Jitender Kumar Jain vs Pavan Enterprises

IN THE MATTER OF: JITENDER KUMAR JAIN Liquidator of Roofit Industries Limited Address: Level 9, Platina, C-59, G Block, BKC, Bandra (East), Mumbai 400 051, India Mobile No. +91-8226223880 Email Id. Jit1.jain@gmail.com ...Appellant

Versus

M/S PAVAN ENTERPRISES Ground Floor, F/3, Plot No. 144, Ashok Silk Mill Compound, Sant Rohidas Marg, Kala Killa, Dharavi, Mumbai - 400017 Email Id. mdpavanenterprises@gmail.com ...Respondent Mobile No. 9372119985

WITH Company Appeal (AT) (Insolvency) No. 514 of 2022

IN THE MATTER OF: JITENDER KUMAR JAIN Liquidator of Roofit Industries Limited Address: Level 9, Platina, C-59, G Block, BKC, Bandra (East), Mumbai 400 051, India Mobile No. +91-8226223880 Email Id. Jit1.jain@gmail.com ...Appellant

Versus

M/S PAVAN ENTERPRISES Ground Floor, F/3, Plot No. 144, Ashok Silk Mill Compound, Sant Rohidas Marg, Kala Killa, Dharavi, Mumbai - 400017 Email Id. mdpavanenterprises@gmail.com ...Respondent Mobile No. 9372119985

Company Appeal (AT) (Insolvency) No. 513 of 2022 Company Appeal (AT) (Insolvency) No. 514 of 2022

1 Present:

For Appellant: Mr. Amir Arsiwala, Mr. Piyush Deshpande & Ms. Nupur Shah, Advocates For Respondents: Mr. Vijay Tangri, Advocate

JUDGMENT

(Date: 15.9.2022)

[Per: Dr. Alok Srivastava, Member (T)]

1. This order shall dispose of two appeals i.e. CA (AT) (Ins) No.

514 of 2022 and CA (AT) (Ins) No. 513 of 2022 as the issue

involved in both the appeals is common, and in both the cases

the Appellant has challenged the order of ad-interim stay granted

by the Adjudicating Authority. Appeal i.e. CA (AT) (Ins) No. 514

of 2022 has been filed against the order dated 28.02.2022 by

which an ad-interim stay was granted, while the second appeal

i.e. CA (AT) (Ins) No. 513 of 2022 has been filed against the order

dated 22.03.2022, by which the order of stay has been extended.

The first Impugned Order dated 28.2.2022 is hereinafter referred

to as Impugned Order - 1 and Impugned Order dated 22.3.2022

is hereinafter referred to as Impugned Order - 2 respectively.

Thus through this judgment, we will dispose of CA(AT) (Ins.)

No.513 of 2022 and CA(AT) (Ins.) No.514 of 2022.

2 Company Appeal (AT) (Insolvency) No. 513 of 2022 Company Appeal (AT) (Insolvency) No. 514 of 2022

2. In brief, Corporate Insolvency Resolution Process (in short

'CIRP') of the corporate debtor was initiated vide order dated

28.06.2017 and the Appellant herein was appointed as the

Interim Resolution Professional (in short 'IRP'). The Appellant

was appointed as Resolution Professional (in short 'RP') of the

Corporate Debtor in the first meeting of CoC dated 27.07.2017.

The Adjudicating Authority passed the order dated 22.01.2018

to initiate liquidation of the Corporate Debtor i.e. Roofit

Industries Limited and the Appellant was appointed as the

Liquidator. It is alleged that the Appellant as Liquidator of the

Corporate Debtor, conducted a first e-auction on 01.12.2020 for

the sale of immovable property viz. Plot No. B-15, Mirjole Block,

MIDC, Opposite MSWC, Ratnagiri (hereafter called 'The

Property'). M/s Pavan Enterprises (Respondent) was declared as

the successful bidder on 02.12.2020 and was asked to deposit

the balance of auction sale price. The Respondent requested for

the extension of time of 75 days in terms of Para No. 4.1 of the

terms and conditions of e-auction on 16.12.2020 and the

Liquidator granted him extension of time to deposit the balance

of sale price. However, the Respondent requested for extension of

another four weeks on 01.03.2021 for the payment of balance

amount and sent a cheque dated 27.03.2021 for an amount of

Rs. 2,24,00,000/- drawn on the Canara Bank. It is alleged by the

Appellant that the Respondent did not pay a single penny after

3 Company Appeal (AT) (Insolvency) No. 513 of 2022 Company Appeal (AT) (Insolvency) No. 514 of 2022 payment of CMD on 01.12.2020 till the expiry of 90 days i.e. till

