Indiabulls Housing Finance Ltd. vs Forging Pvt. Ltd.

M.M. Kumar, CJ

CA-1079(PB)/2019:-

This is an application filed by the erstwhile director and shareholder of the Corporate Debtor-Company in Liquidation (M/s. Forging Pvt. Ltd.) under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 (for brevity 'the Code'). The prayer made in this application is to set aside the valuation report submitted to the liquidator by SCS Consultants of Mr. Anil Kumar Saxena and Mr. Sunil Dhingra. A consequential prayer is to set aside the sale notice dated 15.05.2019. On that basis, a further prayer has also been made to appoint the valuers for ascertaining the value of the land of the Corporate Debtor in terms of IBBI (Liquidation Process) Regulations, 2016 on the basis that land is industrial in nature and applicable TOD policy of Town & Country Planning, Haryana. The other prayers are to direct the liquidator to pay the cost of the valuers appointed till date.

This case has a chequered history. In this case the liquidation order was passed on 26.10.2018 in CA No. 656(PB)/2018 and Mr. Sajeve Bhushan Deora, (the Resolution Professional) was appointed to act as a liquidator of the corporate debtor in terms of the Section 34 (1) of the Code. The directions were issued to the liquidator Mr. Deora to issue public announcement stating that the Corporate Debtor is in liquidation in terms of Regulation 12 of the IBBI (Liquidation Process), Regulations 2016 and a fresh order of moratorium under Section 33(5) of the Code commenced. The view of the RP has also been noticed in the aforesaid order wherein he stated that huge amount is recoverable from related parties to whom various interest free advance were given and the liquidator was directed to investigate the financial affairs of the Corporate Debtor in terms of provisions of Section 35(1) of the Code read with relevant regulations. The liquidator was also directed to proceed with the liquidation process in the manner laid down in Chapter III of Part II of the Code and the relevant regulations.

As a part of liquidation process the liquidator issued notice of sale concerning the piece of land belonging to the Corporate Debtor on 28.02.2019 after obtaining valuation of the land from two valuers. However, the issuance of notice was challenged by the Ex.-director/promoter namely Mr. Karan Gambhir by filing CA No. 501(PB)/2019 (who is the applicant in the present application also) with a prayer to set aside the same alleging that the reserve price of Rs. 52.83 crores has been kept at a dismal low.

The principal argument advanced was that the valuers have proceeded on the basis of wrong assumption that the land in question was agricultural in nature whereas it was an industrial land. While hearing the aforesaid application, we granted opportunity to the applicant to place on record any evidence in support of its claim that the land was no longer agricultural land and it has to be regarded as industrial land. However, that application was disposed of on 24.04.2019 granting 10 days time to the applicant to produce any evidence to show that the land in question is 'Industrial in nature'. The relevant part of that order shall be considered in the succeeding paras.

The applicant is back with a similar prayer in the present application which has been filed on 31.05.2019 and the following reliefs have been sought:-

I. Set aside the valuations reports received by the liquidator from SCS Consultants of Mr. Anil Kumar Saxena and Mr. Sunil Dhingra;

II. Set aside the sale notice dated 15.05.2019;

III. Appoint the valuers for ascertaining the value of the land of the Corporate Debtor in terms of IBBI (Liquidation Process) Regulations, 2016 on the basis of industrial nature and applicable TOD policy of Town & Country Planning, Haryana Government as applicable;

IV. Direct the Liquidator to pay and bear the cost of the valuers appointed till date for the purposes of ascertaining the value of the land of the Corporate Debtor;

V. Direct the Liquidator to pay and bear the cost employed will date in the Liquidation process of the Corporate Debtor;

VI. Direct the Liquidator to involve the Applicants for explaining the deliberations with the valuers in relation to the fresh valuations of the land of the Corporate Debtor,

VII. Pass any other in the facts and circumstances of the matter

After CA No. 501(PB)/2019 along with other applications was disposed of, a copy of the valuation report is conceded to have been received by the applicant on 27.04.2019 and no evidence as directed in the order dated 24.04.2019 was furnished within ten days with regard to the change of land use as was undertaken by the applicant through his counsel. The factual position concerning undertaking is explicit from the order dated 24.04.2019. The order further proceed to observe that if no evidence with regard to the change of land use was produced then the valuers were to proceed with the valuation as per the evidence already on record. As a period of 6 months has expired, the liquidator was obliged to have fresh valuation as per the regulation. The valuation afresh was undertaken by two different valuers.

