AI Structured Summary
Not yet generated for this judgment
Judgment
ORDER
20.01.2023: Heard the Learned Counsel Mr. Anirudh Krishnan appearing for the ‘Appellant’ .
The ‘Appellant’ has focused the instant Comp App AT) (CH) (Ins) No.15/2023, as an ‘Aggrieved Person’ in respect of the ‘impugned order’ dated 21.10.2022 in IA(IBC)/857(CHE)/2021 in CP/1053/IB/2018, whereby and whereunder the said ‘Application’ came to be ‘disposed of’ by the Adjudicating Authority, (National Company Law Tribunal, Division Bench – I, Chennai), by issuing ‘necessary Directions’.
The Adjudicating Authority, (National Company Law Tribunal, Division Bench – I, Chennai), while passing the ‘impugned order’ in IA(IBC)/857(CHE)/2021 in CP/1053/IB/2018, among other things, at ‘Paragraph No.11 to 18 had made the following observations:-
“11.We have heard the submissions made by the Ld. Counsel for both the parties. In the present case it is seen that the sufficient opportunities were granted to the Counsel for the Applicant to appear and put forth his argument in the present case and it is also seen that the time and again indulgence was also granted by this Tribunal to the Ld. Counsel for the Respondent on 27.05.2022, 24.06.2022, 05.07.2022, 29.07.2022, 06.09.2022 and 15.09.2022. In spite of the same, the Applicant Counsel has failed to present his case. However, we have heard the argument of the junior counsel for the Applicant.
12.In the present case is not in dispute that time period of three (3) months was granted to the Applicant to sell the assets of the Corporate Debtor. The Applicant in para 9 of its Applicant has stated the reason failure of the E-auction dated 18.06.2021 and the same is extracted hereunder;
9.With regard to finding No.(iii) this Hon'ble Tribunal vide theCommon Order dated 04.06.2021 was pleased to grant a period of three (3) months for the Applicant to complete the sale of security interest. The Applicant herein had called for an auction to be held on 19.07.2021 vide Auction Notice dated 18.06.2021. A copy of the said Auction Notices dated 18.06.2021 is annexed herewith as Annexure-V. However, the Applicant herein could not identify a buyer for the said security interest pursuant to the auction held on 19.07.2021. Although time has been granted until 04.09.2021 i.e period of 3 months from the Common Order dated 04.06.2021, the Applicant herein is sceptical about identifying buyers for the security interest as the prospective buyers are vary of arranging the necessary funds for the purchase of the said security interest owing to the on-going pandemic situation which has in general lead to a cash crunch across most industries. The Applicant estimates that it would require a further period six(6) months for the sale of security interest to concluded. Therefore, in light of this predicament, the Applicant is constrained to approach this Hon'ble Tribunal seeking an extension of time to conclude the sale of the security interest.
13.It is to be noted here that the e-auction conducted by the Applicant has failed on 19.07.2021 and thereafter a time period of two (2) months was available to the Applicant i.e. till 04.09.2021 to complete the e-auction and if the Applicant was pro-active they could have issued another e-auction. However, the Applicant preferred to be indolent and blamed the pandemic situation as one of the reasons for not going ahead with the e-auction.
14.It is also seen that the Stakeholders of the Corporate Debtor viz. Maximus ARC Ltd. is having a second charge on the aforesaid asset and the admitted claim of the said secured Financial Creditor is a sum of Rs.31.07 crores and the admitted claim of the Applicant in the present case only to the extent of Rs.4.47 crores, whereas the security interest which is expected to be realised from the sale of the above said property is to the tune of the Rs. 25 crores. Thus, the remaining proceeds of the sale is required to be distributed as per Section 53 of the IBC, 2016.
15.Further, it is also seen that the aforesaid property of the Corporate Debtor is the only substantial asset available in the liquidation estate of the Corporate Debtor and the timely realisation of the aforesaid asset is also essential since any amount of delay will have a serious impact on the value of the assets. As per the object of IBC, 2016 the realisation of the assets of the Corporate Debtor has to be achieved in a time bound manner and holding property under the possession of the Applicant indefinitely will erode its value. Further, more than two years have lapsed since order of Liquidation was passed by this Tribunal and thereby granting any further extension to the Applicant would definitely scuttle the Liquidation process of the Corporate Debtor.
16.At this juncture, we are also persuaded by the decision of the Hon'ble NCLAT in the matter of Dhanalaxmi Bank vs Techno Fab Manufacturings Ltd. in Company Appeal (AT) (Ins) No. 777/2021 in which it was held as follows:
Heard Ld. Counsel for the Appellant. He submits that the Appellant being a secured creditor in the liquidation process of the Corporate Debtor has intimated to the Liquidator to realize its asset over which it has exclusive first charge under Section 52(1) (b) of the IBC and in physical possession of the asset. The Liquidator has asked the Appellant to vacate its physical possession and to return back asset to the liquidation estate. However, the Appellant intends to put further efforts to realize its security and accordingly, need a further time period of six (6) months. But Ld. Adjudicating Authority has dismissed the Application. Therefore, this Appeal is filed.
