Chhota vs Kashi Vishwanathan Sivaraman & Anr.

Ashok Bhushan, J.

These two Appeals arises out of Liquidation Proceeding of the Corporate Debtor – ‘Haridwar Iron and Ispat Rollings Ltd.’ and having been heard together are being decided by this common judgment.

‘Haridwar Iron and Ispat Rollings Ltd.’ was admitted to insolvency by order dated 22.05.2018 passed by the Adjudicating Authority (National Company Law Tribunal), Principal Bench, New Delhi. No Resolution Plan having been approved, the liquidation of the Corporate Debtor was directed by the Adjudicating Authority on 17.09.2019. The Respondent was appointed as Liquidator of the Corporate Debtor. Liquidator has conducted e-auction of assets of the Corporate Debtor on six occasions. On 25.09.2020 fifth sale notice was issued for auction to be conducted on 12.10.2020. The Appellant in Company Appeal (AT) (Ins.) No. 318-319 of 2022 – ‘Chhota’ participated in the e-auction for purchase of plant and machinery of the Corporate Debtor and declared as highest bidder. Liquidator, on 22.10.2020, issued letter of intent to the Appellant ‘Chhota’.

Sixth sale notice was issued on 11.11.2020 for purchase of land and building. As per the sixth sale notice, e-auction was conducted on 27.11.2020 in which e-auction ‘M/s Singhi Infrapower Projects Pvt. Ltd.’ (Appellant in Company Appeal (AT) (Ins.) No. 728 of 2020) was declared as highest bidder. Letter of intent dated 11.12.2020 was issued to ‘M/s Singhi Infrapower Projects Pvt. Ltd.’ by the Liquidator.

Liquidator issued reminders to ‘Chhota’ to pay the balance consideration. Appellant ‘Chhota’ filed an application being I.A. 161/2020 before the Adjudicating Authority seeking extension of time to pay remaining part payment to the Liquidator alongwith interest, because last date for completion of payment was 20.01.2021. Adjudicating Authority disposed of the application on 19.01.2021 on the undertaking given by ‘Chhota’ that he will make the balance payment alongwith interest on or before 01.02.2021. Appellant ‘Chhota’ made the balance payment on 31.01.2021.

The Liquidator issued Sale Certificate dated 02.02.2021 for sale of plant and machinery for sale consideration of Rs.4,07,00,000/-. Terms and conditions of the Sale Certificate contemplate lifting up of the material on or before 21.03.2021. Along with Sale Certificate letter of possession dated 02.02.2021 was also issued to purchaser ‘M/s Laxman Enterprises’ through proprietor. On 05.02.2021, an email was sent on behalf of the Liquidator to the purchaser to start the process of lifting of plant and machinery from the site. Email was replied on behalf of the purchaser. On 12.02.2021 the possession was given to the purchaser, however, the Sale Certificate and Letter of Possession was not signed by the purchaser. An email dated 22.02.2021 was sent to the purchaser again requesting eviction on urgent basis and to provide the signed copy of the Sale Certificate and Letter of Possession. On 19.02.2021 a letter was sent on behalf of the purchaser signed by the Appellant ‘Chhota’ pointing out that certain parts and machines are missing. Appellant ‘Chhota’ also filed complaint before Police Station, Laksar, Haridwar dated 25.02.2021.

On 07.04.2021, the Adjudicating Authority directed the Appellant to approach the Liquidator within two days in respect of issue about lifting of plant of machinery and resolve the issue before 18.04.2021 and file the compliance report. Liquidator has filed I.A. No. 1351 of 2021 seeking direction for lifting of plant and machinery of the Corporate Debtor by the purchaser – ‘M/s Laxman Enterprises’. In the said application order dated 07.04.2021 was passed as noted above which order was communicated to the Appellant but no action was taken by the Appellant. In the I.A. of the Liquidator further order was passed by the Adjudicating Authority on 11.08.2021 directing the Liquidator to serve notice on auction purchaser giving him a final chance to take the machinery within a weeks’ time, otherwise the amount paid by the auction purchaser was to be forfeited and fresh auction to be conducted. The order dated 11.08.2021 was communicated to the Appellant on 12.08.2021.

An I.A. No. 3797 of 2021 was preferred by the Appellant for recall of order dated 11.08.2019 and certain other directions. The Liquidator replied to the I.A. On 28.01.2022, the I.A. was dismissed by the Adjudicating Authority. Another I.A. No. 754 of 2022 was filed by the Appellant for recall of order dated 28.01.2022, which was dismissed on 16.02.2022. Company Appeal (AT) (Ins.) Nos. 318-319 of 2022 were filed by the Appellant challenging the order dated 28.01.2022 and 16.02.2022.

