Manish Gupta Liquidator of Bhupen Electronic Ltd. Vs. Eshan Minerals Pvt. Ltd. and Anr. – NCLT Mumbai Bench
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NCLT Mumbai Bench held that:
(i) The Liquidator has been provided with ample powers not only to sell the land in parcels but also not to be bound by the consultation with the stakeholders.
(ii) Section 36 of the IB Code 2016 categorically stipulates the scope and ambit of the liquidation estate. Sub-Section (4) of Section 36 is with respect to the assets which shall not be included in the liquidation estate and shall not be used for recovery in the liquidation.
(iii) The Liquidator is authorized to sell the immovable and movable property of the Corporate Debtor in liquidation through a public auction or a private contract, either collectively, or in a piecemeal manner.
(iv) The proviso to Section 35 (2) of the IBC makes it clear that the opinion of the stakeholders would not be binding on the Liquidator.
In this case, in the EOI, the period for payment of balance sale consideration was given 15 days whereas after the date of amendment of period for payment of balance sale consideration to 90 days in Liquidation Regulations(amended on 25.07.2019). The Respondent had been asking for 90 days from the date of demand in terms of amendment dated 25.07.2019.
Hon’ble NCLAT held that:
(i) The very fact that the circular dated 26.08.2019 has already been withdrawn and that the amendment dated 25.07.2019 was in vogue as on 08.07.2020, it was incumbent upon the Liquidator to have followed the provisions of Regulation 33 much less Schedule 1 (Clause 12) of the Regulations which has not been followed and the terms and conditions have been provided by the Liquidator on its own in the EOI overlooking the terms and conditions as envisage in Schedule 1.
(ii) In such circumstances, the action of the Liquidator is totally unsustainable, therefore, we do not find any error in the order under challenge in which all the factors of this case have been thoroughly appreciated.
(iii) Upheld the decision of NCLT Kolkata Bench.
In this case, Liquidator issued a certificate of sale in favour of the Successful Purchaser under Section 35(1)(f) of IBC and handed over the auctioned property. Thereafter, liquidator issued a letter to the Sub-Registrarto record and file the certificate of sale as the appellant was the successful e-auction purchaser of the auctioned property. However, Sub-Registrar declined to do the needful on the ground that there is no practice of filing certificate of sale of this nature in his office and also on the ground that such filing would attract stamp duty at par with sale under Article 47-A of the Indian Stamp Act, 1899.
Division Bench of Hon’ble High Court of Telangana held that in Madhurambal (SC) special leave petition was filed before the Supreme Court. While dismissing the special leave petition, Supreme Court has held that law on this point is well settled that a sale certificate is not an instrument of the kind mentioned in clause (b) of Section 17 of the Registration Act; the authorized officer of the bank under the SARFAESI Act, 2002 should hand over the duly validated sale certificate to the auction purchaser with a copy forwarded to the registering authority to be filed in book No.1 as per Section 89 of the Registration Act. Supreme Court has further opined that once a direction is issued for the duly validated certificate to be issued to the auction purchaser with a copy forwarded to the registering authority to be filed in book No.1 as per Section 89 of the Registration Act, it has the same effect as registration and obviates the requirement of any further action. Supreme Court has observed that the authorities should stop filing unnecessary special leave petitions on this issue.
Adjudicating Authority held that from the conjoint reading of the provisions under Regulation 32A(4) and Regulation 32(e), it can be inferred that the Corporate Debtor can be sold as going concern in the first auction. However, as regards to the word “exclusively” mentioned in the Regulation 32A(4), we are of the view that whereas the liquidator may sell the assets of the corporate debtor under clause (e) of regulation 32 exclusively only at the first auction, we find no such bar in selling the assets of the Corporate Debtor in the subsequent auctions, where the Liquidator has all other options of sale as stipulated under Regulation 32A, available including selling of the Corporate Debtor as going concern.
NCLAT held that in the judgment in Bank of Baroda v. MBL Infrastructures Ltd., the Hon’ble Supreme Court has held that a ‘purposive interpretation’ of section 29-A is required when the primary aim is to restart the corporate debtor, which is also the case in the present appeal since the corporate debtor is being sold as a ‘going concern’. This judgment, in addition, also clarifies that the management which has ran the company aground, because of which the company has gone into insolvency resolution/liquidation, cannot be allowed to return in a new avatar as a resolution applicant. This judgment also lays down that the erstwhile promoter of a corporate debtor has no vested right to bid for the property of the corporate debtor in liquidation. Such a purposive interpretation of section 29-A also permeates the provisions of section 35 (1)(f) of the IBC and, therefore, a similar prohibition is applicable to a successful auction purchaser so that backdoor entry of erstwhile management is not permissible.
It also held that the successful auction purchaser Redbrick Consulting Pvt. Ltd. did not produce any Udyam Registration Certificate when the e-auction of the corporate debtor as a ‘going concern’ took place on 16.6.2021. The notification dated 26.6.2020 of the Ministry of Micro, Small and Medium Enterprise was in existence on the date of e-auction, and therefore, it was incumbent upon the successful auction purchaser Redbrick Consulting Pvt. Ltd. to have obtained and submitted such a certificate to the liquidator to claim benefit under section 240-A.
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NCLAT holds that it is to be point out that Section 29A(c) of the Code, 2016 relates to persons not eligible to be Resolution Applicant and in fact, the Code has bifurcated such persons into two groups as seen sub clauses (c) & (g) of Section 29A of the Code, 2016. Moreover, if an individual was a promoter/in the management, or control of a Corporate Debtor, in which a preferential transaction, undervalue transaction and extortionate credit transaction or a fraudulent transaction had taken place and in respect of which an Order was passed by the Adjudicating Authority in terms of the Code, 2016, such person was ineligible to submit a Resolution Plant under 29A(g) of the Code. In effect, only such individuals who do not come under sub-clause (g) of Section 29A of the Code, 2016, are eligible to furnish Resolution Plan under clause (c) of Section 29A, if they happen to be individuals, who are in the erstwhile management or control of the Corporate Debtor, as per decision of the Hon’ble Supreme Court in Arcelormittal India Private Limited V. Satish Kumar Gupta [2018] ibclaw.in 31 SC.
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Regulation 47 of the Liquidation Regulations provides “Model time- line for liquidation process”. According to this regulation, from the date of commencement of liquidation and appointment of liquidator under sections 33 and 34 of IBC the time provided for completion of liquidation process is 365 days. Further, sub-regulation (1) under Regulation 44. Thus if the liquidation of the Corporate Debtor is to be done as a going concern, an additional 90 days is allowed beyond one year for completion of liquidation process.