Om Prakash Agrawal vs Upl Ltd

IN THE MATTER OF: Om Prakash Agrawal Liquidator of S Kumars Nationwide Ltd. B-2, 5th Floor, Marathon NextGen off G. K. Marg, Lower Parel, Mumbai-400013 ...Appellant

Vs.

UPL Ltd. UPL House, 610 B/2, Bandra Village, Off Western Express Highway, Bandra (East), Mumbai-400 051 ...Respondent

Present:

For Appellant: Mr. Aayus Agrawal, Mr. A.K. Mishra, Mr. Rohan Agrawal and Mr. Nishit Dhruva, Advocates

For Respondent: Mr. Nand Kishore and Ms. Akshat Singh, Advocates.

JUDGMENT

DR. ASHOK KUMAR MISHRA, TECHNICAL MEMBER

1. The present appeal has been filed under Section 61 of the 'Insolvency and

Bankruptcy Code, 2016' (in short 'Code') against the order dated

12.02.2021 passed by the 'Adjudicating Authority' (National Company

Law Tribunal), Mumbai Bench, in I.A.No. 1036/MB/C-II/2020 in C.P.

(IB) No. 294/MB/C-II/2018.

1 Company Appeal(AT)(Insolvency) No. 310 of 2021

2. The Adjudicating Authority, after hearing the submission of the parties,

has analysed that, no doubt, there is a delay in payment on the part of

the Respondent to pay balance sale consideration but the issue to be

decided is whether the delay was solely on account of the Respondent

and if 'yes' the Respondent has to pay interest for the delayed period. The

Adjudicating Authority has also observed that no supporting documents

fixing the responsibility to follow up with GIDC for subdivision of the land

was produced by the Appellant and hence the Adjudicating Authority has

directed the Liquidator/Appellant to refund the full amount of interest to

the Respondent.

3. The Appellant is the 'Liquidator' of the Corporate Debtor' (CD) is

aggrieved by the findings of the 'Adjudicating Authority' who has held

that the delay in payment of balance sale consideration cannot be

attributed to the 'Successful Bidder' /Respondent herein. The interest

burden, thus, cannot be fasten on the Respondent / Successful Bidder.

The Respondent is not liable to pay interest as claimed by the

Liquidator/Appellant. Therefore, an amount of Rs. 1,57,46,696/- towards

interest by the Successful Bidder/ Respondent herein paid under protest

is to be refunded / adjusted by the 'Liquidator' within 30 days from the

date of the order.

4. The Appellant has submitted that the process of sub-division of the land

was restricted to the leasehold land and not to the other freehold land.

The Respondent was assigned two parcels of land - one leasehold land

and other freehold land. However, the Respondent has failed to pay the

2 Company Appeal(AT)(Insolvency) No. 310 of 2021 sale consideration even for the freehold part of the land. Hence, making

an issue of sub-division of the land is an afterthought process of the

Respondent for lately releasing the payment. The subdivision of the land

was an administrative process and was not linked to the payment of sale

consideration for the subject land. The 'E-auction Sale Process

Memorandum' "Annexure A-4" vide Clause 11 provides for the

mechanism for the declaration of the Successful bidder which includes

payment of sale consideration and attracting of interest, if not paid,

within 30 days. Clause 11 of the E-auction Sale Process Memorandum is

reproduced below:

Clause 11. DECLARATION OF SUCCESSFUL BIDDER(S} The

Liquidator shall determine and at his sole discretion (which discretion

shall not be used arbitrarily), declare at the end of the E-Auction, the

Successful Bidder(s) for any asset lot(s). Determination of the

Successful Bidder(s) shall be done on the basis of highest bid (not

below the reserve price) received for each Lot of assets via the E-

Auction, unless the Liquidator determines, acting reasonably, that the

highest bidder shall not be identified as the Successful Bidder. Where

the Earnest Money has been provided by means of a remittance to

the Company's bank account 9r by Demand Draft, such funds will be

retained by the Liquidator as part payment of the consideration that

the Successful Bidder has agreed to pay for the relevant asset lot(s).

