulations, 2016 is "shall". The second proviso under Rule 12 provides for a consequence that in the event the amount is not paid within 90 days, the sale shall be cancelled. The decision in the case of Prakash Chandra Kapoor (supra) is also sought to be distinguished on the same grounds. Learned senior counsel submitted that in all the Rules under Schedule I, except for Rule 11, the word "shall" has been used and it has been held in Vidarbha Industries Power Limited v. Axis Bank Limited42, that if one provision uses the word "may", and another provision uses the word "shall", then wherever the word "shall" has been used, will have to be treate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expression 'payment of sale consideration' and 'execution of sale deed'. The attention of the Court was also drawn to the letter dated 9th December, 2019 issued by the Liquidator to the Auction Purchaser in response to its communication dated 9th December, 2019 well before the date of auction, seeking a clarification. The Liquidator had clearly stated that the subject property was being sold under the IBC and the Income Tax Department could not have a priority in claim. In any case, the income tax dues were limited to a sum of Rs.2,44,00,000/- crores (Rupees Two crore and forty four lakhs only) and the said amount could have been deposited with the Income Tax Department from out of the sale proceeds. It was on the basis of the aforesaid clarification furnished by the Liquidator that the Auction Purchaser had participated in the auction process and once having succeeded in the bid, it was under an obligation to deposit the balance sale consideration within 90 days from the date of the auction. 28. Questioning the stand taken by the respondents that Regulation 31A that requires constitution of a Stakeholders' Consultation Committee by the Liquidator to advise on matters specified i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction Purchaser to compensate the appellant for the loss of the value of the property which was assessed by the registered Valuers in the year 2019, at Rs.48,00,00,000/- (Rupees Forty eight crores only). G. DISCUSSION AND ANALYSIS 31. This Court has given its thoughtful consideration to the arguments advanced by learned counsel for the parties, perused the records and the judgments cited on both sides. We shall now deal with the contentions raised by learned counsel for the appellant ad seriatim. 32. COVID-19 PANDEMIC AND ITS IMPACT ON LIMITATION 32.1 The ball was set rolling on the Notice for sale of assets issued by the Liquidator for conducting the e-auction of the land and building owned by the Corporate Debtor that declared the reserve price of the subject property as Rs.29,55,96,375/- (Rupees Twenty nine crore fifty five lakh ninety six thousand three hundred and seventy five only). The intending bidders were required to deposit 10 per cent of the reserve price as earnest money amount which came to Rs. 2,95,59,638/- (Rupees Two crore ninety five lakh fifty nine thousand six hundred and thirty eight only). Some of the relevant terms and conditions of the e-auction are extr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ser has sought to take shelter of the order dated 23rd March, 2020, passed by this Court in the Suo Moto Writ Petition wherein it was directed as under: Order "1. This Court has taken suo motu cognizance of the situation arising out of the challenge faced by the country on account of Covm-19 virus and resultant difficulties that may be faced by litigants across the country in filing their petitions/applications/suits/appeals/all other proceedings within the period of limitation prescribed under the general law of limitation or under special laws (both Central and/or State). 2. To obviate such difficulties and to ensure that lawyers/litigants do not have to come physically to file such proceedings in respective courts/tribunals d across the country including this Court, it is hereby ordered that a period of limitation in all such proceedings, irrespective of the limitation prescribed under the general law or special laws whether condonable or not shall stand extended w.e.f. 15-3-2020 till further order(s) to be passed by this Court in present proceedings. 3. We are exercising this power under Article 142 read with Article 141 of the Constitution of India and declare that thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tition is disposed of accordingly." 32.5 The Auction Purchaser has also invoked Regulation 47A of the IBBI Regulations, 2016, that was inserted on 20th April, 2020 and made effective from 17th April, 202045. Regulation 47A provides for exclusion of the period of lockdown and reads as under : "Exclusion of period of lockdown 47A. Subject to the provisions of the Code, the period of lockdown imposed by the Central Government in the wake of Covid-19 outbreak shall not be counted for the purposes of computation of the time-line for any task that could not be completed due to such lockdown, in relation to any liquidation process." 