National Company Law Appellate Tribunal
V.S. Palanivel vs P. Shriram Cs Liquidator M/S. Sri ... on 16 September, 2022
NATIONAL COMPANY LAW APPELLATE TRIBUNAL
CHENNAI BENCH
Company Appeal (AT) (CH) (Ins) No. 336 of 2021
[Arising out of Order dated 17.11.2021 passed by the Adjudicating
Authority/National Company Law Tribunal, Chennai Bench in
MA/120/2020 in CP/1140/IB/CB/2018].
IN THE MATTER OF:
1. Mr. V.S. Palanivel,
Share Holder/ Ex-Managing Director,
M/s Sri Lakshmi Hotels Pvt. Ltd.,
No. T/71, New No. 22, Coastal Road,
Kalakshetra Colony,
Besant Nagar, Chennai-600090. ...Appellant
Versus
1. Mr. P. Shriram, CS,
Liquidator,
M/s Sri Lakshmi Hotels Pvt. Ltd.
10/17, Anandam Colony,
South Canal Bank Road,
Mandaveli, Chennai-600028. ...Respondent
Present:
For Appellant : Mr. A.L. Somayaji, Senior Advocate For APR
Associates.
For Respondent : Mr. P.H. Arvindh Pandian, Senior Advocate for
Respondent No.1 / Liquidator
For Mr. S. Sathiyanarayanan, Advocate of Wise
& Worth
For Respondent No. 1/Liquidator.
With
Company Appeal (AT) (CH) (Ins) No. 339 of 2021
[Arising out of Order dated 17.11.2021 passed by the Adjudicating
Authority/National Company Law Tribunal, Chennai Bench in SR No.
944 of 2020 in CP/1140/IB/CB/2018].
IN THE MATTER OF:
1. Mr. V.S. Palanivel,
Share holder/ Ex-Managing Director,
Company Appeal (AT) (CH) (Ins) No. 336, 339 & 343 of 2021 1 of 40
M/s Sri Lakshmi Hotels Pvt. Ltd.,
No. T/71, New No. 22, Coastal Road,
Kalakshetra Colony,
Besant Nagar, Chennai-600090. ...Appellant
Versus
1. Mr. P. Shriram, CS,
Liquidator,
M/s Sri Lakshmi Hotels Pvt. Ltd.
10/17, Anandam Colony,
South Canal Bank Road,
Mandaveli, Chennai-600028. ...RespondentNo.1
2. M/s KMC Specialty Hospitals (India )
Ltd.,
No. 6, Royal Road,
Cantonment, Tirruchirapalli-620001. ...Respondent No. 2
Present:
For Appellant : Mr. A.L. Somayaji, Senior Advocate For APR
Associates.
For Respondent : Mr. P.H. Arvindh Pandian, Senior Advocate for
Respondent No.1 / Liquidator
For Mr. S. Sathiyanarayanan, Advocate of Wise
& Worth
For Respondent No. 1/ Liquidator.
Mr. P.S. Raman, Senior Advocate for
Respondent No.2 / Auction Purchaser
For M/s. A.K. Mylsamy & Associates.
With
Company Appeal (AT) (CH) (Ins) No. 343 of 2021
[Arising out of Order dated 05.05.2020 passed by the Adjudicating
Authority/National Company Law Tribunal, Chennai Bench in
IA/335/IB/2020 in MA/689/2019 in CP/1140/IB/2018].
IN THE MATTER OF:
1. Mr. V.S. Palanivel,
Share holder/ Ex-Managing Director,
M/s Sri Lakshmi Hotels Pvt. Ltd.,
No. T/71, New No. 22, Coastal Road,
Company Appeal (AT) (CH) (Ins) No. 336, 339 & 343 of 2021 2 of 40
Kalakshetra Colony,
Besant Nagar, Chennai-600090. ...Appellant
Versus
1. M/s KMC Specialty Hospitals (India )
Ltd.,
No. 6, Royal Road,
Cantonment, Tirruchirapalli-620001. ...Respondent
Present:
For Appellant : Mr. A.L. Somayaji, Senior Advocate For APR
Associates.
For Respondent : Mr. P.H. Arvindh Pandian, Senior Advocate for
Respondent No.1 / Liquidator
For Mr. S. Sathiyanarayanan, Advocate of Wise
& Worth
For Respondent No. 1/Liquidator.
Mr. P.S. Raman, Senior Advocate for
Respondent No.2 / Auction Purchaser
For M/s. A.K. Mylsamy & Associates.
J U D G M E N T
(Virtual Mode) (16.09.2022) NARESH SALECHA, MEMBER (TECHNICAL):
The present `Appeals' i.e., Company Appeal (AT) (CH) (Insolvency) No. 336 and 339 of 2021 filed against the common 'impugned order' dated 17.11.2021 passed in MA/120/2020 in CP. No./1140/IB/CB/2018 and SR No. 944 of 2020 in CP. No./1140/IB/CB/2018 respectively and Company Appeal (AT) (CH) (Insolvency) No. 343 of 2021 filed against the 'impugned order' dated 05.05.2020 passed in IA No. 335/IB/2020 in MA No. 689/2019 in CP. No./1140/IB/CB/2018 passed by the 'Adjudicating Authority', (`National Company Law Tribunal', Chennai Bench), whereby, the 'Adjudicating Authority' dismissed the Auction Proceeding challenged by the Company Appeal (AT) (CH) (Ins) No. 336, 339 & 343 of 2021 3 of 40 Appellant on 23.12.2019. These `Appeals' are commonly dealt with in this Judgment.
Brief Facts:
2. 'Shri Lakshmi Hotel Private Limited' was incorporated on 27.10.1972 and there were four shareholders i.e. Appellant, his wife, his son and his daughter-in-law. The company purchased a property situated at Old No. 3A, New No. 27, Alexandria Road, Cantonment, Tiruchirappalli-620001. The total extent of the property is 67,533 sq. ft. and the company was carrying on the business of running a hotel and a bar in the said premises. This property is only immovable asset of the company till auction of the said property.
3. The company took loan from 'M/s Shriram City Union Finance Ltd' ('Financial Creditor') for an amount of Rs. 1,50,00,000 on 03.04.2006 through loan agreement @ 12% interest and was to be repaid within one year. The company took another loan form same 'Financial Creditor' for an amount of Rs. 7,25,000/- on 03.07.2006. Thus, total loan availed was Rs.
