Nagaragro Farmers Producer Company ... vs Harneshwar Agro Products Power & Yeast I ...

1

NATIONAL COMPANY LAW APPELLATE TRIBUNAL PRINCIPAL BENCH NEW DELHI COMPANY APPEAL (AT)(INSOLVENCY) No.597/2021 (Arising out of Order dated 29.06.2021 passed by the Adjudicating Authority, National Company Law Tribunal, Mumbai Bench, Court No.III in IA 1129/2021 in CP(IB) -162(MB)/2019) In the matter of: Nagaragro Farmer Producer Company Ltd C/o Vijay Sampatrao Mohite Flat No. G/5, Near ITI Shaha Apt. Burudgaon Road, Ahmednagar Maharashtra 414001 Appellant

Vs

Harneshwar Agro Products Power & Yeast (I) Ltd Through the Liquidator, Mr. Jigar Shah Ayodhya Bungalow, Walchand Nagar, Taluka Indapur, Distt Pune Respondent

For Appellant: Mr Shivek Trehan, Ms Shagun Chopra, Advocates. For Respondent: Mr Dhiren R Dave PCS and Mr. Jigar Shah, Liquidator.

JUDGEMENT

(VIRTUAL MODE)

JUSTICE RAKESH KUMAR, MEMBER (JUDICIAL)

The present Appeal has been preferred under Section 61 of the

Insolvency & Bankruptcy Code, 2016 (hereinafter referred as the 'IBC Code')

against an order dated 29.06.2021 passed by the Adjudicating Authority/

National Company Law Tribunal Mumbai Bench, Mumbai in IA

No.1129/2021 in CP(IB) No.162(MB)/2019.

2. As per the materials available on record, which is not in dispute in

respect of assets of one M/s Harneshwar Agro Products Power and Yeast (I)

Company Appeal (AT)(Insolvency) No.597/2021 2

Ltd, a liquidation proceeding was initiated and an order passed under Section

33(1) of the IBC. The Liquidator on 31.03.2021issued an Auction Notice. In

the Auction Notice date and time of auction was mentioned as 20.04.2021

between 10 AM to 4 PM whereas last date and time of submission of EMD was

15.04.2021 before 4 PM. Regarding inspection of the site, date and time was

from 01.04.2021 to 13.04.2021 from 11 AM to 2 PM. The EMD was fixed as

Rs.107.58 lakhs.

3. It is the case of the Appellant that after Auction Notice he sent an email

on 15.04.2021 at 14.03 (2.03 PM) which was addressed to Liquidator. The

Appellant claimed that through the said email he requested the Liquidator for

providing Detailed Process Memorandum and also for extension of time of the

bid. As per the Appellant case, he was refused his request by the Liquidator.

Subsequently the Appellant sent another email on 06.05.2021 offering a sum

of Rs.15 crores for auction property. The said mail was replied by the

Liquidator that auction process was already complete. The Appellant

thereafter filed an IA seeking direction to consider his offer. To the IA, the

liquidator also filed reply affidavit. It is further case of the Appellant that the

Adjudicating Authority after hearing the parties vide order dated 15.06.2021

directed the Appellant to pay the entire bid amount by 29.06.2021. In the

meanwhile, the Liquidator also filed affidavit in sur-rejoinder in reply to the

Rejoinder. As per earlier order, on 21.06.2021 the IA was listed for hearing.

As per the Appellant, he informed the Adjudicating Authority that he would

not be able to pay the entire bid amount by 29.06.2021. The case was

adjourned to 22.06.2021. On 22.06.2021 an additional affidavit was filed by

the Appellant before the Adjudicating Authority and a stand was taken that

Company Appeal (AT)(Insolvency) No.597/2021 3

the Appellant was willing to pay Rs.2,25,00,000/- and thereafter again on

29.06.2021 by filing additional affidavit the Appellant informed the

Adjudicating Authority about raising of Rs.15 crores through a loan

consortium of three financial institutions. The Appellant admits that since

he was unable to pay Rs.15 crores as ordered by the Adjudicating Authority

by 29.06.2021, the Adjudicating Authority has passed the impugned order

rejecting the IA petition of the Appellant which has been assailed in the

present Appeal.

4. In the present Appeal a Reply has been filed by the Liquidator of

Harneshwar Agro Products Power and Yeast (I) Ltd, Corporate Debtor, by Mr.

Jigar Shah, which has not been controverted by the Appellant not any

rejoinder has been filed by the Appellant. In reply a detailed chart showing

dates and events has been sated in para 3 which is quoted hereunder:-

S.No Date Particulars Remarks

1 31.03.2021 Auction Notice was issued Admitted fact

with a last date for

inspection 13.04.2021 and

last date for filing the bid

with Earnest Money of

Rs.1,07,58,000/- was

15.04.2021 4 PM and date

of Auction was 20.04.2021

Company Appeal (AT)(Insolvency) No.597/2021 4

2 07.04.2021 Appellant visited the site, Not stated in the Appeal.