02.03.2021 from the date of sale confirmation. The Appellant,

therefore, forfeited the CMD deposited by the Respondent on

03.03.2021 and issued another e-auction notice for the sale of

the same immovable property on 16.03.2021 which was

extended to 19.03.2021 due to nationwide strike of the banks.

3. The Appellant has further stated that the Respondent,

being aggrieved by the decision of the Appellant qua forfeiture of

the CMD, filed an application bearing I.A. No. 468 of 2021 before

the Adjudicating Authority, in which the Adjudicating Authority

passed the order on 16.03.2021 directing that no further time

shall be given to the Respondent for depositing the balance

consideration amount of e-auction and the Respondent once

again participated in the e-auction of March, 2021. The Appellant

issued the e-auction confirmation letter dated 22.03.2021to the

Respondent in which it was asked to pay full consideration

within 15 days as prescribed in the terms and conditions of the

second round of e-auction held in March, 2021. The Respondent

sought extension of time of 15 days on 02.04.2021 which was

granted by the Appellant making it clear that the Respondent will

have to make balance payment by 21.4.2021 and that no further

time shall be possible as was provided in the Terms & Conditions

of the e-auction. The Respondent paid Rs. 75,00,000/- on

4 Company Appeal (AT) (Insolvency) No. 513 of 2022 Company Appeal (AT) (Insolvency) No. 514 of 2022 06.04.2021, but he did not pay the full consideration despite two

opportunities being given to it. The Respondent again made a

request for extension of time on 16.04.2021 which was rejected

by the Appellant and aggrieved against the said decision of the

Appellant, the Respondent filed another I.A No. 868 of 2021 on

20.04.2021. In view of the fact that the Respondent had failed to

deposit the full sale consideration, the e-auction was cancelled

by the Appellant on 23.04.2021 and forfeited the CMD of the

Respondent deposited towards e-auction of December, 2021 and

March 2021. It is claimed by the Appellant that on cancellation

of offer to Respondent, the property was sold by the Appellant for

a sum of Rs. 2.77 Crores to M/s Survival Technologies Pvt. Ltd.

The Respondent in the meanwhile filed a Writ Petition No. 1200

of 2021 before the Hon'ble Bombay High Court seeking stay of

the prospective e-auction. The Writ Petition filed by the

Respondent was dismissed on 06.05.2021 and liberty was

granted to pursue his application for relief before the

Adjudicating Authority.

4. Aggrieved against the order of the Hon'ble High Court, the

Respondent filed SLP(C) No. 7051 of 2021 before the Hon'ble

Supreme Court against the Appellant, IBBI and Survival

Technologies Pvt. Ltd. but the same was dismissed on

29.06.2021.

5 Company Appeal (AT) (Insolvency) No. 513 of 2022 Company Appeal (AT) (Insolvency) No. 514 of 2022

5. It is further stated by the Appellant that the purchaser,

namely, Survival Technologies Pvt. Ltd. through a letter dated

13.12.2021asked the Appellant to cancel the sale of Ratnagiri

property being frustrated in taking possession and making use

of the property due to unnecessary litigation. On 17.12.2021,

the Appellant filed appeal bearing CA (AT) (Ins) No. 1058 of 2021

before this Appellate Tribunal against the order dated

16.03.2021 passed by the Adjudicating Authority which was

withdrawn vide order dated 17.12.2021 as it had become

infructuous. The Respondent Pavan Enterprises filed IA No.

468/2021 regarding forfeiture of his CMD which was finally

adjudicated by order dated 16.03.2021.