15,72,5,000/. Subsequently, dispute arose between both the parties on alleged unilateral interest rate hike by 'Financial Creditor' which compelled company in non-payment of EMIs. 'Financial Creditor' filed a claim petition before sole arbitrator for Rs. 2,21,08,244/- along with 12% interest from date of claim. The arbitrator passed an award on 27.12.2014 for the entire amount along with 24% interest from the date of claim petition till date of realisation. Company thereafter filed a petition under Section 34 of 'the Company Appeal (AT) (CH) (Ins) No. 336, 339 & 343 of 2021 4 of 40 Arbitration and Conciliation Act, 1996' before 'High Court of Judicature at Madras'. High Court dismissed the petition of Company and confirmed 'Arbitration Award' on 16.11.2017. Due to non-payment of Arbitral Award, 'Financial Creditor' filed an Application under Section 7 of the I&B Code, 2016 by filing CP/1140/(IB)/CB/2018 before 'Adjudicating Authority', who admitted this petition on 28.02.2019 and 'Mr. P. Sriram CS' was appointed 'Interim Resolution Professional' (in short 'IRP') who was later confirmed as 'Resolution Professional' and finally as Liquidator.
4. The `Interim Resolution Professional' on 02.03.2019, made a public announcement, calling upon the `Financial' as well as `Operational Creditors' to submit the `Claims'. Until 21.06.2019, no `Resolution Plan' for revival of the Company was received. The 'Committee of Creditors' i.e. `CoC' thereafter, had recommended for `Liquidation' of the company in MA No. 689 of 2019 filed in CP/1140/IBC/CB/2018 before 'Adjudicating Authority'.
5. By way of an order dated 17.07.2019, the 'Adjudicating Authority' passed an order of `Liquidation' in MA/689/2019 in CP/1140/IB/CB/2018.
6. The Liquidator had engaged two `Registered Valuers' and arrived at a valuation of the subject/said property at Rs.39,41,28,500/-. Based on this `Liquidation Value', the `Liquidator' fixed `Auction' to be conducted on 25.11.2019, to `sell the property' at a `Reserve Price' of Rs. 39,41,28,500/-. Since there were no `Bidders' in the said 1st Auction, the `Liquidator' had decided to hold another `Auction'.
Company Appeal (AT) (CH) (Ins) No. 336, 339 & 343 of 2021 5 of 40
8. On 27.11.2019, the `Liquidator' informed the auction date as 23.12.2019. The Reserve Price i.e. upset price was reduced by 25% @ Rs.29,95,96,375/-. M/s KMC Specialty Hospitals (India) Limited took part in the `Auction' and was only `Bidder' and auction was confirmed by the `Liquidator' on the same date, to and in his favour.
9. The Appellant filed M.A. No. 120 of 2020 in CP/1140 (IB)/CB/2018 before the 'Adjudicating Authority' to set aside the proposed `Auction Proceedings', alleging that the `Liquidator' Mr. P. Sriram, sold the property at a lower value in `e-auction' in fixing the `Upset price' at Rs.29,95,96,375/-. Whereas, the purported market value of the property, was more than Rs.100 Crore. The `Appellant' further stated that there was no requirement to sell the entire property of the company for paying only limited sum, to the Financial Creditor. According to the Appellant, the property of the company could have been divided and only the minimum portion of property could have been sold to pay the outstanding dues of the Financial Creditor.
10. Further, as per 'Appellant' the `Successful Bidder' ought to have paid the balance amounts on or before 22.03.2020. The auction purchaser having not paid the said amounts on or before 22.03.2020, the Liquidator should have forfeited the amount already deposited and the Auction should have been cancelled. However, the liquidator had not communicated the same to an `Auction Purchaser' and had colluded with the `Auction Purchaser', in order to defraud the company.
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11. The `Auction Purchaser' has approached the 'Adjudicating Authority' in I.A. No. 335 of 2020, seeking `extension of time' for making payment, stating that there were various issues, pertaining to the property, due to which, they could not make the `Payments' within stipulated time. The `Auction Purchaser' had highlighted one of the major issues that there was an `Order of Attachment' made by the `Income Tax Authority' on property.
12. The averment of the `Appellant' is that the `Auction Purchaser' could not seek an `Extension', since the provisions of the `Insolvency Regulations' are mandatory in character and under in any circumstances, `Time Period' for making the `Payment' cannot be extended.
13. Also the `Appellant' had alleged that the `Auction Purchaser' and the `Liquidator' misled the 'Adjudicating Authority' by misinterpreting the `Orders of the Hon'ble Supreme Court of India and the National Company Law Appellate Tribunal', to contend that the `Time Period' for depositing the amount is extended.
14. The Appellant filed a `Special Leave Petition' before the Hon'ble Supreme Court of India in SLP (c) No. 12300 of 2020 and the same is pending, as on date.
15. The Appellant filed an `Application' before the 'Adjudicating Authority' for the purpose of setting aside the `Sale Deed' dated 28.08.2020 (vide registered as Document no. 3551/2020) before the District Registrar, Tiruchirapalli.
Company Appeal (AT) (CH) (Ins) No. 336, 339 & 343 of 2021 7 of 40
16. The 'Appellant' has urged the 'Adjudicating Authority' to `Recall' the 'impugned order' dated 05.05.2020l, passed in IA No. 335 of 2020 in M.A. No. 689 of 2019 in C.P. No. 1140/IBC/CB/2018 and the unnumbered `Application' was SR No. 944 of 2020.
17. The `impugned order' was passed by the 'Adjudicating Authority', after hearing the `Applications' MA No. 120 of 2021 and the SR No. 944 of 2020 and the same were dismissed, vide the common order dated 17.11.2021 in CP/1140/IB/CB/2018.
18. Hence the present `Appeals'.
Appellant's Submissions:
19. The Learned Counsel for the Appellant submitted that for the sake of convenience, the reference made to the Appellant in these three `Appeals' before this `Hon'ble Appellate Tribunal', the 'Appellant' is referred to as the `Appellant' in all the three `Appeals'. Mr. P. Shriram shall be denoted as the `First Respondent' in Company Appeal (AT) (CH) (INS) Nos. 336, 339 and 343 of 2021. The Second Respondent shall denote 'M/s. KMC Specialty Hospitals (India) Ltd.' in Company Appeal (AT) (CH) (INS) Nos. 339 and 343 of 2021.
20. The Learned Counsel stated that the `Auction' was illegal, as the Appellant was not served the notice of auction. The Learned Counsel also assailed for the `Fixed Reserve Upset Price' of Rs. 39,41,28,500/- was Company Appeal (AT) (CH) (Ins) No. 336, 339 & 343 of 2021 8 of 40 revised and reduced as `Reserve Price' as Rs.29,95,96,375/-. The Learned Counsel for the Appellant submits that this is a `fraudulent action' in collusion by the Respondent Nos. 1 & 2 and on this ground alone, the 'impugned order', is liable to be set aside.
21. The Learned Counsel for the Appellant pleaded his case at length and brought out full facts of the case, alleged collusion between Respondent Nos. 1 & 2 and how the 'Adjudicating Authority' had committed an `error' in passing the 'impugned order' dated 17.11.2021.
