Eshan Minerals Private Limited vs M/S. Sachani Developers Llp & Ors

NATIONAL COMPANY LAW APPELLATE TRIBUNAL PRINCIPAL BENCH, NEW DELHI Company Appeal (AT) (Insolvency) No. 452 & 453 of 2024 [Arising out of order dated 13.02.2024 passed by the Adjudicating Authority (National Company Law Tribunal, Mumbai Bench, Court - II), in I.A. No.5737/2023 & I.A. No. 261/2024 in CP (IB)/03/MB/C-II/2017]

IN THE MATTER OF: Rajkumar Vishambernath Agarwal Authorised representative of Eshan Minerals Private Limited Having its address at: Block Nos. T-2 & T-3, 4th Floor Above, Ganesh Restaurant, Saraf Court Apartment, Dhantoli, Maharashtra - 440012 Email ID: nagpuroffice@eshangold.com ...Appellant

Versus 1. M/s. Sachani Developers LLP, Having its address at: Shop No. 102, Mudliyar Complex, Abhyankar Road, Dhantoli, Nagpur, Maharashtra - 440012 Email ID: info@sachanidevelopers.com ...Respondent No. 1

2. Manish Gupta Liquidator of Bhupen Electronic Limited, Having its address at: 190, SFS Flats, Hauz Khas, New Delhi - 110016 Email ID: manish.gupta@jhalani.co.in ...Respondent No. 2

3. State Bank of India Stressed Assets Recovery Branch (Retail) Having its Branch Office at: 23, Najafgarh Road, New Delhi - 110015 Email ID: SBI.05169@SBI.CO.IN ...Respondent No. 3

Present: For Appellant : Mr. Abhijeet Sinha, Sr. Advocate with Mr. Abhishek Anand, and Ms. Jasleen Singh Sandha, Advocates. For Respondents : Mr. Aditya Gauri, Mr. Amar Vivek and Mr. Dhananjaya Sud, Advocates for R-1. Ms. Purti Gupta and Ms. Henna George, Advocates for R-2/Liquidator. Mr. Sanidhya Kumar and Mr. Amrendra Kumar Singh, Advocate for R-3/SBI.

WITH

Company Appeal (AT) (Insolvency) No. 651 of 2024 [Arising out of order dated 13.02.2024 passed by the Adjudicating Authority (National Company Law Tribunal, Mumbai Bench, Court - II), in I.A. No.5737/2023 & I.A. No. 261/2024 in CP (IB)/03/MB/C-II/2017]

IN THE MATTER OF: Best One Infraventures Private Limited Having registered address at KH. NO. 56/1, N.H.A.D.B., Type-B, Civil Lines, Nagpur GPO, Nagpur, Nagpur, Maharashtra, India - 440001 AND Having its corporate office at: Block No. B-2, 3 & 4, MHADA Complex, Amravati Rd., Civil Lines, Nagpur, Maharashtra, 440001. ...Appellant

Versus 1. Manish Gupta Liquidator of Bhupen Electronic Limited, Flat No.190, SFS Flats, Hauz Khas, New Delhi - 110016 Email ID: manish.gupta@jhalani.co.in Having IBBI registration number; IBBI/IPA-001/IP-P00194/2017-18/10373 ...Respondent No. 1

2. Eshan Minerals Private Limited Block T2 and T3, 4th Floor, Above Ganesh Restaurant, Saraf Court Appt., Dhantoli, Nagpur, Maharashtra - 440012. ...Respondent No. 2

3. Maharashtra Industrial Development Corporation (MIDC) Udyog Sarathi, Marol Industrial Area, Mahakali Caves Road, Andheri (East), Mumbai - 400093. ...Respondent No. 3

Present:

Comp. App. (AT) (Ins.) Nos. 452, 453 & 651 of 2024 2 of 14 For Appellant : Mr. Amar Dave, Sr. Advocate with Mr. Bharat Sood, Advocates. For Respondents : Ms. Purti Gupta and Ms. Henna George, Advocates for R-1/Liquidator. Mr. Abhijeet Sinha, Sr. Advocate with Mr. Abhishek Anand, and Ms. Jasleen Singh Sandha, Advocates for R-3.

