Chhota vs Kashi Vishwanathan Sivaraman & Anr

(Arising out of Orders dated 28.01.2022 and 16.02.2022 passed by the Adjudicating Authority (National Company Law Tribunal), Principal Bench, New Delhi in I.A. No. 3797 (PB) of 2021 and I.A. No. 754/2022, respectively in C.P. (IB)-532(PB)/2017)

IN THE MATTER OF:

Chhota, S/o Ikramu, R/o Purbaliyan, Muzaffarnagar, U.P., Proprietor of Laxman Enterprises Having office at 8 Km Stone, Village Jarodha, Meerut Road, Muzaffarnagar, U.P. - 251003. ...Appellant

Versus

1. Kashi Vishwanathan Sivaraman (Liquidator of Corporate Debtor), E-10A, Kailash Colony, New Delhi - 110048 Liquidator of Haridwar Iron & Ispat Rollings Ltd., Village Akbarpur Oud, Tehsil Laksar, District Haridwar. haridwar.iron@aaainsolvency.com

2. Punjab National Bank 7, Bikaji Cama Place, New Delhi Having one of its Branches at: Civil Lines, Roorkee, Uttrakhand bo0924@pnb.co.in ...Respondents

Present: For Appellant: Mr. Rahul Kapoor, Mr. Akhilesh Kalra, Advocates.

For Respondents: Mr. Aditya Gauri, Mr. Amar Vivek, Mr. Dhananjay Sood, Advocates for R-1.

Mr. Abhijeet Sinha, Ms. Mithu Jain, Mr. Lakshay Sharma, Ms. Shradha Narayan, Advocates for Intervenor.

Cont'd.../ -2-

With

Company Appeal (AT) (Insolvency) No. 728 of 2022

(Arising out of Order dated 08.06.2021 passed by the Adjudicating Authority (National Company Law Tribunal), Mumbai Bench, Court-II in IA 572/2021 in C.P. (IB)-395 (MB)/2020)

IN THE MATTER OF:

Singhi Infrapower Projects Pvt. Ltd., Through Authorised Representative Having Registered Office at: Singhi House, Rajamaidam Road, Jorhat, Assam - 785001 Email: singhicables@gmail.com ...Appellant

Versus

Kashi Vishwanathan Sivaraman Liquidator of Haridwar Iron & Ispat Rollings Ltd. Having its office at: E-10A, Kailash Colony, Greater Kailash-I, New Delhi - 110048 Email: haridwar.iron@aaainsolvency.com ...Respondents

Present: For Appellant: Mr. Abhishek Anand, Mr. Rajeev Agarwal, Ms. Stuti Vatsa, Advocates.

For Respondents: Mr. Aditya Gauri, Mr. Amar Vivek, Mr. Dhananjay Sood, Advocates for R-1.

Mr. Abhijeet Sinha, Ms. Mithu Jain, Mr. Lakshay Sharma, Ms. Shradha Narayan, Advocates for Intervenor.

Company Appeal (AT) (Insolvency) No. 318-319 of 2022 & 728 of 2022 -3-

JUDGMENT

ASHOK BHUSHAN, J.

These two Appeals arises out of Liquidation Proceeding of the

Corporate Debtor - 'Haridwar Iron and Ispat Rollings Ltd.' and having been

heard together are being decided by this common judgment.

2. 'Haridwar Iron and Ispat Rollings Ltd.' was admitted to insolvency by

order dated 22.05.2018 passed by the Adjudicating Authority (National

Company Law Tribunal), Principal Bench, New Delhi. No Resolution Plan

having been approved, the liquidation of the Corporate Debtor was directed

by the Adjudicating Authority on 17.09.2019. The Respondent was

appointed as Liquidator of the Corporate Debtor. Liquidator has conducted

e-auction of assets of the Corporate Debtor on six occasions. On

25.09.2020 fifth sale notice was issued for auction to be conducted on

12.10.2020. The Appellant in Company Appeal (AT) (Ins.) No. 318-319 of

2022 - 'Chhota' participated in the e-auction for purchase of plant and

machinery of the Corporate Debtor and declared as highest bidder.

Liquidator, on 22.10.2020, issued letter of intent to the Appellant 'Chhota'.

3. Sixth sale notice was issued on 11.11.2020 for purchase of land and

building. As per the sixth sale notice, e-auction was conducted on

27.11.2020 in which e-auction 'M/s Singhi Infrapower Projects Pvt. Ltd.'