22. Later, the Learned Counsel for the Appellant also submitted the 'Notes of Submission' coupled with three `Citations', before this `Tribunal' and they are (i) Sagufa Ahmed &Ors. Vs. Upper Assam Polywood Products Private Ltd. &Ors.(2021) 2 SCC 317, (ii) Hero Exports Vs. K. Vasudevan2020 SCC OnLine Mad 5185 and (iii) K. Kayalvizhi Vs. The Bank Manager, Axis Bank, Madras High Court Order dated 28.06.2021 passed in WP Nos. 13341 and 13342 of 2021.
23. Further, the 'Additional Notes of Submissions' with seven Decisions Viz., (i) In Re-Cognizance for extension of Limitation (2021) 5 SCC 452,
(ii) GPR Power Solutions Pvt. Ltd. Vs. Supriyo Chaudhuri 2021 SCC OnLine SC 1328, (iii) Standard Surfa Chem India Pvt. Ltd. Vs. Kishore Gopal Somani 2022 SCC OnLine NCLAT 305, (iv) Grindlays Bank Vs. Central Government Industrial Tribunal 1980Supp SCC 420, (v) Kushal Ltd. Vs. Kartik Baldwa2022 SCC OnLine NCLAT 315, (vi) Ram Chandra Singh Vs. Savitri Devi (2003) 8 SCC 319 and (vii) Potens Transmissions Company Appeal (AT) (CH) (Ins) No. 336, 339 & 343 of 2021 9 of 40 & Power Pvt. Ltd. Vs. Gian Chand Narang 2022 SCC OnLine NCLAT 295 were also submitted.
24. The Learned Counsel for the Appellants refuted the counter arguments of the 'Respondents', as `false' and `misleading'.
25. The Learned Counsel for the Appellants highlighted that on 16.10.2019, the 1st Sale Notice was issued and the Second Respondent deliberately had not taken part in the `Auction', proposed on 25.11.2019.
26. The Learned Counsel for the sake of clarity summarised the prayers which were made by him in his `Petitions', before the 'Adjudicating Authority' are herein as under:-
"3.a. The prayers in IA No. 120 of 2020
i) Directing the Respondent to stay all further proceedings in respect of e-auction conducted on 23.12.2019;
(ii) To work on alternate way by dividing the property and sell a portion of the land as per market value to meet the demand; and
(iii) To grant sufficient time to the Applicant to make payment to the financial creditor.
3.b. The prayer in IA SR No. 944 of 2020:
(a) Set aside the sale deed dated 28.08.2020 registered as document No.3551/2020 before the District Registrar, Tiruchirappalli.
Company Appeal (AT) (CH) (Ins) No. 336, 339 & 343 of 2021 10 of 40
(b) Recall the order passed by this Hon'ble Court dated 05.05.2020 passed by this Hon'ble Court in MA No. 335 of 2020 in CP No. 1140/1BC/CB/2018; and (c) Direct the Respondents to pay damages to the Applicant herein to the tune of Rs. 1,00,00,000/- for causing undue hardship and mental agony to the Applicant."
27. The Learned Counsel for the Appellant summarised his main grievances along with reasons. As per the Learned Counsel the main grievances are:-
• No notice of Auction was given to 'Appellant'. • Reserve/upset price was deliberately set lower to `Defraud the company'.
• The last date of `Auction' was 22.03.2020 and the lockdown imposed due to COVID-19, had no impact on the present `Auction Proceeding'. • The 'Adjudicating Authority' has the power to `Recall' its own order. • Non-Constitution of Stakeholders' Committee is improper. • The Conduct of the Promoter cannot be termed bad or against `Law'. • Second Respondent is not a `Bona-fide Auction Purchaser'.
28. The Learned Counsel for the Appellant pointed out that the last date for balance payment was 22.03.2020 and the lockdown imposed due to COVID-19 had no impact on the present `Auction Proceeding'. The Learned Counsel alleged that the First Respondent had submitted wrongly before the 'Adjudicating Authority' that the last date would fall on 25.03.2020, on the Company Appeal (AT) (CH) (Ins) No. 336, 339 & 343 of 2021 11 of 40 basis that the `Demand Letter' was issued on 24.12.2019 and same was received by the Second Respondent on 26.12.2019.
29. The Learned Counsel for the Appellant takes a plea that the said letter dated 24.12.2019 cannot be termed as a Demand Letter, as there was no `Demand' made by the First Respondent and was only a `Letter of Confirmation' that the Second Respondent was the `Highest Bidder'. Therefore, in the absence of any specific `Demand', the last date for making the `Payment' ought to be computed from the `Closure of Auction', as mandated under Clause 12 of Schedule I to the `Insolvency and Bankruptcy Board of India' (Liquidation Process) Regulations, 2016. Thus, the last date of making the balance payment should have been taken on 22.03.2020. The Learned Counsel emphasised that the `Time Period' for paying the Balance Sale Amount is mandatory.
30. The Learned Counsel stated that the Hon'ble Supreme Court has only referred to difficulties faced by litigants across the country and the second respondent as an 'Auction Purchaser' cannot be termed to be a `Litigant'. The timeline for making the balance sale consideration, is as-per clause12 of Schedule1 of the relevant rules as mentioned earlier and the proviso specifically mentions that the `Sale' shall be cancelled if the `Payment' is not received within 90 days.
31. As per the Learned Counsel for the Appellant, the decision of the Hon'ble Supreme Court of India in GPR Power Solutions Pvt. Ltd. Vs. Supriyo Chaudhuri, reported in 2021 SCC OnLine SC 1328 and another Company Appeal (AT) (CH) (Ins) No. 336, 339 & 343 of 2021 12 of 40 judgment passed by this Tribunal in Standard Surfa Chem India Pvt. Ltd. Vs. Kishore Gopal Somani, reported in 2022 SCC On Line NCLAT 305 are in different context and cannot taken as basis, as projected by the Respondent.
32. The Learned Counsel for the Appellant emphasised that the 'Adjudicating Authority' has the `Power to Recall its own Order'. As from the facts of the present case, it can be seen that the Order dated 05.05.2020 was passed in the light of misrepresentations and fraud played by the First Respondent and the Second Respondent.
33. The Learned Counsel for the Appellant emphatically stated that `Liquidation Proceedings' without constituting the `Stakeholders Committee' was Improper and Regulation 8 of Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016, which envisages consultation with the Stakeholders, as provided under section 35(2) of the Code.
34. The Learned Counsel for the Appellant also refuted the `Claim' of the 'Respondent' that the conduct of the `Promoter' was bad or against `Law'. The Learned Counsel stated that nothing was stated, except to state that the `Promoters' had not co-operated.
35. The Learned Counsel for the Appellant mentioned that, therefore, the execution of the sale deed is illegal and made only to defeat the rights of the Appellant.
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36. The Learned Counsel for the Appellant further stated that the Second Respondent is not a `Bonafide Auction Purchaser', having failed to pay the balance sale consideration within the period.
