Vdb Projects Private Limited vs Anil Mehta Liquidator Of Pratibha ...

IN THE MATTER OF: VDB Projects Pvt. Ltd. ....Appellant

Vs.

Anil Mehta ....Respondent Liquidator Of Pratibha Industries Ltd.

Present: For Appellant: Mr. Jasmeet Singh, Mr. Saif Ali, Mr. Pushpendra S. Bhadoriya, Advocates For Respondents: Mr. Indranil Ghosh, Mr. Orijit Chatterjee, Ms. Swati Dalmia, Mr. Palzer Moktan, Advocates

ORDER

29.03.2023: Heard Learned Counsel for the parties.

2. This Appeal has been filed against the order dated 23.12.2022 by which

order the I.A. No. 1469/MB/2022 in CP (IB) 3558/MB/2018 filed by the

Appellant seeking extension of time for the deposit of amount of Rs. 67.86

Crores along with certain other reliefs have been rejected.

3. The Appellant aggrieved by the said order has come up in this Appeal.

The liquidation proceedings against the Corporate Debtor were initiated by

order dated 08.02.2021. The Liquidator issued first e-auction notice on

23.10.2021 and second e-auction notice on 21.02.2022 for sale of the assets of

the Corporate Debtor as a going concern. E-auction process document was

issued on 31.01.2022, the appellant in pursuance of the e-auction process

document has submitted the EMD of Rs. 18.9 Crores. E-auction was

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conducted on 15.02.2022 and the bid of the Appellant of 150.10 crores was the

highest bid for the Corporate Debtor as a going concern with regard to

Package-A.

4. Appellant was informed that his bid is the highest bid and asked the

Liquidator about the bank details. The Liquidator also informed the appellant

that last date for completing the process was 90 days from the issuance of LOI

and said date is 05.06.2022.

5. There has been certain correspondence between the Liquidator and the

appellant. Liquidator has forwarded the proposed Sale Agreement to the

Appellant and on this Appellant wrote an e-mail on 27.05.2022. It appears that

Appellant thereafter did not make the deposit or signed the Sale Agreement and

filed an application I.A No. 1517/2022 on 31.05.2022. The Adjudicating

Authority passed an order on 03.06.2022 allowing the Appellant to deposit the

amount of Rs. 67.86 Crores with 12% interest on or before 06.06.2022. The

Appellant did not deposit the said amount.

6. Subsequently, an order was passed on 30.06.2022 by the Adjudicating

authority to maintain the Status quo. Thereafter, I.A. No. 1469 of 2022 was

filed where following prayers have been made:

a) Extension of time for the deposit of the amount of Rs. 67.86 Crores along with the interest at the rate of 12%, by a period of 13 days or by such period of time that this Tribunal deems fit as

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in any case, the period between 17.05.2022 and 01.06.2022 deserves to be excluded;

b) Clarification that the non-deposit of the said balance sale consideration on or before 06.06.2022 shall not culminate in cancellation of the sale process pursuant to the Process Document;

c) Pending the hearing and disposal of this application, stay the operation of the direction contained in the Order dated 03.06.2022 that "failure to comply this order for depositing the balance amount will culminate to the cancellation of the sale process"

d) Urgent interim and ad-interim reliefs in terms of prayer clause

(c) above;

e) Costs; and

f) Pass any other orders as the Tribunal may deem fit and proper.

7. The Adjudicating Authority had rejected the application, taking the view

that Appellant having not deposited the amount within 90 days, appellant

cannot claim any relief, hence the sale stands cancelled.

8. Learned Counsel for the Appellant challenging the order contends that

although the sale was as a going concern sale, but Appellant was never

intimated that what are the liabilities which the Appellant had to bear. It is

submitted that by going concern sale, the appellant was not obliged to bear any

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liabilities and secondly, the Liquidator never informed about the liabilities

which the Appellant had to bear after the sale.

9. It is further submitted that the Appellant did not make the payment due

to the aforesaid fact which were already indicated to the Liquidator.

10. Learned Counsel for the Appellant further submitted that Adjudicating

Authority had not returned any findings with regard to the submission which

have been advanced by the Appellant.

11. Learned Counsel for the Liquidator replying the submission of the

Appellant contends that when the sale was a going concern, the sale was with

all assets and liabilities which was clearly mentioned in the process document.

12. It is submitted that the appellant was to take both assets and liabilities

and appellant without any proper valid justification, has refused to deposit the

amount within 90 days and due to the statutory provisions of Liquidation

Regulation Schedule 1, the sale has to be cancelled and has rightly to be

treated cancelled by the Adjudicating Authority.

13. Learned Counsel for the Appellant submits that against the order passed

by this Appellate Tribunal on 14.02.2023 in I.A. No. 524 of 2023 where

appellant sought liberty to furnish Bank Guarantee which was refused, appeal

was filed before the Hon'ble Supreme Court which too has been dismissed on

03.03.2023.

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14. We have considered submissions of Learned Counsel for the appellant

and perused the records.

15. The process document has been brought on record in the appeal as well

as in the reply i.e. dated 29.01.2022, the date of auction was 15.02.2022 and

the sale auction notice mentioned the sale as a going concern sale "As is where

is basis", "As is what is basis", "Whatever there is basis" and "No recourse"

basis.