32.6 It is evident from a perusal of Regulation 47A, that the benefit of the said regulation was made available not only for initiation of any litigation, but also for computation of the timeline for completing any task in connection with a liquidation process that could not be completed on account of declaration of the lockdown. We are not inclined to accept the submission made on behalf of the appellant that the word 'Litigants' used in the order dated 23rd March, 2020 passed in the Suo Moto Writ Petition ought to be given a narrow interpretation so as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rest. On 02nd April, 2020, the Liquidator informed the Auction Purchaser that he was not empowered to relax the timelines for depositing the balance sale consideration and it ought to approach the Adjudicating Authority for appropriate relief. In view of the aforesaid response received from the Liquidator, the Auction Purchaser filed an application before the Adjudicating Authority on 22nd April 202046, seeking extension of the time for making payment of the balance sale consideration on various grounds that included a plea that there was an income tax attachment order in respect of the subject property and the Covid-19 pandemic had caused a lot of disruption. It was this application that was allowed by the Adjudicating Authority vide order dated 05th May, 2020 granting the Auction Purchaser time to pay the balance sale consideration until the Central Government/State Government lifted the lockdown. 32.9 In GPR Power Solutions (supra), a case cited by learned counsel for the Auction Purchaser, the appellant therein was a creditor of the Corporate Debtor who filed a belated claim under Regulation 7of the IBBI Regulations, 2016 which was rejected by the Resolution Professional on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w of the aforesaid conduct, the Court referred to sub-rule (4) and (6) of Rule 9 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (Enforcement) Rules 200247 that prescribes time of sale, issue of sale certificate and delivery of possession and observed that even if a liberal construction is given to the said sub-rules, in view of successive orders passed by the Court on applications moved by the applicant - Auction Purchasers, it was not permissible to extend the timeline under the substantive statutory provisions dealing with the subject. The facts of the present case being on a different footing, the appellant cannot take advantage of the aforesaid decision. 32.12 In the present case, as noticed above, the period of 90 days for depositing the balance sale consideration had expired just after the crucial date, i.e., 23rd March, 2020. We do not find any merit in the submission made by the appellant that the Tribunal ought not to have accepted the view taken by the Adjudicating Authority that Covid-19 lockdown was a valid reason for extension of time to deposit the balance sale consideration. 33. ALLEGATIONS REGARDING UNDER-VALUATIO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nging it down to Rs. 29,55,96,375/- (Rupees Twenty nine crore, fifty five lakhs ninety six thousand three hundred seventy five only), is answered in Rule 4A of Schedule I under Regulation 33 of the IBBI Regulations, 2016, that states as follows: "(4A) Where an auction fails at the reserve price, the liquidator may reduce the reserve price by up to twenty-five percent of such value to conduct subsequent auction." 33.4 Admittedly, in the first round of the Notice for sale through e-auction published by the Liquidator on 25th November, 2019, he did not receive any bid. As a result, the Liquidator reduced the reserve price of the subject property by 25 per cent to conduct a second auction on 23rd December, 2019 wherein the Auction Purchaser was declared as the successful bidder. In our view, the Liquidator cannot be faulted for having exercised the discretion vested in him under Rule 4A of Schedule I when the auction scheduled earlier, did not bear any positive result. In fact, Rule 4B empowers the Liquidator to reduce the reserve price fixed under Rule 4A for subsequent auctions with a rider that the price shall not be reduced to more than 10 per cent at a time. The said eventualit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f sale, pre-bid qualifications, reserve price, amount of earnest money deposit, and marketing strategy: Provided that the decision(s) taken by the liquidator prior to the constitution of consultation committee shall be placed before the consultation committee for information in its first meeting. xxxxx (5) Subject to the provisions of the Code and these regulations, representatives in the consultation committee shall have access to all relevant records and information as may be required to provide advice to the liquidator under sub-regulation (1). xxxxx (8) The liquidator shall place the recommendation of committee of creditors made under subregulation (1) of regulation 39C of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, before the consultation committee for its information. (9) The consultation committee shall advise the liquidator, by a vote of not less than sixty-six percent of the representatives of the consultation committee, present and voting. (10) The advice of the consultation committee shall not be binding on the liquidator: Provided that where the liquidator takes a decision different fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding on the liquidator. Regulation 8 of the Liquidation Regulations refers to the consultative process with the stakeholders, as specified in Section 35(2) IBC and states that they shall extend all necessary assistance and cooperation to the liquidator for completing the liquidation process. Regulation 31-A has introduced a stakeholders' Consultation Committee that may advise the liquidator regarding sale of the assets of the corporate debtor and must be furnished all relevant information to provide such advice. Though the advice offered is not binding on the liquidator, he must give reason in writing for acting against such advice." 