Rimjhim Ispat Limited & Anr vs Jindal Stainless Limited

1. Rimjhim Ispat Limited, Through Authorized Signatory Having Office at : 3A/275, Azad Nagar, Kanpur, Uttar Pradesh - 208002 Email: gauravanand@rimjhimispat.com rohit@rimjhimispat.com ...Appellant No. 1

2. Synergy Steel Limited, Through Authorized Signatory, Having Office at: 1/1, Kirti Nagar, New Delhi - 110015 Email: ssi@synergysteels.com contact@synergysteels.com ...Appellant No. 2

Versus

1. Jindal Stainless Limited, Having its Office at: O.P. Jindal Marg, Hisar, Haryana - 125005

Also At: Jindal Centre, 12, Bikaji Cama Place, New Delhi - 110022 ...Respondent No. 1 Email: navneet@jindalstainless.com

2. Mr. Harish Chander Arora, Liquidator of Rathi Super Steel Limited, Having Office at: Resurgent Resolution Professionals LLP, Unit No. 905, Tower C, Unitech Business Zone, Sector 50, Gurugram - 122018 Email: Harisharora2012@gmail.com Liquidator.rathisuper@gmail.com ...Respondent No. 2 -2-

For Appellant: Ms. Sonal Alagn, Mr. Vikash Kumar, Mr. Aviral Kapoor, Advocates. For Respondent: Mr. Ramji Srinivasan and Mr. Abhinav Vasisht, Sr. Advocates with Mr. Vaijayant Paliwal, Mr. Nikhil Mathur, Ms. Prabh Simran Kaur, Mr. Raksh Kabian, Mr. Krishan Singhal, Advocates for R1. Mr. Sumant Batra, Ms. Apoorva Chowdhary, Mr. Pushpendra S. Bhadoriya, Advocates for Liquidator.

JUDGEMENT

Ashok Bhushan, J:

1. This Appeal has been filed challenging the Order dated 28th

September, 2022 passed by the National Company Law Tribunal, Principal

Bench, New Delhi in I.A.(I.B.C.)/3871(PB)/2021 &

I.A.(I.B.C)/4489(PB)/2021 in C.P. (IB)/1446(PB)/2018. By the Impugned

Order, the Adjudicating Authority has dismissed the

I.A.(I.B.C.)/3871(PB)/2021 filed by the Liquidator-Respondent No. 2 and

has allowed the I.A.(I.B.C.)/4489(PB)/2021 filed by the Jindal Stainless

Limited-Respondent No. 1.

2. The brief facts of the case necessary for deciding the Appeal are:

 The Adjudicating Authority vide Order dated 12th June, 2019

initiated 'Corporate Insolvency Resolution Process' against the

Corporate Debtor-Rathi Super Steel Limited. No Resolution Plan

having been approved by the Committee of Creditors, an Application

for liquidation of the Corporate Debtor was filed before the

Adjudicating Authority which was allowed by Order dated 19th June,

2020 by the Adjudicating Authority.

 Mr. Harish Chander Arora, Respondent No. 2 herein who was

working as Resolution Professional, has been appointed as Liquidator

Company Appeal (AT) (Insolvency) No. 1212-1213 of 2022 -3-

in accordance with Regulation 12 of the Insolvency and Bankruptcy

Board of India (Liquidator Process) Regulations, 2016. A Public

Announcement was made inviting claims from the Creditors of the

Corporate Debtor. The Liquidator prepared a List of Stakeholders and

constituted the Stakeholders Consultation Committee (hereinafter

referred to as "SCC"). A Notice was issued by the Liquidator for e-

Auction of the sale of the Corporate Debtor as a going concern at

reserved price of Rs. 200 Crores on 30.09.2020 but no bid was

received. Second, third and 4th attempt for sale of the Corporate

Debtor as a going concern was made on 26.10.2020, 10.11.2020 and

27.11.2020 for reserved price of Rs. 180 Crores, Rs. 180 Crores and

162 Crores, respectively without any success. On 29.12.2020, fifth

attempt of e-Auction was made for sale of the Corporate Debtor via

slump sale at a reserved price of Rs. 156 Crores but no Bid was

received. On 02.02.2021, sixth attempt of e-Auction was made on

02.02.2021 for sale of the CD on a standalone basis at a reserved

price of Rs. 104.11 Crores. Last attempt for e-Auction was made on

26.02.2021 on a standalone basis at a reserved price of Rs. 104

Crores however no bid was ever received by the Liquidator.

 On 3rd June, 2021, the Appellants approached the Liquidator

expressing interest in acquiring the Corporate Debtor by sending an

email. On 11th June, 2021, the Appellants submitted their final offer

of Rs. 153 Crores for acquisition of the CD as a going concern. Two

other Bidders had also approached the Liquidator in the private sale

for the purchase of the Corporate Debtor.

Company Appeal (AT) (Insolvency) No. 1212-1213 of 2022 -4-

 18th Stakeholders Consultation Committee was held on 11.06.2021.