The Liquidator is not bound to accept the highest offer and has the

absolute right to accept or reject any or all offer(s) or adjourn I

postpone I cancel the e-Auction or withdraw any asset lot or portion

thereof from the E-Auction proceedings at any stage without assigning 3 Company Appeal(AT)(Insolvency) No. 310 of 2021 any reason there for. Return of Earnest Money Deposit of

unsuccessful bidders The Earnest Money Deposit of unsuccessful

bidders will be returned within 7 days from the declaration of the

Successful Bidder .. Issuance of Letter of Intent The Liquidator shall,

as soon as reasonably possible following the end of the E-Auction, but

not more than 7 days from the end of E-Auction, issue to the

Successful Bidder a letter of intent (" Loi" I "Letter of Intent"), inviting

the Successful Bidder to provide balance sale consideration (plus any

applicable GST, if any, on 100% of the bid sum) within 90 (ninety)

days of the date of issuance of the Loi, This Loi per se does not

confirm sale in favour of the Successful Bidder. Confirmation of sale is

subject to the fulfilment of terms and conditions of E-Auction Sale and

approval of the Liquidator. The Successful Bidder shall, within a

period of 2 (two) days from the date of issuance of the Loi,

unconditionally accept the Loi, and record such acceptance by

providing the Liquidator with 1 (one) copy of the Loi with an

endorsement stating that such Loi is, "Accepted Unconditionally",

under the signature of the authorized Director I Authorized Signatory

of the Successful Bidder. Failure to accept the Loi within the time

period specified may result in the disqualification of the Successful

Bidder along with cancellation of the Loi and forfeiture of the Earnest

Money. Payment of Sale Consideration The Successful Bidder(s) shall

deposit the balance sale consideration within 90 (ninety) days from

the date of such demand. Provided that the payments after 30 (thirty)

days shall attract interest at the rate of 12% p.a. Provided further that

the sale shall be cancelled if full payment is not received within 90

(ninety) days.

4 Company Appeal(AT)(Insolvency) No. 310 of 2021 Completion of Sale On payment of the full amount of sale

consideration and any applicable GST (if any), the sale shall stand

completed, and the Liquidator shall execute Certificate of sale or Sale

deed and the assets shall be delivered to the Successful Bidder. The

Certificate of sale or Sale deed will be issued and /or transaction I

sale documents will be executed in the name of the Successful Bidder

only and will not be issued in any other name(s). It is expressly

stipulated that there are no implied obligations on the part of the

Liquidator to do all acts, things and deeds whatsoever for the

completion of the sale. Default in payment of the balance sale

consideration and any applicable GST, if any, on 100% of the bid sum

by the Successful Bidder will result in disqualification of the

Successful Bidder including forfeiture of Earnest Money. The asset

lot(s) may be put to re-auction or sold to the next highest Qualified

Bidder and the defaulting Successful Bidder shall have no claim/right

in respect of such asset lot.

The Appellant has demanded interest based on the provision of

this clause and the Respondent has released the payment bit late

for which the Appellant has demanded interest in terms of the E-

auction documents. The E-auction document provides date of

auction announcement dated December 12, 2019 and date of E-

auction January 16, 2020. The Appellant has confirmed that the

interest will be waived off if delay is on account of sub division

resulting from making a delayed application to the appropriate

authority.

5 Company Appeal(AT)(Insolvency) No. 310 of 2021 The Appellant has also submitted that the 'Letter of Intent' (LOI)

dated 18.01.2020 was issued to the Respondent by the Liquidator/

appellant which was duly accepted by the Respondent and thus it

was mandated for the Respondent to release the payment within 30

days failing which interest will be applicable @ 12 % p.a and outer

limited for receipt of balance sale consideration was 90 days from

the date of issuance of LOI. The Respondent was supposed to

release the payment of balance sale consideration within 30 days

i.e. by 17.02.2020. The Liquidator has also stated that sub division

of the plot was accepted to the leasehold parcel of land and was not

applicable to freehold land. His duty was restricted for filing of

application and follow up the job of the Respondent. He has also

categorically stated that he has applied for the subdivision of plot

on 21.01.2020 within the stipulated time period and he has not

delayed anything on his part. The Appellant has also stated that

the E-auction document nowhere states that the subdivision of

land is a precondition before the sale consideration is paid and the

same has been unconditionally accepted by the Respondent.