34.3 By virtue of the Notification dated 28th April, 2022, an Explanation was appended at the foot of Regulation 31A which clarifies that the requirement of constituting a Stakeholders' Consultation Committee shall apply only to those liquidation processes that were to commence on/after the date of commencement of the IBBI Regulation, 2016. In the present case, the liquidation process in respect of the company had commenced on 17th July, 2019 and therefore, the submission made by the appellant that the Liquidator has breached Regulation 31A of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hall do so the in the manner specified herein. xxxxx (3) The liquidator shall prepare terms and conditions of sale, including reserve price, earnest money deposit as well as pre-bid qualifications, if any. xxxxx (6) The liquidator shall provide all assistance necessary for the conduct of due diligence by interested buyers. xxxxx (12) On the close of the auction, the highest bidder shall be invited to provide balance sale consideration within ninety days of the date of such demand: Provided that payments made after thirty days shall attract interest at the rate of 12%. Provided further that the sale shall be cancelled if the payment is not received within ninety days. (13) On payment of the full amount, the sale shall stand completed, the liquidator shall execute certificate of sale or sale deed to transfer such assets and the assets shall be delivered to him in the manner specified in the terms of sale. (emphasis added) 35.2 Originally, Rule 12 read as follows : "(12) On the close of the auction, the highest bidder shall be invited to provide balance sale consideration within fifteen days of the date when he is invited to provide the balance sale consideratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bject of a law is to be defeated by non-compliance with it, it has to be regarded as mandatory. But when a provision of law relates to the performance of any public duty and the invalidation of any act done in disregard of that provision causes serious prejudice to those for whose benefit it is enacted and at the same time who have no control over the performance of the duty, such provision should be treated as a directory one. Where, however, a provision of law prescribes that a certain act has to be done in a particular manner by a person in order to acquire a right and it is coupled with another provision which confers an immunity on another when such act is not done in that manner, the former has to be regarded as a mandatory one. A procedural rule ordinarily should not be construed as mandatory if the defect in the act done in pursuance of it can be cured by permitting appropriate rectification to be carried out at a subsequent stage unless by according such permission to rectify the error later on, another rule would be contravened. Whenever a statute prescribes that a particular act is to be done in a particular manner and also lays down that failure to comply with the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vision of Section 9(5) IBC relating to the initiation of CIRP by an operational creditor. 76. The fact that the legislature used "may" in Section 7(5)(a) IBC but a different word, that is, "shall" in the otherwise almost identical provision of Section 9(5)(a) shows that "may" and "shall" in the two provisions are intended to convey a different meaning. It is apparent that the legislature intended Section 9(5)(a) IBC to be mandatory and Section 7(5)(a) IBC to be discretionary. An application of an operational creditor for initiation of CIRP under Section 9(2) IBC is mandatorily required to be admitted if the application is complete in all respects and in compliance of the requisites of the IBC and the rules and regulations thereunder, there is no payment of the unpaid operational debt, if notices for payment or the invoice have been delivered to the corporate debtor by the operational creditor and no notice of dispute has been received by the operational creditor. The IBC does not countenance dishonesty or deliberate failure to repay the dues of an operational creditor." (emphasis added) 35.6 In C.N. Paramasivan (supra), one of the questions that fell for consideration before t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment is not made within the period of fifteen days, the court has the discretion to forfeit the deposit, and there the discretion ends but the obligation of the court to resell the property is imperative. A further consequence of non-payment is that the defaulting purchaser forfeits all claim to the property ... (Rule 86). 