State Bank Of India vs Maithan Alloys Ltd. & Ors

NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI COMPANY APPEAL (AT) (INSOLVENCY) NO.1245 - 1247 of 2019

In the matter of:

State Bank of India Stressed Assets Management Branch- II Jevandeep Building, 1st Floor, 1, Middleton street, Kolkata-700071 .....Appellant

Vs 1. Maithan Alloys Limited 9 A.J.C Bose Road, Kolkatta-700017 ...RespondentNo.1

2. Sova Electrocastimg Limited 37,Shakespeare Sarani, S.B. Towers, 3rd Floor, Kolkata-700017 .....RespondentNo.2

3. Typhoon Financial Services Limited 35,Omkar House, Near Swastik Cross Road C.G road,Navranpura, Ahmedabad- 380009 .....RespondentNo.3

4. Sonar Bangla Career Academy Pvt. Ltd 62,New Adarsh Nagar,Agorpara Ghola, North 24 Parganas, Kolkatata-700109 .... Respondent No.4

5. Mr.Samir Kumar Bhattacharya Liquidator of Impex metal & Ferro Alloys Limited 104,S.P Mukherjee Road, Sagar trade cube, Kolkata-700026 ... Respondent No.5 -2-

Present :

For Appellant : Mr.Krishnan Venugopal (Senior Advocate), Mr. Sanjay Kapur, Mr. V.M. Kanna,Mr. Harshal Narayan, Mr.Rajesh Chaubey, Ms. Pallavi Srivastava Advocates. For Respondents : Mr. Rahul Auddy (R-5), Mr. Abhijeet Sinha, Mr. Saikat Sarkar, Mr. Neeraj Kumar Gupta,(R-1) Advocates.

( 26th February, 2020)

Dr. Ashok Kumar Mishra, Technical Member

1. The Appellant M/s. State Bank of India, stressed Asset Management

Branch II Kolkata has filed an appeal under Section 61 (1) of the

Insolvency and Bankruptcy Code 2016, against the Impugned Order

dated 25th September 2019, passed in CA (IB) NO. 796/KB/2019 in CP

(IB) No. 176/KB/2018 by the Ld. National Company Law Tribunal,

Kolkata Bench. Impugned order dated 23rd October 2019 Passed in

CA(IB) No. 1366/KB/2019 in CP(IB) No. 176/KB/2018 by National

Company Law Tribunal, Kolkata Bench and impugned order dated 6th

November 2019 passed in CA(IB) No. 293/KB/2019, CA(IB) No.

1165/KB/2018, CA(IB) No. 615/KB/2019, CA(IB) No. 625/KB/2019,

Company Appeal (AT) (Insolvency) No. 1245 - 1247 of 2019 -3-

CA(IB) No. 755/KB/2019, CA(IB) No. 883/KB/2019, CA(IB) No.

957/KB/2019, CA(IB) No. 1345/KB/2019 in CP(IB) No. 176/KB/2018

by National Company Law Tribunal, Kolkata Bench.

The respondents are as follows:

Maithan Alloys Limited (R-1), Sova Electrocasting Limited (R-2),

Typhoon, Financial Services Limited (R-3), Sonar Bangla Career

Academy Pvt. Ltd. (R-4), Mr. Samir Kumar Bhattacharya

(Liquidator of Impex Metal & Ferro Alloys Limited) (R-5).

2. Out of the above Respondent No. 1 has accepted the bid of the Company

under liquidation, M/s. Impex Metal & Ferro Alloys Limited, in accordance

with law and have paid the requisite amount of EMD and other such payment in

accordance with the terms and conditions of auction/with the approval of

NCLT. The liquidator is Respondent No. 5, Mr. Samir Kumar Bhattacharya,

liquidator of Impex Metal & Ferro Alloys Limited Kolkata.

The appellant has prayed for the following reliefs:

a) To set aside the impugned order dated 25.09.2019 passed in CA

(IB) NO. 796/KB/2019 in CP (IB) No. 176/KB/2018 by the

National Company Law Tribunal, Kolkata Bench.

Company Appeal (AT) (Insolvency) No. 1245 - 1247 of 2019 -4-

b) To set aside the impugned order dated 23.10.2019 passed in

CA(IB) No. 1366/KB/2019 in CP(IB) No. 176/KB/2018 by

National Company Law Tribunal, Kolkata Bench.

c) To set aside the impugned order dated 06.11.2019 passed in

CA(IB) No. 293/KB/2019, CA(IB) No. 1165/KB/2018, CA(IB)

No. 615/KB/2019, CA(IB) No. 625/KB/2019, CA(IB) No.

755/KB/2019, CA(IB) No. 883/KB/2019, CA(IB) No.

957/KB/2019, CA(IB) No. 1345/KB/2019 in CP(IB) No.

176/KB/2018 by National Company Law Tribunal, Kolkata Bench.

d) Pass an order directing the 1st Respondent to complete the sale

transaction by paying the balance Sale Consideration;

e) Pass an order imposing heavy penalty of Rs. 17,06,25,000/- being

25% of the bid amount upon Respondent Nos. 2 to 4 for derailing

and delaying the sale proceedings conducted by the 5 th

Respondent/Liquidator.

f) To pass ad interim ex-parte orders in terms of prayer (a), (b), (c),

(d) & (e) may be granted;

g) Pass such other orders as this Hon'ble Appellate Tribunal may

deem fit in the facts and circumstances of the case and thus render

justice.

Company Appeal (AT) (Insolvency) No. 1245 - 1247 of 2019 -5-

3. The Appellant is the Financial Creditor of the Corporate Debtor which is

under liquidation. On account of Corporate Insolvency Resolution Process

having failed the NCLT directed the liquidation of the Corporate Debtor to sell

the Corporate Debtor as a going concern. The liquidator pushed e-auction notice

for Going Concern Sale(GCS),calling for bids on 27th May, 2019 and the terms

and conditions of bid e-auction here as follows;

The E-auction process for sale of Corporate Debtor as a going

concerns shall be completed in following steps, brief of which is

mentioned here under:

a) Submission of EoI by Prospective Bidder(s) [hereinafter

referred to as PB]

b) Submission of Confidentiality undertaking by PB in

specified format.

c) Submission of Eligibility undertaking by PB in specified

format.

d) Site Visit by the PB.

e) Submission of EMD of 10% of the reserve price in the form

of NEFT/RTGS by interested PB.

Account Name: Impex Metal & Ferro Alloys Limited (in

liquidation)

Company Appeal (AT) (Insolvency) No. 1245 - 1247 of 2019 -6-

Account No.: 37593815470

Bank Name: State Bank of India

IFSC Code: SBIN0001936

Branch: IFB KOLKATA

f) Generation of User Id of the PB concerned for participation

in E-Auction through designated service provider after submission

of KYC document and EMD.

g) Bidding by PB through designated e-auction platform on the

appointed day.

Pre-bid qualification: Technical & Financial

EOI would be subject to evaluation on various Technical

Parameters e.g. Consolidated group revenue and/or Assets under

Management (AUM) in the same/similar activity and various

Financial Parameters e.g. Consolidated Group Net Worth and/or

Funds available for deployment including the following:

In case of body Corporates:

Private/Public Limited Company, LLP, Body Corporate whether

incorporated in India or outside India, with minimum Tangible Net

Worth (TNW) of INR 30.00 Crores (Rupees Thirty Crore only) as

Company Appeal (AT) (Insolvency) No. 1245 - 1247 of 2019 -7-

per The Companies Act, 2013) in the immediately preceding

completed financial year.