However, he has done in good faith and followed up with

appropriate authority for subdivision of the earmarked plot which

was delayed due to onerous condition stipulated by the 'GIDC'

(appropriate authority) and he has approached the Adjudicating

Authority to quash the unreasonable demand of the 'GIDC' while

the Respondent has failed in releasing balance sale consideration

within 30 days as clearly spelt out in the E-auction document and 6 Company Appeal(AT)(Insolvency) No. 310 of 2021 hence the interest is to be levied on the Respondent @ 12 % as

stated in the document.

In the result, the appellant has prayed for setting aside the

order of the Adjudicating Authority.

5. The Respondent has submitted that the 'Liquidator' cannot be aggrieved

by the impugned order of the Adjudicating Authority as he is the

'Liquidator' and cited provisions of the Section 61 of the Code:-

"Notwithstanding anything to the contrary contained

under the Companies Act 2013, any person

aggrieved by the order of the Adjudicating Authority

under this part may prefer an appeal to the National

Company Law Appellate Tribunal."

He has also stated that the E-auction memo has divided the

assets in 'Lot 1' Assets and Lot 2 Assets. 'Lot 1' Assets

comprised of Lease Hold Land etc., and other current assets

while 'Lot 2' comprised of 'Leasehold land' and 'Freehold land'.

The responsibility of the Liquidator is to provide peaceful

possession of immovable property to the Respondent. Hence it

was the Liquidator responsibility to do sub-division of the

Leasehold land from the 'GIDC'. Successful bidder shall bear

the cost of subdivision charges etc., no doubt the Liquidator is

supposed to apply for subdivision to GIDC after issuance of LOI

to the Successful bidder. This implicitly means the Respondent

7 Company Appeal(AT)(Insolvency) No. 310 of 2021 was supposed to pay balance sale consideration after the sub-

division order is received by them of the said leasehold land

from the appropriate authority (GIDC). The Respondent also

stated that on a clarification sought from 'Liquidator' vide its

email dated 03.01.2020:

"This is with respect to sub section B of

subsection 13, Cost, expenses and tax

implications and section 11 - Payment of Sale

consideration. Balance payment consideration

should be payable only upon successful sub

division of land. Delay in payment of balance

sale consideration on account of delay in

subdivision of GIDC Plot should not attract any

interest."

The 'Liquidator' has clarified vide its email dated 09.01.2020 as

follows:

"Interest on delayed payment shall be waived off to

the extent the delay is on account of sub-division of

leased land."

The said clarification made the Respondent more than

convincing that any delay on account of subdivision of the lease

hold land, interest on delayed payment to the extent the delay is

attributable to the subdivision of leasehold land shall be waived

8 Company Appeal(AT)(Insolvency) No. 310 of 2021 off 'mentioned at para 15 of the Reply of the Respondent dated

26.04.2021'.

The Respondent further clarified that the Liquidator /

Appellant failed to mark the letter dated 21.01.2020 addressed

to the GIDC for subdivision of the leasehold land. The Appellant

did not provide a copy to the Respondent. The Respondent has

acknowledged that the actual area of the lease hold land is

295309.45 sq. mtrs. as survey by GIDC instead of 282977.40

Sq meter as provided in the e-auction memo and that the

additional area is chargeable from the respondent at the bid

rate. The Respondent has also accepted that the Liquidator/

Appellant has asked the Respondent vide its letter dated

12.03.2020 to make the payment of balance sale consideration.

The Respondent has also submitted that vide its letter dated

30.03.2020 it has forwarded to the Appellant various issues

pending at the Liquidator/Appellant including subject of the

lease hold land, and survey report of the lease hold land from

GIDC, relinquishing charged by the 'Secured creditors' on the

'Liquidation estate' etc. The Respondent has also sought an

extension of time to pay the balance sale consideration owing to

extension of lockdown upto 03.05.2020 vide its letter dated

14.04.2020. However, the Appellant has agreed the same vide

its letter dated 16.04.2020 subject to payment of interest @ 12

% p.a. Amidst this IBBI vide IBBI/2020-21/GN/REG060, dated

9 Company Appeal(AT)(Insolvency) No. 310 of 2021 20TH April, 2020 (w.e.f.17.04.2020) Regulation 47A was

introduced to the Liquidation Process Regulation. Regulation

47A provides hereunder:

"Exclusion of period of lockdown.

