NCLAT Delhi: Auction Purchaser In Liquidation Proceedings Entitled For Certain Consequential Reliefs
The National Company Law Appellate Tribunal (“NCLAT”), Principal Bench, comprising Justice Ashok Bhushan (Chairperson) and Mr Barun Mitra (Technical Member) has dismissed an appeal. The appeal was filed against order of the National Company Law Tribunal (“NCLT”), Mumbai Bench. The Bench held that the Successful Auction Purchaser can be given certain reliefs and...
The National Company Law Appellate Tribunal (“NCLAT”), Principal Bench, comprising Justice Ashok Bhushan (Chairperson) and Mr Barun Mitra (Technical Member) has dismissed an appeal. The appeal was filed against order of the National Company Law Tribunal (“NCLT”), Mumbai Bench. The Bench held that the Successful Auction Purchaser can be given certain reliefs and concession consequent to going concern sale in the liquidation proceeding of Corporate Debtor.
Background Facts
On 11.06.2018 the Corporate Insolvency Resolution Process (“CIRP”) was initiated against the Corporate Debtor. The Application for the same was filed by Andhra Bank under Section 7 of the Insolvency and Bankruptcy Code, 2016 (“IBC”).
The Resolution Professional made a publication inviting Expression of Interest (“EoI”) from the interested Applicants. No Resolution Plan could be approved in the CIRP of the Corporate Debtor. Following this, an Application under Section 12A IBC was filed by the Promoters to withdraw the CIRP. Liquidation Proceedings was initiated against the Corporate Debtor and Dr. Mamta Binani was appointed as the Liquidator.
The Liquidator published public notice on 27.02.2021 along with process documents. Bids were invited from parties to conduct the operation of the Corporate Debtor. Four qualified bidders took part in the process of the documents.
The Appellant filed its claim to the Liquidator on 19.03.2021. A list of stakeholders was published on 07.06.2021 and 16.12.2021. The name of the Appellant was also included as a stakeholder.
The amended process document was issued on 31.03.2022, while the date of e-auction was scheduled for 04.04.2022. In the e-auction process of Corporate Debtor, Perfect Day INC, who had given the highest bid amount of Rs.638 Crores, was declared as a Successful Bidder.
The Successful Bidder shared Acquisition Plan with the Liquidator to acquire the Corporate Debtor. On 27.05.2022 the Liquidator responded requesting to approach the NCLT. The Successful Auction Purchaser filed an application IA No.1585 of 2022, praying for reliefs and concessions before the NCLT. NCLT allowed the application. Aggrieved by this the Appellant filed an appeal before NCLAT.
Contentions of Appellant
The Appellant argued that the value of the Corporate Debtor was much higher than the one mentioned in the e-auction notice. The Appellant pointed out that the reserved value of e-Auction dated 04.04.2022 was Rs.548.46 Crores. However, in the valuation report, obtained by Andhra Bank from Gajjar Techno-Economic Consultant Pvt. Ltd., the value was three times more. The Applicant further argued that the Liquidator auctioned Corporate Debtor at a throwaway price.
The Appellant further pointed out that they were not informed about the IA No.1585 of 2022. NCLT has made a mistake by granting reliefs and concessions to the Successful Auction Purchaser as this is a deviations from the process document.
Contentions of Respondents
The Respondent opposed the submissions of the Appellant and argued that in pursuance of the auction held on 04.04.2022, the Sale Certificate has already been issued by the Liquidator.
The Respondent further pointed out that the entire amount under the auction has also been received and distributed to the Financial Creditors including the Appellant.
The Respondent argued that the appeal deserves to be dismissed as there is no challenge to the auction sale and Sale Certificate.
NCLAT Verdict
NCLAT has dismissed the appeal. The Bench held that the Successful Auction Purchaser can be given certain reliefs and concessions consequent to going concern sale in the liquidation proceeding of the Corporate Debtor.
It is further relevant to notice that order dated 11.11.2022 is an order granting reliefs and concessions to Successful Auction Purchaser, when the sale of the Corporate Debtor is as going concern, the Successful Auction Purchaser is entitled to receive certain reliefs and concessions to run the Corporate Debtor as going concern. The submission of the Appellant that this fact ought to have been mentioned in the Process Document that reliefs and concessions will be granted to the Successful Auction Purchaser also do not commend us.
Case Title: Punjab National Bank (International Limited) vs Perfect Day INC
Case No.: Company Appeal (AT) (Insolvency) No.1427 of 2022
Counsel For Appellant: Mr Mithilesh Kumar Pandey, Mr Manav Goyal, Mr Rahul Pandey, Advocates.
Counsel For Respondents: Mr Arun Kathpalia, Sr. Advocate with Mr Abhijeet Sinha, Mr Shreeyash Lalit, Mr Hardeep Sachdeva, Mr Ravi Bhasin, Ms Swati Sharma, Mr Mukund Rawat, Mr Abhinav Aggarwal, Mr Himanshu Vats, Advocates for R-1 & 2. Mr Sandeep Bajaj, Ms Aakanksha Nehra, and Ms Adya Singh, Advocates for R-3.