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TMI Blog2025 (2) TMI 217X X X X Extracts X X X X X X X X Extracts X X X X ..... s opting for private sale. The above observation of the Hon'ble Supreme Court was in reference to the facts of that case. There can be no dispute to the proposition that an anchor bidder has no indefeasible right. Anchor bidder has to place first bid, after which other bidders are required to participate and give a higher bid. The present is a case where the OASPL, offer was treated to be a base bid giving right of RoFR and the Swiss Challenge Process was to proceed thereafter, which was fixed for 29.01.2025. The judgment of the Hon'ble Supreme Court in R.K. Industries' case as noted above, in no manner support the submission of the Appellant in the present case that the OASPL could not have been given Right of First Refusal. On looking into the Discussion paper, it clearly mentions that Swiss Challenge is a time-tested mechanism and has proven to be highly effective. The Swiss Challenge Mechanism has also been incorporated in hybrid method pertaining to pre-packaged insolvency resolution process. Section 54K of the IBC contemplate the base resolution plan by the Applicant and thereafter other competitive resolution plans are invited in event the base resolution plan is not appro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncern through private sale method. The Adjudicating Authority by the impugned order allowed the Application. Aggrieved by which order, this Appeal has been filed. 2. Brief facts necessary to be noticed for deciding this Appeal are: (i) By an order dated 03.01.2020, liquidation process commenced against the CD - Essar Power (Jharkhand) Ltd. and Respondent No.2 was appointed as the Liquidator. (ii) The Liquidator initiated e-auction process for sale of CD. Upto 18th e-auction held on 24.04.2024, only two residential units of the CD could be sold. Certain assets of the CD was lying with the Kolkata Port Trust. On an Application filed by Board of Trustee for Kolkata Port Trust seeking permission of the Tribunal to direct sale of assets of the CD lying with Kolkata Port Trust, the Adjudicating Authority passed an order on 31.07.2024 directing sale of assets by the Liquidator. (iii) On 02.08.2024, the Appellant sent a letter to the Liquidator showing interest in the assets of the CD. The Liquidator replied the letter of the Appellant providing the information sought for, after obtaining confidentiality undertaking. (iv) A meeting was held on 26.08.2024 of the Stakeholder's Consu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tisement on 26.12.2024 (E-Auction sale notice under Swiss Challenge Mechanism). Several Expression of Interest ("EoI") were received and on request made, a further Notice was issued. On 21.01.2025, the e-auction scheduled for 22.01.2025 was deferred and informed to be held on 29.01.2025 from 03:00 PM to 04:00 PM. (x) The Appellant aggrieved by the order dated 11.12.2024, granting permission to the Liquidator has filed this Appeal. 3. The Appeal was heard on 22.01.2025, on which date, the learned Counsel appearing for the Liquidator prayed for time to bring the SCC Minutes of 30.09.2024 on the record. In pursuance of the order dated 22.01.2025, an affidavit on behalf of the Liquidator has been filed dated 25.01.2025 bringing on record the Minutes of 36th and 39th meeting of the SCC. The Liquidator in the affidavit has also stated about the process adopted by the Liquidator for conducting the Swiss Challenge Mechanism. 4. We have heard Shri Abhijeet Sinha, learned Senior Counsel for the Appellant and Shri Abhishek Anand, learned Counsel for Respondents. 5. Shri Abhijeet Sinha, learned Senior Counsel appearing for the Appellant challenging the order of Adjudicating Authority subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is submitted that the Appellant has never given any commercial offer to the Liquidator, although it was corresponding with the Liquidator with effect from 02.08.2024. No other interested party having given any offer, offer given by OASPL was considered and approved by Stakeholder's Consultation Committee. The Swiss Challenge Mechanism gives opportunity to all, including the Appellant to participate and is intended to maximize the value of the assets of the CD. No exception can be taken to the Swiss Challenge Mechanism. The Liquidation has received EoIs from several intending parties and Swiss Challenge Mechanism is to be conducted on 29.01.2025. It is submitted that there is no error in the order of Adjudicating Authority, granting permission to the Liquidator. 7. We have considered the submissions of learned Counsel for the parties and have perused the record. 