47A. Subject to the provisions of the Code, the period of

lockdown imposed by the Central Government in the wake of COVID-19

outbreak shall not be counted for the purposes of computation of the

time-line for any task that could not be completed due to such

lockdown, in relation to any liquidation process.".

The Respondent has also elaborately explained that although

'GIDC' was in correspondence with Appellant but whenever

Appellant has asked for comments from Respondent they have

provided adequate reply to assist the Liquidator in the process,

particular, during May, 2020. Inspite of all this it is unfortunate

to know that the Appellant/Liquidator is demanding interest

payment on delay attributable to the GIDC approval but

attributive all delay to the Respondent and is asking for interest

for the same. The period from 23.03.2020 onward is

unprecedented pandemic Covid-19 outbreak which has

jeopardised not only individuals life but entire business set up

and hence an extraordinary situation this itself should have

been considered by the Liquidator on its own and that too after

Adjudication by the Adjudicating Authority instead he has come

10 Company Appeal(AT)(Insolvency) No. 310 of 2021 in Appeal challenging the waiver of interest on account of delay

in subdivision and Lockdown.

6. We have gone through the submission made by the parties and the order

passed by the Adjudicating Authority and have the following

observations:

a. E-auctions sale process Memorandum dated 12.12.2019 vide Clause 3

(appearing at page 130 at Appeal Paper Book) provides as follows:

BID PROCESS

1. This Document has been issued for the purpose of carrying out

electronic auction ("E-Auction") of assets of SKNL under IBC and

Liquidation Process Regulations.

2. All information provided in this document should be read

together with the provisions of the IBC and the Liquidation

Process Regulations. In the event of a conflict between this

document and IBC or Liquidation Process Regulations, the

provisions of the IBC or the Liquidation Process Regulations, as

the case may be, shall prevail.

3. The information contained in this document or subsequently

provided to Bidder(s), whether verbally or in documentary or any

other form by or on behalf of the Liquidator, is provided based on

the terms and conditions set out in this document.

4. This document is neither an agreement nor an offer by the

Liquidator to the prospective Bidder(s) or any other person. The

11 Company Appeal(AT)(Insolvency) No. 310 of 2021 purpose of this document is to provide interested parties with

information that may be useful to them in making their bids

pursuant to issue of this document. The assumptions,

assessments, statements and information contained in this

document may not be complete, accurate, adequate or correct.

Each Bidder(s) should conduct their own investigations, analysis

and should check the accuracy, adequacy, correctness, reliability

and completeness of the assumptions, assessments, statements

and information contained herein.

5. Information provided in this document to the Bidder(s) has

been collated from several sources. The information given is not

intended to be an exhaustive account of statutory requirements

and should not be regarded as complete. The Liquidator accepts

no responsibility for the accuracy or otherwise for any statement

contained herein.

6. The Liquidator, makes no representation or warranty and shall

have no liability to any person, including any Bidder(s) under any

law, statute, rules or regulations or tort, principles of restitution or

unjust enrichment or otherwise for any loss, damages, cost or

expense which may arise from or be incurred or suffered on

account of anything contained in this document or otherwise,

including the accuracy, adequacy, correctness, completeness or

reliability of the document and any assessment, assumption,

statement or information contained therein or deemed to form part

12 Company Appeal(AT)(Insolvency) No. 310 of 2021 of this document or arising in any way from participation in the E-

Auction process.

7. The Liquidator accepts no liability of any nature howsoever

caused arising from reliance of any Bidder(s) upon the statements

contained in this document

8. The Liquidator may in its absolute discretion, but without being

under any obligation to do so, update, amend or supplement the

information, assessment or assumptions contained in this

document.

9. The issue of this document does not imply that the Liquidator

is bound to select a Bidder(s) as Successful Bidder(s) for the

assets of the company and the Liquidator reserves the right to

reject all or any of the Bidder(s) or bids without assigning any

reason whatsoever.

10. Each Bidder(s) shall bear all its costs and charges associated

with or relating to the preparation and submission of its bid and/

or participation in the E-Auction, including but not limited to

preparation, copying, postage, delivery fees, expenses associated

with any demonstrations or presentations which may be required

by the Liquidator or any other costs incurred in connection with or

relating to its bid.