The claim made by the applicant in the present application is that on 09.05.2019 they received an update from Municipal Corporation, Faridabad, (for brevity 'MCF') and the liquidator proceeded with the appointment of registered valuer to ascertain the price of the land belonging to the corporate debtor by appointing Mr. Anil Kumar Saxena and Mr. Sunil Dhingra, registered with the IBBI. Their registration Nos. are IBBI/RV/02/2018/10004 and IBBI/RV/02/2019/11126 respectively as disclosed by the email dated 10.05.2019. They submitted their reports and the liquidator on the basis of the valuation again published a sale notice dated 15.05.2019 on the reserve price of Rs. 52.58 crores. The aforesaid sale notice has again been challenged on the allegation that the realisable value of the property is more than 120 crores and reliance has been placed on the sale deed of the property in the vicinity. While issuing notice of this application on 04.06.2019, we have directed that the auction may take place and the same was not to be finalized. The applicant received a copy of the valuation report and the sale notice dated 15.05.2019, it is alleged that the methodology used by the present valuers and engaged by the liquidator was different from the methodology used by the earlier valuers. According to the allegations, the present valuers have used cost residual method for the purposes of determining the value of the land (Annexure 8), on the basis that the land is agricultural in nature. The applicant has also adversely commented upon and the liquidator by alleging that his sole purpose is to diminish the value of the land and dispose it of at a minimum value at an early date and that the liquidator is in hot hurry as the sale of the land would result in speedy recovery which would defeat the basic purpose of the Code i.e. maximization of the assets. It is insisted that the land in question is industrial in nature which is evident from the document issued by MCF on 29.05.2019 (Annexure 9) and a letter dated 16.12.2002. It is alleged that the aforesaid letter shows the details concerning change of land use. (Annexure 10). It is claimed that an agreement for change of land was executed on 24.10.1978. It is claimed that the sale notice dated 15.05.2019 describing the land as agricultural deserved to be set aside in toto. The applicant asserts that the Corporate Debtor falls under the TOD Zone approved by the Haryana Government and that the FAR allowed by the Haryana Government at the location of the land is 3.5/3.0. A copy of the Transit Oriented Development Policy effective from 09.02.2016 has been placed on record (Annexure 11). Two emails dated 15.05.2019 have also been placed on record (Annexure 12 & 13) which were responded by the applicants. It was requested that till the information was received from MCF, the sale notice dated 15.05.2019 may be stayed. (Annexure 14). The liquidator also shared all the documents which were given to the valuers that included survey plan and letter to MCF seeking clarification on the nature of the land. The liquidator however, has floated the sale notice on "AS IS WHERE IS", "AS IS WHAT IS" AND WHATEVER THERE IS BASIS", without clarifying whether the land is agricultural in nature or industrial. On the basis of letter dated 29.05.2019, the applicant has claimed that as per the record of the property tax, the land of the corporate debtor is industrial. It is further submitted that In that regard, entry in point no. 1 & 4 in the letter dated 29.05.2019 has been relied upon which read thus:-

"Point No. 1 As per the record of Property Tax/M/s. Forging Private Ltd. property use is Industrial.

Point No. 4 Property Tax 2018-19 = 13, 36,838/- Water Charges 12/18 = 897680/-"

Reliance has also been placed on the permission for change of land use dated 16.12.2002 where external development charges amounting to Rs. 1,21,80,505/- were required to be paid which have remained unpaid.

Reply to the application has been filed by liquidator and the sole financial creditor namely Indiabulls Housing Finance Ltd. The broad defence taken by the liquidator is that the valuation report by the valuers is in accordance with the provisions of Regulation 35(3) of the IBBI (Liquidation Process), Regulations, 2016 and average of the two valuers of the village land and building was maintained as reserved price of the e-auction conducted. It has also been pointed out that the applicant fails to provide any evidence showing that there was change of land use and building from agricultural to industrial and that all charges stood paid. Reliance on communication dated 16.12.2002 has been resisted by showing that the external development charges amounting to Rs. 1,21,80,505/- have not been paid and no change of land use took place. Therefore, it cannot be assumed that the land became Industrial in nature. The entry in letter dated 29.05.2019 point No. 4 have also been resisted by submitting that the same is for the purposes of house tax. For tax purpose it has been treated as industrial land. It has also been submitted that in the letter dated 16.12.2002, the MCF clearly pointed out that the corporate debtor were to pay the aforementioned external development charges within a period of 30 days of the notice failing which legal action in accordance with the conditions incorporated in CLU-II agreement and as per the provisions in Act was to be initiated. They were also ask to submit certified copy of the completion certificate in respect of the buildings existing at site. Nothing has been placed record to show the compliance of the aforesaid conditions so as to conclude that there was change of land use.

In a separate reply filed by the sole financial creditor-Indiabulls Housing Finance Pvt. Ltd. has taken the stand that the petition filed by the ex.-director is abuse of the process of the Court. According to the assertions made it is alleged that the applicant has time and again misuse/abuse the process of law with impunity and examples to that effect have been quoted as per record of the courts or tribunal which are as under:-

"a) That the Financial Creditor issued the Demand Notice dated 22.08.2016 to the Corporate Debtor under Section 13(2) of the SARFAESI Act and claimed outstanding of Rs. 28,37,58,344/- from the Corporate Debtor. In response to the Demand Notice dated 22.08.2016, vide reply dated 24.10.2016, Mr. Sanjay Gambhir, 99% shareholder in the Corporate Debtor, has categorically stated that the mortgaged property (Land in question in the captioned matter) is agricultural land. That relevant from the Reply dated 24.10.2016 is reproduced herein below for the ready reference of this Hon'ble Adjudicating Authority:

"That the notice is not maintainable and you cannot proceed against plot measuring 70 Kanal 14 Maria, situated in revenue estate of village Sarai Khawaja, Mathura Road, Tehsil & Dist. Faridahad, Haryana-121003 under SARFAESI Act and cannot enforce security in respect of the said property as the said property is agricultural land in view of Section 31(i) of SARFAESI Act"

Copy of the Demand Notice dated 22.08.2016 is annexed herewith and marked as ANNEXURE-1. Copy of the Reply dated 24.10.2016 is annexed herewith and marked as ANNEXURE-2.

b) That while under the present Application the Applicant claims the subject land to be industrial in nature, in the Securitisation Application being SA No. 03 of 2017 filed by the Corporate Debtor/Applicant/Mr. Sanjay Gambhir and others before the Ld. DRT, Delhi, the Applicant has challenged the action being taken by the Financial Creditor, on the ground that the property in question is an agricultural land and therefore cannot be proceeded against u/s 13(4) being as Agricultural Land covered under Section 31(1) of SARFAESI Act. Copy of the SA No. 03/2017 is annexed herewith as Annexure-3)

c) The Hon'ble Delhi High Court vide its order dated 20.09.2018 in W.P. (C) 9799/2018 - Karan Gambhir vs. Indiabulls Housing Finance Limited-while coming down heavily on the Applicant has recorded the misconduct of the Applicant in the following words:

"On going through various aspects of the matter as brought on record, we find that the petitioner has misused the process of law, has filed the petition on false and incorrect averments and has sworn a false affidavit with regard to various factual aspects of the matter. He has not brought on record the correct fact as was indicated to him by his counsel on September 14, 2018. That being so it was a fit case where we could take action against the petitioner for filing a false affidavit under Section 340 Cr.P.C., so also for misusing the process of law and initiate criminal contempt against him. But at present, in view of the unconditional apologies expressed we let off the petitioner with a warning to remain careful in future, failing which we would take action against him.

Copy of the Order dated 20.09.2018 passed by the Hon'ble Delhi High Court is annexed herewith and marked as Annexure-4.

d) Further, the Hon'ble NCLAT, in an appeal being Company Appeal (AT) (Ins.) No. 423 of 2018, filed by the Applicant challenging the order dated 04.07.2018 of this Hon'ble Adjudicating Authority in the captioned company petition took into cognizance the misconduct of the Applicant. The Hon'ble NCLAT, while dismissing the said Appeal vide its order dated 02.08.2018, directed the Applicant surrender his passport to the Bench Officer with a direction not to leave the country without prior permission of this Tribunal. Copy of this Order dated 02.08.2018 is annexed herewith and marked as Annexure-5.

The applicant has launched frivolous and cantankerous litigation on one pretext or the other before this Hon'ble Adjudicating Authority and the appellate authorities including the Hon'ble Apex Court and the Applicant has miserably failed in all such attempts. Company Appeal No. 779/2018 filed by the applicant against the liquidation order dated 26.10.2018 was dismissed by the Hon'ble NCLAT vide its order dated 09.01.2019. Further, the Applicant went in appeal before the Hon'ble Supreme Court vide Civil Appeal No. 3363/2019 against the order dated 09.1.2019 of the Hon'ble NCLAT and the said Civil Appeal was dismissed by the Hon'ble Supreme Court vide its order dated 16.04.2019. The applicant challenged the sale notice dated 28.02.2019 issued by the Liquidator of the Corporate Debtor vide CA No. 501/2019 filed before this Hon'ble Adjudicating Authority which was disposed of by this Hon'ble Adjudicating Authority vide its order dated 24.04.2019. Due to the failure of the Applicant to provide further evidence with regard to the issue of conversion of land use from agricultural to industrial, as directed by this Hon'ble Adjudicating Authority vide its order dated 24.04.2019, the Liquidator proceeded with the auction process. That the Order dated 24.04.2019 was challenged by the Applicant before the Hon'ble NCLAT vide Company Appeal (AT) No. 531/2019 and the same was allowed to withdrawn by the Hon'ble NCLAT vide its order dated 17.05.2019 without any liberty to raise challenge on the same issues as covered under the Order dated 24.04.2019 passed by this Hon'ble Adjudicating Authority. Copy of the order dated 09.01.2019 is annexed herewith and marked as Annexure-6. Copy of the order dated 16.04.2019 is annexed herewith and marked as Annexure -7. Copy of the order dated 24.04.2019 is annexed herewith and marked as Annexure-8. Copy of the order dated 17.05.2019 is annexed herewith and marked as Annexure-9."