In item No. 3 of the SCC, Discussion was made upon the proposals

received by the Liquidator for the purchase/acquisition of Corporate

Debtor. SCC noticed three offers submitted by the buyers including

Appellants' offer for sale as going concern. Joint offer submitted by

the Appellants was noticed as upfront consideration of Rs. 50 Crores

within 60 days of NCLT Order and deferred consideration of Rs. 102

Crores payable within 12 months from the date of NCLT Order. The

SCC after deliberating with the prospective of offerers, decided to

conduct Limited e-Auction Process on 17th June, 2021 among the

three bidders only at a reserved price of Rs. 153 crores. 10% of

reserve price amount as EMD amount before participation in the

Limited e-Auction Process, 33% to be paid after the approval order

from the Hon'ble NCLT within 60 days and balance amount was to be

paid within one year from the date approval by the Adjudicating

Authority with interest at MCLR. After the resolution of the SCC, the

Liquidator issued Limited e-Auction Process Information Document

for Limited e-Auction Process among existing bidders. The process of

limited e-Auction Information Document contained various terms and

conditions which we shall notice hereinafter. In pursuance thereof

Limited e-Auction was conducted among three bidders on 17th June,

2021 in which the Appellants became the highest bidder with a bid or

Rs. 177.50 Crores. SCC Meeting was held on 18.06.2021 in which

the Appellant was noted as a Highest Bidder. The Letter of Intent (LoI)

was issued on 01st July, 2021. The Revised LoI was issued by the

Company Appeal (AT) (Insolvency) No. 1212-1213 of 2022 -5-

Liquidator to the Appellants on 05th August, 2021 with inclusion of

certain reliefs and concessions which was requested by the

Appellants. On 31st August, 2021, Compliance Certificate under

Form-H was submitted by the Liquidator. The Liquidator filed an I.A.

No. 3871/2021 seeking closure of Liquidation process and approval

of terms and conditions of sale. On 03.10.2021, an Application I.A.

No. 4489/2021 was filed by the Jindal Stainless Limited for

consideration of its bid for acquiring CD as a going concern. In the

Application filed by the Jindal Stainless Limited, the Applicant made

an offer of Rs. 190 Crores payable within 90 days from acceptance of

the bid for purchase of the CD.

3. The Adjudicating Authority on 30th November, 2021 directed the

Jindal Stainless Limited to serve a copy of the Application to the

Appellants-the Successful Bidder. The Appellant filed reply to the I.A. of

Jindal Stainless Limited opposing the prayer of the Applicant-Jindal

Stainless Limited. Both the Applications filed by the Liquidator for closure

of the Liquidation Process and approval of the terms and conditions of sale

as well as Application filed by the Jindal Stainless Limited were heard and

vide Impugned Order dated 28.09.2022, Application filed by the Liquidator

has been dismissed and Application filed by the Jindal Stainless Limited

has been allowed. The Adjudicating Authority passed following order in

paragraph 15:

15. Keeping in view the above, we are inclined to order as follows:

Company Appeal (AT) (Insolvency) No. 1212-1213 of 2022 -6-

i. To establish the bona fides of the Applicant and to ensure that such a belated offer shall not cause prejudice to any of the parties, we direct the Applicant to deposit Rs. 50 crores less the EMD paid, if any, within 3 days of the pronouncement of his order.

ii. On receipt of this sum of money from Applicant, M/s. Jindal Stainless Limited,

Respondent/Liquidator is directed to proceed to hold another auction between Applicant, Successful Bidder M/s. Rimjhim Ispat Limited & Anr. and the other two bidders namely M/s Adya Oversees Limited in collaboration with Shri Karshni Alloys Private Limited & Asteroid Shelter Homes Pvt. Ltd. and Bansal Wire Industries within 7 days of this order.

iii. The reserve price for this auction shall be Rs. 201 crores. The procedure of auction and the terms of payment will be laid down by the Liquidator.

iv. The Applicant in case of failure to pay the above-mentioned amount of Rs. 50 crore less EMD paid, if any, within 3 days from the date of the pronouncement of this order will not be entitled to participate in the bid. If M/s Jindal Stainless Ltd.

fails to deposit as ordered, the EMD will also be forfeited towards cost of litigation to the benefit of liquidation estate.

v. In the event of M/s Jindal Steels not fulfilling the predeposit condition then the liquidator can confirm the sale to the highest bidder i.e. M/s.

Rimjhim Ispat and Anr. and proceed to collect the balance amount as per time period specified excluding the time consumed in this application.

Company Appeal (AT) (Insolvency) No. 1212-1213 of 2022 -7-

vi. If the auction as ordered above takes place then as per terms to be refixed by the liquidator, the highest bidder will be confirmed as the purchaser and dealt with accordingly for such permissible reliefs.

vii. After the auction concludes, liquidator shall be duty bound to return the EMD along with accrued interest (if any) to the unsuccessful bidder.

viii. Liquidator shall give a report on conclusion of the auction to this Adjudicating Authority on or before 14.10.2022.

ix. Based on the report of the Liquidator, matter will be proceeded further by this Adjudicating Authority.

4. This Appeal was filed challenging the Order dated 28th September,

2022 before this Tribunal on 29th September, 2022 and Appeal was

entertained after hearing both the parties and Interim Order was passed

adjourning the Auction for 15 days.

