Jasamrit Designers Private Limited vs Mr. Gian Chand Narang Liquidator Of Apex ...

[Arising out of Order dated 02.12.2022 passed by the Adjudicating Authority (National Company Law Tribunal), Principal Bench, New Delhi, in I.A. No. 3207 of 2022 in CP(IB) No. 706/PB/2018]

IN THE MATTER OF:

Jasamrit Designers Private Limited, Having its registered office at Plot No. 08, Main Road, Opp. CNG Petrol Pump, Goverdhan Vilas, Udaipur - 313001 ...Appellant Versus 1. Mr. Gian Chand Narang, Liquidator of Apex Buildsys Limited, 409, Ansal Bhawan, 16 K.G. Marg, Cannaught Place 2. Apex Buildsys Limited , B-292 Chandra Kanta Complex, Shop No. 7, Near Metro Pillar No. 161, New Ashok Nagar New Delhi, 110096 ...Respondents

Present:

For Appellant: Ms. Pooja Mahajan, Ms. Arveena Sharma, Mr. Savar Mahajan, Advocates For Respondents: Mr. Abhishek Anand, Mr. Karan Kohli, Mr. Vaibhav Mendiratta, Mr. Sahil Chopra, Advocates for Liquidator/Respondent

JUDGMENT

ASHOK BHUSHAN, J.

1. This Appeal has been filed by Successful Bidder challenging the

Order dated 02.12.2022 passed by National Company Law Tribunal, New

Cont'd.../ -2-

Delhi, Principal Bench (hereinafter referred to as "The Adjudicating

Authority") disposing of I.A. No. 3207 of 2022 filed by the Appellant.

2. Brief facts of the case necessary to be noted for deciding this Appeal

are:-

a. The Adjudicating Authority passed an order dated

09.01.2020 for liquidation of Apex Buildsys Limited-

Corporate Debtor.

b. E-Auction Notice was issued by the Liquidator for sale of the

Corporate Debtor as a going concern. After issuance of

several E-Auction Notices by the Liquidator, e-Auction Notice

was issued on 04th May, 2022 fixing 23rd May, 2022 as date

for e-auction. E-auction process information document was

also issued inviting bids for auction/sale of M/s. Apex

Buildsys Limited as a going concern in its totality along with

its employees/workers.

c. E-auction document contained various annexures and

formats. E-Auction Notice also contained terms and

conditions of the e-auction. Prospective bidders were required

to make their own independent inquiries regarding the

encumbrances, title of assets/properties of the company put

on auction as going concern. It is useful to extract clause 2 of

Terms and Conditions of the E-Auction which is to the

following effect:

"The prospective bidders should make their own independent inquiries regarding the encumbrances, title

Company Appeal (AT) (Insolvency) No. 258 of 2023 -3-

of assets/properties of the company put on auction as going concern and claims/rights/dues/affecting the assets and should conduct their own due diligence prior to submitting their bid. The e-auction advertisement does not constitute and will not be deemed to constitute any commitment or any representation of the Liquidator. The company is being sold with all the existing and future encumbrances/claims/dues/demands whether known or unknown to the liquidator. Liquidator shall not be responsible in any of way for any third party claims/rights/dues."

d. Terms and Conditions of e-Auction under Heading P(II) Other

Terms and Conditions of E-auction contains certain

additional terms and conditions. Under clause 2, following

has been stated:

"2. The Liquidator has proposed to conduct sale of the Corporate Debtor as a going concern in its totality as contemplated under Regulation 32(e) of the Liquidation Regulations through E-auction Process, as under: -

a. Upon payment of 25% of the bid amount, A Term Sheet shall be executed between the Liquidator representing the Corporate Debtor and the successful bidder to give effect for sale of the Corporate Debtor as a going concern in its totality alongwith its employees/workers. The broad terms are stated herein below: -

• The cut-off date for the purposes of determination of all assets and liabilities of the Corporate Debtor shall be the liquidation commencement date, i.e., January 9th 2020.

Company Appeal (AT) (Insolvency) No. 258 of 2023 -4-

• The sale of the Corporate Debtor as a going concern shall result in the transfer of the entire available assets of the Corporate Debtor in favour of the successful bidder on the date of transfer after payment of full sale consideration amount, i.e., on the date of handover of the reins of the company.

• All known or unknown, claimed or unclaimed, disclosed or undisclosed liabilities/ obligations, risks as on the cut-off date including prior claims of all creditors whether secured, unsecured, workers, employees, statutory authorities on account of Income Tax, Sales Tax, GST, Service Tax, DGFT, Excise, Customs etc., shareholders on account of transactions prior to the cut- off date shall be dealt with as per Section 53 of the Insolvency and Bankruptcy Code, 2016 as full and final settlement of their dues. The Liquidator shall in no event be responsible for any liabilities /obligations/ risks pertaining to the period prior to the Cut-off date, and the same shall be dealt with as per the provisions of law and directions of Hon 'ble NCL Tor any higher authority thereof.