It has also been asserted that no concrete evidence was brought on record by the applicant after disposal of CA No. 501 (PB)/2019 vide order dated 24.04.2019 so as to substantiate the allegations that the reserve price of the subject of the property was unfair due to the change in land use from agricultural to industrial. Firm reliance has been placed on the minutes of 5th consultative meeting of the stakeholders of the corporate debtor held on 14.03.2019 wherein the applicant himself stated that on account of non-deposit of huge amount of demand of Rs. 8.50 crores raised on 16.12.2002 the land use could not be changed from agricultural to commercial and that the charges from conversion of subject land to commercial use presently were over 110 crores. The minutes of fifth consultative meeting dated 14.03.2019 have been placed on record (Annexure -10). It has also been asserted that ten days time granted by the order dated 24.04.2019 by this tribunal while disposing of CA No. 501 of 2019 to produce evidence with regard to the nature of the land. The order clarified that in case no supporting evidence was produced then the valuers were to proceed with the valuation as per the evidence already on record. However, no evidence could be produced nor any document were placed on record thereafter to prove that conversion charges of land in question from agricultural to commercial were ever paid in respect of the demand raised nor any document has been placed on record showing that the land was to be converted from agricultural to industrial and approval was received from competent authorities. Therefore, it is urged that the land was never converted from agricultural to industrial land. The aforesaid order was challenged by the applicant before the Hon'ble Appellate Tribunal in Company Appeal (AT) (Insolvency) No. 531 of 2019 and the appeal was allowed to be withdrawn vide order dated 17.05.2019 without any liberty to raise any challenge on the basis of the same issue which was covered by order dated 24.04.2019 passed by us. Therefore, it is urged that the present application is liable to be dismissed at the threshold as the applicant has made an attempt to raise the same issue on valuation and nature of subject property which has already been raised before NCLAT in company appeal referred above.

A further case of the financial creditor is that in terms of the order dated 24.04.2019, the liquidator appointed two registered valuers i.e. SCS Consultants of Mr. Anil Saxena and Mr. Sunil Dhingra for ascertaining the fresh value of the assets of the corporate debtor. They submitted their fresh valuation report on 13.05.2019 & 15.05.2019 respectively to the liquidator. The liquidator has accordingly publish the sale notice dated 15.05.2019 for auctioning the assets of the corporate debtor on the reserve price set at Rs. 52.58 crores plus.

A further allegation has been levelled that even in the securitization application registered as SA No. 03 of 2017 filed by the applicant before learned DRT challenging the action of the financial creditor it was urged to DRT that the property in question is agricultural land and therefore, Section 13(4) would not be attracted as agricultural land is not covered under Section 31(1) of SARFAESI Act.

The non-applicant-respondent has also quoted a letter dated 02.05.2019 received by the liquidator sent by the District Town Planning, Enforcement, Faridabad saying that there was no change of land used and the same has been quoted below:-

"On the subject cited above and reference it is intimated that the company M/s. Forging Private Limited has never obtained change of land use permission at 12/6, Main Mathura Road Sarai Khawaja, Faridabad from the Department Town & Country Planning Haryana."

The allegations against the applicant is that it is deliberately delaying with the present proceedings by abusing the process of the court and has been continuously causing obstruction in the timely conclusion of the proceedings. It has been pointed out that against the liquidation order passed by us on 26.10.2018, the applicant preferred an appeal being Company Appeal (AT) (Insolvency) No. 779 of 2018 which was dismissed on 09.01.2019. Thereafter, a Civil Appeal being Civil Appeal no. 3363 of 2019 was filed before Hon'ble the Supreme Court challenging the order of the NCLAT and the appeal was dismissed vide order dated 16.04.2019 by observing as under:-

"Having heard Mr. Gopal Sankarnarayanan, learned Senior counsel appearing for the appellant, Mr. K.V. Viswanathan, learned Senior counsel appearing for the respondents and carefully scrutinizing the material available on record, we don't find any reason to interfere with the impugned order dated 9 January, 2019 passed by National Company law Appellate Tribunal at New Delhi in the Company appeal (AT) (Insolvency) No. 779 of 2018. We find no merit in the appeal. Accordingly, the Appeal is dismissed."

The financial creditor has also alleged that the permission for change in land use from agricultural to industrial was attempted by executing CLU-II agreement dated 24.10.1978 in terms of Rule 26D of Controlled Area Rules, 1965. However, Jamabandi (proprietary record of the land holding) of various years such as 1980-81, 1985-86, 1990-91, 1995-96 and 2000-01 (A-11) have been placed record to show that land was never converted to the industrial land as the applicant did not pay the requisite payment including conversion charges and external development charges.

The financial creditor has also controverted the evidence which has now sought to be relied in the form of RTI information given by MCF on the ground that it is incomplete. Only two out of the five queries raised by the applicant were answered by the public information officer and the important information regarding the date of conversion from agricultural to industrial have still not been answered. The document of conversion, agreement, letters and charges paid by the corporate debtor could have been brought on record if those were available. However, the documents dated 16.12.2002 issued by the Commissioner, MCF have now seen the light of the day and have been placed on record which would show the fraudulent intention of the applicant to mislead the Hon'ble Tribunal. Hence to cause delay in dispensation of justice.

A parawise, reply has been filed which reiterates the stand taken in the preliminary submission. It is however asserted that personal allegations of the applicant concerning the publication of sale notice by the liquidator are absolutely baseless.