In case of Financial Institutions (FI)/Funds/Private Equity (PE)

Investors/Non-banking financial company (NBFC**)/Any other

applicant:

Minimum Asset Under Management (AUM) of INR 500.00 Crores

(Rupees Five Crore only) in the immediately preceding completed

financial year, OR

*FI as defined under Section 45-I(c) of RBI Act

**NBFC as defined under Section 45-I(f) of RBI Act

Note:

1. The aforesaid financial parameters to be certified by

Auditor/Independent Chartered Accountant

2. Management shall also certify the same in addition to

submission of supporting documents.

In case of bidding as a consortium:

Lead member must hold at least 51% equity in the consortium. All

other members would need to have a minimum stake of 20% each

in the consortium.

Company Appeal (AT) (Insolvency) No. 1245 - 1247 of 2019 -8-

In case the consortium is body corporate, Tangible net worth

(TNW) of consortium shall be calculated as weighted average of

individual member's INW (value of negative TNW members shall

be considered as Nil).

In case the consortium is of FIs/Funds/PE Investors/NBFCs/Any

other applicants the minimum AUM of consortium shall be

calculated as weighted average of individual member's AUM OR

Committed funds available for investment/deployment in Indian

companies shall be calculated as weighted average of individual

member's committed fund to investment/deployment in Indian

companies.

No Change in lead member or any member whose financials have

been used to meet the criteria set out herein shall be permitted after

the last date for submission of EoIs.

The Prospective Bidder shall bear the applicable stamp

duties/additional stamp duty/ transfer charge, fees, GST etc. and all

the statutory/non-statutory dues, taxes, rates, assessment charges,

fees, etc. owing to anybody to get it transferred in its own name.

Company Appeal (AT) (Insolvency) No. 1245 - 1247 of 2019 -9-

It shall be the responsibility of the interested bidder to inspect the

property at their own expenses and satisfy themselves about the

property before submission of the bid.

If any offer is received within the last 5 minutes of closure time, the

bidding time will be extended automatically by another 5 minutes

and if no higher bid is received within the extended 5 minutes, the

auction will automatically get closed at the extended 5 minutes.

Upon confirmation of sale the successful bidder (purchaser) shall

Deposit 25% of sale price (including EMD) in 7 days and the

balance sale consideration of 75% be paid within 30 days of sale If

the purchaser fails to pay amounts in time the amounts so far

deposited will be forfeited. The property shall be put to re-auction

and the defaulting bidder shall have no claim/right in respect of

property/amount deposited.

The prospective qualified bidders may avail online training on e-

auction from www.ncltauction.auctiontiger.net prior to the date of

e-Auction. Neither the liquidator nor

www.ncltauction.auctiontiger.net will be held responsible for any

Internet network problem/power failure/ any other technical

lapses/failure etc. In order to ward off such contingent situation the

Company Appeal (AT) (Insolvency) No. 1245 - 1247 of 2019 -10-

interested bidders are requested to ensure that they are technically

well equipped with adequate power back-up etc. for successfully

participating in the e-Auction event.

The sale shall be subject to provisions of IBC 2016 and regulation

of insolvency and bankruptcy board of India (Liquidation process)

regulation 2016.

4. The bid was notified by liquidator on 10.05.2019 originally as first bid

and the reserve price fixed was Rs. 80 Cr. but there was no response to the bid

as a result of which second bid dated 27.05.2019, was notified with reduced

value of Rs. 68 Cr. in which only one bidder declared successfully, who is

Respondent No. 1/ Maithan Alloys Limited and on 10th June, 2019 M/s.

Maithan Alloys Limited was declared the successful bidder and in compliance

with the terms and conditions and deposited the requisite amount during June,

2019. It was submitted that on 3rd July 2019 Respondent No. 2 to 4 forming a

consortium challenged the e-auction in which the above said bidder i.e M/s

Maithan Alloys Limited declared successfully and paid the requisite amount.

5. The Appellant had granted credit facility/loans to the Corporate Debtor

and an amount of Rs. 469.29 Cr. approximately remained outstanding as on

31.12.2017. The Financial Creditor that is SBI filed an application under

Company Appeal (AT) (Insolvency) No. 1245 - 1247 of 2019 -11- Section 7 of the IBC and the same was admitted by NCLT on 09.03.2018 and

Corporate Insolvency Resolution Process was initiated.

6. The Resolution Professional as C.O.C made all efforts till February 2019

to affect resolution of the Corporate Debtor within the frame work of IBC.

7. NCLT also extended time on a few occasions in order to achieve

resolution of the Corporate Debtor. However no resolution could be found and

therefore NCLT vide its order dated 12.02.2019 directed liquidation of the

Corporate Debtor as a going concern and appointed R-5 as the liquidator.

8. The liquidator called for bid for e-auction in newspaper on 10.05.2019.

The reserve price was fixed at Rs. 80 Cr. The detailed terms and conditions of

the auction sale was also published. However, no response was received from

any legible bidder pursuant to the above notice and fresh e-auction notice was

published on 27th/28th May, 2019 by reducing the Reserve Price of the assets of

the Corporate Debtor to Rs. 68 Cr.

9. In this e-auction notice Respondent No. 1/Maithan Alloys Limited

offered to purchase the Corporate Debtor for an amount or Rs. 68 Cr. and

deposited an amount of Rs. 6.84 Cr. on 10.06.2019 and thereafter an amount of

Rs. 10.26 Cr. on 19.06.2019 and thereby completed 25% of total price in

accordance with the terms and conditions of auction sale.

Company Appeal (AT) (Insolvency) No. 1245 - 1247 of 2019 -12-

10. Respondent No. 2 to 4 had not even participated in public auction filed

C.A (IB) No. 796/KB/2019 before the NCLT Kolkata. Despite several

opportunities granted by the liquidator to submit documents Qua the

Consortium requirements and to meet the legible requirements R-2 to R-4 never

submitted the same. The R-2 to R-4 across the Bar offered a price of Rs. 70/-

Cr. and thereafter filed a detailed Affidavit dated 03.09.2019 that they will pay

the amounts as follows;

I. 10% for the offered price Rs. 70 Cr. will be paid immediately upon

acceptance of bid no.

II. 15% of the offered amount that is Rs. 10.50 Cr. within a period of one

month

III. And balance 75% of the offered amount will be paid within 90 days from

the date of acceptance of the offer.

11. The Respondents R-2 to R-4 further requested the Tribunal that the

liquidator may be directed to hand over the assets and overall affairs of the

Corporate Debtor to them as a going concern. In the meantime as per the Order

Sheet of NCLT Kolkata on 25.09.2019 vide Para 4 the M/s. Fairo Alloy Ltd i.e

R-1 made a statement across the Bar that the successful bidder decided to

withdraw his offer and purchase of the Corporate Debtor and requested NCLT

Kolkata to permit them to withdraw from the process. NCLT Kolkata held on

Company Appeal (AT) (Insolvency) No. 1245 - 1247 of 2019 -13-

25.09.2019 that this offer of finance bid of Rs.70 cr is in tune with the objective

of IBC that is "Maximisation of the Value of Assets of the Corporate Debtor"

and accordingly passed the following order:

I. "The Liquidator to accept bid of applicants/Sova

Elecrocasting Limited, M/s Typhoon Financial Services

Limited and M/s Sonar Bangla Career Academy Private

Limited for sum of Rs. 70,00,00,000/- (Rupees seventy

crores) as a sale price of the Corporate Debtor, Impex Metal

and Ferro Alloys Limited.