11. E-Procurement Technologies Limited (Auction Tiger) has been

appointed as the E-Auction Service Provider. The sale of the

13 Company Appeal(AT)(Insolvency) No. 310 of 2021 Properties shall be undertaken by the E-Auction Service Provider

for and on behalf of the Seller through an E-Auction platform

provided on the website portal of the E-Auction Service Provider

(Platform). Other details with respect to the e-auction are as

follows:

Particulars Descriptions

Types of Bid E-Auction

Seller SKNL represented by the Liquidator

Mr. Om Prakash Agrawal,

E-Auction Service E-Procurement Technologies Limited

Provider (Auction Tiger)

Website of E-Auction httQs://ncltauction.auctiontiger.net

Service Provider

Annexure I -Affidavit and Undertaking

Annexure II -Bid Form (to be filled in

and signed and stamped by the

Bidder(s) and uploaded) Annexures

Annexure and Formats and Formats

Annexure III-Declaration by the

Bidder(s) (duly filled in and signed

and stamped by the Bidder(s) and

uploaded along with the Bid form)

Annexure IV -Technical Terms and

Conditions of E-Auction

14 Company Appeal(AT)(Insolvency) No. 310 of 2021 Annexure V -Description of Assets

Special Instructions Please note that this bidding is a

serious matter and last-minute Special

Instructions bidding may lead to

unnecessary lapses. Neither the E-

Auction Service Provider nor the

Liquidator will be responsible for any

lapses on part of the Bidder(s)

12. All terms and conditions with respect to the sale of the

Properties shall be governed by the directions of the Liquidator, in

accordance with the provisions of applicable laws and directions

of Hon'ble NCLT. As mandated by the Hon'ble NCLT, the

Liquidator shall exercise all rights with respect to sale of the

Assets and it would be open to the Liquidator to appoint such

experts, professionals or other persons, as the Liquidator might

think necessary, so as to enable the sale of the Assets.

13. The liquidator may conduct multiple rounds of auctions to

maximize the realization from the sale of the assets, and to

promote the best interests of the creditors.

14. The Annexures to this Document shall form an integral part

hereof and this Document shall always be read in conjunction

with the Annexures hereto.

15 Company Appeal(AT)(Insolvency) No. 310 of 2021 b. Similarly, Vide Clause 8 at Page 138 of the Appeal paper Book

provides as follows:

Clause 8 - ASSETS TO BE AUCTIONED AND RESERVE PRICES

SKNL proposes sale of High Value Fine Cotton Fabric

Manufacturing Unit at Bharuch (Gujarat) business as a going

concern which includes Leasehold Land, and Freehold Land,

Factory Building, Plant and Machinery, Furniture and Fixtures

and net current assets pertaining to the Unit [Current Assets -

Current Liabilities (Refer to liabilities accrued on or after the

commencement of Corporate Insolvency Resolution Process i.e.

April 24, 2018)] and the Brands/ Trademarks owned by SKNL

along with licences, permits, approvals and registrations to the

extent they are transferable under the applicable law on "As is

where is basis", "As is what is basis", "Whatever there is basis",

and "No recourse basis". The proposed sale of assets of the

Company does not entail transfer of any title except the title

which the Company had on its assets as on date of transfer of

the Unit.

Given below is a list of assets to be auctioned along with their

Reserve prices.

Lot Nature of Description Reserve Earnest Asset Price (Inr Money Crores) Deposit(INR Crores) 1. Leasehold Part of Plot no. 825 of Jhagadia GIDC, Bharuch in 16

Company Appeal(AT)(Insolvency) No. 310 of 2021 Land the village Dadheda, Jhagadia Taluka, Bharuch District, Gujarat having a total land area of 42.04 acres I 1,70,133 sq. mt.

or 18,31,294 sq. ft. This land is leasehold from GIDC and is subject to sub-

division of said Plot.

