Haryana State Industrial And ... vs M/S Aar Aar Technoplast Private Limited ...

National Company Law Appellate Tribunal Principal Bench, New Delhi COMPANY APPEAL (AT) (INSOLVENCY) No. 606 of 2021 (Arising out of Order dated 12th November, 2020 passed by National Company Law Tribunal, Court IV, New Delhi, in IA No. 3169/2020 in C.P. (IB) No.- 201/(PB)/2019).

IN THE MATTER OF:

Haryana State Industrial and Infrastructure Development Corporation Ltd. Through its Estate Manager Having its Branch Office at IMT Manesar, District Gurugram, Haryana - 122052. ...Appellant

Versus

1. M/s. AAR AAR Technoplast Private Limited 18/1, Mathura Road, Faridabad, Haryana - 121007. ...Respondent No. 1

2. Yogesh Kumar Gupta Liquidator - Noesis Industries Limited C-17B, Kalkaji, Basement, New Delhi - 110019. ...Respondent No. 2

For Appellant: Mr. Parvinder Chauhan, Advocate.

For Respondent: Mr. P. Nagesh, Sr. Advocate with Mr. Harshal Kumar, Advocates.

JUDGEMENT

[Per; Shreesha Merla, Member (T)]

1. Aggrieved by the Order dated 12.11.2020 in IA 3169/2020 in C.P. (IB)

No.- 201/PB/2019 passed by the Learned Adjudicating Authority (National

Company Law Tribunal, Court IV, New Delhi), the Appellant M/s. Haryana

State Industrial and Infrastructure Development Corporation Limited

preferred this Appeal under Section 60(5) of the Insolvency and Bankruptcy

Code, 2016 (hereinafter referred to as 'The Code') seeking to set aside the

Impugned Order, wherein the Adjudicating Authority has allowed the Application IA 3169/2020 preferred by the Applicant/M/s. AAR AAR

Technoplast Private Limited/the Auction Purchaser seeking a direction to

the Appellant herein to acknowledge and record the transfer of ownership in

the name of the Auction Purchaser.

2. Succinctly put, the facts in brief are that the CIRP was initiated

against M/s. Neosis Industries Ltd./the 'Corporate Debtor' vide Order dated

28.09.2018 and Mr. Yogender Kumar Gupta was appointed as the IRP who

was later confirmed as the RP. Subsequently, the 'Corporate Debtor' went

into Liquidation vide Order dated 28.11.2019 and the RP was also appointed

as the Liquidator of the 'Corporate Debtor'. The Liquidator published the

sale of notice on 05.03.2020 for e-Auction of the property admeasuring 4050

sq. mts. and the constructed building of 2552 sq. mts. at Sector 8, IMT,

Manesar District Haryana, fixing 17.03.2020 as the e-Auction date and

Rs.6,50,00,000/- as the Minimum Reserve Price for the said property. While

so, the applicant was declared as the 'Successful Bidder' and a letter of

intent dated 18.03.2020 was issued in his name. The Liquidator, on

receiving full consideration of the property, issued a possession letter dated

08.06.2020 and a Sale Deed dated 09.06.2020 was duly registered with the

Sub-Registrar, Manesar. A Sale Certificate was also issued showing the

manner of payment of sale consideration. Subsequently, the applicant sent

a Letter dated 10.06.2022 to the Appellant/Haryana State Industrial

Infrastructure Development Corporation Limited intimating the Auction and

purchase of the property through the Liquidator. In response to the said

Letter, the Appellant herein issued a Letter dated 19.06.2020 raising

payment of Rs.4,46,35,445/- towards water, storage charges and additional

-2- Comp. App. (AT) (Ins.) No. 606 of 2021 interest. Hence, the Auction Purchaser preferred IA 3169/2020 before the

Adjudicating Authority which has allowed the Application.

3. Learned Counsel for the Appellant submitted that the subject plot was

allotted to M/s. Media Video Private Limited, whose name was later changed

to M/s. Neosis Industrial Ltd./(the 'Corporate Debtor'); permission to

mortgage was granted vide Letter dated 24.06.2011, wherein the Appellant

was having first charge on the plot against any outstanding recoverable

dues; subsequent to the Liquidation Order dated 28.11.2019, the Liquidator

published a notice for sale of the subject plot on an 'as is where is basis';

and 'nonrecourse basis'; the asset was being sold with all existing and future

encumbrances and therefore the Successful Bidder was required to

discharge all the liabilities of the 'Corporate Debtor'; a Sale Deed dated

09.06.2020 was registered in favour of the Auction Purchaser who

approached the Appellant seeking mutation in its favour; as per Section

55(4)(b) of the Transfer of Property Act, the Appellant asked the Auction

Purchaser for Liquidating the unpaid sale consideration in respect of the

subject plot; it is open for the Liquidator to conduct any Auction on any

asset on 'as is where is basis' and the Auction Purchaser is bound by the

terms of such sale and the concept of 'clean slate' is not applicable in this

case as the asset has not passed to the Auction Purchaser in pursuance of

Successful Resolution, but in fact it has passed on to him on account of

Liquidation of the 'Corporate Debtor'.