37. While rounding up his argument, the Learned Counsel for the Appellant urges this `Tribunal' to set aside the ` orders' impugned herein passed by the `Adjudicating Authority, (`National Company Law Tribunal', Chennai Bench), as well as set aside the `Sale Deed' dated 28.08.2020 (vide registered as Document No. 3551/2020), before the District Registrar, Tiruchirappalli.
Respondent's Submissions:
38. The Learned Counsel for the Respondents contended that all the instant three `Appeals' are not maintainable.
39. The Learned Counsel assailed the Conduct of the Appellant which was not justifiable right from the initiation of `Corporate Insolvency Resolution Process'. In spite of the order of the `Adjudicating Authority' dated 08.04.2019 in MA.No.300 of 2019, the physical possession of property of the `Corporate Debtor' and other records of the `Corporate Debtor' were not handed over to the 1st Respondent. Subsequently, the `Adjudicating Authority' vide its order dated 13.11.2019 in MA/1127/2019, had directed the `suspended management' to extend co-operation and handover the `Assets' of the `Corporate Debtor'. The Liquidator had to take police assistance to take possession of the immovable property.
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40. As per the Learned Counsel for the Respondents, 90 days' time limit to make `balance sale consideration' falls on 25.03.2020. As per Clause 12 of Schedule I to the IBBI (Liquidation Process) Regulations, 2016, the `Highest Bidder' is required to pay the `balance sale consideration' within 90 days from the date of `Demand'. The Respondent/Liquidator had intimated the `Successful Bidder' about the close of the `Auction' vide letter dated 24.12.2019 received by the Successful Bidder on 26.12.2019 and called upon them to pay the `balance sale consideration'.
41. The Learned Counsel for the Respondents stated that as per `Terms and Conditions' of e-auction and Schedule I of the IBBI (Liquidation Process) Regulations, 2016, the `Successful Bidder' was required to pay the `balance consideration' within 90 days from 26.12.2020, i.e., on or before 25.03.2020.
42. Learned Counsel for the Respondents brought out the order of the Hon'ble Supreme Court of India in Suo Moto Writ Petition (Civil) No. 3/2020, extending the period of limitation in all proceedings, is also applicable for Auction Process conducted in a Liquidation Proceeding. The Hon'ble Supreme Court of India in Suo Moto Writ Petition (Civil) No. 3/2020, had extended the period of `Limitation' in all `Proceedings', irrespective of the Limitation prescribed under the General Law or Special Laws whether condonable or not, was extended w.e.f. 15.03.2020 till further orders. The said order of the Hon'ble Supreme Court of India is wide in its scope so as to Company Appeal (AT) (CH) (Ins) No. 336, 339 & 343 of 2021 15 of 40 include all proceedings irrespective of the limitation prescribed under the general law or special law.
43. The Learned Counsel for the Respondents argued that the word "Litigant" and "Litigation" appearing in the aforesaid SUO MOTO WP Order of the Hon'ble Supreme Court of India to cover all proceedings including `Liquidation Proceedings'.
44. The Learned Counsel for the Respondent cited the decision of the Hon'ble Supreme Court of India in GPR Power Solutions P Ltd vs Supriyo Chaudhri& Others [2021 SCC OnLine SC 1328] wherein the exclusion for COVID19 was even allowed for filing claims before the `Resolution Professional'.
45. The Learned Counsel for the Respondents further cited the decision of this Tribunal in the matter of Standard Surfa Chem India Pvt Ltd vs Kishore Gopal Somani [2022 SCC OnLine NCLAT 305] wherein, it was held that in view of lockdown / restrictions in the State of Tamil Nadu (though not Central Government as envisaged under Reg. 47A of Liquidation Regulations) time was extended beyond 90 days to the `Successful Auction Purchaser', to pay the `balance sale consideration'.
46. The Learned Counsel for the Respondents brought out that under extreme covid situation of Tamil Nadu, expecting the `Liquidator' to receive payment or to effect registration of the property at a SRO in Trichy Company Appeal (AT) (CH) (Ins) No. 336, 339 & 343 of 2021 16 of 40 (Liquidator and successful Bidder live / have their office in Chennai) was uncalled for.
47. The Learned Counsel for the Respondents also stated that due to the extra-ordinary circumstances of COVID outbreak, even the NCLT's functioning was restricted from the 2nd week of March 2020 vide Notification in Page No. 182 of the 1st Respondent's counter in CA (AT) (Ins) 339 of 2021.
48. The Learned Counsel for the Respondents emphasised that the Income Tax Department issued NOC for lifting of the prohibition order of property of hotel only on 27.08.2020 and thereafter, the sale was registered.
49. As per the Learned Counsel for the Respondents, the model time line as well as the time line prescribed under Schedule -1 of the IBBI (Liquidation) Regulation, 2016 is only directory and not mandatory and this has been held by this Tribunal to be appropriate.
50. The Learned Counsel for the Respondents stated that he has valued the property from two `Registered Valuers' and arrived at a valuation of the property at Rs. 39,41,28,500/-
51. The Learned Counsel for the Respondent submitted that 1st E-auction was conducted on 25.11.2019 by the Respondent No. 1 / Liquidator with `Reserve Price' of Rs.39,41,28,500/- and no `Bidders' participated.
52. The Learned Counsel for the Respondents mentioned that on 23.12.2019 Second E-auction was conducted by the `Liquidator' with Company Appeal (AT) (CH) (Ins) No. 336, 339 & 343 of 2021 17 of 40 `Reserve Price' of Rs.29,55,96,375/- as per Regulation 33 r/w Serial 4-A of Schedule 1 of the IBBI (Liquidation Process) Regulations, 2016, it is stated that, 'Where an Auction fails at the `Reserve Price', the `Liquidator' may reduce the `Reserve Price' by upto 25% of such value to conduct subsequent Auction'.
53. The Learned Counsel for the Respondents stated that on 18.12.2019, 2nd Respondent paid the `Earnest Money Deposit' [`EMD'] of Rs.2,95,59,638/-. `Balance Sale Consideration' of Rs.26,60,36,737/- was payable within 90 days from the date of `Demand' (in accordance with Regulation 33, r/w Serial 12 of Schedule 1 of the IBBI (Liquidation Process) Regulations, 2016).
54. The Learned Counsel for the Respondents brought out that on 24.12.2019, a Letter was sent by the `Respondent No. 1 i.e., Liquidator', informing the 2nd Respondent that he has been declared as the `Successful Auction Purchaser' which was received by the `2nd Respondent' on 26.12.2019.
55. Vide order dated 05.05.2020 passed, the extension was granted by the 'Adjudicating Authority' in I.A. No. 335 of 2020, to deposit the `balance sale consideration'.
56. The Learned Counsel for the Respondents submitted that on 05.05.2020, I.A. No. 335 of 2020 (Impugned Order in C.A.(AT) (Ins). No. 343 of 2021) was filed by the `2nd Respondent' herein, seeking for `extension of Company Appeal (AT) (CH) (Ins) No. 336, 339 & 343 of 2021 18 of 40 time to deposit the balance sale consideration' on account of pending attachments/encumbrances on the Scheduled Premises and extra-ordinary circumstances prevailing on account of the Covid-19 pandemic and National lockdown was imposed from 24.03.2020 onwards.