Factory Plant building along with Building ancillary structures having total built up area of 61,994 201.80 20.18 sq. mt. or 6,67,298 sq. ft. This also includes land developments in form of boundary walls, Sewage line, streetlights, internal roads etc. Plant and Plant and Machinery which Machinery includes all the machineries installed for manufacturing of fabric as well as equipment installed in utility such as boiler, DG set, ETP, STP etc. This also includes furniture & fixture, office equipment, Computers and vehicles. Brands Brands as owned by S.Kumars Nationwide Limited 17

Company Appeal(AT)(Insolvency) No. 310 of 2021 Net Current Net Current Payable at book value as Assets (Current Assets Assets less on date of transfer of Unit Current Liabilities) amounting to Rs 5 crore approx.

as on date. The Current Assets will not include the Debtors I Claims which are under litigation as on date of transfer of Unit. Lot Nature of Description Reserve Earnest

Asset Price (INR Money

Crores) Deposit (INR

Crores)

2. Lease Hold Part of Plot no. 825 of Jhagadia land GIDC, Bharuch in the village Dadheda, Jhagadia Taluka, Bharuch District, Gujarat having a total land area of28.57 acres I 1,15,632 sq. mt. or 12,44,656 sq. ft. This land is leasehold from GIDC and is subject to sub- division of the said Plot Freehold Survey No. -67 + 73 + 74 + 4A + Land 4B of Village Dadheda, Jhagadia Taluka, 28.43 2.84 Bharuch District, Gujarat having a total land area of 20.10 acres I 81,326 sq. mt. These are the freehold land 18

Company Appeal(AT)(Insolvency) No. 310 of 2021 parcels.

Kindly note that the Bidder(s) cannot place a bid for the

Assets at a value below the Reserve price

Further, the Bidders can increase their Bid by a minimum

incremental amount of Rs. 50,00,000 for Lot No. 1 and Rs

10,00,000/-for Lot No. 2 and in multiples of thereof.

Please find appended the details of underlying Assets in

"Annexure V"

Interested Bidder(s) can bid for assets as per any one Lot or for

both the Lots.

Cognizance should be taken of the fact that the liquidator does

not give any assurance or warranty of the physical condition of

assets and their suitability for any sort of operation that the

bidder envisages.

c. Vide Clause 11 as stated supra the Successful Bidder was supposed

to the deposit the balance sale consideration within 90 days from the

date of such demand. However, payments after 30 days shall attract

interest @12% p.a.

d. Vide Clause 13 (B) appearing at page 146 of paper book which reads

as under:

19

Company Appeal(AT)(Insolvency) No. 310 of 2021 "Clause 13 (B). -The Successful Bidder/s shall bear the sub-

division charges of land payable on land area proportionate to

area in Lot No.1 and Lot No.2 respectively. The Liquidator shall

apply for sub-division of GIDC plot after issuance of LOI to the

Successful Bidder/s and such Bidder/s shall pay the amount of

sub-division charges within 10 days from the date of demand. In

case, the bid succeeds only for one of the Lot no. 1 or for Lot no.2,

the Successful bidder shall initially pay full amount of sub-

division charges and said Successful Bidder shall be given due

set off for the excess amount, in subsequent payments/ final

payment."

e. The Appellant/Liquidator vide its email dated 09.01.2020 has also

confirmed the Respondent as follows:

"Interest on delayed payment shall be waived off to the extent the

delay is on account of sub-division of leased land."

f. However, the Respondent has failed to pay the sale consideration even

for the freehold part of the land. Hence, making an issue of sub-

division of the land is not fully correct for late releasing the payment.

g. Considering all these submissions of the 'Adjudicating Authority' has

failed to consider the interest on delayed payment should have been

considered on the delayed part of payment relating to freehold land.

7. In view of above observations, we still hold the view that the delay in

payment of balance sale consideration in respect of leasehold land cannot

20 Company Appeal(AT)(Insolvency) No. 310 of 2021 be attributed to the Respondent. However, the Respondent is responsible

in respect of delay in payment of balance sale consideration in respect of

freehold land. Accordingly, the Appellant is directed to refund the excess

interest deducted by him to the Respondent to the extent of leasehold

land. We accordingly set aside the impugned order dated 12.02.2021

passed by the Adjudicating Authority with the above observations

and directions.

Pending IAs, if any stands disposed of. Interim Orders, if any, passed

by this Appellate Tribunal stands vacated. No orders as to costs.

[Justice Jarat Kumar Jain] Member (Judicial)

(Dr. Ashok Kumar Mishra) Member(Technical)

19th July, 2021

New Delhi

Raushan.k

21 Company Appeal(AT)(Insolvency) No. 310 of 2021