ORDER

ASHOK BHUSHAN, J.

Both these Appeals have been filed against the order dated 13.02.2024

passed by the Learned Adjudicating Authority, (National Company Tribunal,

Mumbai Bench, Court - II) in I.A. No.5737/2023 & I.A. No. 261/2024 in C.P.

(IB)/03/MB/C-II/2017.

2. The Appellant in Comp. App. (AT) Ins. No. 452 & 453/2024 is a

successful bidder in a private sale whereas Appellant in Comp. App. (AT) Ins.

No. 651/2024 claimed to be a prospective bidder in the private sale of

Corporate Debtor.

3. Facts of the case necessary for deciding the Appeal are:

i. Corporate Insolvency Resolution Process (CIRP) of the Corporate

Debtor/Bhupen Electronic Ltd. commenced by order dated 17.01.2017

of the Adjudicating Authority. The Adjudicating Authority passed an

order on 28.07.2017 directing for liquidation of the Corporate Debtor.

ii. The State Bank of India and Canara Bank are the Financial Creditors

of the Corporate Debtor.

iii. The Respondent/Manish Gupta in both the Appeals is the Liquidator of

the Corporate Debtor appointed by the Adjudicating Authority.

iv. Liquidator issued 6 e-Auction Notices to sell the property of the

Corporate Debtor i.e., on 22.02.2019, 27.03.2019, 03.05.2019, Comp. App. (AT) (Ins.) Nos. 452, 453 & 651 of 2024 3 of 14 28.10.2020, 24.12.2020 and 08.10.2021, all the e-Auctions failed.

Reserved price of the last e-Auction was ₹15,71,06,250/-.

v. Eshan Minerals Pvt. Ltd. (Appellant in Comp. App. (AT) Ins. No. 452 &

453/2024) sent an offer of private sale on 20.09.2023, offering to take

the property for an amount of ₹15,72,00,000/- plus GST.

vi. The offer of Eshan Minerals Pvt. Ltd. was revised to ₹15,80,00,000/-

plus GST. The Eshan Minerals Pvt. Ltd. also made and payment of

₹3,95,00,000/-, i.e., 25% of the sale consideration as Earnest Money

Deposit (EMD) was approved by the Financial Creditor on 16.11.2023.

vii. The offer of the Appellant was also placed before the Financial Creditor,

who approved in its Meeting of the Creditors dated 16.11.2023.

viii. On 21.11.2023, Letter of Intent (LoI) was issued by Liquidator to the

Eshan Minerals Pvt. Ltd.

ix. On 23.11.2023, an email was received from M/s. Sachani Developers

LLP & Ors. (Sachani Developers), expressing interest to participate in

the purchase of rights in the property under private sale. Liquidator

having already issued LoI did not respond to the letter of Sachani

Developers.

x. Liquidator on 01.12.2023, filed I.A. No. 5737/2023 before the

Adjudicating Authority seeking approval of Adjudicating Authority for

private sale of the property in favour of Eshan Minerals Pvt. Ltd.

xi. Sachani Developers also filed an I.A. No. 261/2024 before the

Adjudicating Authority seeking direction to the Liquidator to allow it to

participate in the biding process.

Comp. App. (AT) (Ins.) Nos. 452, 453 & 651 of 2024 4 of 14 xii. Both the applications have been disposed of by the order of the

Adjudicating Authority dated 13.02.2024. Adjudicating Authority by

impugned order rejected the I.A. No. 5737/2023 filed by the Liquidator

seeking approval of the private sale, whereas I.A. No. 261/2024 was

allowed.

xiii. In pursuance of the order of the Adjudicating Authority, 13.02.2024,

Liquidator issued a Public Announcement dated 21.02.2024 in two

newspapers in fixing last date of EMD as 02.03.2024 and 05.03.2024

from 02:00 PM to 04:00 PM as date of Auction.

xiv. Auction notice mentioned the auction as is where is, whatever there is

and without recourse basis.