6. The Appellant has further stated that, upon withdrawal by

Survival Technologies Pvt. Ltd., the Appellant issued fresh

auction notice on 19.02.2022 at the reserve price of approx Rs.

2.89 Crores. On this, the Respondent published a public notice

in the Ratnagiri Times on 23.02.2022, stating that its I.A. No.

868 of 2021 is pending before the Adjudicating Authority and the

auction would be dependent upon the outcome of the said

application. On 28.02.2022, the Adjudicating Authority, while

hearing the application i.e. I.A. No. 485 of 2022 and 868 of 2021,

passed the impugned order dated 28.2.2022, staying the third e-

6 Company Appeal (AT) (Insolvency) No. 513 of 2022 Company Appeal (AT) (Insolvency) No. 514 of 2022 auction, in terms of notice published on 19.02.2022 for a period

of three weeks from the date of the order. Hence, the appeal

bearing CA (AT) (Ins) No. 514 of 2022 has been filed by the

liquidator (Appellant).

7. On 22.03.2022, the Adjudicating Authority passed the

order further extending the stay on the fresh (3rd round) e-

auction of the Ratnagiri Property till 06.04.2022 but it is alleged

that the matter was not called out due to paucity of time on

06.04.2022. The appeal bearing CA (AT) (Ins) No. 513 of 2022 is

filed against the order dated 22.03.2022.

8. We heard the arguments of the Learned Counsels for

Appellant/Liquidator and Respondent M/s Pavan Enterprises

and perused the record.

9. The Learned Counsel for Appellant/Liquidator has referred

to the Impugned Order dated 28.2.2022 in IA No. 485/2022 and

868/2021 to claim that after two unsuccessful attempts to sell

of 'the property' a fresh e-auction notice was issued on 23.2.2022

(the third e-auction) for sale through public auction. He has

further submitted that the respondent Pavan Enterprises has

been frustrating the effort of liquidator in selling the property

through a series of litigations and also by scaring prospective

buyers. In order to place the proper context of the impugned 7 Company Appeal (AT) (Insolvency) No. 513 of 2022 Company Appeal (AT) (Insolvency) No. 514 of 2022 orders, he has referred to the first round of e-auction held in

December, 2020, wherein Pavan Enterprises became the

successful bidder and was told to make full payment of the sale

amount. He has further submitted that Pavan Enterprises

sought extension of time for a period of 75 days through letter

dated 16.12.2020 in accordance with the clause 4.1 of the 'Terms

and Conditions' of the e-auction to deposit the balance of the sale

amount but he failed to do so in the extended time period that

was provided to him and with the result the e-auction was

cancelled with forfeiture of the Caution Money Deposit (in short

'CMD').

10. The Learned Counsel for Appellant has further submitted

that the second round of e-auction took place in March 2021 in

which Pavan Enterprises was again adjudged the highest, and

therefore, the successful bidder. The Learned Counsel for

Appellant has further submitted that Pavan Enterprises sought

extension of time vide letter dated 2.4.2021 for a period of 15

days to complete the full payment and agreed to pay interest @

12% p.a. on the amount, as he could not get financial assistance

from the bank which he needed to deposit the balance amount

and committed itself to making complete payment of the balance

sale amount by 21.4.2021, after being granted 15 days' time

extension as per clause 4.1 of the 'Terms and Conditions' of e-

8 Company Appeal (AT) (Insolvency) No. 513 of 2022 Company Appeal (AT) (Insolvency) No. 514 of 2022 auction vide e-mail dated 2.4.2021. He has stated that the

successful bidder Pavan Enterprises was informed through email

dated 2.4.2021 that no further extension would be possible in

accordance with the 'Terms and Conditions' of the e-auction. The

Learned Counsel for Appellant has added that despite receiving

15 days' extended time, Pavan Enterprises did not make full

payment by 21.4.2021 as was required of him, and hence the

Liquidator cancelled the offer made to Pavan Enterprise for sale

of the said property.