II. The applicants shall make payment of bid amount in

following manner:-

a) 15% of the offered amount being sum of Rs. 70,00,00,000/-

(Rupees Seventy Crores only) to be paid by the applicant

immediately upon acceptance of offer by the Liquidator.

b) 20% of the offered amount (mentioned above) be paid within one

months thereafter; and

c) The balance 65% of the offered amount shall be paid by the

Applicant to the Liquidator within a period of 90 days from the

date of acceptance of the offer.

Company Appeal (AT) (Insolvency) No. 1245 - 1247 of 2019 -14-

III. Upon receipt of the entire bid amount, the Liquidator to hand

over possession and custody of all assets of the Corporate

Debtor along with the managements "as is and where is

basis and file final report"

IV. In case the applicants commit default in making payment as

per time schedule mentioned above, their bid shall be treated

as a cancelled and any amount deposited by them against the

bid shall stand forfeited.

V. CA(IB) No. 796/KB/2019 is disposed.

VI. Other pending applications in this matter are listed for

further consideration on 26.11.2019."

12. Thereafter on 23.10.2019 NCLT passed following order:

1) "Vide order dated 25.09.2019, we approved and accepted bid of M/s Sova

Electricals Limited, M/s. Typhoon Finance Services Pvt. Ltd. and M/s.

Sonar Bangla Career Academy Private Limited for sum of Rs. 70 Crores

and directed the Liquidator to sell the Corporate Debtor to them. We

directed the Liquidator to hand over possession and custody of all assets

of the Corporate Debtor along with managements "as is and where is

basis and file final report" to the successful bidders upon receipt of the

entire bid amount. This application is filed by the successful bidders for

Company Appeal (AT) (Insolvency) No. 1245 - 1247 of 2019 -15-

some clarification and additional prayer to allow them to carry some

initial work to make the Corporate Debtor operational.

2) We heard Ld. Counsel for the successful bidders, Ld. Counsel appearing

for State Bank of India and Ld. Liquidator.

3) The applicants seek direction to the Liquidator to allow them to start the

work so that the Corporate Debtor can be made operational upon their

paying first instalment. Ld. Counsel for State Bank of India objected this

arrangement only on the ground that the successful bidders did not pay

even first instalment as per time schedule.

4) Ld. Liquidator agreed the above arrangements subject to condition that

successful bidders pay first instalment within 3 days.

5) We have accepted and approved bid of the applicant. They were only

bidders and they have offered an amount more than the liquidation value

of the Corporate Debtor. We also consider the fact that the Corporate

Debtor must be made operational so that some people may get

employment.

6) While directing the successful bidders to pay first instalment to the

Liquidator within 3 days, we further direct the Liquidator to allow the

successful bidders to start the work under his supervision so that the

Corporate Debtor can be made functional.

Company Appeal (AT) (Insolvency) No. 1245 - 1247 of 2019 -16-

7) It is made clear that above arrangement is made for convenience of the

successful bidders. But we make it clear that custody and possession of

all assets of the Corporate Debtor shall remain with the Liquidator as per

order dated 25.09.2019.

8) With above clarification, CA (IB) No.1366/KB/2019 stand disposed off."

13. Vide 6.11.2019 NCLT Kolkata Bench Passed following order:

"Ld. Liquidator appeared Ld. Counsel for the Liquidator appeared

d. Counsel for SBI appeared Ld. Counsel for CA (IB) No.

293/KB/2019 appeared ld counsel for CA (IB) No 1345/KB/2019

appeared Ld. Counsel for CA for CA (IB) No 1165/KB/2018

appeared Ld. Counsel for CA (IB) No. 1366/KB/2019 appeared.

Ld. Counsel for Maithan Alloys Ltd. appeared. Ld. Counsel for

TUF Metallurgical Pvt. Ltd. & Million Link (China) Investment

Ltd. appeared. Ld. Counsel for Mortex (India) appeared.

Heard Ld. Counsel for the earlier Successful Bidder, namely

Maithan Alloys Ltd. Heard Ld. Liquidator. Heard Ld. Counsel for

the Financial Creditor i.e.. SBI.

In this proceeding, on 29.04.2019, an order of liquidation of the

Corporate Debtor is already passed. Liquidator was directed to sell

the Corporate Debtor as a going concern. It appears from record

Company Appeal (AT) (Insolvency) No. 1245 - 1247 of 2019 -17-

that during process of liquidation, the Liquidator received one bid

from M/s. Maithan Alloys Limited. In pursuant to the public notice,

the said bidder had given offer of Rs. 68 Crore. Bid was accepted

by the Liquidator and that bidder deposited sum of Rs.

17,06,25,000 (Rupees Seventeen Crore Six Lakh Twenty Five

Thousand Only) i.e. 25% of the total price with the Liquidator.

It is further seen from the record that when the Liquidator was in

process to sell the Corporate Debtor to M/s. Maithan Alloys

Limited, an application bearing no. CA(IB) No.796/KB/2019 is

filed by M/s Sova Electricals Limited, Typhoon Financial Services

Limited and Sonar Bangla Career Academy Private

Limited jointly challenging the liquidation process on the ground

that the Liquidator did not give them opportunity to bid. Hence, on

03.07.2019, this Adjudicating Authority directed the Liquidator and

Successful Bidder i.e. M/s Maithan Alloys Ltd. to file their say. We

also directed M/s. Maithan Alloys Limited not to deposit further

sum till the application is being disposed off.

On 27.08.2019, Ld. Counsel for M/s Maithan Alloys Ltd. made

statement that her client does not wish to contest the application

filed by the intervener i.e. M/s. Sova Electricals Limited, Typhoon

Company Appeal (AT) (Insolvency) No. 1245 - 1247 of 2019 -18-

Financial Services Limited and Sonar Bangla Career Academy

Private Limited jointly challenging the auction and they may be

permitted to withdraw from the process and the Liquidator may be

directed to refund its amount. Upon this, we directed the applicant

in CA (IB) No.796/KB/2019 to give offer quoting bid price on

affidavit and modality of the payment. Accordingly, on 07.09.2019,

the applicant gave offer of Rs. 70 Crore. Since their offer was more

than the offer by earlier successful bidder and it was more than the

liquidation value of the Corporate Debtor, we accepted the offer

directing the Liquidator to sell the Corporate Debtor to the

applicants. We also observed that M/s. Maithan Alloys Ltd. is

allowed to withdraw from the process.

Ld. Counsel for Maithan Alloys Ltd. brought to our notice that

thereafter on 30.09.2019, they requested the Liquidator to return

the amount paid by it. However, the Liquidator did not consider

their prayer. Ld. Counsel for the Liquidator submitted that since

other bidders namely, M/s. Sova Electricals Limited, Typhoon

Financial Services Limited and Sonar Bangla Career Academy

Private Limited did not comply order of payment, Maithan Alloys

Ltd. may not be allowed to withdraw from the process. Ld. Counsel

Company Appeal (AT) (Insolvency) No. 1245 - 1247 of 2019 -19-

for State Bank of India also submitted that the contract between the

Liquidator and Maithan Alloys Ltd. may not be cancelled.