4. Comp. App. (AT) Ins. No. 452 & 453/2023 was filed by Eshan Minerals

on 23.02.2024 in which following interim order was passed by this Tribunal

on 05.03.2024:

"Learned counsel for the Appellant submits that the Adjudicating Authority by the impugned order has rejected the private sale whereas the Liquidator has already filed application for approval of the private sale and at that stage Respondent No.1 filed an application stating that he is interested to take the property and on whose instance the order reserved on the application for approval was de-reserved, application was heard and impugned direction was passed.

An Additional Affidavit has been filed by the Appellant where the Appellant has brought on record letter dated 26.02.2024 sent by the Respondent No.1 that he does not want to involve in any litigation matter, hence, he does not want to proceed further in the proposal. Learned counsel for the Appellant submits that in view of the disinclination shown by Respondent No.1, the whole order is erroneous.

Learned counsel for the Liquidator also submits that she has also received letter dated 26.02.2024. Comp. App. (AT) (Ins.) Nos. 452, 453 & 651 of 2024

5 of 14 In view of the aforesaid, we are of the view that auction in pursuance of the impugned order may not be held till further order.

Let reply be filed by the Respondents within 10 days from today.

List this Appeal on 20.03.2024."

5. In view of the interim order dated 05.03.2024, Auction scheduled to

take place on 05.03.2024 could not take place. Liquidator has filed an

Affidavit bringing on record the publication dated 21.02.2024.

6. It is further stated by the Liquidator that in pursuance of the said

publication an EMD has been received by one party and EoI was submitted

by Best One Infraventures Pvt. Ltd. but no EMD was submitted. One M/s. SD

Reality has submitted EoI along with EMD and deposited the EMD which is

kept in the Fixed Deposit.

7. Appellant in Comp. App. (AT) Ins. No. 651/2024, Best One

Infraventures Pvt. Ltd., after e-Auction Notice issued by Liquidator dated

21.02.2024 sent a letter 27.02.2024 to the Liquidator enquiring about the

outstanding dues of MIDC (Maharashtra Industrial Development Corporation)

on the property. Best One Infraventures Pvt. Ltd. claimed to have prepared a

Demand Draft of ₹1,58,00,000/- towards deposit the EMD, but Demand Draft

was not deposited.

8. Best One Infraventures Pvt. Ltd. filed Comp. App. (AT) Ins.

No.651/2024 in this Tribunal on 28.03.2024, challenging the order dated

13.02.2024. Both the Appeals were heard on 04.04.2024 by this Tribunal.

9. We have heard Sh. Abhijeet Sinha, Learned Sr. Counsel appearing on

behalf of the Appellant in Comp. App. (AT) Ins. No. 452 & 453/2024 and Sh.

Amar Dave, Sr. Advocate appearing for the Appellant in Comp. App. (AT) Ins.

Comp. App. (AT) (Ins.) Nos. 452, 453 & 651 of 2024 6 of 14 No. 651/2024. Ms. Purti Gupta and Ms. Heena George has appeared for the

Liquidator.

10. Sh. Abhijeet Sinha Learned Sr. Counsel for the Appellant appearing for

the Eshan Minerals Private Ltd. submits that the private sale in favour of

Eshan Minerals Pvt. Ltd. was made after 6 failed Auction. LoI was issued in

favour of the Eshan Minerals Private Ltd. on 21.11.2023 and the Liquidator

has filed an application being I.A. No. 5737/2023 seeking approval of the

Adjudicating Authority which has been refused by the impugned order on

insufficient grounds. It is submitted that Sachani Developers, who had filed

an I.A. No. 261/2024 showing interest in participating in the bidding process

of Corporate Debtor has subsequently by letter dated 26.02.2024 has

withdrawn his offer which has been noticed by this Tribunal in its interim

order dated 05.03.2024, when Sachani Developers have withdrawn their offer,

there is no occasion to proceed with any Auction in pursuance of the order

dated 13.02.2024 and the private sale in favour of the Appellant need to be

confirmed. It is submitted that State Bank of India/Financial Creditor have

also filed an Affidavit that private sale in favour of the Appellant be confirmed.