Now coming to the Company Appeal (AT) (Ins.) No.728 of 2022 filed by ‘M/s Singhi Infrapower Projects Pvt. Ltd.’, as noted above, the land and building was auctioned to the Appellant ‘Singhi Infrapower’ on 27.11.2020 for highest bid of Rs.5,87,00,000/-. After ‘Singhi Infrapower’ submitted 10% of the bid amount, letter of intent was sent to the Appellant on 11.12.2020. An I.A. No. 55 of 2021 was filed by ‘Singhi Infrapower’ seeking directions to the Liquidator to remove plant and machinery from the property. The Adjudicating Authority passed order dated 07.06.2022 in I.A. No. 55 of 2021 directing ‘Singhi Infrapower’ to deposit the balance amount of Rs.5.29 crores within 30 days of the order with the liquidator, failing which the auction would be deemed to be cancelled, which was held on 27.11.2020. Aggrieved by the order dated 07.06.2022 Company Appeal (AT) (Ins.) No.728 of 2022 was filed. In Company Appeal (AT) (Ins.) No.728 of 2022, this Tribunal, on 07.07.2022, noted the submission of the Liquidator that by the next date of hearing no steps are proposed for auction of the land.

We have heard Shri Akhilesh Kalra, learned counsel for the Appellant appearing in Company Appeal (AT) (Ins.) Nos. 318-319 of 2022, Shri Abhishek Anand, learned counsel for the Appellant in Company Appeal (AT) (Ins.) No.728 of 2022 and learned counsel for the Liquidator. We have also heard Shri Abhijeet Sinha, learned counsel appearing for ‘Sunhill Proptech Private Limited’ who had filed application for impleadment in both the Appeals.

Shri Kalra, learned counsel appearing for the Appellant ‘Chhota’ submits that Appellant has deposited the entire amount by 30.01.2021 i.e. within the time allowed by the Adjudicating Authority and when after issuance of Sale Certificate the Appellant went to take physical possession it was found that certain parts of plant and machinery were missing with regard to which, immediately a letter dated 19.02.2021 was sent to the Liquidator. But grievances of the Appellant were not redressed. After order dated 11.08.2021 was passed, an I.A. No. 3797 of 2021 was filed by the Appellant which came to be rejected on 28.01.2022. It is submitted that Appellant has filed a Police complaint regarding the theft of machinery but his grievances were also not redressed by the Police Authority.

Learned counsel for the Liquidator refuting the submissions of the Appellant submits that the Appellant deliberately did not remove the plant and machinery inspite of Sale Certificate dated 02.02.2021 and Letter of Possession issued to the Appellant. The sale of the plant and machinery was made as per the terms and conditions and e-auction document on “as is where is”, “as is what is”, and “whatever there is basis”, hence, no grievance could have been raised by the Appellant regarding the plant and machinery. It is submitted that the application dated 19.02.2021 filed by the Appellant was only to delay the process and there was no truth in the allegations made in the application. It is submitted that in pursuance of order dated 11.08.2021 passed by the Adjudicating Authority sale in favour of the Appellant has already been cancelled and assets distributed.

Shri Abhijeet Sinha, learned counsel appearing for Applicant ‘Sunhill Proptech Private Limited’ submits that Applicant be permitted to intervene in the matter, who are ready to take the plant and machinery for a total consideration of Rs.4.25 crore. It is submitted that the plant and machinery be allowed to be taken by the Applicant on payment of Rs.4.25 crore as per the schedule as mentioned in the application.

Shri Abhishek Anand, learned counsel appearing for the Appellant in Company Appeal (AT) (Ins.) No. 728 of 2022 submits that the Appellant could not deposit the balance amount only because of the fact that plant and machinery which was auctioned in favour of Auction Purchaser did not remove the plant and machinery and hence, possession of land and building could not have been obtained by the Appellant ‘Singhi Infrapower’. It is submitted that the Appellant is ready and willing to deposit the entire amount.

Learned counsel for the Appellant refuting the submission of Mr. Anand contends that ‘Singhi Infrapower’ is obliged to deposit the entire amount within the time period allowed in the letter of intent. The Adjudicating Authority has rightly passed the order giving one month time to the Appellant failing which auction in favour of ‘Singhi Infrapower’ was to be deemed to be cancelled.

Shri Abhijeet Sinha, learned counsel appearing for the Applicant -Sunhill Proptech Private Limited’ submits that the Applicant is ready to take the plant and building for consideration of Rs.7.5 crores.

We have heard learned counsel for all the parties and perused the records.