57. After considering the extra-ordinary circumstances, the 'Adjudicating Authority', deferred the `Time Period' granted for depositing the `balance sale consideration' till the lockdown is lifted by the `Central/State Government' respectively.
58. The Learned Counsel for the Respondents mentioned that on 24.08.2020 `Balance Sale Consideration' was paid by the `Respondent' and thereafter the `Sale Deed' was registered in favour of the `2nd Respondent' on 28.08.2020.
59. The Learned Counsel for the Respondents represented that on 06.06.2020 & 18.06.2020, Letters were sent by the `Liquidator' informing the `Appellant' that the `E-auction Sale' was successfully completed in due compliance with the `Law', but the `Appellant' did not take any steps to challenge the extension granted to the `2nd Respondent', but thereafter, filed an `Application' bearing IA in S.R. No. 944 of 2020 seeking to review and recall the Order dated 05.05.2020, which was dismissed vide Common Order dated 17.11.2021.
60. The Learned Counsel for the Respondents cited the following Judgment to support his case and arguments Viz.:-
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a) Peoples General Hospital Pvt. Ltd. vs. Alliance Industries Limited, reported in 2018 SCC OnLine NCLAT 460 (Hon'ble NCLAT, Principal Bench) wherein, it was held that the power to review is not an `inherent power' and must be conferred by `Law', either specifically or by necessary implication.
b) In the decision in Agarwal Coal Corporation Pvt. Ltd. vs. Sun Paper Mill Ltd. &Anr., reported 2021 OnLine NCLAT 1182 (Hon'ble NCLAT, Principal Bench), wherein it was held that "It cannot be gainsaid that there is no express provision for "Review" under the NCLAT Rules'', 2016.
Moreover, the `Applicant/Appellant' cannot fall back upon Rule 11 of NCLAT Rules, 2016, which provides for "inherent powers". In fact, Rule 11 of NCLAT Rules, 2016, is not a substantive Rule which showers any power or jurisdiction upon the `Tribunal'. Undoubtedly, the `Tribunal' has no power to perform an act which is prohibited by Law."
c) In the decision in Standard Sufra Chem India Pvt. Ltd. Vs. Mr. Kishore Gopal Somani, reported in 2022 SCC OnLine NCLAT 305 (NCLAT, Principal Bench), wherein it was observed that, "it is pertinent to mention that `Liquidation Process Regulation 47', deals with the Model Timeline for Liquidation Process. Model Timeline is only directory in nature. It cannot be considered a deadline. It is provided under Regulation as a guiding factor to complete the `Liquidation Process' in a time-bound manner. In exceptional circumstances, such a time limit can be extended.
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61. While summing up his arguments, the Learned Counsel for the Respondent prays for dismissal of all the three instant `Appeals' by this `Tribunal', in the `interest of justice'.
Discussions:
62. Heard the Learned Counsel for both the parties and also perused record made available to us including 'Written Submissions', 'Counter Statement' and 'Additional Written Submissions' along with `Citations' quoted therein. Several issues have been raised in the `Appeal', which are required to be deliberated upon before coming to the final conclusion. These can be taken up as follows:-
(I) Whether the Auction held by the Liquidator, without proper Notice to Shareholders/Stakeholders of the Company is valid in accordance with the IBBI Rules and Regulations, 2016? (II) Whether `Sale' was valid, when `Payment' from 'Auction Purchaser' is not received within 90 days. Can any extension be granted for the same?
(III) Whether the act of Auctioneer to `Sell' the Property at Revised and Reduced upset price can be treated as valid? (IV) Whether the `Liquidator' was justified in selling the entire `Assets' of the company when `Sale' of a part of the `Assets' of the Company would have been sufficient to discharge the liability of the company?
Company Appeal (AT) (CH) (Ins) No. 336, 339 & 343 of 2021 21 of 40 (V) Whether the `Liquidator' was justified in conducting the `Auction Proceedings' without forming the `Committee of Stakeholders', as envisaged under the I & B Code, 2016?
(VI) Whether the `Adjudicating Authority' can review its own order?
Since, all these issues are independent, it will be worthwhile to examine these issues one by one and we shall proceed accordingly in subsequent discussion.
In order to understand the above issue, we will like to refer to the following table:
Date Event
S.No.
16.10.2019 1st Auction Notice was issued.
01.
22.11.2019 Another Notice issued for the Second Auction to
02. be held on 23.12.2019.
09.12.2019
03. A communication was addressed by the Second Respondent to the First Respondent raising five queries including issue of attachments of the Income Tax Department on the property.
09.12.2019 First Respondent responded to the Second
04. Respondent stating that Income Tax Department would not have any priority.
18.12.2019
05. Second Respondent deposits the EMD amount and E-auction Bid was submitted.
23.12.2019 Sole Bid of the Second Respondent was received
06. in 2nd Auction.
24.12.2019 First Respondent intimated the Second
07. Respondent that they were the Highest Bidder.
31.12.2019 Request made by the Second Respondent to
08. remove the Income Tax attachment of the said Company Appeal (AT) (CH) (Ins) No. 336, 339 & 343 of 2021 22 of 40 property.
10.02.2020
09. First Respondent filed an Application before the `Adjudicating Authority' for a direction to the `Income Tax Department' for vacating the `order of attachment' and the same was allowed by the 'Adjudicating Authority' vide order dated 10.02.2020 in MA No. 63 of 2020 in CP/1140/IB/2018.
22.03.2020 Last date for payment of the `balance sale 10(a) consideration' as per Appellant.
25.03.2020 Last date for payment of the `balance sale 10(b) consideration', as per the Respondent.
05.05.2020 Impugned order in IA No. 335 of 2020 passed
11. for extending time to deposit balance payment.
24.04.2020 Balance sale consideration was paid.
12. 28.08.2020 The Sale Deed was executed, which is the
13. subject matter of challenge in Company Appeal (AT) (Ins.) No. 339 of 2021.
17.11.2021 The `Adjudicating Authority' dismissed the
14. Applications in MA No. 120 of 2020 and IA in SR No. 944 of 2020.
Issue No. (I) Whether the Auction held by the liquidator, without proper Notice to the Shareholders/Stakeholders of the Company is valid in accordance with the IBBI Rules and Regulations, 2016? In order to understand the exact issue raised and the implication, it will be imperative to go through the exact rules as provided in I & B Code, 2016, on this issue.
(i) Following are the relevant Rules provided in the I & B Code, 2016:
Company Appeal (AT) (CH) (Ins) No. 336, 339 & 343 of 2021 23 of 40 Chapter VI of Regulation 33 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016, prescribe Mode of Sale, the Liquidator shall ordinarily sell the assets of the corporate debtor through an auction in the manner specified in schedule I, which provides for detailed manner as to how an Auction must be proceeded.