11. He has submitted that the Respondent/Pavan Enterprises

approached the Hon'ble High Court of Bombay to seek 45 days'

extra time to deposit the balance consideration but the Hon'ble

Bombay High Court dismissed the petition of Pavan Enterprises

on the ground that his application for the same relief was

pending before the NCLT and granted him liberty to pursue that

application before the NCLT. The Learned Counsel for Appellant

has stated that the Respondent filed a Special Leave Petition

bearing Special Leave to Appeal (C) No(s) 7051/2021 challenging

the order dated 6.5.2021 of the Hon'ble Bombay High Court,

which was dismissed as withdrawn vide order dated 29.6.2021

of the Hon'ble Supreme Court.

9 Company Appeal (AT) (Insolvency) No. 513 of 2022 Company Appeal (AT) (Insolvency) No. 514 of 2022

12. The Learned Counsel for Appellant has further submitted

that after the offer made to Pavan Enterprises was cancelled by

the Liquidator, Survival Technologies Pvt. Ltd. made an offer to

purchase 'the property' for a total consideration of Rs.

2,77,00,000/- which was accepted by the Liquidator, but due to

protracted and multiple litigations pursued by Pavan Enterprises

before NCLT, Mumbai and Hon'ble Bombay High Court and the

uncertainty looming large with respect to the status of the said

property, it was unable to take possession of said property and

start its project, and thus being frustrated, the purchaser

Survival Technologies requested the Liquidator vide letter dated

13.12.2021 for refund of Rs.2.77 crores after withdrawing its

offer to purchase the said property.

13. He has further submitted that a fresh notice was thereafter

issued by the Liquidator for the third round of e-auction of 'the

property' to be held in March 2022. He has argued that the

Respondent wanted to thwart the effort being made by the

Liquidator for auction-sale of the property, and in pursuance of

such an objective, prior to the holding of the e-auction, it

(Respondent Pavan Enterprises) caused publication of a public

notice in the edition dated 23.2.2022 of the newspaper "Ratnagiri

Times" informing the public that a case IA No. 868 of 2021 was

pending regarding the said property in NCLT Mumbai thereby

10 Company Appeal (AT) (Insolvency) No. 513 of 2022 Company Appeal (AT) (Insolvency) No. 514 of 2022 informing and warning the prospective buyers even though

Pavan Enterprises did neither have a stay order for the e-auction

in its favour nor it was desirable to obstruct the action of the

Liquidator. The Learned Counsel for Appellant has claimed that

in the above-mentioned situation, when the Respondent has

been seeking extension of time and is unable to deposit the

requisite balance sale amount due to probable difficulty in

obtaining bank finance, the conduct of the Respondent is highly

improper. He has stated that in the first round of e-auction

Pavan Enterprises was granted 90 days' time period to deposit

the balance of sale consideration and again given 15 days' time

extension which was in accordance with clause 4.1 of the Terms

and Conditions of the e-auction and because the purchaser

Pavan Enterprises promised to make the payment by 21.4.2021.

14. He has pointed out that it was not necessary for the

Appellant/Liquidator to grant 90 days' time extension as per

clause 12 of Schedule I of the Insolvency and Bankruptcy Board

of India (Liquidation Process) Regulations, 2016 (hereafter called

'Liquidation Process Regulations') as the stated 'Terms and

Conditions' of the e-auction very clearly stipulated the maximum

time that would be given to the purchaser to deposit the balance

of consideration amount and Pavan Enterprises had accepted the

said terms and Conditions. He has also referred to the order

11 Company Appeal (AT) (Insolvency) No. 513 of 2022 Company Appeal (AT) (Insolvency) No. 514 of 2022 dated 16.3.2021 in IA No. 468/2021 whereby the Adjudicating

Authority has allowed Pavan Enterprises to participate in the

second round of e-auction after taking the CMD which was

forfeited by the Liquidator as valid CMD. He has claimed that

this order of the Adjudicating Authority was not appealed against

and hence it has achieved finality, and therefore the Respondent

should not have been given indulgence or allowed to agitate the

issue relating to the second round of e-auction.

15. The Learned Counsel for Appellant has argued that in the

situation as explained in detail by him, the ad-interim stay

granted through Impugned order dated 28.2.2022 and the

extension of ad-interim stay vide the second Impugned Order

dated 22.3.2022 is not legal since there is a clear stipulation in

the terms and conditions regarding the time permitted to deposit

the full sale consideration amount and resorting to Rule 11 of the

NCLT Rules in granting ad-interim stay is not proper.