9. ... These provisions leave no doubt that unless the deposit and the payment are made as required by the mandatory provisions of the Rules, there is no sale in the eye of the law in favour of the defaulting purchaser and no right to own and possess the property accrues to him. *** 11. Having examined the language of the relevant Rules and the judicial decisions bearing upon the subject we are of the opinion that the provisions of the Rules requiring the deposit of 25% of the purchase money immediately on the person being declared as a purchaser and the payment of the balance within 15 days of the sale are mandatory and upon non-compliance with these provisions there is no sale at all. The Rules do not contemplate that there can be any sale in favour of a purchaser without depositing 25% of the purchase money in the first instance and the balance wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns made in the captioned decision : "19. It will thus be seen that Section 34(5) does not deal with the power of the Court to condone the non-compliance thereof. It is imperative to note that the provision is procedural, the object behind which is to dispose of applications under Section 34 expeditiously. One must remember the wise observation contained in Kailash [Kailash v. Nanhku, (2005) 4 SCC 480] , where the object of such a provision is only to expedite the hearing and not to scuttle the same. All rules of procedure are the handmaids of justice and if, in advancing the cause of justice, it is made clear that such provision should be construed as directory, then so be it. xxxx 21. Section 80, though a procedural provision, has been held to be mandatory as it is conceived in public interest, the public purpose underlying it being the advancement of justice by giving the Government the opportunity to scrutinise and take immediate action to settle a just claim without driving the person who has issued a notice having to institute a suit involving considerable expenditure and delay. This is to be contrasted with Section 34(5), also a procedural provision, the infraction of w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the manner prescribed in terms of the sale. The word "shall" has again been used thrice in Rule 13. It is noticed that except for Rules 4A, 4B, 8 and Rule 11A where the word "may" has been used and it vests a discretion in the Liquidator to reduce the reserve price more than once and conduct multiple rounds of auctions with the purpose of maximizing realization from the sale of assets in the best interest of the creditors, in the remaining Rules, the word "shall" features prominently and without an exception. But that is not to say that wherever the word "shall" has been used in the Rules under Schedule I, it attains a mandatory nature. The Rule could still be construed as purely procedural if its infraction does not entail any serious or prejudicial consequence. Much will depend on the connotation and the textual context of the Rule. 35.11 In view of the analysis undertaken above, Rule 12 would have to be treated as mandatory in character for the reason that it contemplates a consequence in the event of non-payment of the balance sale consideration by the highest bidder within the stipulated timeline of 90 days, which is cancellation of the sale by the Liquidator. To that e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... em." 35.13 Nor can the decisions of the Tribunal in Standard Surfa Chem India Private Limited (supra) and Prakash Chandra Kapoor (supra) referred to by learned senior counsel for the Liquidator, be read in favour of the respondents. A sweeping observation that all the timelines prescribed in Regulation 47 are directory, is impermissible. The consequences of non-compliance of the specific rule would have to be individually examined to decide as to whether the said rule has a directory flavour or is mandatory in character. 35.14 In the present case, records reveal that when the Auction Purchaser had approached the Liquidator seeking extension of time to deposit the balance sale consideration. The Liquidator had rightly expressed his inability to do so and indicated that such a power vests only in the Adjudicating Authority. On receiving the aforesaid response, the Auction Purchaser did take steps to move the Adjudicating Authority for seeking extension of time for making the payments. It is a matter of record that the said application was allowed by the Adjudicating Authority on 5th May, 2020 and time was granted to the Auction Purchaser to pay the balance sale consideration on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the view expressed above that the Adjudicating Authority was empowered in law to extend the time on sufficient cause being shown, the matter ought to have rested there. But there is something more to be said in this case that revolves around the arguments advanced by learned counsel for the appellant regarding the import of the order of attachment issued by the Income Tax Authorities in respect of the auctioned property and its effect. 