The order dated 13.02.2024, directing for e-Auction be set aside.

11. Learned Counsel for the Liquidator advancing submission on behalf of

the Liquidator submits that Liquidator has issued Auction Notice dated

21.02.2024, in pursuance of the order of the Adjudicating Authority dated

13.02.2024 and it has received one EoI from M/s. SD Reality but the Auction

could not take place in view of the interim order passed by this Tribunal on

05.03.2024. Liquidator further submits that the Liquidator has also received

Comp. App. (AT) (Ins.) Nos. 452, 453 & 651 of 2024 7 of 14 the letter dated 26.02.2024 from Sachani Developers that they are no more

interesting to participate in the sale of the Corporate Debtor.

12. Sh. Amar Dave, Learned Sr. Counsel for the Appellant appearing in

Comp. App. (AT) Ins. No. 654/2024 submits that Appellant is interested in

participating in the bidding process of the Corporate Debtor. It is submitted

that Liquidator has not clarified about the dues of the MIDC. It is submitted

that it was obligated for Liquidator to find out the current dues of the MIDC

and transparency requires that dues of MIDC be informed to all the

prospective bidders to submit their bid. It is submitted that Appellant has

prepared a draft of ₹1,64,00,000/- to submit EMD. Adjudicating Authority did

not commit any error in issuing a fresh e-Auction Notice.

13. Learned Counsel for the Liquidator refuting the submission of Sh. Amar

Dave submits that Appellant-Best One Infraventures Pvt. Ltd. although

submitted the EoI but did not submit an EMD hence, they were not entitled

to participate in the bid in the Auction. It is submitted that Liquidator has

already filed an application before the Adjudicating Authority being I.A.

No.830/2022 seeking a direction again the MIDC that no transfer charges are

payable to the MIDC, which application is still pending. MIDC has already

informed about its pending dues of ₹17,16,64,355/- till 04.12.2020 and

transfer fee which amount must have increased by time, sale is being as is

where is basis. It is the bidder who has to pay all the dues of the MIDC and

the Eshan Mineral Private Limited has undertaken to pay the dues of MIDC

directly.

14. We have considered the submissions of the Counsel for the parties and

perused the record.

Comp. App. (AT) (Ins.) Nos. 452, 453 & 651 of 2024 8 of 14

15. In Comp. App. (AT) Ins. No. 452 & 453/2024, challenge is to the order

dated 13.02.2024, by which Adjudicating Authority has refused to approve

the private sale in favour of Eshan Minerals Private Limited as was prayed in

I.A. No.5737/2023.

16. Submission has been made by the Appellant that Financial Creditor

having also approved the private sale Adjudicating Authority ought to have

approved the private sale in favour of the Appellant. Offer of the Appellant

being higher than reserve price of the last failed Auction. It is submitted that

Appellant Eshan Minerals Private Limited has already undertaken to pay all

MIDC dues, including transfer charges directly to the MIDC. It is submitted

that offer for private sale given by the Appellant was after 6 failed Auction and

hence there was no reason for not approving the said sale.

17. Adjudicating Authority in paragraphs 11 & 12 made following

observations:

"11. While the Liquidator has taken various steps to ensure the private sale is reasonable and transparent, we cannot ignore the fact that the Liquidation Regulation provides for some more checks and balances on the private sale in Schedule 1 of the Liquidation Regulations which includes, inter alia, preparation of a strategy to approach interested buyers for assets to be sold by private sale, liaising with potential buyers or their agents, completion of sale in accordance with the terms of sale, etc. It is observed that the Buyer approached the Liquidator on his own and expressed interest to acquire the rights over the said Property above the reserve price fixed at the last failed auction. Though belated ie., after issue of letter of intent in favour of the Buyer, another person (the Applicant in IA.No.261/2024) has come out with an expression of interest to acquire the rights on the said Property. Thus it is evident that there is interest in the market to acquire the rights in the said Property even though there are other outstanding issues.