16. Learned Counsel for the Liquidator has referred to Clause 5.3 which

relates to due diligence by the bidders. Sub Clause (e) and Sub Clause (f) have

been relied which are to the following effect:

5.3 (e) The sale of the Corporate Debtor as a 'going concern' under Regulation 32A of the Liquidation Process Regulations is proposed to be sold on "As is where is basis", "As is what is basis", "Whatever there is basis" and "No recourse" basis and the same does not entail the transfer of any title, except the title which the Corporate Debtor had on its assets as on date of transfer. All local taxes/maintenance fee/electricity/ water charges etc., outstanding as on a date or yet to fall due should be ascertained by the Bidder and would be borne by the Successful Bidder.

(f) The Bidders should make their own independent inquiries regarding the encumbrances, titles of Assets and claims/rights/dues/affecting the Assets and should conduct their own due diligence prior to submitting their Bid. The Process Document does not constitute any representation or

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offer by the Liquidator. The Corporate Debtor as a 'going concern' basis under Regulation 32A of the Liquidation Process Regulations is being sold with all the existing and future encumbrances/claims/dues/demands whether known or unknown to the Liquidator. The Liquidator shall not be responsible in any way for any third-party claims/rights/dues.

17. Learned Counsel for the Liquidator has also relied on Clause 5.4 (c)

which is to the following effect:

"5.4 (c) The Successful Bidder agrees that it shall be bound to

pay the balance sale consideration within the time frame

stipulated in the Letter of Intent, this Process Document read

with Liquidation Process Regulations."

18. The Clause 5.6 provides for issuance of Letter of Intent and transaction

document.

19. The first submission of the counsel for the Appellant that the appellant

for sale as a going concern was not required to take any liabilities, does not

merit consideration. When the appellant took the sale as going concern and

process documents clearly stipulated that the sale is along with the liabilities

future encumbrance claims/dues/demands whether known or unknown as

noted above, the argument cannot be accepted that sale was without any

liability.

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20. Now the second submission of counsel for the appellant that he was not

intimated about the liabilities by the Liquidator and even the sale agreement

which was forwarded, there was no details of the liabilities and there was

provision of Schedule II which was mentioned that liabilities was not there.

21. Be as it may, when the process document provides for due diligence by

bidders and specifically provides as noted above, the sale of asset of Corporate

Debtor as a going concern and with all existing and future encumbrances

claims/dues/demands whether known or unknown which was clearly

stipulated in the process document, appellant cannot be heard in saying that

he was not made aware of the liabilities and hence, he did not know the

liability and therefore he refused to sign the Sale Agreement.

22. There is no dispute between the parties that appellant did not make the

payment within 90 days which is a statutory requirement under Schedule I for

payment of the sale consideration.

23. Learned Counsel for the Liquidator has relied on the Judgment of this

Tribunal in Company Appeal (AT) (Ins.) No. 532 of 2022 in Potens Transmission

and Power Pvt. Ltd. Vs. Gian Chand Narang where this Court has held that in

event the payment has not been made for sale consideration within 90 days as

per Clause 1(12) of Schedule 1 of the Liquidation Process Regulation, 2016 the

sale has to be cancelled.

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24. This Tribunal in the above judgment in paragraph 7 & 8 laid down

following:

"7. 2nd proviso to Clause 1(12) under Schedule I of the Liquidation Process Regulations, 2016 is as follows:

"1 Auction.

(12) On the close of the auction, the highest bidder shall be invited to provide balance sale consideration within ninety days of the date of such demand:

Provided that payments made after thirty days shall attract interest at the rate of 12%:

Provided further that the sale shall be cancelled if the payment is not received within ninety days."

8. When we look into the above regulation, it is clear that 90 days' period provided for making the deposit is the maximum period under which the Auction Purchaser had to make the deposit. 2nd Proviso of the Item 12 of the Schedule I provided that sale shall be cancelled if the payment is not received within 90 days. When the Consequence of non-compliance of the provision is provided in the statute itself, the provision is necessary to be held to be mandatory. Item 12 provides that payment is to be made within 90 days and with interest after 30 days at the rate of 12 percent. Non-compliance of 2nd Proviso, sale shall be cancelled if the payment is not received within 90 days. The Adjudicating Authority has rightly observed that in view of the Appellant having not made payment in 90 days, Adjudicating Authority has no option except to allow the Application filed by the Liquidator for cancellation of the sale. The action taken by the Adjudicating

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Authority is in accordance with the statutory provisions. We do not find any merit in the submissions of Learned Counsel for the Appellant as noticed above. Prayer 'a' in the Application which was filed through I.A. No. 3153 of 2021, itself is indicative that Appellant was never interesting in making the payment and he by different prayers wanted to prolong the proceedings."

25. We thus are of the view that Appellant having not made the payment

within 90 days', sale has rightly been cancelled and Adjudicating Authority did

not commit any error in taking the view that sale stands cancelled.

26. We are satisfied that no error has been committed by the Adjudicating

Authority in the rejecting the application filed by the Appellant, there is no

merit in the appeal, the appeal is dismissed.

27. Learned Counsel for the Liquidator lastly contended that the EMD which

was provided by the Appellant in the form of Bank Guarantee was required to

be extended as the Bank Guarantee has already expired. It is open for the

Liquidator to take such steps as permissible in law.

[Justice Ashok Bhushan] Chairperson

[Mr. Barun Mitra] Member (Technical)

sa/nn

Company Appeal (AT) (Ins.) No. 55 of 2023