Means they were about the Unclean hands approach.

auction

3 13.04.2021 Last date of inspection Admitted fact

4 15.04.2021 Last to submit bid with Admitted fact

EMD

5 15.04.2021 Appellant sent an email for Admitted fact that

02.03 PM 1.From unregistered email 1. They have visited

ID of the appellant the place means no

2.Without EMD. lockdown situation.

3.Extensioin of 30 days 2. They are not

time for filing auction bid prepared to file Bid.

and to make necessary 3. They were not

preparations. having funds.

4.Last line of email 'also 4. They want IM only

request for Detailed Process for further study.

Memorandum

6 15.04.2021 Email was replied rejecting Admitted fact. Thereafter

3.32 PM the request for extension no reply to this email.

7. 20.04.2021 Auction took place This proves that genuine

16 Bidders took place bidders were there and

10 Bidders were from business activities were

Maharashtra. Auction was very much on.

completed at Rs.2.25 crore

Company Appeal (AT)(Insolvency) No.597/2021 5

higher than the Reserve

Price

8 22.04.2021 Letter of Intent issued to Copy attached as

successful bidder. Annexure A.

9 26.04.2021 EMD refunded to Bank statement acched

To unsuccessful bidder. as Annexure B.

28.04.2021

10. 06.05.2021 16 daus after completion of Whereas admitted fact

Bid process Email received that they visited the site

from Appellant. With a on 07.04.2021. (Page 83

false statement that we of the Appeal Paper Book).

became aware of the Notice Not ready with the funds

on 14.04.2021. even on the date of email.

After completion of the

Auction Process Liquidator

has not powers to consider

such request.

11 07.05.2021 Email was replied that Admitted fact

Auction process is

completed as per IBC Code

12. 13.05.2021 IA 1129/2021 filed by the Copy not produced in the

Appellant. IA was defective appeal. Unclean hands

and without authority. approach.

Company Appeal (AT)(Insolvency) No.597/2021 6

13 15.06.2021 Hon. Adjudicating Appellant had no money

22.06.2021 Authority gave sufficient and was not able to prove

29.06.2021 time to prove their their own bonafides and

bonafides even after they wanted to reverse the

completion of Auction Bid clock.

and deposit the amount

with liquidator. IA was

dismissed.

14 28.07.2021 Certificate of Sale for Plant Copy of Certificate of Sale

and Machinery was issued attached as Annexure C

15 31.07.2021 Possession handed over to Copy of possession letter

Successful Bidder attached as Annexure D

16 02.08.2021 Appeal was executed 34 days after dismissal of

IA. This shows that there

was no genuine interest

but harass.

17 Sale Deed is under process Draft ready.

of execution.

5. Primarily a stand has been taken in the Reply by the Liquidator that

the Appellant has not come to this Tribunal with clean hands and many

important facts were concealed. In some and substance a plea has been taken

in the Reply that the present proceeding has been initiated by the Appellant

only and only with a view to defeat the finalisation of the Auction Sale.

Company Appeal (AT)(Insolvency) No.597/2021 7

6. Shri Shivek Trehan, learned counsel appearing on behalf of the

Appellant has raised three points assailing the impugned order which are as

follows:

a) It was argued that the impugned order is liable to be set aside on the

ground that the same non-speaking.

b) Second argument has been advanced that his application was not

decided by the Adjudicating Authority on its merit; and

c) Lastly it has been argued that the application of the Appellant was

initially rejected by the Official Liquidator on extraneous

considerations.

7. The Learned counsel for the appellant has emphatically argued that the

impugned order does not reflect any reason for rejection of his application.

He has taken us to the impugned order and tried to persuade that the same

is liable to be set aside as the same is non-speaking.

8. Learned Counsel for the Appellant has further argued that his

application has not been decided on merit. He has argued that the Appellant

who was ready to deposit much more amount than the amount settled in

favour of the highest bidder. Learned counsel for the Appellant had taken

this Court to Annexure 'C' (Page 36) and Annexure 'D"' (Page 37), Annexure

'G' (Page starting from 41) and other documents while referring to statement

made in reply by the RP which is Annexure G. It has been argued that the

request of the Appellant for providing detailed process memorandum was

rejected on untenable grounds. He has specifically referred to paragraph 5 at

running page 43 and paragraph 7 at Page 44. It has been highlighted that

there was no reason for the Respondent to reject the request of the appellant

Company Appeal (AT)(Insolvency) No.597/2021 8

on the plea that the Appellant was neither Director of the Company nor email

which had come from the registered email of the Company. He submits that

Liquidator as responsible Officer of the Court has not shared process of

memorandum which was not correct. It has been emphatically argued that

once before the time for submission of EMD the Appellant had sent an email,

the Official Liquidator was duty bound to provide the details to enable him to

participate in the bid. The Appellant was ready to offer much more than the

highest bidder. Of course, learned counsel for the Appellant at the initiation

of the arguments had argued that the application was rejected on extraneous

reasons, however, at the time of argument no such fact was brought to the

notice of the Court.

9. Shri Dhiren R Dave, Learned PCS for Respondent at the very outset has

argued that in the pleading there was no allegations against the Liquidator.