5. We have heard Ms. Sonal Alagn, Learned Counsel for the Appellant.

Mr. Ramji Srinivasan, Sr. Advocate and Mr. Abhinav Vasisht, Sr. Advocate

for Jindal Stainless Limited and Mr. Sumant Batra, Advocate for the

Liquidator.

6. Learned Counsel for the Appellant Ms. Sonal Alagn advanced

submissions on behalf of the Appellant with clarity and emphasis. It is

submitted that the private sale conducted on 17th June, 2021 by Limited e-

Auction Process did not require any approval of the Adjudicating Authority.

It is submitted that under Regulation 33 sub-regulation 2 proviso, the

embargo on Liquidator not to sale without prior permission of the

Company Appeal (AT) (Insolvency) No. 1212-1213 of 2022 -8-

Adjudicating Authority, is with regard to only three circumstances i.e. (a) a

related party of the corporate debtor, (b) his related party or (c) any

professional appointed by the Liquidator. The present case is not covered

by any of the contingency as contemplated under above proviso and no

permission of the adjudicating authority was required. The Adjudicating

Authority proceeded erroneously that limited e-Auction Process held on

17th June, 2021 required prior permission of the Adjudicating Authority

and the Adjudicating Authority can proceed to examine and refuse to grant

permission. It is submitted that after limited e-Auction Process held on 17th

June, 2021, 'Letter of Intent' was issued to the Appellant on 01st July, 2021

and 05th August, 2022 and the sale was completed. Appellant was accepted

as a highest bidder both by Liquidator as well as SCC and vested right had

accrued in favour of the Appellant which could not have been taken away

by the Adjudicating Authority by the Impugned Order. It is submitted that

even if there is some clause in e-Auction Process Document requiring any

approval by the Adjudicating Authority, the said clause was inoperative

being in contradiction with Regulation 33 sub-Regulation 2 where only for

related contingency, prior permission is required. The clause in e-Auction

Process Document itself contained a clause in event of conflict between

regulations, process document and provisions of IBC, IBC and Regulations

shall prevail. It is submitted that the Respondent-Jindal Stainless Limited

neither participated in any of the seven Auctions conducted by the

Liquidator nor had shown any interest for purchase of the Corporate

Debtor. It is only when the Appellant was declared as a highest successful

bidder, the Jindal Stainless Limited has come up in fray by making an

Company Appeal (AT) (Insolvency) No. 1212-1213 of 2022 -9-

Application before the Adjudicating Authority. Jindal Stainless Limited

never submitted its own offer to the Liquidator nor has submitted any EMD

so as to enable to consider its offer. It is submitted that Liquidation

Proceedings have to be completed in a time bound manner and it cannot be

allowed to be delayed by intervention of Jindal Stainless Limited. It is

submitted that in the Application which was filed by the Liquidator as well

as Form-H, no prior approval of the Adjudicating Authority was sought for

as well for Limited e-Auction conducted on 17th June, 2021. The Approval

of the Adjudicating Authority was sought only with respect to certain reliefs

and concessions which was added in the 'Letter of Intent' dated 05th

August, 2021 at the instance of the Appellant. The Liquidator has filed

closure application with a request to close the Liquidation Process. The

Adjudicating Authority while considering the Application of closure could

not have assumed jurisdiction of approval of the sale and the assumption

of jurisdiction of Adjudicating Authority is not in accordance with statutory

scheme and deserved to be set aside.

7. It is further submitted that the offer submitted by the Appellant was

higher than the last reserved price hence the sale being on a price higher

than the reserved price, Liquidator was entitled to conduct the Private Sale

without any intervention of the Adjudicating Authority.

8. Learned Counsel for the Appellant has relied on a Judgment of this

Tribunal in the matter of "Manjit Commercial LLP Vs. SPM Auto Pvt.

Ltd. & Anr." (Company Appeal (AT) (Ins.) No. 732 of 2019) where this

Tribunal has taken the view that the Appellant of that case who have not

participated in the e-Auction had sent an email of making an offer to

Company Appeal (AT) (Insolvency) No. 1212-1213 of 2022 -10-

purchase the asset at higher price, was not entertained which Judgement

is fully applicable in the facts of the present case. Learned Counsel for the

Appellants further relying on a Judgement of Hon'ble Supreme Court in

"Pratap Technocrats (P) Ltd. & Ors. Vs. Monitoring Committee of

Reliance Infratel Limited & Anr." (Civil Appeal No. 676 of 2021)

submits that the Adjudicating Authority while exercising jurisdiction under

the IBC and the Liquidation Regulations, cannot exercise any equity

jurisdiction nor in the name of maximization interfere with a process which

has been validly completed.