Comp. App. (AT) (Ins.) Nos. 452, 453 & 651 of 2024 9 of 14 Furthermore, substantial time has passed after the last public auction in October 2021.

12. It is also pertinent to observe from the Liquidation Regulations that the private sale has to be conducted in a manner so as to maximize the realizations from the sale of assets. The Hon'ble NCLAT in the case of State Bank of India Vs. Bhuvee Stenovate Private Limited and Ors. Comp. App. (AT) (Ins) No. 1013/2022 observed that the Liquidator, for conducting private sale is not to identify one buyer and sell the assets; rather, strategy has to be made to approach the interested buyer for assets which is with the object to attract more and more interested buyers to maximize the realization from the sale of assets. Keeping in mind the above decision and considering the interest shown by the Applicant in IA.No.261/2024, we feel it appropriate to give an opportunity to the Applicant in IA No.261/2024 and other interested parties, if any, to participate in the sale process."

18. The Adjudicating Authority after noticing the sequence of the event and

the fact that offer of private sale was received from the Appellant/Eshan

Minerals Private Ltd. and the Liquidator had not to identify one buyer and sell

the assets rather strategy has to be made to approach the interested buyer

for asset with the object to attract more and more to maximise the realisation

from the sale of assets. Adjudicating Authority in paragraph 12 of the order

as noted above with the object of giving opportunity to the Applicant in I.A.

No. 261/2024 and other `interested parties' to participate in the sale of the

process directed for issue of a fresh Notice for conducting sale in two

newspapers.

19. We have already noticed that fresh Auction Notice was issued on

21.02.2024 fixing 05.03.2024 for Auction which Auction could not take place

due to interim order passed on 05.03.2024 by this Tribunal.

Comp. App. (AT) (Ins.) Nos. 452, 453 & 651 of 2024 10 of 14

20. It is relevant to notice that Adjudicating Authority himself has directed

that bid offered by the Appellant be treated as anchor bid and in the event

higher bid is received than the anchor bid the buyer shall have the option to

match the same. It is useful to extract the directions issued in paragraph 13

of the impugned order which are as follows:

"13. For the foregoing reasons, we disallow private sale in terms of the Letter of Intent annexed as Exhibit O in IA. No. 5737 of 2023 and dismiss IA No. 5737 of 2023 with the following directions to the Liquidator under Section 35 of the Code:

(i) The Liquidator shall issue fresh notice of conducting sale in two newspapers circulating in the area where the said Property is situate and invite bids above the bid submitted by the buyer by adopting Swiss Challenge method, thereby treating the bid offered by the Buyer as an anchor bid. The interested bidders will have to submit 10% of the bid amount as EMD along with the bid. In the event of receipt of higher bid than the anchor bid of the Buyer, the Buyer shall have the option to match the same.

(ii) The Liquidator may finalize other terms relating to MIDC dues, time period for making deposit of consideration, documentation, etc.

(iii) The entire sale process to be completed within one month from the date of the order and there is no requirement of obtaining fresh consent/approval of financial creditors for confirming the private sale in favour of the highest bidder subject to satisfaction of other terms and conditions as may be specified by the Liquidator."

21. We have already noticed that Liquidator has submitted that in

pursuance of the Auction Notice dated 21.02.2024, one EMD has already been

received and the Appellant-Best One Infraventures Pvt. Ltd. has sent EoI, but

EMD was not paid.

22. We are of the view that Adjudicating Authority did not commit any error

in issuing a direction for issue of a fresh Notice of conducting sale to other

Comp. App. (AT) (Ins.) Nos. 452, 453 & 651 of 2024 11 of 14 interested parties one party had been already expressed interest and filed I.A.

No.261/2024.

