Mandip Singh vs Mahesh Bansal

a. The Insolvency Petition was filed by the Corporate Debtor (CD) under Section 10 of the Code and the Petition was admitted vide order dated 05.10.2018 and Shri Y.P.Singhal was appointed as Interim Resolution Professional (IRP).

b. The CoC in its meeting held on 12.11.2018, proposed to replace the IRP with the Respondent i.e. Mr. Mahesh Bansal as Resolution Professional (RP) and vide order dated 28.11.2018, the Respondent was appointed as RP by the Adjudicating Authority.

c. No resolution Plan was received by the RP, during the CIRP, the Adjudicating Authority vide order dated 01.11.2019, passed the order under Section 33(1)(a) of the Code, for liquidator of the CD and Mahesh Bansal, Respondent was appointed as a Liquidator in connection with the Liquidation Process of the CD.

a. Sale notice dated 24.08.2020 (Annexure A-14) and dated 16.12.2020 (Annexure A-25) fixing the sale of assets of CD by three different modes on single day is violative of Regulation 32 and 32(A)(1) of LP Regulations

b. Non-disclosure of valuation reports to the appellant being Stakeholders’ Consultation Committee (SCC) member and other members of SCC is violative of Regulation 31-A(1) and 31-A(5) of LP Regulations.

c. The reserve price fixed of the assets of the CD is highly inadequate.

d. Reserve price of the assets of the CD fixed in violation of LP Regulations.

e. It was also stated by the Appellant that the Adjudicating Authority erred an error in rejecting the said IA filed by the Appellant on the ground that CIRP was initiated on 05.10.2018 and object of maximization of value of CD will be defeated if liquidation of CD is delayed. The Adjudicating Authority failed to appreciate that the Liquidation order of the CD was passed on 01.11.2018 and since March, 2020 there was lockdown due to Covid-19 pandemic and IBBI has already excluded the period of lockdown.

f. The Appellant further went to say that the value of the assets of the CD has been depreciated by the conduct of the Respondent/RP himself who failed to adopt proper procedure laid under Liquidation Process Regulation 2016 and has acted in utter violation of Regulation 32, Regulation 32-A(1), Regulation 31-A(5) and Regulation 33-(1) read with Schedule I Clause (4) of LP Regulations, 2016.

g. It was also stated by the Appellant that matter has not become infructuous by non-receiving of bids in pursuance of sale notice dated 16.12.2020 as the case involves challenge to mode and manner of sale and fixing of inadequate Reserve price by Liquidator in violation of statutory IBBI (Liquidation Process) Regulations.

h. During the course of hearing, the Appellant has further stated that the issue of locus standi of the Appellant cannot be challenged by the Liquidator at this stage as the Appellant is the Ex-Director of the CD and the Liquidator has not challenged his locus standi at this stage of Adjudicating Authority in IA No. 389 of 2020 filed by the Appellant. If the Liquidator has not challenged the same at the Adjudicating Authority level, then naturally it cannot be challenged at the Appellate Level.

The Appellant has stated that he has filed an IA No. 389 of 2020 before the Adjudicating Authority under Section 60(5) of the Code being Ex-Director/Shareholder and guarantor of the CD and Member of SCC.

j. They have also raised the issue that the process memorandum dated 24.08.2020 has included machinery worth Rs. 75 lakhs given in the list of the missing assets (Annexure A-9 page 153 of the Convenience Compilation) but the reserve price of the collective sale of assets remained the same at Rs. 10.25 Crore which cast a shadow of doubt on the Authority of valuation report and support the arguments raised by the Appellant that the valuers have not done physical verification that assets of the CD before submitting valuation report in utter violation of Regulation 35(3) of Liquidation Process Regulation. It was also stated by the Appellant that the Liquidator was supposed to get fresh valuation done after physical verification of plant and machinery for the best interest of the CD. The challenge is that the Liquidator has conducted the Liquidation Process in utter violation of Liquidation Process Regulation resulting in Sale of plant and machinery of CD at highly inadequate reserve price which is in strict violation of Liquidation Process Regulation. Publishing the sale notice giving three modes of sale disclosing three reserve prices in single sale notice, the Liquidator has in fact made mockering of Liquidation Process Regulation and has ensured that nobody bids for first lot for which reserve price is highest, as nobody in his right business sense would purchase assets at a higher value as a going concern at 10a.m, if option in the same sale notice is given to the bidder to purchase the same assets in parcels at a lower value at 1p.m onwards.

a. The Appellant has no locus standi to challenge the reserve Price fixed for the sale of assets of the Corporate Debtor or seek a copy of the Valuation Reports. That the grounds raised by the Appellant in the Appeal assailing the impugned order dated 09.12.2020 passed by the Adjudicating Authority, Chandigarh Bench on the grounds that the Respondent has not fixed the reserve price for the Corporate Debtor and its assets in accordance with Regulations 35 of the IBBI (Liquidation Process) Regulations, 2016 are misconceived, misleading and frivolous with the sole intention to delay and cause hindrance in the Liquidation Process of the Corporate Debtor. Further, the Appellant herein has no locus standi to challenge the decision of the Liquidator to fix the reserve price for the sale of assets or seek a copy of the valuation reports conducted by the registered valuers appointed by the Respondent. That the Appeal filed by the Appellant herein deserves to be dismissed with exemplary costs for reasons specified herein below: Firstly, it is relevant to refer to the Regulation 35 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, the Resolution Professional shall provide the fair and liquidation value computed by the registered valuers to only members of the Committee of Creditors i.e. the Financial Creditors, only on receiving an undertaking to maintain confidentiality of the fair value and the Liquidation value of the Corporate Debtor. The provisions of Regulation 35 of CIRP Regulations is reproduced herein under for reference:

b. Now coming to the similar Regulation provided under the Liquidation Process Regulations, 2016 it is relevant to refer to Regulation 35 of the Liquidation Process Regulations, 2016 which is reproduced below:

c. The Respondent has submitted that in accordance with Regulation 35(2) of the Liquidation Process Regulations appointed two registered valuers to determine the realizable value of the assets or business of the Corporate Debtor under clauses (a) to (1) of Regulation 32.