"(2) The liquidator shall prepare a marketing strategy, with the help of marketing professionals, if required, for sale of the asset. The strategy may include-
(a) releasing advertisements;
(b) preparing information sheets for the asset;
(c) preparing a notice of sale; and
(d) liaising with agents.
(5) The liquidator shall [issue a public notice] of an auction in the manner specified in Regulation 12(3);
[emphasis supplied] i. The auction held without notice shall be invalid, as the language of the abovementioned Regulation seems to be a clear direction and mandatory.
ii. The `Liquidator' followed the proper way of issuing Public Notice, as per Rules the 1st Auction Notice was released on 19.10.2019 for e- auction but no Bidders participated for Sale on 25.11.2019. The Respondent/Liquidator issued 2nd Sale Notice on 22/11/2019 and Company Appeal (AT) (CH) (Ins) No. 336, 339 & 343 of 2021 24 of 40 the Sale was scheduled on 23.12.2019 with the revised and reduced Reserve Price of Rs.29,55,96,375/-. The issue is that whether the proceeding of Sale can be carried out without proper Notice to the `Stakeholder'/`Shareholder' stands unmaintainable as Public Notice was released through Newspapers. iii. We have also taken note of the IBBI (Liquidation Process) Regulations, 2016 (Liquidation Regulations) as it stood before the amendment dated 25th July 2019, provided that the Liquidator shall Liquidate the Corporate Debtor (`CD') within a period of two years from the Liquidation Commencement Date (LCD). Keeping in mind the principle of time value as enshrined in the BLRC report, the said time limit was reduced to one year vide amendment dated 25.07.2019.
Hence, this `Tribunal' find that the required Notice was issued correctly by the `Liquidator' in accordance with the Rules, as provided in I & B Code, 2016, and there was no infringement of rights of the `Appellant'. We do not find any error in the 'impugned order' on this issue.
Issue No. (II) Whether sale was valid when payment from the 'Auction Purchaser' is not received within 90 days. Can any extension be granted for the same?
We will refer to exact rules as provided in I & B Code, 2016 on this issue, and see precedent Judgments.
Company Appeal (AT) (CH) (Ins) No. 336, 339 & 343 of 2021 25 of 40
(i) Following are the relevant rules as provided in I & B Code, 2016.
Chapter VI of Regulation 33 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 Schedule IMode of sale, a. [(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. b. [(13) On payment of the full amount, the sale shall stand completed, the liquidator shall execute certificate of sale or sale deed to transfer such assets and the assets shall be delivered to him in the manner specified in the terms of sale.] [emphasis supplied]
(ii) This Appellate Tribunal passed a Judgment in the case of Standard Surfa Chem India Pvt. Ltd vs. Kishore Gopal Somani vide order dated 09.08.2021, reported in 2022 SCC OnLine NCLAT 305 held that:-
a. Para 24- In the instant case, the Appellant, i.e. successful auction purchaser by filing IA 3377 of 2021 dated 25 May 2021, sought an extension of 90 days for making the full payment to complete the auction proceedings. However, before the expiry of the 90 days' timeline, the Company Appeal (AT) (CH) (Ins) No. 336, 339 & 343 of 2021 26 of 40 appellant/applicant filed the said Application on the ground of Regulation 47A of Liquidation Process Regulation, 2016.
b. Para 25 - Regulation 47A was brought by the amendment in liquidation process regulation by Government Notification dated 20 April 2020 with retrospective effect from 17 April 2020. This Regulation provided that the period of Lockdown imposed by the central government in the wake of the Covid 19 outbreak shall not be counted for computation of the timeline for any task that could not be completed due to such Lockdown in relation to any liquidation process.
c. Para 26 - It is pertinent to mention that the Government of India vide notification dated 20 April 2020 brought similar notification 40C, as a special provision relating to the timeline under the Insolvency Resolution Process Regulation 2016. Accordingly, this Regulation was effective with effect from 29 March 2020.
d. Para 28 - It is pertinent to mention that Liquidation Process Regulation 47 deals with the Model Timeline for Liquidation Process. Model Timeline is only a directory in nature. It cannot be considered a deadline. It is provided under Regulation as a guiding factor to complete the liquidation process in a timebound manner. In exceptional circumstances, such a time limit can be extended.
Company Appeal (AT) (CH) (Ins) No. 336, 339 & 343 of 2021 27 of 40 e. Para 32- Further, paragraph 4 of the declaration of the bidders is also relevant to consider, which is as under; Paragraph 4 of the declaration by bidders "The timeline for payment of final sale consideration may be extended by the sole discretion of Liquidator, to the extent permissible under the applicable laws and regulations. However, in case final sale consideration is not paid within stipulated timeline, the Liquidator shall forfeit earnest money."
[emphasis supplied]
(iii) As per above mentioned provisions and decision of this Appellate Tribunal, the extension was granted due to the Covid-19 lockdown.
The order passed by the 'Adjudicating Authority' stands valid on the grounds that almost all functioning were restricted during Covid-19 outbreak, vide Order dated 05.05.2020.
(iv) Moreover, the property was said to be in subsistence of attachment of Income Tax Department, and due to the same, the Registrar was not registering the property in the name of the `Successful Bidder' and subsequently the 'Adjudicating Authority' directed the Income Tax Department to issue a NOC, and then the property was registered successfully in name of Successful Bidder.
(v) Further the delay in payment if reasonable, the 'Adjudicating Authority' by exercising its `inherent powers' under Rule 11 of I & B Code, 2016, can grant extension of payment by the `Successful Company Appeal (AT) (CH) (Ins) No. 336, 339 & 343 of 2021 28 of 40 Bidder'. We may also refer to Section 424 of the 'Companies Act, 2013'.
"Rule 11 of NCLT Rules, 2016 Inherent Powers- Nothing in these rules shall be deemed to limit or otherwise affect the inherent powers of the Tribunal to make such orders as may be necessary for meeting the ends of justice or to prevent abuse of the process of the Tribunal.
Section 424 of the Companies Act, 2013.
Procedure before the Tribunal and Appellate Tribunal.- (1) The Tribunal and the Appellate Tribunal shall not, while disposing of any proceeding before it, or the case may be, an appeal before it, be bound by the procedure laid down in the Code of Civil Procedure, 1908 (5 of 1908) but shall be guided by the principles of natural justice, and subject to the other provisions of this Act or of the Insolvency and Bankruptcy Code, 2016 (31 of 2016) and of any rules made hereunder, the Tribunal and the Appellate Tribunal shall have power to regulate their own procedure."