In our considered opinion, we have already permitted M/s. Maithan

Alloys Ltd. to withdraw from the process because we have

accepted some good offer from the applicant in

CA(IB)No.796/KB/2019. If the applicants in

CA(IB)No.796/KB/2019 are not complying the order passed by

this Authority, they shall be dealt with separately but only for this

reason the Liquidator cannot withhold the amount deposited by

Maithan Alloys Ltd.

Hence, we direct the Liquidator to pay back sum of Rs.

17,06,25,000/- (Rupees Seventeen Crore Six Lakh Twenty Five

Thousand Only) along with interest agreed thereon within 7 days

from today.

It is informed at bar that SBI also filed some more CA. That CA

and all other pending CAs to be placed together for further

consideration on 25.11.2019."

14. It is submitted by the Appellant:

Company Appeal (AT) (Insolvency) No. 1245 - 1247 of 2019 -20-

a) No allegations of mala fide or arbitrariness on the part of the

Liquidator has either been alleged by R2 - R4 or noted by

the NCLT.

b) In the absence of any provision either under the IBC or the

Liquidation Regulations enabling the NCLT to interfere with

a public auction by the Liquidator, the NCLT totally erred in

interfering with the sale which stood concluded in favour of

the 1st Respondent.

c) It is submitted, that IBBI (Liquidation Process)

Regulations, 2016 contemplate that only when the sale is a

private sale permission of Adjudicating Authority is needed

under certain circumstances.

d) In the instant case when sale is by way of auction there was

no scope for interference by Ld. Tribunal.

e) In any event, the NCLT ought not to have entertained an

offer by R2 - R4 made orally before the Tribunal

overlooking that the law mandates making and acceptance of

offers only by public auction. (See Reg. 33 (1) of the IBBI

(Liquidation Process) Regulations, 2016).

Company Appeal (AT) (Insolvency) No. 1245 - 1247 of 2019 -21-

f) The filing of objections by R2 - R4 is clearly no ground for

the 1st Respondent to withdraw. The only consequence of a

withdrawal from the bid is that the amounts deposited by the

Bidder would be forfeited.

g) As per the Appellant if he do not set aside the order which

would put a wrong and dangerous persistent and sanctity of

public auction could be seriously jeopardise the provisions of

the IBC and regulation made there under would be rendered

ineffective. If such intervention in a public auction is

allowed.

15. The Appellant further submits and cited certain judgment to substantiate

their claims which are enumerated hereunder:

I. In Valji Khimji & Company Vs. Official Liquidator,(2008) 9 SCC,

The Hon'ble Supreme Court held us under:

"11. It may be noted that auction-sale was done after adequate publicity

in well-known newspapers. Hence,if anyone wanted to make a bid in the

auction he should have participated in the said auction and make his bid...

However,in our opinion,entertaining objections after the sale is confirmed should not ordinarily be allowed except on very limited grounds like fraud,otherwise no auction-sale will ever be completed."

Company Appeal (AT) (Insolvency) No. 1245 - 1247 of 2019 -22-

II. In VedicaProcon Private Limited Vs. Balleshwar Greens Private

Limited,(2015) 10 SCC 94, The Supreme Court Held:

"40. In other words, in Navalkha case, this Court only recognized the existence of the discretion in the Company Court either to accept or reject the highest bid before an order of confirmation of the sale is made. This Court also emphasized that it is equally a well-settled principle that once the Company Court recorded its conclusion that the price is adequate, subsequent higher offer cannot be a ground for refusing confirmation"

47. "A survey of the abovementioned judgments relied upon by the first respondent does not indicate that this Court has ever laid down a principle that whenever a higher offer is received in respect of the sale of the property of a company in liquidation"

In para51, it was made clear by Hon'ble Supreme Court that except on the grounds of fraud and irregularity, there cannot be an intervention in public auction. Futhermore, a successful bidder contractual obligation arising out of the offer made by the bidder and accepted by the liquidator. III. In Datta Vs. The state of Maharashtra, (2020) 1 BomCR 392, A Division of the Hon'ble Bombay High Court held as under:

"In view of the law laid down in the case of VedicaProcon Pvt Ltd. (supra) and above referred principles and safeguards emerged from various judgements, we have no hesitation to hold that if all the said principles and safeguard are satisfied and if there is nothing to suggests any collusion or fraud, the auction proceeding may not be reopened only on the ground that subsequent to the finalization slightly higher offer is received, than the auctioned price to the sale of

Company Appeal (AT) (Insolvency) No. 1245 - 1247 of 2019 -23-

the property in the liquidation. Thus, in view of the fact that except allegation of fraud and collusion, no evidence in that regard brought on by any of the petitioners, we are of the considered view that this is not a fit case to reopen the auction proceedings only because slightly higher offer is made by one of the petitioner than the auction price"

IV. Recently, this Hon'ble Appellate Tribunal, In Manjeet commercial LLP

Vs. SPM Auto Pvt. Ltd., Company Appeal (AT) (Insolvency) No. 732

of 2019, Decided on 05.09.2019, Upheld the action of the liquidator to

inter alias reduce the reserve Price publicity and reducing the time period

on allegations being levelled by an objector .This Hon'ble Appellate

Tribunal held us under:

"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."

V. The power to restore status quo ante was addressed by the Division Bench of the Hon'ble Bombay High Court in Anand jayant more Vs. Bank of India,2009 SCC Online BOm 1565, as under:

"13...Nevertheless, the petitioner in the main proceedings as well as subsequent amended reliefs, have questioned the validity of the action

Company Appeal (AT) (Insolvency) No. 1245 - 1247 of 2019 -24-

sorted to by the respondent bank under section 13(4) of the act. If the said challenge succeeds, the Debt Recovery Tribunal would be competent and obliged to grant such reliefs as may be necessary even to the extent of ordering status-quo ante to be resorted."

16. The contention that the Appellant Bank has no locus to file the Appeal is

without any merit because as per section 61(1) of the IBC which starts

with a non-obstante clause, any person aggrieved by the order passed by

the Adjudicating Authority is entitled to file an appeal. The Appellant

Bank being the lead Financial Creditor of the consortium of banks of the

Corporate Debtor, who had opposed the intervention by NCLT in the

auction, is well within its rights to approach this Hon'ble Appellate

Tribunal.

17. The contention that time was of the essence and the sale not having

concluded in 30 days the 1st Respondent could walk out of the auction is

wholly untenable for the reason that:-

a) The reference to the 30 days period in the terms & conditions is in

respect of the obligation of 1st Respondent to make the payments

within 30 days and not as regards the obligation of the liquidator to

conclude the sale in the said period.

Company Appeal (AT) (Insolvency) No. 1245 - 1247 of 2019 -25-

b) The delay, if any was due to the erroneous approach of the NCLT to

entertain an oral offer of R2 - R4 made in Court and the same

cannot be a ground to completely overlook the public auction

conducted in accordance with law.