However, at the time of arguments a subsequent case was tried to be

developed that the order was passed due to extraneous reasons. He has

specifically referred to Annexure C to show that the appellant's intention was

not to participate in the bid proceeding but his prime object was to delay the

auction which is reflected from email dated 15.04.2021 which is placed at

Annexure C. He by way of referring to fact enumerated in the reply submits

that on the date of auction i.e. 20.04.2021, 16 bidders participated and

auction was complete on the fixed date at Rs.2.5 crore which was much higher

than the reserve price. Thereafter, Letter of Intent to successful bidder was

also sent and in between 26.4.2021 to 28.4.2021 unsuccessful bidders were

refunded their EMD. About after 16 days of this events an email was received

from the Appellant with false statement that he became aware of the auction

Company Appeal (AT)(Insolvency) No.597/2021 9

notice on 14.4.2021 whereas admittedly the Appellant visited the site on

07.04.2021 for inspection. In the reply Certificate of Sale for plant and

machinery as well as custody letter has been brought on record. Learned

Counsel for the Respondent by way of referring to running page 109 i.e. one

of the documents brought on record by the Appellant alongwith his additional

affidavit filed before the Adjudicating Authority/National Company Law

Tribunal, Mumbai Bench, Court III, submits that it is surprising that this

sanction of capital bridge funding is of Rs.700 lakh whereas the contents of

letter makes it clear that the application was filed by the Appellant for capital

bridge fund of Rs.300 only. It has been concluded by the Learned Counsel

for the Respondent that despite the fact that auction in the case had taken

place long back on 20.04.2021 till date on one pretext or the other the

Appellant has succeeded in keeping the dispute alive. He submits that the

Appeal is fit to be rejected with imposing heavy costs.

10. Besides hearing learned counsel for the parties, we have perused the

entire material available on record. Prima facie on examination of the record

and pleading we are satisfied that Appellant has adopted undue steps for

abusing process of the Court. In normal course such appeals are required to

be rejected with imposing heavy costs. However, at the moment we are

refraining to impose such costs. The intention of the Appellant is to defeat

the object of auction as is evident from the initial sending of email by the

Appellant. As per the auction notice 15.4.2021 before 4 PM was the time fixed

for last date for submission of EMD and inspection date was fixed for 1.4.2021

to 13.4.2021. In the reply filed by the Respondent, which has not been

Company Appeal (AT)(Insolvency) No.597/2021 10

rebutted, it has been indicated that the Appellant himself had inspected the

site on 07.04.2021. However, no such fact has been disclosed by the

Appellant either before the Adjudicating Authority or in the present memo of

appeal. The Appellant as per reply visited the site on 07.04.2021 still at the

last hour i.e. at 2.03 PM on 15.4.2021 he sent an email primarily for extending

the date for bid for 30 more days time and at the sametime he requested to

send detailed process memorandum for further study. It is profitable to

reproduce the email dated 15.4.2021 of the Appellant which is Annexure C

hereunder:

Company Appeal (AT)(Insolvency) No.597/2021 11

11. On examination of the email of the Appellant there is no difficulty to

infer that the Appellant was not at all interested to participate but his sole

object was to delay the bid. Even though as per auction notice which was

held on the date fixed i.e. 20.04.2021 total 16 bidders participated but much

belatedly the Appellant started raising dispute and finally he filed IA Petition

before the Adjudicating Authority assailing the bid. Of course, the order of

the Adjudicating Authority is not elaborate but on perusal of the same it is

reflected that despite indulgence given by the Adjudicating Authority for

depositing the amount as stated by the Appellant, he never comply with the

same and one way or the other he was trying to delay the proceeding and as

such the learned Adjudicating Authority was left with no option but to reject

the same. The affidavit filed before the Adjudicating Authority enclosing with

letter of sanction by one of the so called lender i.e. Jyoti Kranti Cooperative

Credit Society Ltd prime facie also appears to be doubtful. We are in

agreement with the submissions of the learned counsel for the Respondent

that no one can offer funding much beyond demanding. The sanction letter

which was annexed with the additional affidavit of the Appellant filed before

the Adjudicating Authority makes it clear that the Appellant's application for

capital bridge funding was of Rs.300 lakhs whereas sanction of funding was

shown as Rs.700 lakhs. Such stand taken by the appellant itself creates

serious doubts on the conduct of the appellant.

12. After going through material available on record we are of the opinion

that the Appeal is required to be rejected. We are of the opinion that the

appellant has initiated the present proceeding only and only with a view to

Company Appeal (AT)(Insolvency) No.597/2021 12

defeat the auction sale. We do not find any point to interfere with the

impugned order or grant any relief to the Appellant. Rather it was a fit case

for rejection of Appeal with imposing heavy costs. However, taking lenient

view we are refraining to impose costs. The appeal stands dismissed. No

order as to costs.

(Justice Rakesh Kumar) Member (Judicial)

(Dr. Ashok Kumar Mishra) Member (Technical) 31.05.2022

Bm

Company Appeal (AT)(Insolvency) No.597/2021