Once Bidder Accepts Corporate Debtor In Slump Sale, Can't Request For Conversion Of Sale Into Sale As A Going Concern: NCLT Ahmedabad

Background Facts

State Bank of India had filed a petition under petition Section 7 of the Insolvency and Bankruptcy Code, 2016 ("IBC"), seeking initiation of Corporate Insolvency Resolution Process ("CIRP") against Shirpur Power Pvt. Ltd. ("Corporate Debtor"). On 04.03.2020, the petition was admitted and CIRP was initiated by the NCLT Ahmedabad Bench. Subsequently an order for liquidation was passed. The Liquidator made ample efforts sell the Corporate Debtor as a going concern and had reduced the reserve price several times to attract prospective buyers. However, when no prospective buyers turned up to purchase the Corporate Debtor as a going concern, the Liquidator published a fresh notice dated 20.07.2021 declaring the slump sale of the Corporate Debtor. The reserve price for slump sale was fixed for Rs. 4,77,84,50,000/-, which was further reduced to Rs. 3,14,38,49,770/-. Jindal Power Ltd. ("Applicant/Successful bidder") emerged as the successful bidder of Corporate Debtor and accepted to purchase the Corporate Debtor as slump sale and deposited the bid amount.

Thereafter, the Successful Bidder filed an application before NCLT Bench requesting to convert the slump sale of the Corporate Debtor into the sale as a going concern and direct the Liquidator to issue the sale certificate accordingly.

Contentions Of The Applicant

The Applicant argued that the main object of the IBC is to promote entrepreneurship and preserve the existence of the Corporate Debtor. If the Liquidator is directed to treat the sale as a going concern then all stakeholders would be benefited, and employment will be generated. Further, it is the duty of the liquidator to protect the existence of the Corporate Debtor as far as possible and to avoid its death by not pushing the latter into dissolution.

Issue

Whether having accepted the corporate debtor in a slump sale, the bidder can request to treat that sale as a sale of the corporate debtor as a going concern?

Decision Of NCLT

The Bench held that once a successful bidder has accepted the Corporate Debtor in slump sale, it cannot request to treat that sale as a sale of Corporate Debtor as a going concern. It was observed that as per IBC's objective the liquidator's first effort should be to sell the corporate debtor as a going concern and the Liquidator had taken all possible in that direction but he did not get any response. It is not known as to why the Applicant did not accept the bid of the Corporate Debtor as a going concern at the first point of time.

Further, there was a vast difference between the sale price of the Corporate Debtor as a going concern and the sale price of the Corporate Debtor in a slump sale. If the Applicant's request is accepted then the rights stakeholder committee members would be affected prejudicially. The Bench declined the Applicant's request and held that the application was not maintainable.

Case Title: State Bank of India & Anr. v Shirpur Power Pvt. Ltd, CP(IB) No. 487/NCLT/AHM/2018

Counsel For the Applicant/Successful bidder: Ld. Sr. Adv. Mr. Kamal Trivedi along with Ld. Adv. Mr. Anuj K. Trivedi, Ld. Adv. Mr. Vinay Baigra, and Ld. Adv. Ms. Vaidehi Parikh

Counsel For the Stakeholders Committee: Ld. Sr. Adv. Mr. Saurabh Soparkar

Counsel For the Liquidator: Ld. Adv. Ms. Prachiti Shah along with Ld. Adv. Mr. Urjit Dave

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