16. In reply, the Learned Counsel for Respondent Pavan

Enterprises has claimed that he is the only successful bidder

after three rounds of e-auction of 'the property' and since he has

already paid approximately Rs. 99 lakhs as part of the total bid

amount, he should be given extension of time to deposit the

balance of sale consideration. He has referred to the difficulties

12 Company Appeal (AT) (Insolvency) No. 513 of 2022 Company Appeal (AT) (Insolvency) No. 514 of 2022 he faced in obtaining financing from the banks due to various

reasons and said that the liquidator ought to have given him

extension of time as per Clause 12 of the Schedule I of

Liquidation Process Regulations which was not done, thereby

denying him permissible full opportunity and time to deposit the

balance consideration, and moreover the Liquidator is not bound

by the advice of Stakeholders Consultation Committee and has

full and independent authority to give extension of time to the

Respondent for depositing the balance sale consideration.

17. The Learned Counsel for Respondent has argued that since

he has already paid substantial amount against the sale

consideration, he is willing to deposit the balance amount and in

view of his willingness he had approached the Adjudicating

Authority by filing IA No. 868 of 2022 and in the interest of

justice, the Adjudicating Authority has granted ad-interim stay

to the process of fresh e-auction. He has, thus claimed that the

said stay is in the interest of justice and for protecting his rights

and therefore, there is no error in the order dated 28.2.2022 and

later in the order dated 22.3.2022 which has only extended the

stay order, passed in IA No. 868 of 2021 and IA No. 485 of 2022.

18. We note that the first round of e-auction took place in

December, 2020 and Pavan Enterprises was adjudged as the

13 Company Appeal (AT) (Insolvency) No. 513 of 2022 Company Appeal (AT) (Insolvency) No. 514 of 2022 successful bidder and that since Pavan Enterprises was unable

to deposit the requisite amount within stipulated time period, he

sought an extension of time from the Liquidator, which was

granted by the liquidator vide e-mail dated 16.12.2020 (attached

at page 41 of the appeal paperbook in CA No. 514 of 2022). We

find that thus Pavan Enterprises was given a total of 15+75= 90

days for the payment of balance amount, which was as per his

request through letter dated 16.12.2022 (attached at pg. 42 of

the appeal paperbook in CA No. 514 of 2022). We also note that

the Liquidator cancelled the sale offer and forfeited the CMD

deposited by Pavan Enterprises, when the successful bidder

Pavan Enterprises could not deposit the balance consideration in

the given time.. Quite clearly these actions of the Liquidator were

in accordance with the Liquidation Process Regulations and the

provisions in the Terms and Conditions of the e-auction

document.

19. Admittedly, the second round of e-auction took place on

19.3.2021 and the sale confirmation letter was issued to the

Respondent Pavan Enterprises on 22.3.2021 as he was the

successful bidder. The terms and conditions of the e-auction

specified that the successful bidder has to deposit the bid

amount and complete the transaction within 15 days following

the confirmation date of e-auction. Thus, this period of 15 days

14 Company Appeal (AT) (Insolvency) No. 513 of 2022 Company Appeal (AT) (Insolvency) No. 514 of 2022 were to get over on 6.4.2021, but in the meantime the

Respondent sought an extension of 15 days vide letter dated

2.4.2021 (attached at page 62 of the appeal paperbook in CA 513

of 2022) which he was given, and thus he was asked to make

complete payment on or before 21.4.2021. It is admitted that the

Respondent paid Rs. 75 lakhs on 6.4.2021, but did not deposit

the remaining bid amount by 21.4.2021, and his request for

further extension of deadline to deposit the remaining amount of

sale consideration was rejected by the liquidator vide letter dated

16.4.2021. The liquidator cancelled the e-auction sale of

23.4.2021 and forfeited the CMD deposited by the Respondent

Pavan Enterprises on the ground that he had failed to deposit the

complete bid amount by 21.4.2021 and the offer stood cancelled.