8. As noted above, the Liquidator has conducted at least 21 e-auctions for sale of assets of the CD. However, no assets of the CD could be sold, except two residential units. An offer was received from OASPL dated 26.09.2024 for purchase of assets of the CD as a going concern, except the assets at Kolkata Port Trust for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assets, in the manner specified in the terms of sale." 10. The Liquidator after receiving the offer from OASPL, placed the said offer for consideration before the Stakeholder's Consultation Committee in its meeting held on 30.09.2024. The Minutes of the meeting has been brought on the record along with affidavit filed by the Liquidator. At Item No.14, details of offer received from OASPL has been noticed and discussed. It is useful to extract following part of the Minutes, which is as follows: "14. To take a note of the offer received from one of the Prospective Investors and decide the way forward, in relation to the sale of assets of the Corporate Debtor: Liquidator apprised the members that, an offer has been received from one of the prospective investors, namely, Orissa Alloy Steel Private Limited (Rashmi Group) for acquiring the Corporate Debtor on a Going Concern Basis excluding the assets of the Corporate Debtor lying at KoPT. The Liquidator also stated that, the said private offer was annexed to the notice of this meeting. Accordingly, Liquidator presented following salient features of the private sale offer received from Orissa Alloy Steel Private Limited : Pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ebtor, a Swiss Challenge Mechanism or equivalent process would be essential. On a separate note, the SCC also requested that, subject to discussion, negotiations on the commercials and other relevant terms of the offer of Orissa Alloy in the present meeting and prior to the same being put for e-voting for SCC consideration and the time involved in circulation of minutes and voting and the fact that mid-week holiday owing to Gandhi Jayanti and weekend on account of Durga Festivities week, Orissa Alloy is requested that the validity period of the original or revised offer, if any be extended by a period of ten days which is currently expiring on October 06, 2024. The authorised representative of Orissa Alloy stated that, the validity period of the original or revised offer, if any would be extended by a period of seven days excluding the date of the offer which would end on Tuesday, October 08, 2024." 12. The Agenda Item was put to vote and Resolution No.2, which is to the following effect was approved with 66.52% vote: "Resolution 2 To consider and in-principally approve the offer received the Prospective Investor, namely, Orissa Alloy Steel Private Limited and request the Li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Liquidator to sell the Corporate Debtor on a Going Concern Basis excluding the assets of the Corporate Debtor lying at KoPT through private sale method by carrying out Swiss Challenge Mechanism or any other equivalent process wherein the Right of First Refusal would be given to OASPL to match the highest bid; and d) For such other reliefs as this Hon'ble Tribunal may deem fit in the facts and circumstances of the present case." 14. The Adjudicating Authority after noticing the prayers had made following observations while allowing the Application: "Mr. Abhishek Anand, Ld. Counsel for the Liquidator present in Court and states that the proposal is filed after approval of the SCC which is recorded at page 170 & 173 of the application in the meeting held on 30.09.2024 (voting concluded on October 07, 2024). He further states that they have already received several offers and the SCC intend to reach out to a wide network of intending bidders and to undertake the Swiss challenge so as to maximize the same proceeds by sale of a CD as a going concern minus the assets lying in KoPT. In view of the submissions made, we deem it appropriate to allow the application. Ld. Counsel for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hanism or equivalent process would be essential. Thus, the SCC deliberated on Swiss Challenge Mechanism and decided to adopt Swiss Challenge Mechanism with Right to First Refusal to OASPL, which is clear from the Minutes of the Meeting dated 01.10.2024 as extracted above. Swiss Challenge Mechanism is a method for discovering the maximum price, which can be offered by the Applicants. The submission of the Appellant that Swiss Challenge Mechanism is against the principles of natural justice and does not provide for transparency has no substance. In Swiss Challenge Mechanism all Applicants, who comply with the terms and conditions of process documents, are entitled to participate and Swiss Challenge Mechanism gives opportunity to all competitors and thus provides transparent process. We do not find any substance in submission of the Appellant that Swiss Challenge Mechanism ought not to have been adopted. 