9. Mr. Ramji Srinivasan, Learned Sr. Counsel appearing for the

Respondent refuting the submissions of Learned Counsel for the Appellants

submits that limited e-Auction Process held on 17th June, 2021 required

approval of the Adjudicating Authority which is clear from the terms of sale

i.e. terms and conditions contained in the Limited e-Auction Process

Information Document. It is submitted that Schedule I of Liquidation

Regulations which provides for 'Mode of Sale' itself contemplates that sale

shall stand completed in accordance with terms of the sale. Terms of the

sale required approval of the NCLT as well as the issuance of sale certificate

after deposit of the entire amount. The sale was never completed in favour

of the Appellant nor any undefeatable right has accrued in favour of the

Appellant. The terms of the sale when read with Schedule I of the

Liquidation Regulations makes it clear that the approval of the NCLT was

contemplated in the Limited e-Auction Process Document and the

Appellant cannot be heard in contending that no approval of the

Adjudicating Authority was required. Appellant having participated in the

Company Appeal (AT) (Insolvency) No. 1212-1213 of 2022 -11-

limited e-Auction on the basis of terms of the sale contained in e-Auction

Process Information Document, the Appellant cannot be heard in

submitting that no approval of the Adjudicating Authority was required for

the limited e-Auction Sale. Sale in favour of the Appellant was never

completed. The mere fact that Appellant was declared as a highest bidder

does not clothe with the Appellant right to enforce the auction sale. One of

the objects of the IBC is maximization of the assets of the Corporate

Debtor. Offer having been made of Rs. 190 Crores and to make payment

within three months was an offer which was in accordance with the object

of IBC and Adjudicating Authority did not commit any error in not

accepting the sale in favour of the Appellants and directing a fresh Limited

e-Auction between the Appellant and Respondent-Jindal Stainless Limited

and other two bidders who participated in the Limited e-Auction Process

dated 17th June, 2021. The Order passed by the Adjudicating Authority

does substantial justice and is in accordance with the object of IBC which

does not require any interference by this Tribunal. The Appellants as well

as the Jindal Stainless Limited had not participated in any of the seven E-

Auction conducted by the Liquidator. With regard to private sale offer

submitted by the Appellants and entertained by the Liquidator, the

Respondent had no knowledge and it came to know about the

developments only when the Adjudicating Authority granted extension of

the Liquidation Process on 29th June, 2021. Successful Bidder does not

acquire any vested right to enforce the auction which is a law settled by the

various Judgements of the Hon'ble Supreme Court and this Tribunal.

Learned Counsel for the Respondent has relied on Judgment of this

Company Appeal (AT) (Insolvency) No. 1212-1213 of 2022 -12-

Tribunal in Company Appeal (AT) Ins. No. 757 of 2021 in "Punjab National

Bank, Sastra Division Vs. EVA Agro Feeds Pvt. Ltd. & Ors.".

10. Mr. Sumant Batra, Learned Counsel for the Liquidator submitted

that Process Information Document of the Sale clearly contemplated the

approval of the NCLT and further 'Letter of Intent' specifically contained the

conditions that sale in question i.e. sale dated 17th June, 2021 is subject to

approval by the NCLT and the Appellant had to abide by the terms and

conditions of the LOI which had been agreed by the Appellant.

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

parties and have perused the record.

12. From the facts and sequence of events noticed above, it is clear that

Liquidator conducted seven E-Auction for sale of the Corporate Debtor.

Last Attempt being made on 26th February, 2021. Liquidator unable to

obtain any bid in the e-Auction, decided to conduct private sale as

permissible under the Liquidation Regulation 33 read with Schedule I. We

may first notice the relevant statutory provisions governing the private sale.

Regulation 33 deals with Mode of Sale which is as follows:

"33. Mode of Sale.-(1) The liquidator shall ordinarily sell the assets of the corporate debtor through an auction in the manner specified in Schedule I. (2) The liquidator may sell the assets of the corporate debtor by means of private sale in the manner specified in Schedule I when-

(a) the asset is perishable;

(b) the asset is likely to deteriorate in value significantly if not sold immediately;

Company Appeal (AT) (Insolvency) No. 1212-1213 of 2022 -13-

(c) the asset is sold at a price higher than the reserve price of a failed auction; or

(d) the prior permission of the Adjudicating Authority has been obtained for such sale:

Provided that the liquidator shall not sell the assets, without prior permission of the Adjudicating Authority, by way of private sale to-

(a) a related party of the corporate debtor;

(b) his related party; or

(c) any professional appointed by him.

(3) The liquidator shall not proceed with the sale of an asset if he has reason to believe that there is any collusion between the buyers, or the corporate debtor's related parties and buyers, or the creditors and the buyer, and shall submit a report to the Adjudicating Authority in this regard, seeking appropriate orders against the colluding parties."

13. Under Regulation 33(2) which empowers the Liquidator to sell the

assets of the Corporate Debtor by means of private sale in the manner as

specified in Schedule I. Schedule I, Clause 2 deals with 'Private Sale' which

is as follows:

"2. PRIVATE SALE (1) Where an asset is to be sold through private sale, a liquidator shall conduct the sale in the manner specified herein.

(2) The liquidator shall prepare a strategy to approach interested buyers for assets to be sold by private sale.

(3) Private sale may be conducted through directly liaising with potential buyers or their agents, through

Company Appeal (AT) (Insolvency) No. 1212-1213 of 2022 -14-

retail shops, or through any other means that is likely to maximize the realizations from the sale of assets. (4) The sale shall stand completed in accordance with the terms of sale.

(5) Thereafter, the assets shall be delivered to the purchaser, on receipt of full consideration for the assets, in the manner specified in the terms of sale.

