In Re: M/s. St. John Freight Systems Limited (Swiss Challenge Application)

ORDER Per: Justice (Retd.) S. RAMATHILAGAM, MEMBER (JUDICIAL)

Under Consideration is an application filed by the Applicant/ Liquidator of M/s. St. John Freight Systems Limited under section 60(5) of Insolvency and Bankruptcy Code, 2016 seeking the following reliefs,

The learned Counsel for the Applicant submitted that the Applicant herein was appointed as the Interim Resolution Professional vide order dated 10.12.2018 and was subsequently appointed as Resolution Professional upon Confirmation by the CoC. During the said CIRP period, as the resolution plan submitted was not commercially viable an application under section 33 of the Insolvency and Bankruptcy Code, 2016 was filed before this Adjudicating Authority for Liquidation of the Corporate Debtor which was allowed vide order dated 26.11.2021. Subsequent to which an appeal against the said liquidation order was preferred by the suspended director before the Hon'ble NCLAT, owing to which an initial stay was granted vide order dated 04.12.2019 by the Hon'ble NCLAT thereafter the same was dismissed. Again the said suspended director has approached the Hon'ble Supreme Court of India by way of an Appeal and Review, both of which was dismissed.

The Learned Counsel for the applicant submitted that pursuant to the order of the Hon'ble NCLAT, the applicant/Liquidator has caused Public Announcement as per Regulation 12 of the IBBI (Liquidation Process) Regulations, 2016 on 13.03.2021 at the places of the Registered and Principal Offices of the Corporate Debtor and the same was also published in the IBBI website.

It is submitted that the last date for submission of the claims specified in Form B was extended till 31.08.2020. The claims received till 02.09.2020 was verified and list of stakeholders was prepared in accordance with Regulation 31 of the IBBI (Liquidation Process) Regulation, 2016 and the same was also filed before this Adjudication Authority upon which the Liquidator had constituted a consultation Committee as per Regulation 31A of the IBBI (Liquidation Process) Regulations, 2016, further claims received after 02.09.2020 up to 26.12.2020 were verified and a separate application was filed before this Adjudicating Authority for modification of stakeholders list.

The Learned Counsel for the Applicant submitted that the business of the Corporate Debtor is being carried on as Going Concern for Beneficial Liquidation. It is further submitted that the applicant/liquidator for the benefit of the corporate debtor has identified and closed certain branches of the Corporate Debtor and has also issued discharge certificate to 136 employees and 15 retainers of the Corporate Debtor in terms of section 33(7) of the Code. The liquidator/applicant has also carried out steps to appoint administrators to look into the affairs of the direct and step-down subsidiaries.

The Learned Counsel for the Applicant submitted that the progress of the Liquidation is regularly submitted as per Regulation 15 (1) (a) of Liquidation Regulations and the latest progress report for 2nd Quarter of FY 2021-22 was submitted on 15.10.2021. It is further submitted that a Public Announcement was issued on 23.10.2020 inviting Expression of Interest (EoI) from interested parties to take over the business of the Corporate Debtor as a Going Concern. Pursuant to which, 13 parties evinced interest out of which only 3 parties have submitted the proposal. The same was discussed in the first stakeholders committee (SCC) meeting, then discussions as to improvising the proposal amount was carried out with the prospective buyers. Thereafter, the same was discussed in the second and third meetings. Later during the fourth SCC meeting all the three proposals were unanimously rejected. Later during the fifth SCC Meeting suggestions were given as to issue afresh public announcement inviting EoI, owing to which a public announcement was made on 16.06.2021; in response thereto two proposals were received out of 11 evinced buyers. It is further submitted that comparisons of the two proposals were submitted for the stakeholder's discussion during the Sixth Stakeholders Meeting. Thereupon one of the buyers failed to revert back despite multiple steps taken by the applicant to reach the same. In the meantime, a new proposal was received on 25.09.2021 which was also taken up before the 7th SCC meeting dated 28.09.2021. Discussions as to negotiation and to decide the same by voting on the proposal was made.

The learned Counsel for the applicant/liquidator submitted that during the 8th SCC meeting, the already existing proposals were also considered for voting upon their price improvisation. The SCC upon consideration have finalized two proposal which are as follows,

The learned Counsel for the Applicant submitted that three resolutions as to a) proceed with the proposal of Global Corp LLC, b) to proceed with proposal of Galaxy Freight System Limited and c) to carryout Swiss challenge method for maximizing the value of the proposal was passed along with voting for the proposal on 22.10.2021 Summary and the result of the voting are as follows:

The learned counsel for the applicant/Liquidator states that the reasons for not voting and voted against the resolution were recorded in the Ninth Stakeholders committee meeting. Further an offer from the promoter under Section 230 of Companies Act, 2013 was received by the liquidator with no sufficient clarity as to the investor or any proper reply for the clarifications raised was answered. However; the same was put before the SCC meeting, which was subsequently rejected figuring out it to be a delay strategy. It is further submitted that the liquidator after October 2021 has received expression of interest from three buyers. However, the same was not considered as they were submitted after the timeline prescribed. The applicant in pg. no. 18 of the application has tabulated the comparison of liquidation value, quoted value along with the voting percentage which did not meet the 66% of the stakeholders vote. It is evident herein that Proposal –A shows up to be Rs. 137.54 Crore which is mere closer to that of Rs. 147.72 Crore, the liquidation value. The liquidator in this situation as the SCC is unable to meet the vote not less than 66% has come up with the reasons recorded in the application to fix Proposal –A as the base price and go ahead with Swiss Challenge method among the other prospective buyers including the EoI received after the specified timeline.

Heard the submission made by the Learned Counsel for the Applicant and perused the documents placed on record. At this juncture it is relevant to refer Ravi Development vs. Shree Krishna Prathisan and ors. (Civil Appeal No.3459 of 2009) in which the Hon'ble Supreme Court has held with respect to adoption of Swiss Challenge Method that "The method is transparent inasmuch as all the parties were well aware of the "right of first refusal" accorded to the "originator of proposal". As per the method which was known to all the parties the originator of the proposal must in consideration of his vision and his initiative be given to the benefit of matching the highest bid submitted. Further has also held that an unsolicited bid or a proposal received from a developer can thus be subjected to a bidding process by different modes including the Swiss challenge method.

Accordingly, the Applicant/ Liquidator is hereby allowed to fix Proposal –A as base price and accordingly adopt Swiss Challenge Method including the proposals received after the specified timeline considering the fact of maximization of the value of the Corporate Debtor.

Accordingly, the MA/122/2021 stands Allowed.