18. It is further submitted by learned Counsel for the Appellant that Adjudicating Authority has not given any reason for approving the Swiss Challenge Mechanism. When the Application was filed by the Liquidator being IA No.5745 of 2024, it was in pursuance of the Resolution taken by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 30.09.2024 of the SCC brought on the record, it is clear that in the Minutes it was recorded that there was only Orissa Alloy, who has submitted offer for private sale, whereas the other prospective investors seem to have not submitted any offer till date. Only offer which was received was by the Orissa Alloy. As noted above, there have been 21 e-auctions, but the assets could not be sold inspite of 21 e-auctions held. The liquidation order was passed in 2020 and more than four years have elapsed without any successful e-auction. The Liquidator received offer from OASPL of Rs.67 crores, which was promptly placed before the SCC. The SCC in the Minutes have noticed that no other prospective investor has given any offer. In the affidavit filed by the Liquidator, it has been mentioned that the Appellant has not given any formal commercial offer. 22. In the Minutes of 30.09.2024 of the SCC, offer which was submitted by OASPL has been quoted at Item No.14, which we have noticed above. In one of the conditions of the offer under the terms and conditions of the offer, following was stated at Item No.3 by OASPL: "14. …3. If the Liquidator chooses to conduct an auction process ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dustries (supra) in paragraph 66 as extracted above has also recognized the Right of First Refusal to an anchor bidder, who is originator of proposal. 25. Learned Counsel for the Appellant has also submitted that Liquidator cannot exercise wide and unlimited powers in conducting the sale of assets of the CD. The power and jurisdiction of the Liquidator are regulated by IBC and 2016 Regulations. The powers vested and the duties cast upon the Liquidator have been subjected to directions of the Adjudicating Authority under Section 35. The present is a case where Liquidator filed an Application seeking direction under Regulation 35(h) of the Regulations and the Adjudicating Authority has approved such prayer. When Adjudicating Authority has granted the approval, it cannot be said that the Liquidator exercised any unguided or arbitrary powers. The Hon'ble Supreme Court in R.K. Industries has held that when stakeholders have endorsed the view taken by the Liquidator, it is not for the Court to undertake further scrutiny of the desirability or reasonableness of the said decision or substitute the same with its own views. The observation made by the Hon'ble Supreme Court in the above case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as land. The request of the Welspun was turned down by the Liquidator, who filed an Application before the Adjudicating Authority praying for direction to consider its offer. The NCLT on 05.07.2021 directed the Liquidator to permit Welspun to inspect the assets of the CD. After the inspection, Welspun hiked its offer for the consolidated assets from Rs.627.50 crores to Rs.650 crores. The SCC in its meeting conducted on 13.08.2021 decided that it would be beneficial if the Dahej material and the shipyard are sold as composite assets to maximise realization to the stakeholders. Welspun sent an email to the Liquidator increasing its offer to Rs.675 crores. The Liquidator apprised the NCLT about the recommendation made by SCC for entertaining the consolidated offer received from Welspun. The NCLT passed an order on 16.08.2021 permitting the Liquidator to go in for private sale of all the assets of the CD and complete the entire sale process. The aforesaid order was challenged by R.K. Industries before the Appellate Tribunal, which dismissed the Appeal and the matter was thereof taken to the Hon'ble Supreme Court. The learned Counsel for the Appellant has relied on paragraphs 66 to 75 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... offered for sale. 67. In the instant case, there was good reason for Respondent 2 liquidator to have halted the Second Swiss Challenge Process midstream and approached the adjudicating authority (NCLT) armed with an offer of Rs 675 crores received from Respondent 7 Welspun who had shown interest in the composite sale of the