(Appellant in Company Appeal (AT) (Ins.) No. 728 of 2020) was declared as

Company Appeal (AT) (Insolvency) No. 318-319 of 2022 & 728 of 2022 -4-

highest bidder. Letter of intent dated 11.12.2020 was issued to 'M/s Singhi

Infrapower Projects Pvt. Ltd.' by the Liquidator.

4. Liquidator issued reminders to 'Chhota' to pay the balance

consideration. Appellant 'Chhota' filed an application being I.A. 161/2020

before the Adjudicating Authority seeking extension of time to pay

remaining part payment to the Liquidator alongwith interest, because last

date for completion of payment was 20.01.2021. Adjudicating Authority

disposed of the application on 19.01.2021 on the undertaking given by

'Chhota' that he will make the balance payment alongwith interest on or

before 01.02.2021. Appellant 'Chhota' made the balance payment on

31.01.2021.

5. The Liquidator issued Sale Certificate dated 02.02.2021 for sale of

plant and machinery for sale consideration of Rs.4,07,00,000/-. Terms

and conditions of the Sale Certificate contemplate lifting up of the material

on or before 21.03.2021. Along with Sale Certificate letter of possession

dated 02.02.2021 was also issued to purchaser 'M/s Laxman Enterprises'

through proprietor. On 05.02.2021, an email was sent on behalf of the

Liquidator to the purchaser to start the process of lifting of plant and

machinery from the site. Email was replied on behalf of the purchaser. On

12.02.2021 the possession was given to the purchaser, however, the Sale

Certificate and Letter of Possession was not signed by the purchaser. An

email dated 22.02.2021 was sent to the purchaser again requesting eviction

on urgent basis and to provide the signed copy of the Sale Certificate and

Company Appeal (AT) (Insolvency) No. 318-319 of 2022 & 728 of 2022 -5-

Letter of Possession. On 19.02.2021 a letter was sent on behalf of the

purchaser signed by the Appellant 'Chhota' pointing out that certain parts

and machines are missing. Appellant 'Chhota' also filed complaint before

Police Station, Laksar, Haridwar dated 25.02.2021.

6. On 07.04.2021, the Adjudicating Authority directed the Appellant to

approach the Liquidator within two days in respect of issue about lifting of

plant of machinery and resolve the issue before 18.04.2021 and file the

compliance report. Liquidator has filed I.A. No. 1351 of 2021 seeking

direction for lifting of plant and machinery of the Corporate Debtor by the

purchaser - 'M/s Laxman Enterprises'. In the said application order dated

07.04.2021 was passed as noted above which order was communicated to

the Appellant but no action was taken by the Appellant. In the I.A. of the

Liquidator further order was passed by the Adjudicating Authority on

11.08.2021 directing the Liquidator to serve notice on auction purchaser

giving him a final chance to take the machinery within a weeks' time,

otherwise the amount paid by the auction purchaser was to be forfeited

and fresh auction to be conducted. The order dated 11.08.2021 was

communicated to the Appellant on 12.08.2021.

7. An I.A. No. 3797 of 2021 was preferred by the Appellant for recall of

order dated 11.08.2019 and certain other directions. The Liquidator

replied to the I.A. On 28.01.2022, the I.A. was dismissed by the

Adjudicating Authority. Another I.A. No. 754 of 2022 was filed by the

Appellant for recall of order dated 28.01.2022, which was dismissed on

Company Appeal (AT) (Insolvency) No. 318-319 of 2022 & 728 of 2022 -6-

16.02.2022. Company Appeal (AT) (Ins.) Nos. 318-319 of 2022 were filed

by the Appellant challenging the order dated 28.01.2022 and 16.02.2022.

8. Now coming to the Company Appeal (AT) (Ins.) No.728 of 2022 filed

by 'M/s Singhi Infrapower Projects Pvt. Ltd.', as noted above, the land and

building was auctioned to the Appellant 'Singhi Infrapower' on 27.11.2020

for highest bid of Rs.5,87,00,000/-. After 'Singhi Infrapower' submitted

10% of the bid amount, letter of intent was sent to the Appellant on

11.12.2020. An I.A. No. 55 of 2021 was filed by 'Singhi Infrapower' seeking

directions to the Liquidator to remove plant and machinery from the

property. The Adjudicating Authority passed order dated 07.06.2022 in

I.A. No. 55 of 2021 directing 'Singhi Infrapower' to deposit the balance

amount of Rs.5.29 crores within 30 days of the order with the liquidator,

failing which the auction would be deemed to be cancelled, which was held

on 27.11.2020. Aggrieved by the order dated 07.06.2022 Company Appeal

(AT) (Ins.) No.728 of 2022 was filed. In Company Appeal (AT) (Ins.) No.728

of 2022, this Tribunal, on 07.07.2022, noted the submission of the

Liquidator that by the next date of hearing no steps are proposed for

auction of the land.