20. It is a fact that the terms and conditions of e-auction,

(attached at pp. 49-60 of the appeal paperbook in CA No. 513 of

2022) stipulated in clause 3.6 that the balance purchase price

will be paid within 15 calendar days following the date of

confirmation of e-auction and clause 4.1 provided that if the

purchaser fails to pay the balance payment, the liquidator at its

sole discretion could extend the period by 15 days. The

liquidator, in keeping with the situation and the terms and

conditions of the second e-auction, gave a total of 30 days' time

to Pavan Enterprises to deposit the bid amount, but he failed to

15 Company Appeal (AT) (Insolvency) No. 513 of 2022 Company Appeal (AT) (Insolvency) No. 514 of 2022 do so. It is a fact that Pavan Enterprises participated in the e-

auction based on the terms and conditions for e-auction of 'the

property' without any condition and thus bound himself to the

various clauses of terms and conditions of e-auction, particularly

the time period stipulated therein for depositing the balance

purchase price. Moreover, in the order of the Adjudicating

Authority dated 16.3.2021 given in IA No. 468 of 2021 (attached

at pp. 13-14 of Respondent's reply, Dy. No. 36975 dated

4.7.2022), it was made clear that no further indulgence shall be

granted to Pavan Enterprises.

21. This order of NCLT was not challenged and has therefore

achieved finality insofar as the participation of Pavan Enterprises

in the second round of e-auction is concerned, and also with

respect to any time extension for depositing the balance amount.

Thus, it is clear that Pavan Enterprises participated in the second

e-auction and availed the benefit of a full 30 days' time for

payment of balance purchase consideration, but he failed to

deposit the requisite amount within the time period granted as

per the 'Terms and Conditions' in the e-auction document.

Further in view of the fact that the order dated 16.3.2021 has

achieved finality, we are of the opinion that the Respondent is

precluded from raising issues that were part of this order again.

16 Company Appeal (AT) (Insolvency) No. 513 of 2022 Company Appeal (AT) (Insolvency) No. 514 of 2022

22. Thus, the Respondent had committed himself to make

complete payment on or before 21.4.2021 which was in

consonance with the admitted 'Terms and Conditions' of the e-

auction and that the order dated 16.3.2021 in IA No. 468/2021

was binding on the parties including the Respondent. The

relevant portion of the order dated 16.3.2021 is as follows:-

"....It is submitted by the Applicant that the Applicant wants a direction from this Bench for acceptance of the balance amount (of the previous auction) as on 27.03.2020. The proposed auction is slated to be held on 19th March, 2021. In the circumstances, since further action has already been taken, we are not inclined to allow the present Application. However, we permit the Applicant to take part in the fresh auction process. The EMD already in deposit for the previous auction dated 2nd December 2020 may be taken towards the EMD of the present auction and the balance amount shall stand forfeited. The EMD shall abide by the terms and conditions of the present bid document. No further indulgence shall be given to the Applicant in this connection. In case, the Applicant fails to secure the auction, then the EMD amount shall stand forfeited irrespective of the terms and conditions of the present bid. We make it clear that the present order shall not be taken as a precedent in any other matter including any action that may be undertaken in the present matter. There will be no further relaxation in respect of the time line as far as Applicant is concerned in depositing the balance consideration amount of the auction in case of it being successful in the current bid process."

(Emphasis Supplied)

23. It is clear from the above-cited order that no relaxation in

respect of time-line would be provided to the successful bidder in

17 Company Appeal (AT) (Insolvency) No. 513 of 2022 Company Appeal (AT) (Insolvency) No. 514 of 2022 the second round of e-auction. Since this order had achieved

finality as it had not been appealed against or modified, Pavan

Enterprises could not have been given extension of time-line to

what was provided in the e-auction document. Moreover, Pavan

Enterprises who was the successful bidder in the second e-

auction, had committed itself to making full payment by

21.4.2021 and therefore to engage in litigation through IA no.

868/2022 and IA no. 485.2021 was highly improper on the part

of Respondent, and obtaining the order of ad-interim stay dated

28.2.2022 when it was precluded from doing so was clearly abuse

of the judicial process. We also note that the Respondent

approached Hon'ble High Court at Bombay to seek extra time of

45 days to deposit the balance consideration, which was not

acceded to, and the petitioner was given liberty to move the NCLT

for hearing of its Interlocutory Application.