18. However, the Respondent No.1 have made following submissions:

a) That a Financial Creditor of Corporate Debtor was no way

involved during (CIRP) Corporate Insolvency Resolution Process

and has no locus standi to file the present appeal. The respondent

has also made following submissions:-

b) Bid was submitted by R1 on 10.06.2019 along with 10% of the bid

amount and a declaration that amounts paid by R1 to would stand

forfeited, if R1 failed to comply with the terms of sale in relation to

the assets.

c) R5 informed R1 on 12.06.2019 that R1 was declared the highest

bidder. On 17.06.2019, R5 requested R1 to deposit 25% of the bid

amount and R1 accordingly deposited the Advance on 18.06.2019

and intimated the same to R5 and R5 acknowledged receipt of the

Advance from R1 on 20.06.2019.

d) Respondents 2 - 4 filed an application bearing CA(IB) No.

796/KB/2019 before the Adjudicating Authority (A4) inter alia

Company Appeal (AT) (Insolvency) No. 1245 - 1247 of 2019 -26-

challenging the proposed auction sale. AA passed ad-interim orders

directing R5 not to part with possession on 26.06.2019. On

03.07.2019, AA passed a specific order of injunction restraining

R1 from making further payments to R5 in respect of the proposed

sale of the Assets. The Terms made it clear that the proposed sale

was to be completed within a period of 30 days.

e) On 01.08.2018, much after expiry of 30 days (from acceptance of

bid), R1 made a clear request before the AA to withdraw from the

proposed sale. On 27.08.2019, AA while referring to the request

made by R1 merely directed that such request would be considered

on a later date.

f) The Application filed by R2 - R4 was thereafter considered the AA

on 5 occasions. However, SBI had at no stage objected to the

request of R1to withdraw from the proposed auction sale. Neither

did SBI take the stand that R2 - R4 should not be allowed to derail

the (then) proposed sale of Assets to R1. In fact, SBI moved before

this Appellate Tribunal only when the AA passed consequential

directions to refund the Advance to R1. No Sale Certificate was

issued to R1 for the proposed auction sale in terms of Schedule - I

of the Insolvency and Bankruptcy Code (Liquidation Process)

Company Appeal (AT) (Insolvency) No. 1245 - 1247 of 2019 -27-

Regulations, 2016. (Liquidation Regulations) It is clear that SBI's

attempt, is to now seek performance of a contract that never came

into existence, merely because SBI and R5 have been unable to

hold R2 - R4 to the "better" offer.

19. As mentioned above, on 27.08.2019, R1 reiterated its request to withdraw

from the auction process. R2 - R4 offered before the AA to improve upon the

offer made by R1. AA therefore directed R2 - R4 to file an affidavit stating

the modalities of payment for purchase of the Assets. On 03.09.2019, AA

directed R2 - R4 to reconsider their proposal by making it workable so that

the CD could be sold as a going concern. It is after the order passed on

27.08.2019 it was clear that R1 was replaced by R2 - R4 as the successful

bidder and R1 was the erstwhile successful bidder. The order passed on

27.08.2019 was not challenged by either SBI or R5. Neither did anyone seek

any recall of the order. That order has attained finality.

20. On 25.09.2019, the AA passed a specific order directing R1 to withdraw

from the auction process and accepted the higher bid proposed by R2 - R4.

On 23.10.2019, AA granted an extension of 3 days to R2 - R4 for making

payment of the bid amount and also directed R5 to allow R2 - R4 to start

work qua the CD; and on 06.11.2019, the AA directed R5 to refund the

Advance paid by R1.

Company Appeal (AT) (Insolvency) No. 1245 - 1247 of 2019 -28-

21. Liquidator has in compliance of the order dated 06.11.2019 passed by the

AA has refunded the Advance. It follows from the above that SBI did not

even object to either:

a. The proposed sale in favour of R1 expiring by efflux of time, or

b. The direction of completing a sale in favour of R2 - R4.

22. Subsequently, the AA has on 26.11.2019 directed R5 to initiate fresh

auction process. Such direction for re-auction has also not been challenged.

23. The Respondent have also challenged the appeal as not maintainable on

the following ground:-

a) SBI's case is that AA had no jurisdiction to direct R5 to

return the Advance paid by R1. The underlying basis for

such submission is that the proposed sale was a matter

between R5 and a third party (R1). On that basis, the

Appellant itself cannot contend it has any locus.

b) CD is now represented by R5. The only entitlement of SBI

during the process of liquidation is to make a claim before

R5 in accordance with IBC. During the thirty day period as

provided under the Terms, no objection was made to the

request for withdrawal of R1, nor did SBI seek any relief of

completing the sale.

Company Appeal (AT) (Insolvency) No. 1245 - 1247 of 2019 -29-

c) SBI has taken the stand that R5 had objected to the

application filed by R2 - R4 under Section 60 (5) (c) IBC on

behalf of the Committee of Creditors (CoC) does not assist

SBI. Firstly, this stand is incorrect factually because there is

no CoC at the stage of liquidation. Secondly, jurisdiction

cannot be created by consent or by waiver. Third, SBI cannot

allege to be an aggrieved party in the facts as above.

d) Even assuming the appeal is maintainable, no direction can

be sought against R1 at the instance of SBI. It is well settled

that even a court cannot create a contract for sale, when on

the basis of the Terms no sale could be completed.

24. The Respondent has also submitted that relief sought by Appellant

beyond their jurisdiction:

a) It appears that SBI is keen to ensure that a non existing

contract is enforced/thrust on R1. SBI is entitled to its

remedies against R2 - R4 who, as is clear, are now

absconding. Under the Terms of the auction sale (Pg. 22 - 23

Reply), R1 was required to submit a declaration (Pg. 38 - 40

Appeal) alongwith the bid which contained the following

conditions:

Company Appeal (AT) (Insolvency) No. 1245 - 1247 of 2019 -30-

i. R1 was required to submit an Advance against the proposed

auction sale which was subject to confirmation of AA.

ii. The balance 75% bid amount was to be deposited within 30 days.

iii. The Advance paid by Respondent No. 1 would stand forfeited, in

the event R1 failed to pay the remainder 75% amounts within the

stipulated timeframe.

b) The only criteria for forfeiture of Advance under the

declaration furnished by R1 were:

i. Failure to act upon the Terms of the auction sale, and

ii. Failure to complete the transaction within the time limit specified.

None of these are fulfilled in the present case.

It was always the understanding between R5 and R1 that the

proposed auction sale was subject to the approval of the AA which

is also evident from R5's email dated 20.06.2019 to R1. Since, the

conditions stipulated under the Terms of the auction sale were

never completed and no rights accrued under the Terms of the

auction sale and/or from the said declaration. Therefore no specific

performance of a non-existing contract can be sought for by SBI

against R1. (Section 19 & 20 of The specific relief Act, 1963)

Company Appeal (AT) (Insolvency) No. 1245 - 1247 of 2019 -31-

c) Furthermore, SBI has failed to show anywhere from the

records that R1 has failed to honour any of its obligation(s)

towards deposit of the Advance within the stipulated

timelines as set by R5. In fact the Appellant had made

payment of the Advance one day before expiry of time i.e.,

on 18.06.2019. The Appellant was however compelled to

stop making further payment upon direction from the AA

vide order dated 03.07.2019

d) As stated herein above, that time was of the essence of the

auction process. Therefore, R1 cannot be made a scapegoat

for no-objection being raised by SBI, at the appropriate

stage, to the interference in the alleged concluded sale in

favour of R1; despite being aware of the same. The limited

objection raised by R5 and SBI before the AA was regarding

the non-payment of Advance and/or the bid amount by R2 -

R4. No allegation of misconduct/non-compliance was ever

levied against R1.

e) In any event, neither the AA nor this Appellate Tribunal is a

civil court; therefore the relief for specific performance

sought for by the SBI cannot be granted.