We have heard learned counsel for the parties at a considerable length and find that the following question of law would emerge for determination - 'whether the valuation and the consequential sale notice is in accordance with the provisions of Regulation 35(3) & (4) of the IBBI (Liquidation Process), Regulations, 2016.

It has come on record that in the fifth consultative meeting held on 14.03.2019 of the stakeholders of the corporate debtor convened by the liquidator, the applicant Mr. Sanjay Gambir ex.-director has stated in the meeting as under:-

"On an enquiry from the Liquidator, Mr. Sanjay Gambhir stated that the subject land and building of the CD was an agricultural land at the time of purchase, which was sometime in 1969, and was put to industrial use by the CD. Mr. Sanjay Gambhir further mentioned that his family took over shareholding of Forging Private Limited (In Liquidation) sometime in 1994 (when the CD was under purview of the Sick Industrial Companies (Special Provisions) Act, 1985) and that no records of the CD prior to the time of their acquisition were available with them as the same had been lost in fire. He further mentioned that the subject land building of CD was in use for an industrial activity both prior to and after take-over of the CD by his Family. He further mentioned that there may be a notice regarding charges payable for change of land use received sometime in the past and a demand of about Rs. 8.5 crores was probably raised and not deposited, and that no documents are available with him in respect thereof. He also further mentioned that the charges for conversion of the subject land to commercial use are over Rs. 110 crores."

A perusal of the aforesaid statement made by the applicant clearly shows that the applicant's family took over the shareholding of the corporate debtor (company in liquidation) sometime in 1994 when it was under the purview of SICA and that he had no record available with him prior to that date which was lost in fire. It has been stated that the land building was in use for industrial activities even after taking over by the applicant's family. However, crucial statement has been made that the charges payable for change of land use were not paid and a demand of Rs. 8.5 crores was raised which was complied with and presently the charges for conversion to commercial use of the land in question were over Rs. 110 crores.

In pursuance of the 5th consultative meeting held on 14.03.2019 (Annexure 9), sale notice was issued and the reserve price of Rs. 52.83 crores was mentioned therein. Accordingly, bids were invited. The aforesaid sale notice was challenged before this tribunal by filing CA No. 501 of 2019. In the aforesaid meeting, the applicant has categorically stated that he did not have any document to show. The documents prior to 1994 were gutted in fire. However, the sale notice was challenged before us by filing CA No. 501 of 2019 and opportunities were granted to the applicant to produce documents to show that there was conversion of land use as is inter alia observed from the order dated 08.04.2019 which reads as under:-

"CA-501(PB)/2019:-

The prayer made in this application is that the notice of sale concerning land in question dated 28.02.2019 issued by the liquidator be set aside. The other prayers are covered in this principal prayer. The stand taken on behalf of the liquidator as well as the financial creditor is that reserve price in the sale notice has been kept at Rs. 52.83 crores and the bids are invited. The last date of receipt of bids is 25.03.2019. The liquidator may proceed with the process. We grant one last opportunity to the applicant to place on record any evidence in support of its claim that the land is no longer agricultural land and it is in fact an industrial land. The needful shall be done within a week with a copy in advance to the counsel for the liquidator as well as the financial creditor. No further time for producing evidence of change of land shall be granted. We also make it clear that if the applicant has any person who is prepared to purchase the land at a price higher than the reserve price or any other bidder, he may also file his bid before the liquidator before the closing date.

List on 24.04.2019."

In terms of the directions issued, the applicant was not able to produce any evidence; produce any bidder with better price and then further time of ten days was granted to produce any evidence to facilitate the job of the valuers and the application was disposed of on 24.04.2019 by a detailed order which reads as under:-

"CA-501(PB)/2019, CA-741(PB)/2019 & CA-740(PB)/2019:-

The principal prayer in all these applications is this that with regard to the notice of sale concerning land in question dated 28.02.2019 issued by the liquidator. The Ex-Management in its application i.e. CA-501(PB)/2019 has alleged that the reserve price of the land fixed at Rs. 52.83 Crores may not be a fair price. Some dispute was raised with regard to the nature of the land stating whether it is agricultural or industrial? Mr. Sibbal, Ld. Senior Counsel with Mr. Deora, Liquidator and Mr. Dhawan, Ld. Counsel for sole financial creditor have made a joint statement that meeting of all the stake holders have taken place on 16.04.2019 and 23.04.2019 and a decision has been taken to go for fresh valuation from two valuers. We have also been shown the additional affidavit dated 23.04.2019 Progress Report (2nd Report, 1st Quarterly) filed through CA-741(PB)/2019 and attention was invited to 5th consultative meeting of the stakeholders held on 14.03.2019. Mr. Sibbal, Ld. Counsel for the RP has read out item No. 7 under the caption "The plan for liquidation for assets" and the last para at page 152 reads as under:-

"Mr. Sanjay Gambhir pointed out that there should be vigilance to be observed that there is no cartelisation in bidding, to which all present agreed.

The Representative of India bulls stated that reserve price is high, which was clarified by the Liquidator as an average of values estimated by the 2 valuers appointed earlier.