36.2 It has been strenuously argued by learned senior counsel for the appellant that the attachment order could not be used as an excuse by the Auction Purchaser for belatedly depositing the balance sale consideration. The terms and conditions of the Notice of Sale as extracted in this judgement go to show that the Liquidator had declared that e-auction of the subject property was being conducted on an "AS IS WHERE IS", "AS IS WHAT IS" and "WHATEVER THERE IS" basis. It was further clarified that the intending bidders must undertake their own independent inquiries, inspect the subject property and satisfy themselves before submitting their bids. 36.3 The fact that the Auction Purchaser was aware of the income tax attachment order in respect of the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liabilities attached to it, weigh all the pros and cons and only thereafter participate in the auction process. After having participated in the e-auction with its eyes wide open, the Auction Purchaser cannot be heard to state that payment of the balance sale consideration was linked with the lifting of the attachment order passed by the Income Tax Department when it knew all along that the auction was being conducted on an "AS IS WHERE IS", "AS IS WHAT IS" and "WHATEVER THERE IS" basis. 36.6 To fortify the submission that the sale transaction could not have been completed on account of the embargo placed under the IT Act, learned counsel for the Auction Purchaser has referred to Sections 222 and 281 of the IT Act read with Rule 48 Part III, Schedule 2 of the IT Act. Section 222 of the IT Act, empowers the Tax Recovery Officer to draw up a statement specifying the amount of arrears due from an assessee who has defaulted in payment of tax and thereafter proceed to recover the said arrears by attaching and selling the assessee's movable/immovable properties. Section 281 of the IT Act declares that if an assessee creates a charge or parts with the possession of any of his assets, suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 2016 must be read in conjunction with Rule 12 and only on payment of the full amount, could the sale transaction be treated to have been completed in all respects. Since the full amount could not be paid till the attachment order was lifted, the Liquidator could not have executed a certificate for sale/sale deed to transfer the subject property in favour of the Auction Purchaser. 36.9 We are afraid, such an assumption does not stand to reason. Rule 12 is not interlinked with Rule 13. Both the Rules cover different situations. The first proviso to Rule 12 gives a leeway to the successful bidder to make payment of the balance sale consideration after thirty days subject to paying interest at the rate of 12%. However, the second proviso to Rule 12 is unequivocal and declares that the sale itself will be treated as cancelled if the payment is not received within the outer limit of 90 days. It is only on completion of the steps contemplated in Rule12 that Rule 13 can come in. Reference to Rule 13 that starts with the expression "on payment of the full amount" would naturally be understood to mean on payment of the full amount within the period prescribed in Rule 12. We have already h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the entire balance sale consideration. The spectre of Covid-19 was nowhere on the horizon at that time. It spiralled only in the last week of March, 2020. If the Auction Purchaser was serious, it could have easily deposited at least some amount out of the balance sale consideration of Rs.26,60,36,677/- (Rupees Twenty six crore sixty lakh thirty six thousand six hundred and seventy seven only) much earlier, but it elected not to deposit a penny till the end of August, 2020. When the first proviso to Rule 12, Schedule I of the IBBI Regulations, 2016 permits payment of sale consideration after expiry of 30 days from the date of demand subject to payment of interest @ 12% p.a., there was no question of the Auction Purchaser going scot free, when its conduct has not been blemishless. 36.12 On an overall conspectus of the facts of the present case which brings out the glaring default on the part of the Auction Purchaser in making deposit of the balance sale consideration even after permission was granted by the Adjudicating Authority on 10th February, 2020 to lift the attachment order, the only question that needs to be answered is as to whether this Court should proceed to set aside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsideration the estimated value of the subject property in terms of the Reports submitted by the Registered Valuers appointed by the Liquidator. Based on their Reports, the Liquidator had fixed Rs.39,41,28,800/- (Rupees Thirty nine crore forty one lakh twenty eight thousand and eight hundred only) as the average liquidation value of the subject property for the purpose of e-auction. This figure was brought down by 25% in the second round of auction which came to Rs.29,55,96,375/- (Rupees Twenty nine crore fifty five lakh ninety six thousand three hundred and seventy five only). The difference in the two figures mentioned above comes to Rs.10,00,00,000/- (Rupees Ten crore only) approximately. Keeping in mind the fact that the Auction Purchaser managed to retain the balance sale consideration for over six months reckoned from 10th February, 2020 and about five months reckoned from 25th March, 2020, we deem it appropriate to direct it to deposit 50% of the differential figure, i.e., an additional sum of Rs.5,00,00,000/- (Rupees Five crore only) with the Liquidator along interest @ 9 % p.a. reckoned from 26th March, 2020 till date of actual payment. The said amount shall be deposited ..... X X X X Extracts X X X X X X X X Extracts X X X X
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