23. The submission of Sh. Abhijeet Sinha that Sachani Developers who had

shown interest and filed an I.A. No.261/2024 subsequently withdrawn his

offer by letter dated 26.02.2024 there is no occasion to proceed with the

Auction any further. The Auction Notice was already issued on 21.02.2024

and the letter dated 26.02.2024 was issued by Sachani Developers on

26.02.2024 subsequent to e-Auction and in pursuance of Notice for fresh

Auction, EMD has already been received at least by one party.

24. We thus are of the view that fresh Auction need to be conducted by

issuance of corrigendum by Liquidator in continuation of the e-Auction Notice

by 21.02.2024 by fixing a date within two weeks from today for conduct of the

e-Auction. The Liquidator in the corrigendum may also state that the

successful bidder has to pay all the dues of MIDC.

25. The interest of the Appellant Eshan Minerals Private Limited are also

protected by the impugned order since the bid given by the Appellant has been

treated to be anchor bid. We are of the view that in event no higher bid is

received in a Swiss Challenge Method, private sale in favour of the Appellant

as per LoI dated 21.11.2023, need to be confirmed without requiring any

further approval from the Adjudicating Authority.

26. Coming to the Comp. App. (AT) Ins. No. 651/2024, the prayer in the

Appeal by the Appellant is as follows:

"a) Stay the effect of the Impugned Order, effectively, the auction process adopting the Swiss Challenge Method allowed by the Impugned Order till the hearing and adjudication of the present Appeal.

Comp. App. (AT) (Ins.) Nos. 452, 453 & 651 of 2024 12 of 14

b) In the alternative, stay the Corporate Insolvency Resolution Process of the Corporate Debtor till the hearing and disposal of the present Appeal.

c) Pass such further and other relief or directions as the nature and circumstances of the case may require."

27. The prayer of the Appellant Best One Infraventures Pvt. Ltd.,

challenging the order of the Adjudicating Authority insofar as it direct for

adopting Swiss Challenge Method cannot be accepted. Appellant- Best One

Infraventures Pvt. Ltd. in event intend to participate in the Swiss Challenge

Method. It is open for Best One Infraventures Pvt. Ltd. to submit an EMD in

pursuance of EoI already issued by the Appellant and subject to this liberty

to the Appellant- Best One Infraventures Pvt. Ltd., no other relief can be

granted in Comp. App. (AT) Ins. No. 651/2024.

28. In view of the abovementioned discussions and conclusions, the

Appeals as above are decided in following manner:

i. The order dated 13.02.2024 passed by the Adjudicating Authority,

challenged in the above Appeals is upheld.

ii. The Liquidator to issue a corrigendum fixing a date of e-Auction within

two weeks from today in continuation of e-Auction Notice dated

21.02.2024 to conduct the e-Auction by Swiss Challenge Method as

directed by Adjudicating Authority by order dated 13.02.2024.

iii. Appellant-Best One Infraventures Pvt. Ltd. who has send its EoI but

has not given the EMD is at liberty to submit its EMD to the Liquidator

within a week from today.

iv. On submission of the EMD and other necessary compliances by

Appellant- Best One Infraventures Pvt. Ltd., Appellant shall also be

permitted to participate in the Swiss Challenge Process. Comp. App. (AT) (Ins.) Nos. 452, 453 & 651 of 2024 13 of 14 v. That in event in the Swiss Challenge Method in pursuance of the

e- Auction as directed herein above, no other bid is received higher to

the consideration offered by the Appellant, i.e., Eshan Minerals Private

Limited the private sale in favour of the Eshan Minerals Private Limited

as per LoI dated 21.11.2023 shall stand confirmed without requirement

of any approval by the Adjudicating Authority.

vi. In Swiss Challenge Method, the Liquidator after completion of the Swiss

Challenge Method shall issue LoI to highest successful bidder and take

all other steps as per Auction Notice.

Parties shall bear their own cost.

[Justice Ashok Bhushan] Chairperson

[Barun Mitra] Member (Technical)

[Arun Baroka] Member (Technical)

NEW DELHI

16th April, 2024

himanshu

Comp. App. (AT) (Ins.) Nos. 452, 453 & 651 of 2024 14 of 14