Dahej assets. In fact, this was all along the preferred choice of Respondent 2 liquidator as can be seen from the fact that when public auctions were conducted by him on five earlier occasions, bids were invited for the composite assets of the corporate debtor. It is a different matter that the earlier e-auctions turned out to be unsuccessful, thus compelling Respondent 2 liquidator to explore other options, including the option to sell the assets in smaller lots. 68. In his wisdom, Respondent 2 liquidator found the offer made by Respondent 7 Welspun to be of better value for more than one reason. Firstly, unlike the sale proposed under the Second Swiss Challenge Process that was confined to the Dahej material, Respondent 7 Welspun expressed its willingness to purchase the Dahej land and the scrap as a composite asset thereby curtailing two rounds of sales ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te to the proposition that an anchor bidder has no indefeasible right. Anchor bidder has to place first bid, after which other bidders are required to participate and give a higher bid. The present is a case where the OASPL, offer was treated to be a base bid giving right of RoFR and the Swiss Challenge Process was to proceed thereafter, which was fixed for 29.01.2025. The judgment of the Hon'ble Supreme Court in R.K. Industries' case as noted above, in no manner support the submission of the Appellant in the present case that the OASPL could not have been given Right of First Refusal. 28. Shri Abhijeet Sinha, learned Senior Counsel for the Appellant has relied on Discussion Paper issued by IBBI dated 27.08.2021 in its written submission. The Appellant has referred to Discussion Paper dated 27.08.2021 with respect to Swiss Challenge Method. It is useful to quote paragraph 10 of the Written Submission, where Discussion Paper deals with Swiss Challenge Method, which is as follows: "10. That in addition to the aforesaid, reference is drawn to the Discussion Paper with regards to the issues related to a corporate insolvency resolution process (CIRP) dated 27th August, 2021 by the In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f developing research to get detailed analytical and critical exploration of various facets of insolvency ecosystem." 30. When we look into the paragraph 24, as quoted above of the Discussion paper, the said paragraph clearly mentions that Swiss Challenge is a time-tested mechanism and has proven to be highly effective. The Swiss Challenge Mechanism has also been incorporated in hybrid method pertaining to pre-packaged insolvency resolution process. Section 54K of the IBC contemplate the base resolution plan by the Applicant and thereafter other competitive resolution plans are invited in event the base resolution plan is not approved. 31. Another part of Discussion Paper dated 27.08.2021, which is on the subject "Strengthening Regulatory Framework of Liquidation Process". In paragraph 11 of the written submission, the Appellant extracted following part of Discussion Paper: "11. That further reliance is placed on the Discussion Paper on Strengthening Regulatory Framework of Liquidation Process dated 27th August, 2021 by the Insolvency & Bankruptcy Board of India wherein the Swiss Challenge Mechanism and its related issues has been discussed in detail. The relevant extracts of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Challenge has been adopted. 33. The Discussion Papers issued by IBBI are Discussion Papers to elicit response from stakeholders and to inform the stakeholders about the issues, which arose regarding working of IBC and Regulations. Discussion Papers are only to inform the issues and elicit response to strengthen the regulatory framework. The Discussion Paper in no manner can affect the statutory and regulatory scheme governing the liquidation process as noticed in foregoing paragraph of this judgment. We, thus, are of the view that Discussion Paper dated 27.08.2021 relied and as extracted by the Appellant, in no manner help the Appellant to support his submission in the present case. 34. The power and duties given to the Liquidator under the IBC and the 2016 Regulations, has to be exercised within the four corners of the statutory provisions. The decision taken by the Liquidator to proceed with private sale by adopting Swiss Challenge Mechanism, cannot be said to be a decision beyond the jurisdiction or authority of the Liquidator. Furthermore, SCC has already endorsed the said decision after detailed discussion as noted above. The Adjudicating Authority did not commit any error i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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