14. It was in the process of Private Sale that Appellants and two other

entities have expressed their desire to the Liquidator for purchase of the

Corporate Debtor. 18th Stakeholders Consultation Committee held on 11th

June, 2021 where Liquidator brought into notice of Stakeholders

Consultation Committee about the three offers which was received by the

Liquidator in the Private Sale. It is useful to notice following from the Item

No. 3:

"8. The members present in the meeting had a detailed discussion on the revised offers submitted by the three probable buyers. In order to arrive at a best price it was discussed that we have the option of adoption of Swiss Challenge among the existing buyers to arrive at the best price.

9. After deliberation among the members present in the meeting, it was decided to conduct limited E- Auction Process on 17.06.2021 from 10:00 AM to 03:00 Am among the existing buyers only by keeping the reserve price at Rs. 153 Cr. (i.e. the best offer we received) and the terms and conditions which states the payment shall be done in three instalments (i) 10% of reserve price amount as EMD amount before participation in the E-Auction Process, (ii) 33% to be paid after the approval order from the Hon'ble NCLT

Company Appeal (AT) (Insolvency) No. 1212-1213 of 2022 -15-

within 60 days and (iii) balance amount shall be paid within one year from the date approval by the AA with interest at MCLR."

15. The limited e-Auction Process Information Document was issued by

Liquidator for e-Auction on 17th June, 2021 inviting all the three offerers to

participate. In the limited e-Auction Process Document, under the heading

A. Information Must Be Read Before Bidding contained various

stipulations. In this context, Item No. 2, 5 and 7 are relevant which are as

follows:

"2. The information provided in the instant Auction Document should be read together with the provisions of the Code and the Liquidation Process Regulations. In the event of any conflict between the instant Auction Document and the Code or the Liquidation Process Regulations, the provisions of the Code or the Liquidation Process Regulations, as the case may be shall always prevail.

......

5. The issuance of the instant Auction Document does not imply that the Liquidator is bound to select a Successful Bidder out of the Existing Bidders or to appoint the Preferred Bidder as Successful Bidder for the sale of the company on Going Concern Basis and the Liquidator reserves the right to reject all or any of the Existing Bidders or their bids without assigning any reason whatsoever.

......

7. All terms and conditions with respect to the sale of the company on Going Concern Basis shall be governed by the directions of the Hon'ble NCLT, Principal Bench, New Delhi (NCLT) and in accordance

Company Appeal (AT) (Insolvency) No. 1212-1213 of 2022 -16-

with the provisions of the Code and other applicable laws. The Liquidator shall exercise all rights with respect to sale of the Company on Going Concern Basis and it would be open to the Liquidator to appoint such experts, professionals or other persons, as the Liquidator might think necessary and appropriate, as per the provisions of the Code and the applicable rules thereunder, so as to enable the sale of the Company on Going Concern Basis."

(Emphasis Supplied)

16. Further under the heading D. Earnest Money Deposit (EMD), there

are certain bullet points under the heading issuance of Letter of Intent

and Transaction Documents, following is stated:

"The Liquidator within twenty days of the end of E- Auction date shall issue the letter of intent (LOI) to the Successful Bidder. The Successful Bidder within two (2) Working Days from the date issue of LOI, shall be required to execute a LOI provided by the Liquidator, the terms of which shall be binding on the Successful Bidder."

17. Further under heading G. Terms and Conditions of Limited E-

Auction, following is also one of the stipulations:

"....

The Liquidator will issue a Letter of Intent (LOI) to the Successful Bidder, detailing the total amount payable and other Terms and Conditions. The Successful Bidder shall have to comply with the payments terms as was decided in the 18th Stakeholder Consultation Committee Meeting held on 11.06.2021 which states the payment shall be done in three instalments (i) 10% of reserve price amount as EMD amount before

Company Appeal (AT) (Insolvency) No. 1212-1213 of 2022 -17-

participation in the E-Auction Process, (ii) 33% to be paid after the approval order from the Hon'ble NCLT within 60 days and (iii) balance amount shall be paid within one year from the date approval by the AA with interest at MCLR. The sale shall be cancelled if the entire sale consideration is not received within the timeline then the Liquidator shall forfeit the amount already paid and the property/assets/company may be offered to second highest bidder or put to re- auction at sole discretion of the Liquidator and the defaulting bidder shall have not claim/right in respect of property/assets/company or the amount paid, or any loss incurred by it whatsoever."

18. The Appellant himself has brought on record LOI dated 05th August,

2021 issued by the Liquidator wherein Paragraph 5, 15, 18 and 20 are as

follows:

"5. The sale of the Corporate Debtor as a Going Concern to the Successful Bidder is subject to approval by the Hon'ble Adjudicating Authority, National Company Law Tribunal, Principal Bench ("NCLT") New Delhi.

......

15. The sale certificate will be executed in the name of the Successful Bidder or a company owned by the management of the Successful Bidder only and will not be issued in any other name(s) or the nominees of the Successful Bidder, which shall be issued after payment of the entire sale consideration of Rs. 177.50 Cr is paid. All documents relating to the Corporate Debtor in possession of the undersigned shall be handed over to the Successful Bidder upon making of full payment.

Company Appeal (AT) (Insolvency) No. 1212-1213 of 2022 -18-

......

18. The Successful Bidder are requested to unconditionally agree and accept this LOI in entirety by countersigning this LOI and returning the original of the same to the Liquidator within a period of 2 (Two) business days from the date of issuance of the LOI.