In view of all the above discussions, including Rules, cited Judgments, we do not find any error on the part of the liquidator. The 'Adjudicating Authority' correctly gave the 'impugned order' on this issue. Issue No. (III) Whether the act of Auctioneer to Sale the property at revised and reduced Upset Price can be treated as valid. Company Appeal (AT) (CH) (Ins) No. 336, 339 & 343 of 2021 29 of 40
(i) Following are the relevant Rules are provided in I & B Code, 2016:
(ii) Schedule I - Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 MODE OF SALE (Under Regulation 33 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016) • (3) The liquidator shall prepare terms and conditions of sale, including reserve price, earnest money deposit as well as pre-bid qualifications, if any.
• Provided that the liquidator shall not require payment of any non-refundable deposit or fee for participation in an auction under the liquidation process:
• Provided further that the earnest money deposit shall not exceed ten percent of the reserve price.
• (4)(4) The reserve price shall be the value of the asset arrived at in accordance with regulation 35. • (4A) Where an auction fails at the reserve price, the liquidator may reduce the reserve price by up to twenty-five percent of such value to conduct subsequent auction. • (4B) Where an auction fails at reduced price under clause (4A), the reserve price in subsequent auctions may be further reduced by not more than ten percent at a time.";
[emphasis supplied]
(iii) We need to note that after admitting Section 9 Application by the 'Adjudicating Authority', a complete drill was carried out for 'Corporate Insolvency Resolution Process'. Even then, it is noted that no proposal was received for Resolution.
Company Appeal (AT) (CH) (Ins) No. 336, 339 & 343 of 2021 30 of 40
(iv) Subsequently, based on the `Application' of `Resolution Professional', the 'Adjudicating Authority' ordered for `Liquidation' of the company.
(v) As required by the Rules relating to `Liquidation', as provided in I & B Code, 2016, the `Liquidator' engaged two `Registered Valuers' to arrive at right price of the property of the company. Following table gives clear picture and how the `Liquidator' came to the conclusion of `Reserve Price' against a plea of the `Appellant' that, prevailing market rate of the property is more than Rs.100 Crore.
Name of the Valuer Tax Value Liquidation Value
Ms. Vijayalakshmi Rs.48,03,00,000 Rs.40,82,57,000
Mr. R.S. Babu Rs.48,48,00,000 Rs.38,00,00,000
Rajendran
Average Liquidation Rs.39,41,28,500
Value for the purpose
of E-auction Upset
Price
(vi) Thus, from the above table, it is evident that Rs.39,41,28,500/-
was `Average of Liquidation Value' for the purpose of E-auction Upset Price, which is as stipulated in the relevant Rules.
(vii) We also need to appreciate that different property may have different value depending upon location, size of property, economic situation prevailing at the particular time, demand and supply of properties at the relevant time. The sale of distressed assets, more Company Appeal (AT) (CH) (Ins) No. 336, 339 & 343 of 2021 31 of 40 so, if it is along with dispute, may also impact the valuation of the property adversely. Although, many parameters like last `Auction' of similar property or notified rates by relevant `Authority' of the area etc., also need to be kept in view. However, the fact remain that, when any property is put to `Sale' for `Auction', what truly matter is the market response at that time. Only thing, which is required to be ensured that the process was conducted in a fair and transparent manner. This `Tribunal' already seen from the 'Written Submissions' and `Averments' made during hearing, that the `Liquidator' indeed has followed the required norms. Hence, it will be difficult to accept pre-notion of the `Appellant' that the property is valuing approximately Rs.100 Crore and it was deliberately valued at a `Lower Price' and `Sold' to `Defraud' the company.
(viii) It has already been brought to the notice of this `Tribunal' that the property in dispute was not in use for a long time, which may also have some impact on valuation.
(ix) This `Tribunal' will also like to note that Liquidator's powers are different than that of an `Insolvency Resolution Professional' or the `Resolution Professional' who are given administrative powers, not decisive, whereas the `Liquidator' is having partial judicial powers. This position was upheld by this `Tribunal' in one another case i.e.JJE Adornment Pvt. Ltd. Vs. Pingle Builders Pvt. Ltd. & Company Appeal (AT) (CH) (Ins) No. 336, 339 & 343 of 2021 32 of 40 Anr. in Company Appeal (AT) (Ins.) No. 97 of 2021, reported in 2021 SCC OnLine NCLAT 471.
"Para 3 The liquidator, being a quasi-judicial authority, is empowered to admit or reject the claim, in whole or in part and such determination is subjected to appeal under the provisions embodied in Section 42 of the 'I & B Code'...."
[emphasis supplied]
(x) Time value in any commercial transaction is of paramount importance. It is the onerous responsibility of the `Liquidator' to ensure maximum realisation of the property and therefore, it is expected that he shall take decisions in the sale of the property to `Auction', based on the `Commercial Wisdom' as being done in case of 'Corporate Insolvency Resolution Process' by the 'Committee of Creditors'. In catena of Judgment of the Hon'ble Supreme Court of India, it has been clearly held that the 'Adjudicating Authority' or the `Appellate Authority', need not to dwell upon the `Commercial Wisdom' of the 'Committee of Creditors'. Although, there is no scope for the `Liquidator' to be treated at par with the 'Committee of Creditors', however we need to recognise the `Commercial Wisdom' of the `Liquidator' in conduct of an `Auction' to realise `Maximum Value'.
(xi) In view of the above discussions, the act of `Liquidator' stands to be valid as the process was conducted in accordance with the IBBI Company Appeal (AT) (CH) (Ins) No. 336, 339 & 343 of 2021 33 of 40 Rules and Regulations, especially as per Rule 4A and 4B, the `Liquidator' has power to reduce the Reserve Price by 25% for subsequent action. There is no error in the 'impugned order' w.r.t. this aspect.
Issue No. (IV) Whether the Liquidator was justified in selling the entire assets of the company when sale of a part of the `Assets' of the company would have been sufficient to discharge the liability of the company.
(i) The counsel for the `Applicant' in CP No. 336 of 2021, contended that the liability was not even the 1/10th and could have been satisfied with only selling some particular part of the property and there was no need to sell the whole property. It can be argued both ways as stated in 'CHAPTER VI REGULATION 32 OF IBBI Rules and Regulations' "32 [Sale of Assets, etc. The liquidator may sell-
(a) an asset on a standalone basis;
(b) the assets in a slump sale;
(c) a set of assets collectively;
(d) the assets in parcels;
(e) the corporate debtor as a going concern; or
(f) the business(s) of the corporate debtor as a going concern:
Company Appeal (AT) (CH) (Ins) No. 336, 339 & 343 of 2021 34 of 40 Provided that where an asset is subject to security interest, it shall not be sold under any of the clauses (a) to (f) unless the security interest therein has been relinquished to the liquidation estate.]"
"(ii) Also, Amendment Regulation 32A describes `Sale' as a going Concern;
"Sub-regulation (1) Where the committee of creditors has recommended sale under clause (e) or (f) of regulation 32 or where the liquidator is of the opinion that sale under clause (e) or
(f) of regulation 32 shall maximize the value of the corporate debtor, he shall endeavor to first sell under the said clauses.