We may first notice the submissions and issues raised in Company Appeal (AT) (Ins.) No. 318-319 of 2022. In the fifth e-auction held on 12.10.2020, the Appellant ‘Chhota’ the proprietor of ‘Laxman Enterprises’ was the highest bidder. In addition to EMD amount of Rs.20 Lakh Appellant also deposited Rs.21 Lakhs i.e. balance of consideration of EMD (10% of the bid amount). For payment of balance amount, Adjudicating Authority directed the Appellant to deposit the entire amount by 01.02.2021 and by 31.01.2021 entire amount was deposited by the Appellant. The issue which was raised by the Appellant after issuance of the Sale Certificate on 02.02.2021 is regarding missing of some part of plant and machinery by letter dated 19.02.2021. One of the condition of e-auction in Clause H was as follows:-

The Appellant participated in the e-auction after due diligence and was declared the highest bidder. Sale Certificate and Letter of Possession was issued to the Appellant dated 02.02.2021. The Appellant requested the Liquidator to depute some suitable person for taking the possession which was deputed by the Liquidator. It was only on 19.02.2021 that allegation of missing of some parts of plant and machinery was raised by the Appellant. Police Complaint was also filed by the Appellant which was not even registered since police did not find any offence to be registered and enquired. Terms and condition of the Sale Certificate in Para 5 and Para 9 are as follows:-

The Appellant being the highest bidder, who has already been issued Sale Certificate dated 02.02.2021 and no allegations regarding plant and machinery made by the Appellant any time prior to 19.02.2021, no error has been committed by the Adjudicating Authority in not placing any reliance on the Allegations made by the Appellant regarding part of the plant and machinery being missing on the spot. The plant and machinery not being removed by the Appellant, the Liquidator had to file an application before the Adjudicating Authority seeking direction to the Appellant to remove that plant and machinery since auction of land and building was also conducted and possession was to be handed over to the Successful Auction Purchaser of land and building i.e. ‘Singhi Infrapower’, Appellant in Company Appeal (AT) (Ins.) No. 728 of 2022. The Adjudicating Authority in the application filed by the Liquidator has passed following order on 11.08.2021:-

The Appellant had filed an application for recall of order dated 11.08.2021 which was rightly rejected on 28.01.2022. Further, application filed by the Appellant being I.A. No. 754 of 2022 was rejected by order dated 16.02.2022 refusing to review the order dated 28.01.2022 as was prayed by the Appellant. The Adjudicating Authority has rightly taken the view that the Adjudicating Authority has no power to review its own order dated 28.01.2022. The Appellant having not lifted the plant and machinery inspite of several requests made by the Liquidator and directions issued by the Adjudicating Authority, we see no fault in the direction of the Adjudicating Authority giving last opportunity to the Appellant to remove the plant and machinery within one week by order dated 11.08.2021, failing which the auction sale was to be deemed cancelled. The Liquidator had no option but to comply with the order dated 11.08.2021 and has consequently cancelled the auction in favour of the Appellant. With regard to the cancellation of the auction held in favour of the Appellant, there is no ground to interfere in the impugned order passed by the Adjudicating Authority. The auction in favour of the Appellant ‘Chhota’ rightly stood cancelled.

Now coming to the application filed by ‘Sunhill Proptech Private Limited’ where the Applicant has offered to take the plant and machinery for an amount of Rs.4.25 crore i.e. an amount higher to the amount on which plant and machinery was auctioned to the Appellant. In the application itself the applicant has in Para 11 made following averments:-

Consequent to the cancellation of auction in favour of the Appellant ‘Chhota’, as per the provisions of the Liquidation Regulations, 2016, a fresh auction needs to be conducted by the Liquidator for the plant and machinery. No direction can be issued to handover the plant and machinery to the Applicant for an amount of Rs.4.25 crores, as Applicant has prayed.

There is only one aspect of the matter which needs to be considered. As per the order passed by the Adjudicating Authority and affirmed by us, fresh auction of the plant and machinery has to be undertaken by the Liquidator. The Highest Successful Bidder of the plant and machinery in whose favour letter of intent is issued shall be liable to deposit the entire bid amount, for which amount the plant and machinery is re-auctioned. We are of the view that the ends of justice be served in directing forfeiting of 10% of the bid amount deposited by the Appellant ‘Chhota’ i.e an amount of Rs.41 Lakhs. The balance amount out of the total amount deposited by the Appellant needs to be refunded subject to the condition that in the fresh auction to be conducted a higher amount is received towards 90% of the bid which may be refunded to the Appellant. In case, in the fresh auction any lesser amount is received as towards 90% of the bid, the Appellant shall be entitled to be refunded only lesser amount and not the entire balance amount.

Coming to the Company Appeal (AT) (Ins.) No. 728 of 2022, the Adjudicating Authority has directed by the impugned order dated 07.06.2022 to the Appellant ‘Singhi Infrapower’ to deposit the balance amount within 30 days. The Appeal having been entertained by this Tribunal, which is being decided by this order, we are of the view that ends of justice be served in disposing of the Appeal by directing the Appellant ‘Singhi Infrapower’ to deposit the balance amount within one month from the date of this order failing which the Liquidator shall proceed with the fresh auction of the land and building forfeiting 10% of bid amount already deposited.

In result, both the Appeals are disposed of in following manner:-