2.Ld. Counsel appearing on behalf of the Liquidator vehemently opposes the prayer and submits that the order of liquidation was passed on 05.09.2018 and the physical possession on the secured asset was handed over to the Appellant by the liquidator on 03.09.2019. The first auction of the secured asset was made on 03.09.2019 and second on 06.01.2021, this clearly shows that no steps were taken by the Appellant for auction for about 15 months. Thereafter, about 8 months have been lapsed but, no steps have been taken by the Appellant to realize its security interest.
3.It is further submits that Sub Regulation (2) of Regulation 21-A of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 provides that a secured creditor has to realize its security interest in time bound manner and has to relinquish the security interest to the l i q u i d a t o r w i t h i n 9 0 d a y s f r o m t h e liquidation commencement date and the secured creditor shall pay the excess of the realized value of the asset, which is subject to security interest, over the amount of his claims admitted, to the liquidator within one hundred and eighty days from the liquidation commencement date. Sub Regulation (3) of Regulation 21 provides that where a secured creditor fails to comply with sub-regulation (2), the asset, which is subject to security interest, shall become part of the liquidation estate.
4.In the present case, the order of liquidation was passed on 05.09.2018, three years has been lapsed and the liquidation proceeding could not be completed and after granting ample opportunity the Appellant has failed to realize its security interest. Therefore, Ld. Adjudicating Authority has rightly directed the Appellant to handover the asset in possession back to the liquidator within seven (7) days.
5.We have gone through the impugned order and relevant provisions. We find no legal flaw in the impugned order. Thus, the Appeal is dismissed summarily.
17.Thus, in view of the reason stated above and also in view of the decisions rendered by the Hon'ble NCLAT in the matter referred (supra) we hereby direct the Applicant viz. Andhra Pradesh State Finance Corporation Limited to hand over the possession of the assets of the Corporate Debtor which is an immovable property admeasuring about AC 44.65 Cents of Industrial Land at Nidadavole Village and Mandal, West Godavari District, Andhra Pradesh, to the Liquidator within a period of 7 days from the date of receipt of this order. The above said asset will form part of the liquidation estate of the Corporate Debtor and the Liquidator is directed to takes pro-active steps to sell the aforesaid property in terms of the provision of IBC, 2016 and IBBI (Liquidation Process) Regulations, 2016 and distribute the proceeds to the stakeholders in the order of priority as envisaged under Section 52 and 53 of the IBC 2016.
18.Further, it is also made clear that the Applicant will liable to pay sum of Rs. 31,07,500/- as liquidation cost to the Liquidator in terms of the order passed by this Tribunal dated 04.06.2021.” and ‘disposed of’ the said ‘Application’.
Assailing the ‘impugned order’ passed by the Adjudicating Authority, (National Company Law Tribunal, Division Bench – I, Chennai), in IA(IBC)/857(CHE)/2021 in CP/1053/IB/2018 dated 21.10.2022, the Learned Counsel for the ‘Appellant’ submits that the Adjudicating Authority, (National Company Law Tribunal, Division Bench – I, Chennai) had committed an ‘error’ in failing to appreciate that the ‘immovable property’ being AC 44.65 Cents of Industrial Land at Nidadavole Village and Mandal, West Godavari District, Andhra Pradesh being unrelinquished, as communicated to the Liquidator on 25.08.2020 and, then, the same would stand outside the purview of ‘Liquidation Estate’ of the ‘Corporate Debtor’.
According to the Learned Counsel for the ‘Appellant’ / ‘Applicant’, the ‘Appellant’ had paid already under protest a sum of Rs.3,90,000/- on 28.06.2021 and Rs.27,17,500/- on 06.07.2021 in all aggregating to Rs.31,07,500/- in respect of the ‘Liquidation Cost’ to the ‘Liquidator’.
The Learned Counsel for the ‘Appellant’ brings it to the ‘Notice’ of this ‘Tribunal’ that the Adjudicating Authority, (National Company Law Tribunal, Division Bench – I, Chennai) had incorrectly ‘failed to appreciate that the ‘extension of 6 months’, as sought by the ‘Appellant’ in IA(IBC)/857(CHE)/2021 in CP/1053/IB/2018, ought to have been granted.
The Learned Counsel for the ‘Appellant’ proceeds to point out the facts and circumstances of the instant case that the Adjudicating Authority, (National Company Law Tribunal, Division Bench – I, Chennai) should have seen a ‘prima facie case’ and ‘Balance of Convenience’ prevailed in the ‘Appellant’s favour’ for the grant of extension of six months.
The Learned Counsel for the ‘Appellant’ while summing up, points out that the Adjudicating Authority, (National Company Law Tribunal, Division Bench – I, Chennai) had failed to appreciate that the ‘Applicant’ / ‘Appellant’, despite having the 1st charge over the unrelinquished security interest, would sustain irreparable loss by the means of the fact that it is an unrelinquished security interest was placed in the ‘Liquidation Estate’ of the ‘Corporate Debtor’, in negation of the Scheme of Section 52 of the Insolvency & Bankruptcy Code, 2016.