Sub-regulation (4) If the liquidator is unable to sell the corporate debtor or its business under clause (e) or (f) of regulation 32 within ninety days from the liquidation commencement date, he shall proceed to sell the assets of the corporate debtor under clauses (a) to (d) of regulation 32."
As per abovementioned provisions, it is the discretion of the `Liquidator', as to in what way he wants to conduct the `Sale' procedure, subject to above rules.
(iii) The concept of `Commercial Wisdom' has to be interpreted with prudence and its evolution has to be vigilantly observed for striking the balance between the `Liquidation' and `Reorganization', which is enshrined to be the base for the design of the Insolvency and Bankruptcy Code, 2016. The value of property(s) as a whole and in parts, if sold may experience a depreciation in their value or appreciation. The determinants of market value of a property differ in many aspects, sometimes a property as whole holds more Company Appeal (AT) (CH) (Ins) No. 336, 339 & 343 of 2021 35 of 40 market value and if sold in parts, the value may depreciate and vice versa. The `Commercial wisdom' of the `Liquidator' is not questionable by the 'Adjudicating Authority', and if the `Liquidator' is of the idea that, then, it should be understood that the `Liquidator' is appointed to benefit and improve the situation of the `Corporate Debtor' and not degrade it. We do not know that what would appreciate or depreciate the value of the property, but the `Liquidator' is a person who has knowledge on the ground and can identify the best possible way to benefit the `Corporate Debtor' and understands the practical aspects of Commercial Real Estate Markets, then, it should not be questioned. Also, the Hon'ble Supreme Court of India in case of R.K. Industries LLP v. H.R. Commercial (P) Ltd., reported in MANU/SC/1069/2022 held that Liquidator's commercial wisdom not open to judicial review by the Adjudicating Authority.
(iv) The 'Adjudicating Authority' finds the Liquidator's action justified and reasonable and in accordance with `Law', hence this issue is not maintainable in the `Appeal'. This `Tribunal therefore, do not find any error on the part of the `Liquidator' and uphold the decision of the `Adjudicating Authority' on this aspect.
[emphasis supplied] Company Appeal (AT) (CH) (Ins) No. 336, 339 & 343 of 2021 36 of 40 Issue No. (V) Whether the `Liquidator' was justified in conducting the `Auction Proceedings' without forming the `Committee of Stakeholders', as envisaged under the I & B Code, 2016?
(i) The Liquidator was appointed by the `Adjudicating Authority' vide order dated 17.07.2019 and the `Auction' has been successfully carried out. The property has been sold, and the Appellant has objected that the `Liquidator' did not form `Committee of Stakeholders', as per I & B Code, 2016.
(ii) We will need to refer to the Amendment, Regulation 31A vide Notification No. - IBBI/2019-20/GN/REG047 w.e.f. 25.07.2019 and the Amendment Regulation 31A vide, which states that;
"31A (1) - The liquidator shall constitute a consultation committee within sixty days from the liquidation commencement date, based on the list of stakeholders prepared under regulation 31, to advise him on the matters relating to sale under regulation 32."
(iii) IBBI vide circular No. IBBI/LIQ/024/2019 dated 26.08.2019 also clarified that the amendment regulations are not applicable to the liquidation processes, which had commenced before coming into force of the said Amendment Regulations and that they are applicable to liquidation processes, which commenced on or after 25.07.2019. It is therefore clear that the processes of `Liquidation' Company Appeal (AT) (CH) (Ins) No. 336, 339 & 343 of 2021 37 of 40 started before the amendment for the formation of `Stakeholders Committee', came into force.
(iv) `Retrospective effect' is `restricted' and `prohibited' in `Law', and are not `enforceable' in the rule of `Law'. This `Tribunal', therefore do not find any error in the `Impugned Order', on this ground. Issue No. (VI) Whether the `Adjudicating Authority' can review its own order?
Power of NCLT to review its own order:
The `Applicant' filed an `Appeal' to NCLT to review and revise their order regarding commencement of `Liquidation Proceeding', here arises the principle of Res judicata the principle that a cause of action may not be pursued further once it has been judged on the merits. "Finality" is the term which refers to when a court renders a final judgment on the merits. To understand, we must refer to the following;
"Rectification of Order: Rule 154 of the NCLT Rules, 2016 provides that: (1) Any clerical or arithmetical mistakes in any order of the Tribunal or error therein arising from any accidental slip or omission may, at any time, be corrected by the Tribunal on its own motion or on application of any party by way of rectification."
Company Appeal (AT) (CH) (Ins) No. 336, 339 & 343 of 2021 38 of 40 "General power to amend: Further, Rule 155 of the NCLT Rules, 2016, provides that the Tribunal may, within a period of thirty days from the date of completion of pleadings, and on such terms as to costs or otherwise, as it may think fit, amend any defect or error in any proceeding before it; and all necessary amendments shall be made for the purpose of determining the real question or issue raised by or depending on such proceeding." From the abovementioned points, this `Tribunal' can easily differentiate between `Review' and `Recall'. The Hon'ble Supreme Court of India in the case of Lily Thomas vs. Union of India, reported in (2000) 6 SCC 224 held:
"That the power of review can only be exercised for correction of a mistake and not to substitute a view and that the power of review could only be exercised within the limits of the statute dealing with the exercise of such power. The review cannot be treated like an appeal in disguise. The mere possibility of two views on the subject is not a ground for review. Once a review petition is dismissed no further petition of review can be entertained."
Therefore, the `Adjudicating Authority' was right in taking a decision that it has no power to `Review'/`Recall' its own order. Company Appeal (AT) (CH) (Ins) No. 336, 339 & 343 of 2021 39 of 40
63. Based on the aforesaid qualitative and quantitative discussions and reasons, this `Tribunal', is of the considered opinion that no ground is made out for any interference by this `Tribunal' with the Company Appeal (AT) (CH) (Insolvency) No. 336 and 339 of 2021 filed against the common 'impugned order' dated 17.11.2021 passed in MA/120/2020 in CP. No./1140/IB/CB/2018 and SR No. 944 of 2020 in CP. No./1140/IB/CB/2018 respectively and Company Appeal (AT) (CH) (Insolvency) No. 343 of 2021 filed against the 'impugned order' dated 05.05.2020 passed in IA No. 335/IB/2020 in MA No. 689/2019 in CP. No./1140/IB/CB/2018 by the `Adjudicating Authority', (`National Company Law Tribunal', Chennai Bench). Consequently, the `Appeals' fail.
In fine, the Comp. App (AT) (CH) (Ins.) Nos. 336, 339 & 343 of 2021 are dismissed. No costs. The connected pending `Interlocutory Applications', if any, are Closed.
[Justice M. Venugopal] Member (Judicial) [Naresh Salecha] Member (Technical) Simran Company Appeal (AT) (CH) (Ins) No. 336, 339 & 343 of 2021 40 of 40