• The transfer of ownership of the Corporate Debtor shall take place by way of writing off the entire existing shareholding of Corporate Debtor and issuance of fresh equity shares to the successful bidder. The shares shall be issued only in the name of the successful bidder and will not be issued in any other name.

• The closing date of the transaction shall be 90 days from the payment of the full consideration amount, wherein in these 90 days, all the ancillary processes as mentioned in the Term Sheet shall be executed and implemented by the Liquidator and the bidder. The said executions include but are not restricted to distribution

Company Appeal (AT) (Insolvency) No. 258 of 2023 -5-

of the purchase consideration to various stakeholders, extinguishment of shares of the Corporate Debtor, issuance of fresh equity shares to the bidder, etc. b. Confirmation of sale: On payment of the 100% of the bid amount, and any applicable GST/Taxes, registration fees, transfer fee etc. the successful bidder shall be issued the letter for confirmation of sale. The confirmation of sale is subject to the necessary approvals and processes, if any, towards various statutory and non-statutory authorities which include but is not restricted to Securities and Exchange Board of India, Bombay Stock Exchange, National Stock Exchange, The Directorate General of Foreign Trade, Income Tax, GST Department, Factory Inspector, PCB, SIDCUL, MIDC."

e. The Appellant was selected as a highest bidder in the e-

Auction held on 23rd May, 2022. Appellant has submitted a

bid of INR 91 Crores against the reserve price of INR 73

Crores. There was certain challenge by another bidder which

challenge was unsuccessful. The Appellant made the

payment of sale consideration. Liquidator issued a Sale

Certificate dated 22nd June, 2022 to the Appellant. Appellant

thereafter filed an I.A. No. 3207/2022 in Company Petition

seeking certain directions/reliefs/concessions and the

provisions which according to the Appellant were necessary

for fulfilling and actualizing the sale of the corporate debtor

as a going concern.

Company Appeal (AT) (Insolvency) No. 258 of 2023 -6-

f. The Application was listed before the Adjudicating Authority,

the Adjudicating Authority by Order dated 02.12.2022

disposed of the Application. In the order, the Adjudicating

Authority noticed large number of prayers which were made

by Appellant in the Application and after extracting prayers

made in the Application, the Adjudicating Authority disposed

of the Application by following order:

"The Applicant in this case is a successful auction purchaser of the Respondent/Corporate Debtor i.e. namely M/s. Apex Buildsys Limited.

Though the application is filed with a number of reliefs. In this application, we are not constrained to go to every aspect of the relief and concessions sought, except observing that the applicant successful auction purchaser will be entitled to seek appropriate relief from the respective department concerned in accordance with the law.

IA-3207 /2022 stands disposed of in the above terms.

In so far as the direction to ROC is concerned, we are inclined to accept the plea and direct the ROC to change the status of the corporate debtor from under liquidation to action on the application made by the applicant."

g. The above order indicates that except one direction directing

ROC to change the status of the corporate debtor from under

Liquidation to action on the application made by the

applicant, for other reliefs and concessions, the Adjudicating

Authority observed that applicant - successful auction

Company Appeal (AT) (Insolvency) No. 258 of 2023 -7-

purchaser will be entitled to seek appropriate relief from the

respective department concerned in accordance with law.

3. We have heard Ms. Pooja Mahajan, Learned Counsel for the

Appellant and Mr. Abhishek Anand, Learned Counsel for the Liquidator.

4. Learned Counsel for the Appellant submits that Application filed

by the Appellant seeking certain reliefs/concessions/directions were

necessary to affect the takeover of the Corporate Debtor on clean slate

basis. The Adjudicating Authority erred in not granting the said reliefs.

The question of settlement of liabilities of the creditors under Section 53

of the Code in case of sale of a corporate debtor in liquidation is a

question that ought to be decided by the Adjudicating Authority in the

Application filed under Section 60(5)(c ) of the Code. It is submitted that

without judicial order, the statutory authorities are not accepting

settlement of their claims in terms of Section 53 of the Code. In the

present case after passing of the impugned order applicant did approach

various authorities for waiver of their liabilities which stood settled in

terms of Section 53 of the Code however the Tax Authority informed the

Applicant that since the impugned order does not grant any relief, the

Appellant should contest the pending tax cases on merits. Notices have

been issued by SIDCUL for payment of past dues, despite the fact that

the E-Auction Process Notice specifically provided that SIDCUL's claim

will be settled under Section 53 of the Code. When the Liquidator after

receipt of the sale consideration has settled all claims of the creditors, no

creditors can insist for any claim which stood settled under the

liquidation. It is submitted that Adjudicating Authority have passed

Company Appeal (AT) (Insolvency) No. 258 of 2023 -8-

several orders in relation to sale as a going concern allowing various

reliefs, concessions and directions whereas several reliefs and

concessions have been granted. Learned Counsel for the Appellant

submits that due to non-consideration of various reliefs, concessions and

directions which are necessary for operationalisation of Corporate Debtor

as a going concern, the objective of the Code shall not be fulfilled.