Company Appeal (AT) (Insolvency) No. 1245 - 1247 of 2019 -32-

f) In addition to the above, law enables an auction bidder to

withdraw, before the conclusion of auction sale, with the

permission of the Court. R1, in the instant case, has therefore

acted in accordance with law and submitted to the AA its

intention to withdraw from the auction sale prior to its

conclusion. R1 only withdrew from the proposed auction

sale only after the request for withdrawal was accepted by

the AA.3

25. Some of the judgments cited by Respondent are enumerated hereunder:

A. COURT CANNOT MODIFY/REWRITE THE TERMS OF THE

CONTRACT:

i. IN Puravankara Projects ltd.v. Hotel Venus International,(2007)

10 scc 33 at page 45

"23.. There is a vital distinction between the administrative and contractual law decisions. There is a vital distinction between the administrative and contractual law decisions." "32.. It was stated in no uncertain terms that duty to act fairly which is sought to be imported into a contract to modify and/or alter its terms and/or to create an obligation upon the State Government which is not there in the contract is not covered by any doctrine of fairness or reasonableness. The duty to act fairly and reasonably is a doctrine developed in administrative law field to ensure the rule of law and to prevent failure of justice when the action is administrative in nature."

Company Appeal (AT) (Insolvency) No. 1245 - 1247 of 2019 -33-

"33.. Just as the principles of natural justice ensure fair decision where function is quasi-judicial the doctrine of fairness is evolved to ensure fair action when the function is administrative. But the said principle cannot be invoked to amend, alter or vary the expressed terms of the contract between the parties." ii. Satyanarayana Construction co. Vs. Union of india,(2011)15 SCC 101 : (2014) 2 SCC (Civ)252 at page 104:

"11 Thus, as per the contract, the contractor was to be paid for cutting the earth and sectioning to profile etc. @ Rs. 110 per cubic meter. There may be some merit in the contention of Mr. Tandale that contractor was required to spend huge amount on the rock blasting work but, in our view, once the rate had been fixed in the contract for a particular work, the contractor was not entitled to claim additional amount merely because he had to spend more for carrying out such work. The whole exercise undertaken by the Arbitrator in determining the rate for the work at serial No. 3 of Schedule 'A' was beyond his competence and authority. It was not open to the Arbitrator to rewrite the terms of the contract and award the contractor a higher rate for the work for which rate was already fixed in the contract. The Arbitrator having exceeded his authority and power, the High Court cannot be said to have committed any error in upsetting the Award passed by the Arbitrator with regard to claim No. 4"

"12. We, thus, find that the High Court did not commit any error in upsetting the Award of the Arbitrator with regard to claim No. 4 in the statement of claim."

Company Appeal (AT) (Insolvency) No. 1245 - 1247 of 2019 -34-

B. ADJUDICATING AUTHORITY OR APPELLATE AUTHORITY IS NOT A CIVIL COURT:

I. Embassy Property Developments pvt.ltd. vs. State of Karnataka & ors.2019 SCC online SC 1542 "29... The NCLT is not even a Civil Court, which has jurisdiction by virtue of Section 9 of the Code of Civil Procedure to try all suits of a civil nature excepting suits, of which their cognizance is either expressly or impliedly barred. Therefore NCLT can exercise only such powers within the contours of jurisdiction as prescribed by the statute, the law in respect of which, it is called upon to administer. Hence, let us now see the jurisdiction and powers conferred upon NCLT."

C. WHEN AUCTION BIDDER IS PERMITTED TO WITHDRAW:

I. Narendra Dada Agro Industries Ltd. In re,2006 scc online Bom 7 : (2006) 3 Mah LJ 467 2006) 5 bom 799 at page 479

"19. From the above, it is clear that the bid is to be accepted finally by this Court. The Official Liquidator, therefore, rightly retained two consecutive highest bidders i.e. Bhaskar Exxols Ltd. and Sankh Impex for placing their matters/offers before this Court. The offers were of Rs. 4.87 Crores and Rs. 4.85 Crores respectively. Both these bidders accepted the terms and conditions including clause No. 10 and clause No. 28 above and also deposited earnest money of Rs. 6.5 lakhs each to show their bona fides. Having participated in the auction, both these bidders could not have withdrawn/retracted from the process or, bid. The auction was being conducted as per directions and under the supervision of this Court and unilaterally, Bhaskar Exxols Ltd. and Sankh Impex could not have

Company Appeal (AT) (Insolvency) No. 1245 - 1247 of 2019 -35-

retracted their bids and withdrawn from auction process. Their bids were not rejected and were under the process of consideration of this Court.

Merely because two new bids were received or negotiations were held, that did not mean that their bids were rejected. The terms and conditions in this case cannot and does not prescribe any time limit, but here, in any case, both the bidders raised their bid only in negotiations on 23-6-2003 and the bids were placed for consideration of this Court in these proceedings on 3-7-2003 in a very reasonable time. Advertisements were issued by the Official liquidator on 15th/17th/18th, June only. Both these bidders could have made appropriate grievance before this Court at the time of consideration of their offers. If they wanted to retract, they could have done so after seeking permission of this Court and only if such permission was granted. Otherwise, they were duty bound to continue to participate till appropriate orders in this respect were passed by this Court. The obligation cast by "terms and conditions" is on each bidder whose offer is to be placed for consideration of this Court. The second highest bidder, therefore, cannot take shelter behind the first highest bidder. Otherwise, the very purpose of incorporating clause Nos. 6 and 8 in said terms and conditions will stand defeated. The said property was required to be re-advertised and sold by undertaking fresh exercise, expenditure and at less price. The breach of Clauses 10 and 6 above by Bhaskar Exxols Ltd. and Sankh Impex is established in the matter. Where the parties have deliberately specified the amount of Rs. 6,50,000/- as Earnest Money for each bidder and agreed to stipulation in clause No. 10 above, there can be no presumption that, at the same time, it was intended to allow the bidder responsible for the breach to give a go-by to the sum specified. Here the Clause of forfeiture is included in

Company Appeal (AT) (Insolvency) No. 1245 - 1247 of 2019 -36-

tender document only in the interest of Creditors of the Company and to avoid unnecessary delays in restoring to them their legal dues. The clause is, therefore, in the public interest. The offer made by both the bidders was subject to this condition and by paying earnest Money they also accepted it, it represents a guarantee that the contract will be fulfilled as per its terms and conditions. Said amount is part of the purchase price to be adjusted accordingly when the bid is accepted by this Court. It is liable for forfeiture when the transaction falls through by reason of the default or failure of the purchaser/bidder. Clauses 10 and 28 of the terms and conditions practically covered all situations in which the contract can fall through on account of any mistake on the part of such bidders. There is nothing to the contrary in the terms of the contract to avoid application, of forfeiture clause and hence, on default committed by the bidders, the Official Liquidator is entitled to forfeit said earnest."