24. We also take note of the fact that the Respondent

experienced difficulty in depositing the balance of sale

consideration after the first round of e-auction and could not

deposit the requisite amount after committing itself to doing so.

We also note that after making an offer to Survival Technologies

in the second round of e-auction, due to delay in getting

possession of the said property caused to protracted litigation by

Pavan Enterprises. Survival Technologies sought cancellation of

18 Company Appeal (AT) (Insolvency) No. 513 of 2022 Company Appeal (AT) (Insolvency) No. 514 of 2022 the e-auction sale after having made payment of Rs. 2.77 crores,

and sought refund of the deposited amount. The delay in

auctioning the said Ratnagiri property was to the detriment of

the creditors of the corporate debtor.

25. We note that the Respondent sent a post-dated cheque

dated 27.3.2021 drawn on Canara Bank for payment of Rs. 2.24

crores to the Liquidator. We feel that this payment could have

been made either through electronic online transfer in the

account of the Corporate Debtor/Liquidator or through a

demand draft if Pavan Enterprises was serious about making the

balance payment and making payment through a post-dated

cheque cannot be taken as showing his sincerity and seriousness

in making the payment. The Appellant's contention that it made

enquiry from Canara Bank and discovered that Pavan

Enterprises had a meagre amount of Rs. 500 in its account is

also not rebutted by the Respondent. Further after Appellant

returned the said cheque dated 27.3.2021 drawn on Canara

Bank to the Respondent we do not find that the Respondent

made any sincere effort again to transfer/transmit the requisite

amount to the Appellant. All these events show the casual

approach of Pavan Enterprises in making the said payment.

19 Company Appeal (AT) (Insolvency) No. 513 of 2022 Company Appeal (AT) (Insolvency) No. 514 of 2022

26. We follow the judgment of Hon'ble Apex Court in the matter

of Kridhan Infrastructure Pvt. Ltd. vs. Venkatesan

Sankarnarayan & Ors. (2021) 6 SCC 94 cited by the Learned

Counsel for Appellant wherein the resolution process under IBC

is held to be a time-bound process. The relevant portion of the

judgment is reproduced below:

"11. The appellant has been unable to raise the funds. The fact of the matter, as its merges from Mr Vishwanathan's submissions, is that the appellant will be unable to raise funds from the Term Lenders who are insisting that the status of the Company should change from a company under liquidation to an active status. The order of liquidation has not been set aside. Ultimately, what the request of the appellant reduces itself to, is that it would raise funds on a mortgage of the assets of the Company and unless the Company is brought out of liquidation, it would not be in a position to raise the funds. This is unacceptable. At this stage, the order of liquidation has only been stayed, but a final view was, thus, to be taken by this Court. Sufficient opportunities were granted to the appellant earlier during the pendency of the proceedings both before the NCLT and NCLAT. The orders of the NCLT and NCLAT make it abundantly clear that despite the grant of sufficient time, the appellant has not been able to comply with the terms of the Resolution Plan. Since 9 October 2020, despite the passage of almost five months, the appellant has not been able to deposit an amount of Rs 50 crores. Time is a crucial facet of the scheme under the IBC.8 To allow such proceedings to lapse into an indefinite delay will plainly defeat the object of the statute. A good faith effort to resolve a corporate insolvency is a preferred course. However a resolution applicant must be fair in its dealings as well. The appellant has failed to abide by its obligations. In that view of the matter, we see no reason or justification to entertain the Civil Appeal any further. The consequence envisaged under the order of this Court shall accordingly ensue in terms of the forfeiture of the amount of Rs 20 crores. As a consequence of this 20 Company Appeal (AT) (Insolvency) No. 513 of 2022 Company Appeal (AT) (Insolvency) No. 514 of 2022 order, the management shall revert to the liquidator for taking steps in accordance with law. The Civil Appeal is accordingly dismissed."