On an enquiry from the Liquidator, Mr. Sanjay Gambhir stated that the subject land and building of the CD was an agricultural land at the time of purchase, which was some time in 1969, and was put to industrial use by the CD. Mr. Sanjay Gambhir further mentioned that his Family took over shareholding of Forging Pvt. Ltd. (In Liquidation) sometime in 1994 (When the CD was under purview of Sick industrial Companies (Special Provisions) Act, 1985 and that no records of the CD prior to the time of their acquisition were available with them as the same had been lost in fire. He further mentioned that the subject land building of CD was in use for an industrial activity both prior to and after take-over of the CD by his Family. He further mentioned that there may be a notice regarding charges payable for change of land use received sometime in the past and a demand of about Rs. 8.5 Crores was probably raised and not deposited, and that no documents are available with him in respect thereof. He also further mentioned that the charges for conversion of the subject land to commercial use are over Rs. 110 Crores."

However, at the hearing Mr. K. Datta, Ld. Senior Counsel has pointed out that even the Resolution Professional has stated that the land is industrial land at one stage. However, there is no concrete evidence on record to that effect. In our opinion one Mr. Sanjay Gambhir who is the largest shareholder in the company under liquidation having 99% share holding has stated that the company was not able to deposit the charges for change of land use amounting to Rs. 8 1/2 Crores, therefore the change of land use was never processed. The land continues to be the agricultural land. Despite the aforesaid statement we grant liberty to the applicant represented through Mr. Datta to produce any evidence before the liquidator within the next ten days so that the job of the valuer is facilitated. If no evidence with regard to the nature of land is produced then the valuer shall proceed with the valuation as per the evidence already on record. After the valuation is completed the liquidator shall take all necessary steps contemplated by the IBBI Liquidation Process Regulation, 2016. Accordingly, we find that the prayer made in the application would not require consideration at this stage and we dispose of the same with aforesaid observation.

A copy of the valuation report may be furnished to the Ex-Management Mr. Karan Gambhir as per the procedure laid down in the process regulation.

CA-501(PB)/2019, CA-741(PB)/2019 & CA-740(PB)/2019 are disposed of."

A perusal of the above mentioned order shows that as per the record the land continues to be the agricultural land as the whooping charges of change of land use amounting to Rs. 8.5 crores due in 2002 were not deposited which were presently Rs. 110 crores. Despite that we granted ten days time to the applicant to produce any evidence before the liquidator/valuers within ten days commencing from 24.04.2019. We also clarified that if no evidence concerning the nature of land was produced then the valuers were to proceed with valuation as per the evidence on record and the liquidator was to proceed with the auction in accordance with the liquidation process regulations. However, no evidence before liquidator/valuers was produced by the applicant. That order was challenged before Hon'ble NCLAT and it was dismissed as withdrawn on 17.05.2019. The order dated 24.04.2019 attained finality and was required to comply with in letter and spirit.

Moreover, there is sufficient evidence showing that the land in question is agricultural land irrespective of its use. The revenue record in the form of Jamabandis has been placed on record and presumption of truth attaches to the Jamabandis under the Punjab Land Revenue Act as applicable to Haryana. The Jamabandis are prepared every four years in order to ascertain the proprietorship of the land. The photocopies of the Jamabandis have been placed on record. A perusal of the revenue record shows that the nature of land is Shamlat and it is in possession of M/s. Forging Pvt. Ltd. (Company in Liquidation). These entries are consistent starting from the year 1980-81 to 2000-01. However for the purposes of the rent, cultivator is stating to be paying rent for the factory. The land which is known as Shamlat is in fact the land used for village common purposes like cremation ground, grazing grass, playground etc. But there is peculiar history in the present case showing that this Shamlat land is under the rights of the Company in Liquidation namely M/s. Forging Pvt. Ltd. In the translated copies, the word 'Shamlat' has not been typed which could be seen in the photocopies of the original. Therefore, in the absence of change of land use, the liquidator could not have treated the land as commercial nor the valuers could have done so because huge amount of charges amounting to Rs. 8.05 crores in 2002 and Rs. 110 crores in the current period have not been deposited. If a vendee is to purchase it then he has to pay the huge amount as aforesaid. The valuers or the liquidator by no means could have described the land as 'Industrial'.

The difficulties of the applicant is further compounded because he himself took the stand before the financial creditor in response to notice under Section 13 of the SARFAESI Act. In the reply dated 24.04.2016, the applicant stated that the notice was not maintainable and the financial creditor could not have proceeded in respect of the land in question as the said land/property was agricultural land. The bar of Section 31(i) of the SARFAESI Act by pleading that it was agricultural in nature. A copy of the reply has been placed on record by the financial creditor (Annexure-2).

The matter does not end there. The applicant challenged the action of the financial creditor before the DRT by filing SA No. 03 of 2017. A categorically stand has been taken by the applicant is that the land in question is an agricultural land.