..........

20. Notwithstanding anything contained herein, the issuance of this LOI shall not be deemed to have created any rights, title or interest in the Corporate Debtor. In the event the Successful Bidder are found to have made any misrepresentation or wrongful disclosure under section 29A of the Code or otherwise, this LOI may be revoked."

19. After noticing the relevant statutory provisions and process

document containing terms and conditions of the sale and also certain

conditions contained in the LOI issued by the Appellant, it is clear that the

process documents itself contemplated about the approval of the NCLT. We

have noticed above under heading G-Terms and Conditions of Limited e-

Auction which specifically noted that payment shall be done in three

instalments (i) 10% of reserve price amount as EMD amount before

participation in the E-Auction Process, (ii) 33% to be paid after the approval

order from the Hon'ble NCLT within 60 days and (iii) balance amount shall

be paid within one year from the date approval by the AA with interest at

MCLR. We further noticed that in the Letter of Intent also there are specific

conditions which contemplated "the sale of the Corporate Debtor as a

Company Appeal (AT) (Insolvency) No. 1212-1213 of 2022 -19-

going concern to the Successful Bidder is subject to approval by the

Hon'ble NCLT, Principal Bench, New Delhi."

20. Now the submissions which has been pressed by Learned Counsel

for the Appellant is that prior permission for sale with regard to the private

sale as contemplated under Regulation 33 is only with regard to three

circumstances mentioned in the proviso and for no other private sale, any

prior permission of the Adjudicating Authority is required. The proviso to

Regulation 33(2) as noted above is clear that the sale as contemplated in

(a), (b) and (c) shall not be done without prior permission of the

adjudicating authority. Thus the sale with regard to a related party of the

Corporate Debtor, his related party or any professional appointed by the

liquidator requires prior permission. Present is not a case where proviso to

Regulation 33 (2) is attracted since present sale is not covered by any of the

contingency mentioned in proviso hence present is a case where no prior

permission of the adjudicating authority was required. Thus Learned

Counsel for the Appellant is right in her submissions that present is not a

case where prior permission of the sale was required by the Adjudicating

Authority.

21. We have noticed above that in the Process Information Document as

well as conditions of the Letter of Intent, there is specific contemplation of

approval of the sale by the Adjudicating Authority and issue of sale

certificate subsequent to making entire payment. Learned Counsel for the

Appellant has referred to clause 2 under Heading A.

"2. The information provided in the instant Auction Document should be read together with the provisions

Company Appeal (AT) (Insolvency) No. 1212-1213 of 2022 -20-

of the Code and the Liquidation Process Regulations. In the event of any conflict between the instant Auction Document and the Code or the Liquidation Process Regulations, the provisions of the Code or the Liquidation Process Regulations, as the case may be shall always prevail."

22. There can be no quarrel to the submissions that if there is conflict

between the auction process document and the Code or the Liquidation

Process Regulations, the provision of the Code and Liquidation Regulations

shall prevail. The above clause clearly contemplates the same.

23. Now we have to see whether the requirement contained in the process

document as well as Letter of Intent are in conflict with the provisions of

the Code or Liquidation Regulations. As noted above, terms and conditions

of the Limited e-Auction contained under Heading G of the Process

Information Document contemplated approval order from the NCLT.

Whether there is conflict between Regulation 33, Schedule I of the

Liquidation Process Regulations is the question to be answered. The

Schedule I, Clause 2 deals with 'Private Sale'. Clause 4 of the Private Sale

provides "the sale shall stand completed in accordance with the terms of

sale." The Terms of Sale as noticed above clearly contemplates approval by

the NCLT which is further clarified and amplified by the conditions

contained in the LOI issued by the Liquidator to the Appellant. When the

approval of the NCLT is contemplated in the "Terms of Sale" we do not

agree with the submissions of Learned Counsel for the Appellant that there

is any conflict between the terms of the sale requiring approval of the NCLT

under the Regulation 33 or Schedule I. In the meeting of the Stakeholders

Company Appeal (AT) (Insolvency) No. 1212-1213 of 2022 -21-

Consultation Committee dated 11th June, 2021 as noted above under Item

No. 3, there was clear contemplation for Order of the Adjudicating

Authority. Stakeholders Consultation Committee thus contemplated

approval of the NCLT which conditions also got reflected in the Process

Information Document. The Process Information Document having been

issued by the Liquidator which reflects the requirement of approval of the

sale by the NCLT which is part of the sale, there is no occasion to question

the aforesaid requirement in the Process Information Document. Even if

under Regulation 33 (2) proviso, no prior permission is required for sale in

question, there was no prohibition from including such terms of the sale.

