Successful Auction Purchaser In Liquidation Proceedings Entitled For Certain Consequential Reliefs: NCLAT Rules in Matter of Punjab National Bank International [Read Order]

In the matter of Punjab National Bank (International Limited), the National Company Law Appellate Tribunal (“NCLAT”) has ruled that the successful auction purchaser in liquidation proceedings is entitled to certain consequential reliefs. The Appeal has been filed against the order passed by the National Company Law Tribunal, Mumbai. The Adjudicating Authority by the impugned order has allowed an appeal filed by Successful Auction Purchaser (Respondent No.1) praying for certain reliefs and concession consequent to going concern sale in the liquidation proceeding of Corporate Debtor – Sterling Biotech Limited On an Application filed by Andhra Bank under Section 7 of the Insolvency and Bankruptcy Code, 2016 (“IBC”), the Corporate Insolvency Resolution Process (“CIRP”) was initiated against the Corporate Debtor by order dated 11/06/2018. The Resolution Professional (“RP”) made a publication inviting Expression of Interest (“EoI”) from the interested Applicants. No Resolution Plan could be approved in the CIRP of the Corporate Debtor. An Application under Section 12A was filed by the Promoters to withdraw the CIRP. The Adjudicating Authority vide order dated 08.05.2019, dismissed the Section 12A Application and directed for liquidation of the Corporate Debtor under Section 33, sub-section (1) of the IBC. The Adjudicating Authority also observed that as the Corporate Debtor is a going concern, employing more than 800 employees, the Corporate Debtor be liquidated as per the provisions of Section 32(b) & (e) of the IBBI (Liquidation Process) Regulations, 2016. By a subsequent letter dated 13.05.2019, Dr. Mamta Binani, was appointed as a Liquidator. The order of the liquidation remained abeyance, in pursuance of the order passed by the NCLAT and the order passed by the Supreme Court of India. The Appellant filed its claim to the Liquidator on 19.03.2021 of USD 6,203,185.70, which was acknowledged by the Liquidator on 22.03.2022. The Appellant vide email dated 24.03.2022 relinquished its security under Section 52 of the Code. The Liquidator published a list of stakeholders on 07.06.2021 and 16.12.2021 in which the name of Appellant was included as stake holder. The amended Process Document was issued on 31.03.2022, while the date of e-auction was scheduled on 04.04.2022. After the Respondent, Perfect Day INC was declared as a Successful Auction Purchaser Prayers in the Application were to stay the eAuction process/ sale process of the Corporate Debtor till fresh bids are invited for re-auction and the liquidator is directed to maintain the status quo. The auction was already completed on 04.04.2022 and the Letter of Intent was issued by the Liquidator to the Successful Auction Purchaser on 05.04.2022. The Principal Bench, comprising Justice Ashok Bhushan (Chairperson) and Mr Barun Mitra (Technical Member observed that the Appellant, who was a stakeholder of only 0.734% in the total value of stakeholders of the Corporate Debtor, was part of the Committee of Creditors and participated in the liquidation process by filing its claim, which was accepted. The Appellant has been distributed the proceeds of the liquidation as per the entitlement under Section 53 of the IBC. At no point in time, before the holding of the auction, i.e., 04.04.2022, any kind of objection was raised by the Appellant to the reserve price or against valuation obtained in the liquidation process by the Liquidator. It was only after the auction was over and Successful Bidder was declared, for the first time letter dated 26.05.2022 was written to the Liquidator by the Appellant calling for relevant information. It was found that the Appellant wanted to stay the process of auction and sale of the Corporate Debtor. The auction had already been completed and there was no occasion to stay the auction. Further process of Sale was to be undertaken as per the Liquidation Regulations. when the Successful Resolution Applicant has deposited the entire amount, issuance of the Sale Certificate was as per the Liquidation Regulations, in which no objection can be raised by the Appellant. Further noticed that “is an order granting reliefs and concessions to Successful Auction Purchaser, when the sale of the Corporate Debtor is as going concern, the Successful Auction Purchaser is entitled to receive certain reliefs and concessions to run the Corporate Debtor as going concern. “ The question of reliefs and concessions arises only when the Successful Resolution Applicant requires certain reliefs and concessions to run the Corporate Debtor as a going concern, which is consequential after acceptance of the highest auction bid by the Successful Auction Purchaser. Non-mention in the Process Document that reliefs and concessions can also be allowed is inconsequential. We do not find any merit in any of the submissions raised by the Appellant in the Appeal. The Appeal is dismissed. No order as to costs. Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates

Successful Auction Purchaser In Liquidation Proceedings Entitled For Certain Consequential Reliefs: NCLAT Rules in Matter of Punjab National Bank International [Read Order]

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