The valuers could not have proceeded on the basis that the land in question is industrial land as it would result in misleading the prospective bidder. No potential bidder could have purchased this land as industrial or commercial because there was no conversion of land use and as per the statement of the applicant himself initially the charges for conversion of land amounting to Rs. 8.5 crores were not paid and presently the charges amounted to Rs. 110 crores. The valuers would have been guilty of misconduct had they proceeded on the basis that the land is industrial/commercial in nature.

It is noteworthy that the liquidator has taken precaution by inserting in the sale notice that the land is being sold on 'AS IS WHERE IS, AS IS WHAT IS AND WHATEVER THERE IS BASIS'. Such a sale notice takes care of the possibility of all the ground realities and therefore the grievance of the applicant, if any, has been remedied.

When the application No. 501 of 2019 was decided, we have asked the applicant to arrange any bidder higher than the one, the liquidator has found but the applicant was not able to bring anyone. Had there been any bidder giving higher price than the one before liquidator then the applicant could have easily done that. It is imaginary to argue that the land is worth Rs. 110 crores.

Mr. Rakesh Kumar, learned counsel for successful bidder has repeatedly stated before us on every date that the amount of the bid has been deposited as he is the highest bidder. Therefore, we are satisfied that the liquidation process has been conducted in accordance with the provisions of Regulation 35 of the IBBI (Liquidation Process), Regulations, 2016.

We may examine the provisions of Regulation 35 of the IBBI (Insolvency Resolution Process for Corporate Persons), Regulations, 2016 (for brevity 'Insolvency Resolution Regulations'). In accordance with the aforesaid Regulation, the fair value and liquidation value is required to determine and the Regulation 35 (1) reads as under:-

CHAPTER X

RESOLUTION PLAN

"[Fair Value and Liquidation value.

(1) Fair value and liquidation value shall be determined in the following manner:-

(a) the two registered valuers appointed under regulation 27 shall submit to the resolution professional an estimate of the fair value and of the liquidation value computed in accordance with internationally accepted valuation standards, after physical verification of the inventory and fixed assets of the corporate debtor;

(b) if in the opinion of the resolution professional, the two estimates of a value are significantly different, he may appoint another registered valuer who shall submit an estimate of the value computed in the same manner; and

(c) the average of the two closest estimates of a value shall be considered the fair value or the liquidation value, as the case may be."

A perusal of the aforesaid regulation shows that the two registered valuers are to be appointed to determine the fair and liquidation value and both the aforesaid registered valuers shall not be a relative of the resolution professional or a related party of the corporate debtor or its auditor or a partner/director of Insolvency Professional entity. (See Regulation 27). There is no allegation that the valuer who submitted the valuation report on 27.04.2019 were not registered or they suffered from any disability contemplated by proviso to Regulation 27 of the Insolvency Resolution Regulations. The Regulation 35 (1) further required to that two registered valuers were to submit an estimate of the fair and of the liquidation value computed in accordance with internationally value standard after physical verification of the inventory of the fixed assets of the corporate debtor. Again there is no allegation that the estimate of the fair and liquidation value has not been computed in accordance with the acceptable internationally value standard and same has not been done after physical verification of the fixed assets. The regulation vest the resolution professional (liquidator) with the function of referring the matter to an other registered valuers if in the opinion of the resolution professional, the two estimates were significantly different. Otherwise, the average of two closets estimate of value were to be considered as the fair and the liquidation value and the confidentiality of the valuation was to be maintained. There is another set of Regulations known as IBBI (Liquidation Process) Regulations, 2016.

In Regulation 35 of the liquidation process regulations, the liquidator is obliged to consider the average of the estimate of the values arrived under Regulation 35 of the Insolvency Resolution Regulations and proceed with the liquidation process. However, the discretion has till been vested with the liquidator to prefer a fresh valuation if so required under the circumstances. The provisions of Regulation 35 of the Liquidation Process Regulations are set out below verbatim to appreciate the liquidation process:-

"35. (1) Where the valuation has been conducted under regulation 35 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 or regulation 34 of the Insolvency and Bankruptcy Board of India (Fast Track Insolvency Resolution Process for Corporate Persons) Regulations, 2017, as the case may be, the liquidator shall consider the average of the estimates of the values arrived under those provisions for the purposes of valuations under these regulations.

(2) [In cases not covered under sub-regulation (1) or where the liquidator is of the opinion that fresh valuation is required under the circumstances, he shall within seven days] of the liquidation commencement date, appoint two registered valuers to determine the realisable value of the assets or businesses under clauses (a) to (f) of regulation 32 of the corporate debtor:

Provided that the following persons shall not be appointed as registered valuers, namely:-

(a) a relative of the liquidator;

(b) a related party of the corporate debtor;

(c) an auditor of the corporate debtor at any time during the five years preceding the insolvency commencement date; or

(d) a partner or director of the insolvency professional entity of which the liquidator is a partner or director.

(3) The Registered Valuers appointed under sub-regulation (2) shall independently submit to the liquidator the estimates of realisable value of the assets or businesses, as the case may be, computed in accordance with the Companies (Registered Valuers and Valuation) Rules, 2017, after physical verification of the assets of the corporate debtor.