The reason for containing such terms for sale is not far to seek. Looking to

the enormous value of the assets of the corporate debtor and further that e-

Auction did not succeed, in event the Liquidator has put a condition for

requiring approval of the sale from NCLT, no exception can be taken to the

terms of the sale. It is such condition which ensures the transparency and

protects the liquidator as well. We thus are of the view that there is no

conflict in the statutory regulations and the terms of the sale requiring

approval by the NCLT. We thus do not accept the submissions of Learned

Counsel for the Appellant that there was no requirement for taking

approval by the NCLT. Learned Counsel for the Appellant has also

submitted that Application which was filed by the Liquidator only prayed

for closure of the Liquidation Process. The prayers made by the Liquidator

in his Application I.A. 3871/2021 are as follows:

"a. Allow the Present Application;

Company Appeal (AT) (Insolvency) No. 1212-1213 of 2022 -22-

b. Take note of the sale of the corporate debtor as a going concern to Synergy Steels Limited & Rimjhim Ispat Limited pursuant to E-Auction dated 17.06.2021 and on terms and conditions mentioned in Limited E-Auction Process Information Document dated 13.06.2021 and Letter of Intent dated 05.08.2021;

c. Grant such relief and concessions mentioned in para 3(w) of the present application as this Hon'ble Adjudicating Authority deems fit and proper;

d. Direct that no action shall be taken by any statutory/quasi-judicial body/government

department/any other body against Corporate Debtor or its assets and/ or Synergy Steels Limited & Rimjhim Ispat Limited being the successful bidders in view of Section 32A of the Insolvency and Bankruptcy Code, 2016 for any cause of action emanating on or before commencement of Corporate Insolvency Resolution Process for the Corportae Debtor i.e., 12.06.2019;

e. Direct closure of liquidation on payment of full sale consideration of Rs. 177.50 Crores plus interest by Synergy Steel Limited & Rimjhim Ispat Limited and completion of Sale in accordance with Limited E-

Auction Process Information Document dated 13.06.2021 and Letter of Intent dated 05.08.2021;

f. Pass such orders as deemed fit and proper by this Hon'ble Adjudicating Authority in the facts and circumstances of the case and in the interest of justice."

24. The prayers which has been made by the Liquidator as noted above

clearly mentioned about the terms and conditions mentioned in Limited E-

Company Appeal (AT) (Insolvency) No. 1212-1213 of 2022 -23-

Auction and the sale was to be taken cognizance by the Adjudicating

Authority. The prayers thus contained a request for recognition of the sale

in question. Adjudicating Authority after considering all terms and

conditions of the sale and others attending facts and circumstances, have

taken view that sale was not complete unless approval is granted by the

Adjudicating Authority. We see no reason to take a different view. The

submissions of Learned Counsel for the Appellant that at the stage when

request/offer was made by the Jindal Stainless Limited which was

subsequent to filing of the Application by the Liquidator ought not to have

been entertained. The present was a private sale, present was not a case of

sale by e-auction as per Regulation 33(1). It is true that if any e-Auction

Process a person does not participate, he has no right to make any offer

and his Application subsequently to make higher offer has to be rejected

but present being case of a private sale and the terms and conditions

stipulated approval of the NCLT, the Adjudicating Authority did not commit

any error in taking note of the offer made by the Respondent No. 1 who

made an offer of initial Rs. 190 Crores and revised offer was Rs. 201 Crores

i.e. much higher than the one on which Appellant was declared successful

bidder. We further notice that Order passed by the Adjudicating Authority

permits both Appellant and other two bidders to participate in the e-

Auction and there is a further direction in paragraph 15(v) of the Impugned

Order that if Jindal Stainless Limited does not fulfil the condition,

Liquidator can confirm the sale in favour of the Appellants. We thus are of

the view that directions issued by the Adjudicating Authority amply

protects the interest of the Appellants also.

Company Appeal (AT) (Insolvency) No. 1212-1213 of 2022 -24-

25. Now we come to the Judgement of this Tribunal in "Manjit

Commercial LLP" (supra) which has been relied on by Learned Counsel for

the Appellant. The above was a case where in the Liquidation process,

publication was made in the Newspaper "Business Standard" for e-Auction

from 15th April to 19th April. In the e-Auction held on 15th to 19th April,

2021, the Appellant did not participate and on the same day sent an email

that he is interested to purchase on higher price of Rs. 7.24 Crores. In the

above context, this Tribunal in paragraph 9, 10 and 11 laid down following:

"9. Further, the Appellant vide e-mail dated 15.04.2019 addressed to the Liquidator wherein it was stated that the he intended to purchase the asset at a much higher price than the Reserve Price of Rs. 6.15 Crores. However, the Appellant instead of addressing letter to the Liquidator should have participated in the bid process on the date the Sale Notice was advertised in the newspapers and we are of the view that the Appellant was aware of the Sale Notice. However, to the reasons best known to the Appellant, he did not participate in the e-auction held on 15.04.2019. We also noticed that one of the ex- Director, Mr. Vikrant Mahajan by e-mail dated 20.04.2019 addressed to the Liquidator wherein it is stated that the conduct of second public e-auction with a shorter time given smell that the whole process was done to sell the property to a pre-settled buyer.

10. From the letter of the ex-Director dated 20.04.2019 and the earlier letter of the Appellant dated 15.04.2019, it is apparent that the Appellant may be related party to the ex-Director. However, we are not expressing any opinion with respect to the

Company Appeal (AT) (Insolvency) No. 1212-1213 of 2022 -25-

same. As per Regulation 33 (Liquidation Process Regulations, 2016) and as per sub-clause 3, the Liquidator shall not proceed with the sale of asset if he has reason to believe that there is any collusion between the buyer and creditor and the buyer shall submit a report to the Adjudicating Authority in this regard, seeking appropriate orders against the colluding parties.