9. We have heard Shri Akhilesh Kalra, learned counsel for the Appellant

appearing in Company Appeal (AT) (Ins.) Nos. 318-319 of 2022, Shri

Abhishek Anand, learned counsel for the Appellant in Company Appeal (AT)

(Ins.) No.728 of 2022 and learned counsel for the Liquidator. We have also

heard Shri Abhijeet Sinha, learned counsel appearing for 'Sunhill Proptech

Company Appeal (AT) (Insolvency) No. 318-319 of 2022 & 728 of 2022 -7-

Private Limited' who had filed application for impleadment in both the

Appeals.

10. Shri Kalra, learned counsel appearing for the Appellant 'Chhota'

submits that Appellant has deposited the entire amount by 30.01.2021 i.e.

within the time allowed by the Adjudicating Authority and when after

issuance of Sale Certificate the Appellant went to take physical possession

it was found that certain parts of plant and machinery were missing with

regard to which, immediately a letter dated 19.02.2021 was sent to the

Liquidator. But grievances of the Appellant were not redressed. After order

dated 11.08.2021 was passed, an I.A. No. 3797 of 2021 was filed by the

Appellant which came to be rejected on 28.01.2022. It is submitted that

Appellant has filed a Police complaint regarding the theft of machinery but

his grievances were also not redressed by the Police Authority.

11. Learned counsel for the Liquidator refuting the submissions of the

Appellant submits that the Appellant deliberately did not remove the plant

and machinery inspite of Sale Certificate dated 02.02.2021 and Letter of

Possession issued to the Appellant. The sale of the plant and machinery

was made as per the terms and conditions and e-auction document on "as

is where is", "as is what is", and "whatever there is basis", hence, no

grievance could have been raised by the Appellant regarding the plant and

machinery. It is submitted that the application dated 19.02.2021 filed by

the Appellant was only to delay the process and there was no truth in the

allegations made in the application. It is submitted that in pursuance of

Company Appeal (AT) (Insolvency) No. 318-319 of 2022 & 728 of 2022 -8-

order dated 11.08.2021 passed by the Adjudicating Authority sale in favour

of the Appellant has already been cancelled and assets distributed.

12. Shri Abhijeet Sinha, learned counsel appearing for Applicant 'Sunhill

Proptech Private Limited' submits that Applicant be permitted to intervene

in the matter, who are ready to take the plant and machinery for a total

consideration of Rs.4.25 crore. It is submitted that the plant and

machinery be allowed to be taken by the Applicant on payment of Rs.4.25

crore as per the schedule as mentioned in the application.

13. Shri Abhishek Anand, learned counsel appearing for the Appellant in

Company Appeal (AT) (Ins.) No. 728 of 2022 submits that the Appellant

could not deposit the balance amount only because of the fact that plant

and machinery which was auctioned in favour of Auction Purchaser did not

remove the plant and machinery and hence, possession of land and

building could not have been obtained by the Appellant 'Singhi Infrapower'.

It is submitted that the Appellant is ready and willing to deposit the entire

amount.

14. Learned counsel for the Appellant refuting the submission of Mr.

Anand contends that 'Singhi Infrapower' is obliged to deposit the entire

amount within the time period allowed in the letter of intent. The

Adjudicating Authority has rightly passed the order giving one month time

to the Appellant failing which auction in favour of 'Singhi Infrapower' was

to be deemed to be cancelled.

Company Appeal (AT) (Insolvency) No. 318-319 of 2022 & 728 of 2022 -9-

15. Shri Abhijeet Sinha, learned counsel appearing for the Applicant -

Sunhill Proptech Private Limited' submits that the Applicant is ready to

take the plant and building for consideration of Rs.7.5 crores.

16. We have heard learned counsel for all the parties and perused the

records.

17. We may first notice the submissions and issues raised in Company

Appeal (AT) (Ins.) No. 318-319 of 2022. In the fifth e-auction held on

12.10.2020, the Appellant 'Chhota' the proprietor of 'Laxman Enterprises'

was the highest bidder. In addition to EMD amount of Rs.20 Lakh

Appellant also deposited Rs.21 Lakhs i.e. balance of consideration of EMD

(10% of the bid amount). For payment of balance amount, Adjudicating

Authority directed the Appellant to deposit the entire amount by

01.02.2021 and by 31.01.2021 entire amount was deposited by the

Appellant. The issue which was raised by the Appellant after issuance of

the Sale Certificate on 02.02.2021 is regarding missing of some part of

plant and machinery by letter dated 19.02.2021. One of the condition of e-

auction in Clause H was as follows:-

"H. Due Diligence

....