4. It is further submitted by the Learned Counsel for the Appellant that

the dispute in hand does not pertain to determination of hierarchy of

disbursement and there is no question of attraction of Section 238 of the

-3- Comp. App. (AT) (Ins.) No. 606 of 2021 Code. Learned Counsel placed reliance on the Judgement of the Hon'ble

Supreme Court in 'Municipal Corporation of Greater Mumbai' Vs.

'Abhilash Lal & Ors.', (2020) 13 SCC 234 and also relied on the ratio of

the Hon'ble Apex Court in the Judgement of 'Telangana State Southern

Power Distribution Company Ltd.' Vs. 'Srigdhaa Beverage', (2020) 6

SCC 4040, wherein the Hon'ble Apex Court has observed as follows:

"It was noted by the Hon'ble Supreme Court that as an auction purchaser bidding in an "as is where is, whatever, there is an without recourse basis", the purchaser would have inspected the premises and made inquiries about the dues in all respects and as there is a specific mention of electricity dues as liability of the purchaser the purchaser was clearly put to notice in this behalf. Hence it was held that the liability to pay electricity dues exists on the purchaser."

5. Learned Counsel for the first Respondent/Auction Purchaser

submitted that pursuant to the Order dated 12.11.2020, the first

Respondent had addressed letters dated 05/01/2021, 25/01/2021 and

01.03.2021 to the Appellant to comply with the directions of the

Adjudicating Authority and transfer the said property in the name of the

first Respondent Company, but there was no response. Subsequently, vide

Order dated 16.08.2021 the Adjudicating Authority directed the Appellant to

transfer the said property in the name of the first Respondent within seven

days, which was informed to the Appellant herein on the very next date.

Learned Counsel drew our attention to the relevant para of the Order dated

16.08.2021, which is reproduced here for ready reference:

"Learned Counsel along with the HOD Legal, make a joint statement that letter with respect to the transfer will be issued with one week without any further condition". Appeal against the said order is pending and is listed on 27.08.2021. Mr. Nagesh, Learned

-4- Comp. App. (AT) (Ins.) No. 606 of 2021 Senior Counsel further states that the appeal is barred by limitation, hence no notice is still issued. On perusal of advance Copy Mr. Nagesh states that there is gross delay and the appeal is required to be dismissed at threshold. In view of the same the letter as undertaken by the Learned Counsel along with the HOD legal is required to be issued and this order be complied."

6. It is submitted that the Appellant had intentionally delayed in filing

the present Appeal and is only seeking to delay the proceedings further.

7. It is submitted that the first Respondent is a bona fide purchaser and

now cannot be fastened with the liabilities relating to pre-sale confirmation;

that the Order dated 12.11.2020 passed by the Adjudicating Authority

conforms with the Principles of Doctrine of clean slate; that it is a settled law

that post Admission of the Liquidation, the Auction Purchaser is not liable

to discharge the dues relating to the property. Once the sale is confirmed,

prior dues of the Municipal Authorities are to be discharged by the

Liquidator out of the sale proceeds and the Auction Purchaser cannot be

settled for any further liability.

8. The dues of the Appellant have already been dealt with by the

Liquidator in accordance with Section 53 of the Code and therefore is

estopped from raising any claims which have already been dealt with during

the Liquidation Process.

Assessment:

9. The main point which falls for consideration in this Appeal is whether

the Successful Bidder in an Auction conducted on 'as is where is basis' is

liable to pay prior dues attached to such Auction property, when the

Company is in Liquidation and the dues were claimed under 'Operational

Debt' before the Liquidator?

-5-

Comp. App. (AT) (Ins.) No. 606 of 2021

10. At the outset, it is relevant to see the terms of the Auction sale relied

upon by the Learned Counsel for the Appellant:

(Emphasis Supplied)

11. It is the case of the Appellant that as the Auction was held on an 'as is

where is basis' and on a 'non-recourse basis', it is stated that the assets of

the 'Corporate Debtor' have been sold with all the existing and future

-6- Comp. App. (AT) (Ins.) No. 606 of 2021 encumbrances, 'the Auction Purchaser' is liable to pay the dues outstanding

with the Appellant. It is seen from the record that the Company went into

Liquidation on 28.11.2019 and the Successful Auction Purchaser, on paying

the full sale consideration was issued a Sale Certificate subsequent to

executing a Sale Deed for the subject property on 09.06.2020.

12. The material on record establishes that the Appellant herein had filed

their Form-C on 09.03.2020 which was defective and the Liquidator vide

email dated 09.03.2020 pointed out the deficiency and sought clarifications

on the information provided. A reminder was also sent on 12.03.2020 to

consider the claim of the Appellant herein as an 'Operational Creditor'.