(4) The average of two estimates received under sub-regulation (3) shall be taken as the value of the assets or businesses.]"

After 24.04.2019, no evidence has been produced before the new valuers by the applicant which could warrant a different view. Therefore, the valuers while conducting the valuation afresh has proceeded on the basis of the evidence which was produced by the applicant and which was already on record.

The applicant has made a valiant attempt to persuade us to accept that the land in question must be regarded as industrial in nature and for the aforesaid purposes he has placed on record a copy of the memo dated 29.05.2019 send by the MCF in response to an RTI application and the same read as under:-

"Sub: Regarding Information under RTI Act, 2005.

With reference to your Letter dated 24.04.2019 on the subject cited above.

The point wise reply mention in the application of Sh. Mona Khurana, F-1/9, Okhla Industrial Area Phase-1, New Delhi-110020 is as under.

Point No. 1 As per the record of Property Tax M/s. Forging Private Ltd. property use is Industrial.

Point No. 4 Property Tax 2018-19 = 13,36,838/- Water Charges 12/18 = 897680/-

State Public Information Officer-Cum, Zonal & Taxation Officer"

A perusal of the Point No. 1 would show that for the purposes of property tax, the property of the company in liquidation (M/s. Forging Pvt. Ltd.) is industrial. The question would be whether treating the property for the purposes of property tax as industrial would result in accepting the property as such in the absence of its conversion in law to industrial land. It is one thing to say that for the purposes of taxes the property is considered industrial and it is quite an other thing to say that there is no change of land use to industrial from agricultural. It has been seen that the huge charges which are leviable for the change of land use were never paid. A potential bidder cannot be sold the property as Industrial because it continues to be the agricultural land and in order to convert it into industrial or commercial then huge dues are payable to the state authorities. It must be remembered that when land is converted 'Industrial" huge sources provided by the State come under stress which need to be paid. Therefore, we are unable to persuade our self to accept the aforesaid information given under the RTI to the applicant as a proof that the land in question must be regarded as commercial.

The other submission made by the applicant is that the sale deed for the property in the same vicinity would show that the value of the land of the corporate debtor is more than 120 crores and the same has been ignored by the liquidator. In reply, the liquidator has pointed out in the corresponding para that the evidence produced before him is in respect of industrial plot of land and which is for smaller plot. However, the fact remains that if the nature of the land is agricultural in record and it has never change its land use then it could not be sold as a commercial/industrial property. In any case the liquidator has done well by issue sale notice describing the land 'AS IS WHERE IS, AS IS WHAT IS AND WHATEVER THERE IS BASIS'. Therefore, there is no substance in the present application.

We are not able to appreciate unwarranted insinuation and wholly baseless allegations made against the liquidator. In fact we find that the allegations are unfair and emerge from frustration. These allegations must be viewed in the light of the observations made by Hon'ble Delhi High Court where the conduct of the applicant is highlighted in the reply filed by the financial creditor. In its order dated 20.09.2018 passed in Writ Petition (C) No. 9799 of 2018 (Annexure 4), the following observations with regard to the conduct of the applicant have been made:-

"On going through various aspects of the matter as brought on record, we find that the petitioner has misused the process of law, has filed the petition on false and incorrect averments and has sworn a false affidavit with regard to various factual aspects of the matter. He has not brought on record the correct fact as was indicated to him by his counsel on September 14, 2018. That being so it was a fit case where we could take action against the petitioner for filing a false affidavit under Section 340 Cr.P.C., so also for misusing the process of law and initiate criminal contempt against him. But at present, in view of the unconditional apologies expressed we let off the petitioner with a warning to remain careful in future, failing which we would take action against him."

We are further constraint to observe that the sequence of event inclined us to believe that the effort made by the applicant is only to delay the liquidation process without any basis and indulge in baseless litigation endlessly. For the conversion of agricultural land to commercial/industrial huge amount is payable and the valuers and the liquidator could not be expected to treat the land commercial in nature. The liquidation order has been passed on 26.10.2018 and sufficient time has already elapsed. The applicant has successfully delayed it but no further delay would be warranted at the instance of the applicant and the application warrants dismissal.

The base price of Rs. 52.58 crores is reserve price of the property which is for higher than the circle rate of the agricultural land and the value is much more in demonetisation of development potential of the property. The property was earlier put to e-auction during liquidation in March, 2019 with a reserve price of Rs. 52.83 crores and no bid was received even at the reserve price and the applicant had failed to identify any bidder/buyer whatsoever in spite of the opportunity given vide order dated 08.04.2019 passed in CA No. 501(PB)/2019.

Mr. Rakesh Kumar, learned counsel for the highest bidder stated that the whole amount of the highest bid stand deposited and the transfer deed is to be executed by the Liquidator.

As a sequel to the above discussion, we issue following directions:-

(a) The application is dismissed with cost of Rs. 50,000/- payable to the Prime Minister's Relief Fund.

(b) The liquidator is directed to accept the highest bid as the amount stand already deposited and proceed with the liquidation process as per law.