The properties and assets of the Company are proposed to be sold on "As is where is basis", "As is what is basis", "Whatever there is basis" and "No recourse" basis and the proposed sale of

Company Appeal (AT) (Insolvency) No. 318-319 of 2022 & 728 of 2022 -10-

assets of the Company does not entail transfer of any title, except the title which the Company held on its assets as on date of transfer. All local taxes / maintenance fee /electricity / water charges etc., outstanding as on date or yet to fall due in respect of the relevant asset should be ascertained by the E-Auction process applicant and would be borne by the successful bidder."

18. The Appellant participated in the e-auction after due diligence and

was declared the highest bidder. Sale Certificate and Letter of Possession

was issued to the Appellant dated 02.02.2021. The Appellant requested

the Liquidator to depute some suitable person for taking the possession

which was deputed by the Liquidator. It was only on 19.02.2021 that

allegation of missing of some parts of plant and machinery was raised by

the Appellant. Police Complaint was also filed by the Appellant which was

not even registered since police did not find any offence to be registered and

enquired. Terms and condition of the Sale Certificate in Para 5 and Para 9

are as follows:-

"5. From the date of issue of Sale Certificate, notwithstanding anything to the contrary, the Purchaser shall hold the Asset sold at its sole risk and cost as regards any loss or damage to the Asset by fire or any other natural calamities or due to theft, or from any other cause whatsoever, which shall be that of the Purchaser and the Liquidator shall not be liable for any such loss or damages.

Company Appeal (AT) (Insolvency) No. 318-319 of 2022 & 728 of 2022 -11-

....

9. As intimated earlier the land and building has been sold and the proper eviction/lifting up of material should be concluded by or before 21st March, 2021. Post that the liquidator is authorized to collect charges from your office."

19. The Appellant being the highest bidder, who has already been issued

Sale Certificate dated 02.02.2021 and no allegations regarding plant and

machinery made by the Appellant any time prior to 19.02.2021, no error

has been committed by the Adjudicating Authority in not placing any

reliance on the Allegations made by the Appellant regarding part of the

plant and machinery being missing on the spot. The plant and machinery

not being removed by the Appellant, the Liquidator had to file an

application before the Adjudicating Authority seeking direction to the

Appellant to remove that plant and machinery since auction of land and

building was also conducted and possession was to be handed over to the

Successful Auction Purchaser of land and building i.e. 'Singhi Infrapower',

Appellant in Company Appeal (AT) (Ins.) No. 728 of 2022. The Adjudicating

Authority in the application filed by the Liquidator has passed following

order on 11.08.2021:-

"ORDER

IA No. 1351/2021

The liquidator is directed to take out notice and serve the auction purchaser of the plant and

Company Appeal (AT) (Insolvency) No. 318-319 of 2022 & 728 of 2022 -12-

machinery, giving him a chance to take the machinery within a weeks' time, otherwise the amount paid by the auction purchaser will be forfeited and fresh auction will be conducted to sell the plant and machinery. Further the auction purchaser is directed to appear before this Tribunal either in person or though advocate on the next date of hearing.

List the mater for further consideration on 21.09.2021."

20. The Appellant had filed an application for recall of order dated

11.08.2021 which was rightly rejected on 28.01.2022. Further, application

filed by the Appellant being I.A. No. 754 of 2022 was rejected by order dated

16.02.2022 refusing to review the order dated 28.01.2022 as was prayed

by the Appellant. The Adjudicating Authority has rightly taken the view

that the Adjudicating Authority has no power to review its own order dated

28.01.2022. The Appellant having not lifted the plant and machinery

inspite of several requests made by the Liquidator and directions issued by

the Adjudicating Authority, we see no fault in the direction of the

Adjudicating Authority giving last opportunity to the Appellant to remove

the plant and machinery within one week by order dated 11.08.2021, failing

which the auction sale was to be deemed cancelled. The Liquidator had no

option but to comply with the order dated 11.08.2021 and has

consequently cancelled the auction in favour of the Appellant. With regard

to the cancellation of the auction held in favour of the Appellant, there is

Company Appeal (AT) (Insolvency) No. 318-319 of 2022 & 728 of 2022 -13-

no ground to interfere in the impugned order passed by the Adjudicating

Authority. The auction in favour of the Appellant 'Chhota' rightly stood

cancelled.