Subsequent to the e-Auction conducted and the receipt of the sale

consideration, the Liquidator allocated the funds in accordance with Section

53 of the Code in a waterfall mechanism. The Liquidator submitted in his

Reply Affidavit before the Adjudicating Authority that the 'dues of the

Secured Financial Creditors against the 'Corporate Debtor' was much higher

than the proceeds from the sale of Liquidation Assets of the 'Corporate Debtor'

and therefore the dues of the Appellant herein could not be paid by the

Liquidator under the Liquidation Process'. The same was also communicated

to the Appellant herein vide email dated 19.06.2020. The relevant portion of

the said email is reproduced as hereunder:

"The sale proceeds were insufficient even to meet the claims of the secured creditors. Since your claim has been raised as an operational creditor, so even after an assuming such claim to be in Order there is no amount left for the payment to any operational creditor and hence your claim has not been paid".

13. Having regard to the fact that the Appellant herein has already

submitted his 'Claim' in Form-B as an 'Operational Creditor' when the

-7- Comp. App. (AT) (Ins.) No. 606 of 2021 'Corporate Debtor Company' was in Liquidation and the Liquidator has

already distributed the proceeds as per Section 53 of the Code, the

contention of the Learned Counsel for the Appellant that the dues raised

prior to the Auction are liable to be paid by the Auction Purchaser, has to be

examined on the touchstone of the ratio of the Hon'ble Apex Court in the

Judgement of 'Committee of Creditors Essar Steels Standard Chartered

Bank' Vs. 'Satish Kumar Gupta', 2019 SCC OnLine 388, in which it was

held as follows:

"107. For the same reason, the impugned NCLAT judgement [Standard Chartered Bank Vs. Satish Kumar Gupta, 2019 SCC OnLine 388] in holding that claims that may exist apart from those decided on merits by the resolution professional and by the Adjudicating Authority/Appellate Tribunal can now be decided by an appropriate forum in terms of Section 60(6) of the Code, also militates against the rationale of Section 31 of the Code. A successful resolution applicant cannot suddenly be faced with "undecided" all claims after the resolution plan submitted by him has been accepted as this would amount to a hydra head popping up which would successfully take over the business of the corporate debtor. All claims must be submitted to and decided by the resolution professional so that a prospective resolution application knows exactly what has to be paid in order that it may then take over and run the business of the corporate debtor. This the successful resolution applicant does not on a fresh slate, as has been pointed out by us hereinabove. For these reasons, NCLAT judgement must also be set aside on this count."

14. We also find it relevant to place reliance on the principle laid down by

the Hon'ble Supreme Court in 'Ghanshyam Mishra and Sons Private

Limited' Vs. 'Edelweiss Asset Reconstruction Company Limited' (2021)

SCC OnLine 313, wherein the Hon'ble Apex Court has observed as follows:

"61. All these details are required to be contained in the information memorandum so that the resolution

-8- Comp. App. (AT) (Ins.) No. 606 of 2021 applicant is aware, as to what are the liabilities, that he may have to face and provide for a plan, which apart from satisfying a part of such liabilities would also ensure that the Corporate Debtor is revived and made a running establishment. The legislative intent of making the resolution plan binding on all the stakeholders after it gets the seal of approval from the Adjudicating Authority upon its satisfaction that the resolution plan approved by CoC meets the requirement as referred to in sub-section (2) of Section 30 is, that after the approval of the resolution plan, no surprise claims should be flung on the successful resolution applicant. The dominant purpose is that he should start with fresh slate on the basis of the resolution plan approved."

15. The Judgement in 'Telangana State Southern Power Distribution

Company Ltd.' (Supra), relied upon by the Learned Counsel for the

Appellant is not applicable to the facts of this case as under the provisions

of the Code, the Appellant had claimed the amount as an 'Operational

Creditor', though his claim was rejected. The principle of 'clean slate' laid

down in the Judgement of the Hon'ble Apex Court in 'Committee of

Creditors Essar Steels Standard Chartered Bank' is applicable to the

facts of this case, though it pertains to a successful Resolution Applicant.

The scope and purpose of this Code and the ratio of the Judgement is to be

interpreted in its truest sense, i.e., not to saddle the 'purchaser' with any

'hydra head' popping up.

16. We are of the considered view that once the Liquidation sale has been

completed and the Certificate of Sale has been executed followed by handing

over possession to the Auction Purchaser, any claim relating to such

property for dues prior to the Auction cannot be raised against the Auction

Purchaser specifically when the Company is in Liquidation and the dues

were already claimed by the said party as an 'Operational Creditor', during

-9- Comp. App. (AT) (Ins.) No. 606 of 2021 the CIRP process as the Company was in Liquidation and the Appellant had

already approached the Liquidator by filing a Form-B and the Liquidator has

intimated to the Appellant that there is no amount left for the payment to

any 'Operational Creditor', we are of the earnest view that the Auction

Purchaser cannot be made liable for any dues arising on the property before

the purchase of the said property in this case.

17. Hence, we do not see any illegality or infirmity in the Order of the

Adjudicating Authority and hence this Appeal fails and is accordingly

dismissed. No order as to costs.

[Justice Anant Bijay Singh] Member (Judicial)

[Ms. Shreesha Merla] Member (Technical) NEW DELHI 06th September, 2022 Himanshu

-10- Comp. App. (AT) (Ins.) No. 606 of 2021