5. Learned Counsel for the Liquidator during his submissions

supported the claims for reliefs, concessions and directions as was made

by the Applicant. However, in the written-submissions, the Liquidator has

submitted that there are certain reliefs claimed by the Appellant in I.A.

No. 3207 of 2022 which is neither permissible under the Code nor in

terms of settled position of law. Liquidator further submits that sale of

the Corporate Debtor as a going concern would entail transfer of both

assets as well as liabilities of the Corporate Debtor in favour of the

Successful Bidder. Learned Counsel for the Liquidator further raised

question as to whether principle of clean slate theory will be applicable in

case which is applicable in case of approval of Resolution Plan hence

whether shall also be applicable with regard to sale of the corporate

debtor as a going concern under Regulation 32A of the Liquidation

Regulations, 2016.

6. We have considered the submissions of Learned Counsel for the

parties and have perused the record.

7. From the facts brought on record, it is clear that sale of Corporate

Debtor was sale as a going concern. E-Auction Process Document on the

basis of sale as a going concern plays an important role and clarificatory

Company Appeal (AT) (Insolvency) No. 258 of 2023 -9-

role. Other terms and conditions of the e-auction as extracted above

states that all known or unknown, claimed or unclaimed, disclosed or

undisclosed liabilities/ obligations, risks as on the cut-off date including

prior claims of all creditors whether secured, unsecured, workers,

employees, statutory authorities on account of Income Tax, Sales Tax,

GST, Service Tax, DGFT, Excise, Customs etc. are required to be dealt

with as per Section 53 of the Code as full and final settlement of their

claims. When the process document clearly contemplated such

consequences the said consequences shall ensue on sale as going

concern and if any roadblocks come into ways of successful resolution

applicant, necessary directions, clarifications can very well be issued by

the Adjudicating Authority on an Application filed under Section 60(5)(c)

of the Code.

8. Further the process document clearly contemplated that transfer of

ownership of the corporate debtor shall take place by way of writing off

entire existing shareholding of the corporate debtor and issuance of fresh

equity shares to the successful bidder. The share shall be included in the

name of Successful Bidder and will not be issued in any other name.

9. Learned Counsel for the Appellant has brought on record the letter

dated 3rd March, 2023 issued by the State Infrastructure and Industrial

Development Corporation of Uttrakhand Limited informing the liquidator

that necessary application for transfer of the land should be undertaken.

By an affidavit dated 01st April, 2023, the Appellant has brought on

record various communications received from several authorities

including notices issued by various departments. Notices issued by

Company Appeal (AT) (Insolvency) No. 258 of 2023 -10-

Income Tax Department claims reference to various outstanding

payments.

10. In view of the subsequent facts and notices brought on record by

the Appellant and other terms and conditions of the process document as

extracted, we are of the view that ends of justice will be served in granting

liberty to file an Application before the Adjudicating Authority claiming

reliefs/concessions/directions which may be necessary for

operationalisation of the Corporate Debtor as per terms and conditions of

the process document.

11. We may also observe that prayers which were included in I.A. No.

3207 of 2022 were too elaborate and general prayers which cannot be

made by a Successful Bidder who have been declared as Successful

Bidder. Successful Bidder on e-Auction of the Corporate Debtor as a

going concern can make only such prayers for reliefs/concessions which

are commensurate and in accordance with the terms and conditions of

the process document. Prayers in general in a very wide term as

contained in I.A. No. 3207 of 2022 may not require any consideration by

the Adjudicating Authority.

12. We while granting such liberty to the Appellant observe that law is

well settled, a successful bidder who is declared as successful bidder of

sale as going concern can seek access of the Adjudicating Authority and

may pray for necessary directions in accord with and in consonance with

the process document in the liquidation proceedings. In result, we partly

allow this Appeal and hold that applicant's prayers i.e.

relief/concessions/directions needs consideration by the Adjudicating

Company Appeal (AT) (Insolvency) No. 258 of 2023 -11-

Authority for which we grant liberty to the Applicant to make a fresh

Application containing prayers which may be commensurate and in

accord with terms and conditions of the process document of e-auction

process document. The Appellant may submit a fresh application praying

for reliefs, concessions and directions which may be considered and

decided by the Adjudicating Authority in accordance with law. The Appeal

is disposed of, accordingly.

[Justice Ashok Bhushan] Chairperson

[Naresh Salecha] Member (Technical)

NEW DELHI 04th July, 2023

Basant B.

Company Appeal (AT) (Insolvency) No. 258 of 2023