Liquidator To Fix The Reserve Price Based On Average Of Two Valuation Reports Received In The CIRP Process. NCLAT Delhi
The National Company Law Appellate Tribunal (“NCLAT”), New Delhi Bench, comprising of Justice Ashok Bhushan (Chairperson) and Shri Barun Mitra (Technical Member), while adjudicating an appeal filed in Amit Ahirrao v Anagha Anasingharaju & Anr., has held that the Liquidator while auctioning the assets has to fix the reserve price based on average of two valuation reports received in...
The National Company Law Appellate Tribunal (“NCLAT”), New Delhi Bench, comprising of Justice Ashok Bhushan (Chairperson) and Shri Barun Mitra (Technical Member), while adjudicating an appeal filed in Amit Ahirrao v Anagha Anasingharaju & Anr., has held that the Liquidator while auctioning the assets has to fix the reserve price based on average of two valuation reports received in the CIRP process.
“We, however, are of the view that the Liquidator while proceeding to sell the assets in accordance with Liquidation Process Regulation, 2016 has to take the reserve value as per Schedule-I of the Liquidation Regulation. The reserve price has to be value of assets arrived at as per Regulation 35(1), as noted above. We, thus, are of the view that the Liquidator while proceeding to sell the assets has to take reserve price on the basis of average of two valuation reports received in the CIRP process.”
BACKGROUND FACTS
M/s Virtue Infra and Entertainment Pvt. Ltd. (“Corporate Debtor”) was admitted into Corporate Insolvency Resolution Process (“CIRP”) on 29.09.2021. When no Resolution Plan was received, the Committee of Creditors (“CoC”) unanimously agreed to liquidate the Corporate Debtor since it was not even a going concern. Accordingly, on 10.05.2022 the NCLT directed the liquidation of the Corporate Debtor.
The Promoter of Corporate Debtor (“Appellant”) filed an appeal before the NCLAT challenging the order of liquidation. It was submitted that valuation of the Corporate Debtor has not been correctly done by the Liquidator and the latter want to auction properties on lesser valuation.
The Liquidator submitted that the Resolution Professional had obtained two valuations of the Corporate Debtor which were shared with the Appellant. Further, the Liquidator has also obtained one valuation report at the instance of Stakeholders Consultation Committee (“SCC”).
NCLAT VERDICT
The Bench opined that the CoC had correctly decided to liquidate the Corporate Debtor in absence of any Resolution Plan.
Regulation 35 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (“CIRP Regulations”) provides for fair value and liquidation value. Before commencement of Liquidation, the Resolution Professional had obtained the two valuation reports as per Regulation 35 of CIRP Regulations.
Further, under Regulation 35(1) of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 (“Liquidation Regulations”), the Liquidator shall consider the average of the two valuations done under Regulation 35 of CIRP Regulations. The Regulation 35(2) of the Liquidation Regulations empowers Liquidator to appoint two Registered Valuers if fresh valuation is required.
Since two valuations were conducted during the CIRP, the Liquidator is obliged to consider the average of the valuation arrived as per Regulation 35 of the CIRP Regulation, 2016. It was observed that the Liquidator had not invoked his powers under Regulation 35(2) of Liquidation to conduct fresh valuation. In fact, two valuation reports were already on the record.
The Bench held that when the case is covered by Regulation 35(1) of Liquidation Regulations, the Liquidator has to fix the reserve price based on average of two valuation reports received in the CIRP, as per Regulation 35 of CIRP Regulations.
“We, however, are of the view that the Liquidator while proceeding to sell the assets in accordance with Liquidation Process Regulation, 2016 has to take the reserve value as per Schedule-I of the Liquidation Regulation. The reserve price has to be value of assets arrived at as per Regulation 35 (1), as noted above. We, thus, are of the view that the Liquidator while proceeding to sell the assets has to take reserve price on the basis of average of two valuation reports received in the CIRP process.”
The Bench has directed the Liquidator to fix the reserve price as per the average of two valuation reports received as per Regulation 35 of the CIRP Regulations read with Regulation 35(1) of Liquidation Regulations.
Case Title: Amit Ahirrao v Anagha Anasingharaju & Anr.
Case No.: Company Appeal (AT) (Insolvency) No. 842 of 2022
Counsel For Appellant: Mr. Rahul Totala, Mr. Rajat Malu, Advocates.
Counsel For Respondents: Mr. Avinash R Khanolkar, Advocate for R1/Liquidator. Mr. Sandeep Bajaj, Mr. Rautam Singh, Advocates for R-2. Mr. Manvendra Kumar, Mr. Swetab Kumar, Mr. Ayush Tyagi, Advocates. Ms. Priyanka Vora, Advocate for Intervenor, I.A. No. 1427 of 2023.