Before the Adjudicating Authority, (National Company Law Tribunal, Division Bench – I, Chennai) in IA(IBC)/857(CHE)/2021 in CP/1053/IB/2018 filed under Section 60 (5) of the Insolvency & Bankruptcy Code, 2016, had prayed for a ‘Relief’ of ‘issuance of clarification’, as to whether the ‘Applicant’ / ‘Appellant’ has to pay only, if share of the ‘Liquidation Cost’ for a sum of Rs.31,07,500/- i.e., 12.43% of Rs.13,07,500/- which is Rs.3,90,000/- or whether the ‘Applicant’ / ‘Appellant’ has to pay the wholesome of Rs.31,07,500/- as estimated by the ‘Respondent’ and also had prayed for an extension of further period of ‘six months’ from 04.09.2021 by the ‘Applicant’ / ‘Appellant’, to complete the sale of the ‘Security Interest’.
It is not in dispute that, originally, that a time of ‘Three Months’ was granted to the ‘Applicant’ / ‘Appellant’ to complete the sale of the ‘Security Interest’ and the said ‘Three Months’ time granted, expired on 05.09.2021. Thereafter, the ‘Applicant’ / ‘Appellant’ had issued a ‘Caution Notice’ on 18.06.2021 in the teeth of Section 19 of the State Financial Corporate Act, 1951 and the ‘candid fact’ is that ‘No Bidder’ had taken part in that ‘Auction’ and hence, the ‘Auction’ had failed.
It transpires that the ‘Liquidator’ through an ‘E-mail’ on 06.09.2021 had claimed possession of the property to be handed over to him and that the ‘Applicant’ / ‘Appellant’ had failed to sell over the possession of the properties to and in favour of the ‘Liquidator’ and hence, the ‘Applicant’ / ‘Appellant’ was perforced to prefer IA(IBC)/857(CHE)/2021 in CP/1053/IB/2018 before the ‘Adjudicating Authority’, (National Company Law Tribunal, Division Bench – I, Chennai) seeking ‘extension’ of ‘Three Months’ period.
At this juncture, this ‘Tribunal’ on going through the ‘impugned order’ passed in IA(IBC)/857(CHE)/2021 in CP/1053/IB/2018 by the ‘Adjudicating Authority’, (National Company Law Tribunal, Division Bench – I, Chennai) dated 21.10.2022 is of the ‘earnest opinion’ that the ‘Adjudicating Authority’, (National Company Law Tribunal, Division Bench – I, Chennai) had taken into account of the ‘Judgment’ / ‘Decision’ rendered by this ‘Appellate Tribunal’ and, ultimately, had directed the ‘Applicant’ / ‘Appellant’ to hand over the ‘possession’ of ‘Assets’ of the ‘Corporate Debtor’, being an ‘immovable property’, admeasuring Acres 44.65 Cents of Industrial Land at Nidadavole Village and Mandal, West Godavari District, Andhra Pradesh to the ‘Liquidator’, within a period of ‘7 Days’ on the date of ‘receipt of this Order’.
Not resting with the above, the ‘Adjudicating Authority’, (National Company Law Tribunal, Division Bench – I, Chennai) had candidly made it quite clear that the aforesaid ‘Assets’ will for part of the ‘Liquidation Estate’, of the ‘Corporate Debtor’ and the ‘Liquidator’ was directed to take proactive steps to ‘sell the property’, in question, as per the ‘Scheme’ of the Insolvency & Bankruptcy Code, 2016 and distribute the ‘proceeds’ to the ‘stakeholders’ by means of an ‘order of priority’, in the teeth of Section 52 and 53 of the Insolvency & Bankruptcy Code, 2016.
In fact the ‘Adjudicating Authority’, (National Company Law Tribunal, Division Bench – I, Chennai) had directed the ‘Applicant’ / ‘Appellant’ to pay a sum of Rs.31,07,500/-, as ‘Liquidation Cost’ to the ‘Liquidator’, as per the order passed by the ‘Adjudicating Authority’, (National Company Law Tribunal, Division Bench – I, Chennai) dated 04.06.2021. The said ‘Order’ is free from any ‘material irregularity’ and does not suffer from any ‘Patent Legality’, in the eye of ‘Law’, as opined by this ‘Tribunal’.
Therefore, this ‘Tribunal’, is in ‘Complete Agreement’ with the view arrived at by the ‘Adjudicating Authority’, (National Company Law Tribunal, Division Bench – I, Chennai) in ‘disposing of’ the aforesaid IA(IBC)/857(CHE)/2021 in CP/1053/IB/2018 dated 21.10.2022 and by issuing ‘necessary Directions’ in the considered opinion, do not require any interference in the hand of this ‘Tribunal’, sitting in an ‘Appellate Jurisdiction’. Resultantly, the instant Comp App AT) (CH) (Ins) No.15/2023 is ‘devoid of merits’ and it fails.
In fine the instant Comp App AT) (CH) (Ins) No.15/2023 is ‘dismissed’. The connected IA/46/2023 (For ‘Stay’) and IA/47/2023 (For ‘Exemption) are Closed.