Fixation Of Reserve Price For Auction Being Commercial Decision Of Stakeholders Consultation Committee, NCLT Can’t Sit In Appeal; NCLT Kolkata

“We are of the considered opinion, this is a commercial decision of the Stakeholders Consultation Committee (SCC) arrived at after due deliberations. Applicant has stated that he engaged two valuators to determine the value of these assets. This Adjudicating Authority is not expected to sit in appeal over it. We are also of the view, it is the SCC who are in a position to reasonably assess the value of the assets.”

The Liquidator and the Stakeholders Consultation Committee differed on the amount of reserve price fixed for auction of Corporate Debtor’s plant and machinery. The NCLT directed the Liquidator to opt for the reserve price fixed by the Stakeholders Consultation Committee.

Background Facts

Kohinoor Pulp & Paper Pvt. Ltd. (“Corporate Debtor”) was admitted into Corporate Insolvency Resolution Process (“CIRP”) by the NCLT. Thereafter, the NCLT ordered liquidation of Corporate Debtor.

The Liquidator issued auction notices for sale of Corporate Debtor’s plant and machinery from time to time, and the reserve price was reduced from Rs. 11.50 Crores to Rs. 6.50 Crores.

The Liquidator consulted the Stakeholders Consultation Committee (SCC) members for reducing the auction price to Rs. 3.60 Crores, which was deemed to be reasonable mid-point value of one entity with the offer of Rs. 1.50 Crore and last reserve price of Rs. 6.50 Crores.

The SCC decided that the reserve price in auction notice of plant and machinery cannot be below Rs. 6.5 Crores.

The Liquidator filed an application before NCLT, seeking permission to conduct auction sale of the plant and machinery with reserve price fixed at 3.60 Crores. It was argued that the reduction was required since no bidders came at the reserve price of Rs. 6.50 Crores. The SCC and Liquidator differed on the amount of reserve price.

NCLT Verdict

The Bench took the view that fixation of reserve price for auction is a commercial decision of SCC being arrived at after due deliberations. The NCLT cannot sit in appeal over such decisions

“We are of the considered opinion, this is a commercial decision of the Stakeholders Consultation Committee (SCC) arrived at after due deliberations. Applicant has stated that he engaged two valuators to determine the value of these assets. This Adjudicating Authority is not expected to sit in appeal over it. We are also of the view, it is the SCC who are in a position to reasonably assess the value of the assets. It is mentioned in application in para 8 that various auction notices were issued on various dates, however, no auction notice has been placed on record by the liquidator in this IA.”

The Bench directed the Liquidator to issue a fresh auction notice with the reserve price fixed at Rs. 6.5 Crores

“Keeping in view the opinion of Stakeholders Consultation Committee which comprises of various banks and also the facts and circumstances as enumerated above with a view to seek maximization of the value of the assets, we direct;

i. Liquidator to publish a fresh auction notice fixing it minimum reserve price of 6.50 Crore as opined by Stakeholders Consultation Committee.”

Case Title: Sauria Corporation v Kohinoor Pulp & Paper Private Limited

Case No.: C.P (I.B) 511/KB/2018

Counsel for Applicant: Mr. Rishav Banerjee, Mr. Shaunak Mitra and Mr. Avik Chaudhury.

Counsel for Respondent: Mr. Mayukh Roy and Ms. Aasia Hasan.

Click Here To Read/Download Order