26. Liquidator has made following submissions:

a) It is submitted by the Liquidator from the order dated

12.02.2019 directing liquidation of the company the same

required the company to be liquidated as a going concern

under Regulation 32 (c) of the IBBI (Liquidation Process)

Regulation, 2016. The Liquidator has endeavoured to

achieve the purpose of ensuring that the company itself sold

so as to ensure the continuance of its business after such

liquidation as well. The Liquidator has framed the terms and

Company Appeal (AT) (Insolvency) No. 1245 - 1247 of 2019 -37-

conditions of the sale so as to ensure that the bids are

received only from identified entities having certain

minimum credential. Which would be indicated of their

intention to run the business of the company and to operate

as a going concern even after the liquidation sale. So that to

ensure continuance of commercial and industrial activities

and employment of the workman engaged in such activity.

Therefore, the criteria given is just to ascertaining the

identity of the bidders. The initial auction published by him

in the reserve price for sale of the company at Rs. 80/-

Crores and provided for an earnest money deposit of Rs. 8/-

Cr. Even so this e-auction did not receive any response.

Thereafter liquidator published another e-auction in

"Business Standard" and cuts of the price from 80/- Crores

to 68/- Crores in second public announcement. The only

eligibility criteria to garb this offer is to meet the

requirement of the terms and conditions of the sale.

b) It was further submitted by the liquidator that on 10.06.2019,

he received an e-mail from one nucleus consultant

submitting a bid form though the e-mail was sent after 5 PM

Company Appeal (AT) (Insolvency) No. 1245 - 1247 of 2019 -38-

as the RTGS of the EMD was done prior to the 5 PM.

Liquidator is decided to consider the bid form. From the

perusal of the bid form it appears that the name of the bidder

was "Typhoon Financial Services Limited and Associate

Companies". The email id and contract details were given of

Typhoon Financial Services Limited however, the EMD was

paid by "One Sova Electrocasting Limited". Upon

consideration of the said email and the bid form liquidator

was not at all sure as to the who is the bidder and who were

its associates. The name of the bidder was written as

"Typhoon Financial Services Limited and Associates". The

EMD was paid by "One Sova Electrocasting" and the email

was sent by one nucleus consultant so that liquidator was not

at all certain about the identity and credential for the bidders.

It was clear that the bid was being done by consortium but

no details of the Members of the consortium as per the terms

and conditions of the auction sale. It is further submitted by

the liquidator that if the bidder is the consortium, then

expression of interest (EoI), confidentiality under taking

eligibility undertaking of each of the consortium member

Company Appeal (AT) (Insolvency) No. 1245 - 1247 of 2019 -39-

was required to be submitted. The only financial eligibility

was that a corporate bidder had to have net worth of Rs. 30

Crores and NBFC bidder AUM of Rs. 500 Crores. In present

case no document to establish the Financial Creditors of any

of the consortium member was submitted. Upon ROC

searches conducted by the liquidator it appears that Typhoon

was the NBFC whose net worth as on 31.03.2018 was only

Rs. 3,12,83,489/- and the AUM requirement for a NBFC to

submit its bid was Rs. 500/- Crores.

c) Liquidator submits that on 11.06.2019 nucleus consultants

sent mail to the liquidator and forwarded the profile of

Typhoon Financial Services Limited, eligibility Affidavit of

Typhoon and declaration by Typhoon. After liquidator

perused with documents which was submitted and found that

the bidder had not yet disclosed the basic information such

as name of the consortium members, leave aside the

supporting documents, document to show eligibility

documents in connection with confidentiality undertaking of

all consortium members. Further with regard to Typhoon the

bidder does not disclose financial eligibility document as

Company Appeal (AT) (Insolvency) No. 1245 - 1247 of 2019 -40-

stated above. Liquidator reiterated that the balance sheet of

the Typhoon which he obtained from MCA Website. It

appeared that their net worth of Rs. 500/- Crores for a

NBFC. Therefore the documents were not being disclosed

intentionally since they were not complying with the

minimum eligibility criteria. Liquidator also pursued study

of the balance sheet of the Sova Electrocast and it appears

that net worth of Sova Electrocast as on 31.03.2018 was Rs.

22.11 Crores.

d) Liquidator further submitted that it had issued three mails on

11.06.2019 to the bidder seeking clarification upon the net

worth and eligibility criteria and calling upon the bidder to

submit documents as earliest. It is also stated in the mail that

if documents have not been submitted on time then liquidator

will not permit prospective bidder to bid in the absence of

the document. In response to above mentioned mail nucleus

consultant responded back to liquidator by saying that they

have done essential requirement of submission of EMD and

informed that their group turnover is Rs. 4000 Cr. and sought

time to submit the required document and requested to

Company Appeal (AT) (Insolvency) No. 1245 - 1247 of 2019 -41-

postpone the auction by one week. In response liquidator

stated that instead of submitting net worth of bidder, they

mentioned turnover of group which is of no use. It is

submitted by the liquidator that since the bidder had failed to

provide any document for information about its financial

eligibility confidentiality undertaking 29 A compliance,

which is mandate under the Code .In spite of giving several

opportunities again liquidator sent mail on 12.06.2019 about

8 minute before the auction was supposed to commence

inform the bidder that he is not allowed to participate in the

auction. As appear from the email dated 12.06.2019 issued

another mail to liquidator informing that they complied all

requisite details and shall sent all document within 4 to 5

days and also requested to participate in the bid. As

liquidator obliged to act in accordance with the terms and

conditions of sale, liquidator was not at liberty to derogate

from the same. It was in any evident to liquidator that the

identity of the bidder was not certain, the identity of the

consortium was not certain, the identity of the members

forming the consortium was not certain, no particulars had

Company Appeal (AT) (Insolvency) No. 1245 - 1247 of 2019 -42-

been provided to their AUM or net worth as required by the

terms and conditions of sale and consequently there was no

opportunity whatsoever to independently make an

assessment of their credentials or to obtain any measure of

satisfaction with regard to their ability or intent to run the

company as a going concern. It is in these circumstances,

Liquidator was compelled to consider their bid as ineligible

to reject the same. In this context it is also relevant to note

that the approach of the said bidder, whose identity however

remained uncertain, and even at the time of making of the

bid, no consortium had in fact been formed. This was an

essential condition of participation in the bid, particularly as

the terms and conditions of sale provide that the

bidder/consortium members could not be change after the

submission of the bid.

e) It is stated by the liquidator that the bidder for the first time

after the bid has started says that Sonar Bangla is consortium

member but it appears that the bidder was searching for

consortium member in the last moment and was sending

name as and when it got any company on board. If a bidder

Company Appeal (AT) (Insolvency) No. 1245 - 1247 of 2019 -43-

and its consortium members are not in position to provide

basic information about their net worth and supporting

documents such as their balance sheet confidentiality

undertakings and 29-A undertakings in three days in spite of

several mails sent by liquidators, the same clearly conveys

the intention and seriousness and genuinity of the bidder. In

the application in one place it says Typhoon is the lead

member of the consortium and in another place it says Sonar

Bangla Academy is the lead member. It is significant that the

bidder for two days over several mail did not mention the

name of the lead member of the consortium and only after

the bidding had started and after it was disqualified for non-

submission of necessary documents, choose to mention for

the very first time that Sonar Bangla is the consortium

member and in this application for the first time described it

as the lead member. As bidder clearly failed to provide the

name of the lead member of the consortium the same speaks

volumes about the seriousness and intention of such bidders.