11. However, the Appellant did not participate in the e-auction and now making vague allegations without any substantial grounds cannot be accepted. As per Regulation 44(1) of the Liquidation Process Regulations, 2016, the Liquidator shall liquidate the 'Corporate Debtor' within a period of two years. We are of the view that there should not be any unnecessary delay and protract the liquidation process for undue advantage of some of individuals or group, which would adversely affect the liquidation process."

26. The above case was public e-Auction and was not case of private

sale. There cannot be any quarrel to the preposition laid down in the above

Judgment in reference to a Public e-Auction. The Above Judgement does

not help the Appellant.

27. Learned Counsel for the Appellant has next relied on a Judgment of

Hon'ble Supreme Court in the matter of "Pratap Technocrats (P) Ltd. &

Ors." (supra). Learned Counsel for the Appellant submits that Hon'ble

Supreme Court has clearly laid down that the Adjudicating Authority and

this Appellate Tribunal does not have equity jurisdiction nor any equitable

Company Appeal (AT) (Insolvency) No. 1212-1213 of 2022 -26-

consideration order can be passed. We may notice with regard to Indian

Insolvency Regime, following has been laid down in Paragraph 40:

"40 Certain foreign jurisdictions allow resolution/reorganization plans to be challenged on grounds of fairness and equity. One of the grounds under which a company voluntary arrangement can be challenged under the United Kingdom's Insolvency Act, 1986 is that it unfairly prejudices the interests of a creditor of the company. The United States' US Bankruptcy Code provides that if a restructuring plan has to clamp down on a dissenting class of creditors, one of the conditions that it should satisfy is that it does not unfairly discriminate, and is fair and equitable. However, under the Indian insolvency regime, it appears that a conscious choice has been made by the legislature to not confer any independent equity based jurisdiction on the Adjudicating Authority other than the statutory requirements laid down under sub-Section (2) of Section 30 of the IBC."

28. Present is a case where the Adjudicating Authority has proceeded to

pass order relying on the terms of the sale as well as to obtain the object of

maximization of the assets of the Corporate Debtor. The exercise of

jurisdiction by the Adjudicating Authority in the Impugned Order can not

be said to be reliance on any equity jurisdiction. The Judgement of the

Hon'ble Supreme in "Pratap Technocrats" thus does not help the Appellant

in the facts of the present case.

29. We may also refer to the Judgement of this Tribunal in "PNB Sastra

Division" (supra) which has been relied on by the Learned Counsel for the

Company Appeal (AT) (Insolvency) No. 1212-1213 of 2022 -27-

Respondent. In the above case, this Tribunal had laid down that Successful

Bidder does not acquire any vested right in law enforcing the auction. In

paragraph 13, 15 and 17, following has been laid down:

"13. In the instant case, Respondent No 1, the sole bidder on 20 July 2021, had placed its bid at the reserve price. For the reasons as stated supra, the learned Liquidator invoked the provisions contained in Clause 3(k) of the sale auction notice dated 28 June 2021 and decided to cancel the auction. However, the learned Adjudicating Authority failed to consider Clause 13 of the Schedule 1, to IBBI (liquidation process) Regulation 2016, which provides that on payment of the total amount, the sale shall stand completed, the Liquidator shall execute the certificate of sale deed to transfer such assets. The assets shall be delivered to him in the manner specified in terms of sale.

......

15. It is well-settled law laid down by Hon'ble Supreme Court in the catena of decisions that the successful bidder in the auction sale does not acquire any vested right in law to enforce the auction, more particularly, when the auction notice confers power on the Authority conducting the auction to cancel the auction in its discretion. Therefore, Respondent No. 1, being the highest bidder (sole) that too at the reserve price, had no vested right in law.

.........

17. An auction sale is not completed under Clause 12 merely because the person has been declared the highest bidder. Instead, the sale is concluded only on

Company Appeal (AT) (Insolvency) No. 1212-1213 of 2022 -28-

full payment of the amount envisaged under Clause 13 of Schedule 1."

30. The above Judgement fully supports the submissions of Learned

Counsel for the Respondents. In the facts of the present case, sale in favour

of the Appellant on 17th June, 2021 cannot be said to be completed. Terms

of sale required issuance of sale certificate after entire payment is made.

Present is not a case where any sale certificate was issued in favour of the

Appellant only 'letter of intent' was issued by the Appellant.

31. We thus are of the view that Adjudicating Authority did not commit

any error in passing the Impugned Order. The Impugned Order gives an

opportunity to both Appellants and Respondent-Jindal Stainless Limited

and other two bidders to participate and Adjudicating Authority has also

put condition to deposit Rs. 50 Crores by the Jindal Stainless Limited to

ensure the bona fide as a pre deposit of the Jindal Stainless Limited, we

thus do not find any good ground to interfere with the Impugned Order in

exercise of our Appellate Jurisdiction. The Appeal is dismissed. No costs.

[Justice Ashok Bhushan] Chairperson

[Dr. Alok Srivastava] Member (Technical)

[Mr. Barun Mitra] Member (Technical)

NEW DELHI, 21st October, 2022.

Basant B.

Company Appeal (AT) (Insolvency) No. 1212-1213 of 2022