21. Now coming to the application filed by 'Sunhill Proptech Private

Limited' where the Applicant has offered to take the plant and machinery

for an amount of Rs.4.25 crore i.e. an amount higher to the amount on

which plant and machinery was auctioned to the Appellant. In the

application itself the applicant has in Para 11 made following averments:-

"11. That the present applicant based on the due diligence, which has been done by it, based on market conditions makes an offer of Rs.4.25 Crores and therefore, is seeking indulgence of this Hon'ble Tribunal to direct the Liquidator to consider the offer of the applicant herein for purchase of the plant and machinery at a total consideration of Rs.4.25 Crores or put the property on an open sale so as to fetch maximum price."

22. Consequent to the cancellation of auction in favour of the Appellant

'Chhota', as per the provisions of the Liquidation Regulations, 2016, a fresh

auction needs to be conducted by the Liquidator for the plant and

machinery. No direction can be issued to handover the plant and

machinery to the Applicant for an amount of Rs.4.25 crores, as Applicant

has prayed.

Company Appeal (AT) (Insolvency) No. 318-319 of 2022 & 728 of 2022 -14-

23. There is only one aspect of the matter which needs to be considered.

As per the order passed by the Adjudicating Authority and affirmed by us,

fresh auction of the plant and machinery has to be undertaken by the

Liquidator. The Highest Successful Bidder of the plant and machinery in

whose favour letter of intent is issued shall be liable to deposit the entire

bid amount, for which amount the plant and machinery is re-auctioned.

We are of the view that the ends of justice be served in directing forfeiting

of 10% of the bid amount deposited by the Appellant 'Chhota' i.e an amount

of Rs.41 Lakhs. The balance amount out of the total amount deposited by

the Appellant needs to be refunded subject to the condition that in the fresh

auction to be conducted a higher amount is received towards 90% of the

bid which may be refunded to the Appellant. In case, in the fresh auction

any lesser amount is received as towards 90% of the bid, the Appellant shall

be entitled to be refunded only lesser amount and not the entire balance

amount.

24. Coming to the Company Appeal (AT) (Ins.) No. 728 of 2022, the

Adjudicating Authority has directed by the impugned order dated

07.06.2022 to the Appellant 'Singhi Infrapower' to deposit the balance

amount within 30 days. The Appeal having been entertained by this

Tribunal, which is being decided by this order, we are of the view that ends

of justice be served in disposing of the Appeal by directing the Appellant

'Singhi Infrapower' to deposit the balance amount within one month from

the date of this order failing which the Liquidator shall proceed with the

Company Appeal (AT) (Insolvency) No. 318-319 of 2022 & 728 of 2022 -15-

fresh auction of the land and building forfeiting 10% of bid amount already

deposited.

25. In result, both the Appeals are disposed of in following manner:-

I. Company Appeal (AT) (Ins.) No. 318-319 is disposed of with

following direction:

i. Impugned orders dated 28.01.2022 and 16.02.2022 are

upheld.

ii. The cancellation of the auction in favour of the Appellant

'Chhota' of plant and machinery is also upheld.

iii. 10% bid amount deposited by the Appellant i.e. Rs.41

Lakhs stands forfeited.

iv. The Appellant shall be entitled for refund of the balance

amount deposited by him subject to following conditions:

a) The balance amount be refunded to the

Appellant by the Liquidator form the sale

proceeds of the fresh auction.

b) Total balance amount deposited by the Appellant

needs to be refunded only when the bid of sale of

plant and machinery is received with higher bid

than the bid of the Appellant and in event the, a

bid for a lower amount than the bid of the

Appellant is received, the Appellant shall be

entitled for refund of only proportionate amount.

Company Appeal (AT) (Insolvency) No. 318-319 of 2022 & 728 of 2022 -16-

II. Company Appeal (AT) (Ins.) No. 728 of 2022 is disposed of with

direction to the Appellant to deposit the balance amount within

a period of one month from today. In event, balance amount

is not deposited, the amount deposited by the Appellant shall

be forfeited and the Liquidator shall hold fresh auction for land

and building in accordance with law.

[Justice Ashok Bhushan] Chairperson

[Barun Mitra] Member (Technical)

NEW DELHI

18th October, 2022

Archana

Company Appeal (AT) (Insolvency) No. 318-319 of 2022 & 728 of 2022