27. The Respondent has referred to clause 12 of Schedule 1

under Regulation 33 of the Liquidation Process Regulations to

claim that the Respondent should have been provided a full time

period of 90 days from the date of confirmation of e-auction to

provide the balance sale consideration, but it was not done so,

and on this basis, he sought and was granted ad-interim stay to

the 3rd round of e-auction by the Adjudicating Authority vide

Impugned Order dated 28.2.2022. In view of the fact that the

Respondent had not raised any objection or denied about the

"Terms and Conditions" of the second e-auction and the time

period for depositing balance amount contained therein before

the conduct of e-auction, and also that the Respondent had

raised this issue in his IA No. 468/2021 and did not get desired

relief, we are of the opinion that the Liquidator did not commit

any error in not giving 90 days' time to the Respondent for

depositing the balance amount.

28. In view of the order dated 16.3.2021 passed by the

Adjudicating Authority which had achieved finality and also the

Terms and Conditions of the second round of e-auction process,

we are of the opinion that the Respondent caused a serious 21 Company Appeal (AT) (Insolvency) No. 513 of 2022 Company Appeal (AT) (Insolvency) No. 514 of 2022 obstruction in the sale of 'the property' by preferring an

application to obtain stay order to the third round of e-auction

through order dated 28.2.2022 which was granted. While it is

quite probable that the Adjudicating Authority may not have had

the benefit of the knowledge of the order dated 16.3.2021, on

appreciation of the full facts of the case, we are of the opinion

that the order dated 28.2.2022 and 22.3.2022, which granted ad-

interim stay to the third round of e-auction process and further

extended it, be set aside to allow the sale of the said property to

take place promptly and the liquidation process is brought to

fruitful culmination at the earliest, as required under the IBC

and in keeping with the ultimate objective of completing

liquidation in a time-bound manner. We, therefore, set aside the

impugned orders dated 28.2.2022 and 22.3.2022 and direct that

the liquidator shall proceed with the sale of the assets of

Ratnagiri property of the corporate debtor, if it has not already

done so.

29. In view of the facts of the case and the conduct of the

Respondent in obstructing the process of liquidation, particularly

the e-auction of 'the property' despite it being fully aware of the

order dated 16.3.2021 in IA No.468 of 2021, we are of the opinion

that the Respondent has clearly abused the process of law to gain

undue advantage and thereby caused a delay in the culmination

22 Company Appeal (AT) (Insolvency) No. 513 of 2022 Company Appeal (AT) (Insolvency) No. 514 of 2022 of the liquidation process. Our opinion is strengthened by the

fact that the first round of e-auction took place in December,

2020 and further rounds of e-auction of the same property went

on till March, 2022, which is lapse of a considerable period of

time. We also note that the Hon'ble Apex Court in the matter of

Kridhan Infrastructure (supra) has also acknowledged that

timely completion of the insolvency and liquidation process is the

main objective of IBC and should be completed in a time-bound

manner as required and stipulated under the IBC.

30. In view of the situation and the conduct of the Respondent

as discussed in detail above, we are of the view that a fine of Rs.

One Lakh should be imposed on the Respondent for abusing the

process of law thereby causing delay in the liquidation process,

and seeking to subvert the basic objective of IBC. This fine shall

be deposited in Prime Minister's Relief Fund within 30 days of

this order. We also direct that the respondent shall pay to the

Liquidator an amount of Rs. One lakh as litigation costs incurred

by the liquidator in protracted litigation thereby causing

reduction in the total corpus of liquidated estate. This amount

which would eventually be added to the total corpus of

liquidation estate thereby taking care of the interest of the

creditors.

23 Company Appeal (AT) (Insolvency) No. 513 of 2022 Company Appeal (AT) (Insolvency) No. 514 of 2022

31. With the above-stated directions, we dispose of the appeal.

[Justice Rakesh Kumar Jain] Member (Judicial)

[Dr. Alok Srivastava] Member (Technical)

[Mr. Naresh Salecha] Member (Technical)

New Delhi

15th September, 2022.

/aks/

24 Company Appeal (AT) (Insolvency) No. 513 of 2022 Company Appeal (AT) (Insolvency) No. 514 of 2022