f) It is stated by the liquidator that in the instant case, the

successful bidder is Maithon Alloys Limited which is a

Company Appeal (AT) (Insolvency) No. 1245 - 1247 of 2019 -44-

reputated company carrying on the same business as that of

the company - In Liquidation. On the other hand, the

consortium members of the instant bidder are NBFC,

Academic Company etc and they do not even meet the

financial requirements. It may be relevant to note that said

Maithan Alloys Limited has since, in accordance with the

terms and conditions of the sale deposited 25% of the sale

price within seven days upon its confirmation as successful

bidder.

g) Maithan Alloys Limited, being in the same line of business,

has a clear demonstrable interest in running the company as

a going concern. It has, in pursuance of such interest, acted

as per the clear mandate of the terms and conditions of sale,

and satisfied all eligibility criteria set-forth for its

participation. It has, thereafter, upon being declared the

successful bidder also acted in depositing the 25% of the sale

consideration within the time provided and has also clearly

represented to me that it was in as state of readiness to

deposit the balance 75% of such sale consideration as well.

In the aforesaid facts and circumstances compelled to say

Company Appeal (AT) (Insolvency) No. 1245 - 1247 of 2019 -45-

that the application is frivolous and mala fide even the

application made after the collusion of the auction sale does

not disclose the true identity of the member of consortium or

their true net worth. The application as such deserved to be

and should be dismissed in limine.

27.As far as Respondent 2 to 4 are concerned notices on R-2 and R-3 was

served on 27.11.2019 Originally notice was issued to R-2 TO R4 on

18.11.2019 which returned as not delivered, thereafter again notice

was sent issued on 02.01.2020,10.01.2020, 22.01.2020,finally e-mail

was sent on 27.01.2020. In spite of notice getting served on R-2 and

R-3 they have not appeared on 17.12.2019, 07.01.2020, 21.01.2020,

30.01.2020, 31.01.2020 and 04.02.2020. However R-4 has not

appeared inspite of getting email notice 30.01.2020, 31.01.2020 and

04.02.2020.Inspite of giving all these opportunities since none has

appeared accordingly the case was progressed ex parte.

28.We have gone through the various submissions made by them.

Appellant, Respondent No. 1 and liquidator and we found that R-2 to

R-4 did not participate in the e-auction and filed an application as

objectors and offering a higher price in order to create a lust for worth

maximisation and thereby vitiated the whole process. In any case R-1

Company Appeal (AT) (Insolvency) No. 1245 - 1247 of 2019 -46-

has also withdrawn the offer without there being any corresponding

provision in the IBC and NCLT was entitled to forfeit their entire

amount. Regulation 32, 32(A) and 33 of Insolvency and Bankruptcy

Board of India liquidation process regulation 2016, provides for the

mode of liquidation. Regulation 32 of Insolvency and Bankruptcy

Board of India Liquidation Process Regulation 2016 the liquidator

should originally sell the Corporate Debtor through an auction and

private auction is permitted only in certain classes of assets which are

of perishable nature, assets likely to deteriorate in value if not sold

immediately, if it is sold at a higher price than the Reserve Price of a

failed auction etc. Regulation 33(3) states as follows:-

"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."

29.Hon'ble Supreme Court has already observed in Valji and Khimji

Company vs. Official liquidator of Hindustan nitro product

(Gujarat) limited and others. where bids were received and were

Company Appeal (AT) (Insolvency) No. 1245 - 1247 of 2019 -47-

opened in the Court. The highest bid was that of the appellant M/s.

Valji Khimji & Company amounting to Rs. 3.51 crores. With the

consent of the learned advocates representing the secured creditors,

the said bid was accepted and the sale was confirmed on 30.7.2003.

The Court directed the appellant to deposit 25% of the purchase price

i.e. Rs.63,98,000/- within 30 days from the said day and to deposit the

balance amount within the next three months. The Court also

directed that the amount may be deposited in instalments, but no

instalment should be less than Rs.5 lakhs. Accordingly Hon'ble

Supreme Court confirmed the auction sale in favour of the Appellant.

CONCLUSION

30. The appeal is, therefore, maintainable in view of the provision of Section

61 (1) of IBC as SBI has a large stake of Rs.469.29 cr.

31. The Auction is not challenged on the ground of fraud and/or irregularity.

32. There is no provision in the terms and condition of auction to withdraw

from the auction process once it is agreed by the successful bidder (R-1) i.e m/s

Maithan Alloys Limited.

33. Section 35 (1) (f) of the IBC empowers liquidator to sell the property of

the corporate debtor in liquidation by public Auction, Hence there was no need

for adjudicating authority to direct the liquidator for considering the proposal of

Company Appeal (AT) (Insolvency) No. 1245 - 1247 of 2019 -48-

R- 2 to R-4 who has approached the Adjudicating Authority after due date of

finalisation of Auction.

34. NCLAT has also held in case of MAJIT COMMECIAL LLP VS SPM

AUTO PVT.LTD (IN LIQUIDATION) CA(AT) (INSOLVENCY) No. 732

of 2019 that objectors are not to be allowed to unnecessary delay and protract

the liquidation process for undue advantage of some of individuals or groups

which would affect unnecessarily the liquidation process.

35. This is a case of unilaterally cancelling the contract may be with

involvement of R-2 to R-4 and thereby putting the liquidation process into

jeopardy.

36. Hence Appeal is allowed by setting aside, impugned order dated

25.09.2019, 23.10.2019 and 06.11.2019 in CA (IB) NO. 796/KB/2019 in CP

(IB) No. 176/KB/2018, CA(IB) No. 1366/KB/2019 in CP(IB) No.

176/KB/2018, CA(IB) No. 293/KB/2019, CA(IB) No. 1165/KB/2018, CA(IB)

No. 615/KB/2019, CA(IB) No. 625/KB/2019, CA(IB) No. 755/KB/2019,

CA(IB) No. 883/KB/2019, CA(IB) No. 957/KB/2019, CA(IB) No.

1345/KB/2019 in CP(IB) No. 176/KB/2018 and directing Respondent No.1 i.e

M/s Maithan Alloys Limited to complete sale transaction by paying sale

consideration.

Company Appeal (AT) (Insolvency) No. 1245 - 1247 of 2019 -49-

37. Respondent R-2 to R-4 is imposed a fine of Rs. 10 Lakhs each as they

have hampered & derailed the liquidation process. The amount is to be

deposited in favour of the Corporate Debtor i.e. Impex Metal & Ferro Alloys

Limited (in Liquidation) and be handed over to Liquidator, Mr. Samir Kumar

Bhattacharya within 30 days from the date of this Judgment.

38. If such dubious systems are permitted, the liquidation process will

become unending leading to reduction in value of Asset of Corporate Debtor

instead of Maximisation of value of Corporate Debtor.

39. With the above observation, Appeal is disposed off and all interim orders,

if any, stands vacated with disposal of Main (CA).

(Justice Jarat Kumar Jain) Member (Judicial)

(Mr. Balvinder Singh) Member (Technical)

[Dr. Ashok Kumar Mishra] Member (Technical)

NEW DELHI

RK

Company Appeal (AT) (Insolvency) No. 1245 - 1247 of 2019