d. Regulation 34(2)(a) & (b) of the Liquidation Process Regulations, 2016 mandates that the asset memorandum shall provide the following details in respect of the assets which are intended to be realized by way of sale, which includes (a) value of the asset, valued in accordance with Regulation 35 and (bb) value of the assets or business(es) under clauses (b) to (f) of regulation 32, valued in accordance with regulation 35, if intended to be sold under those clauses. Regulation 34 is reproduced herein under for ease of reference:

e. Purpose of valuation reports is not res integra and have been settled by the Hon’ble Supreme Court. It is also pertinent to mention here that the Appellant has further no Locus Standi to challenge the valuation carried out under Regulation 35 of the Liquidation Process Regulations, 2016. In this regard, it is worthwhile to refer to the judgment passed by the Hon'ble Supreme Court in the matter of Maharashtra Seamless Limited vs Padmanabhan Venkatesh & Ors on 22.01.2020 wherein it was held as under:

f. That above mentioned judgement was affirmed by the Hon'ble Supreme Court in the matter of State Bank of India v. Accord Life Spec Private Limited through director & ors. vide judgement dated 28.02.2020, wherein it was held as under:

g. It is settled position of law that question of valuation carried out by two independent Registered Valuers duly registered with IBBI cannot be challenged by the Appellant as the same being a question of fact is normally not interfered by Courts. It is relevant to refer to judgment dated 03.12.1999 passed by the Hon'ble Supreme Court in the matter Duncans Industries Limited v. State of U.P. &Ors (AIR 2000 SC 355) wherein it was held as under:

h. The Appellant through its Appeal has raised objections with regard to the reserve price of the Corporate Debtor being below the valuations conducted by the State Bank of India on 08.02.2016 being 32 months before the CIRP Commencement date has no relevance as in terms of the provisions of the Code as the Resolution Professional and Liquidator are required to conduct valuation from the valuers registered with IBBI. It is relevant to note that in the first SCC meeting it was State Bank of India only that recommended the reserve price be fixed as Rs. 10.25 crores. The Appellant is further relying on the book value of the plant and machinery of the Corporate Debtor as per the audited financial statements for the year 2017-18. It is submitted that the book value of the asset of the Corporate Debtor has no bearing in the Liquidation Process, as in terms of Regulation 35 of the Liquidation Process Regulations, the valuation is conducted by qualified professionals registered with IBBI to determine the 'realisable value of the assets of the Corporate Debtor. As per the Appellant the Reserve Price of Rs. 10.25 crores for the collective sale of assets of the Corporate Debtor is less and should be higher. However, it must be noted that admittedly there were no bids submitted by any interested bidder at the reserve price of Rs. 10.25 crores for collective sale of assets of the Corporate debtor in pursuance to the 2nd sale notice. This fact was duly recorded by this Adjudicating Authority as well in its order dated 22.07.2020. It is further submitted there was no prospective bidder willing to participate in the e-auction in terms of sale notice dated 16.12.2020 issued by the Respondent at the same Reserve Price of Rs. 10.25 crores. The Respondent hereby prays to this Adjudicating Authority to direct the appellant to state on an affidavit as to how the Appellant was able to obtain the confidential valuation reports in respect of the valuation which the State Bank of India had got conducted.

It is pertinent to mention here that there was a delay on part of the secured financial creditors in relinquishing their security interest to the Liquidation Estate and to enable the Respondent to form the Liquidation Estate as per Section 36 of the Code. Due to the delay, the Respondent was unable to sell the Corporate Debtor as a going concern within a period of 90 days from the Liquidation Commencement Date in terms of 32A(4) of the Liquidation Process Regulations. That the proviso for Regulation 21 stipulates that where an asset is subject to security interest, it shall not be sold under any clauses (a) to (1) unless security interest has been relinquished to the liquidation estate. That in terms of Regulation 32A(4), if the Liquidator is unable to sell Corporate Debtor as a going concern within 90 days then the Liquidator may endeavor to sell the assets as per Regulation 32(a) to (d).

j. The Respondent at the First meeting of Stakeholders Consultation Committee convened on 25.02.2020 discussed the delay on part of the Secured Financial Creditors in relinquishing their security interest and consequent delay to form Liquidation Estate in terms of Section 36 of the Code. That the Respondent discussed the way forward in the SCC meeting wherein upon discussions and deliberations, the members of the SCC decided to sell the assets of the Corporate Debtor collectively at the Reserve Price of Rs. 10.25 crores. It is further pertinent to mention that the Appellant was duly present in the First SCC meeting wherein the Reserve price of Rs. 10.25 crores were recommended by the State Bank of India. Further, the Respondent shared the first and second minutes of the SCC meeting with the Appellant and there were no objections raised by the Appellant in the first meeting or the minutes of second meeting of the SCC. Accordingly, the Respondent issued the first sale notice dated 08.05.2020 to sell the assets of the Corporate Debtor collectively at a reserve price of Rs. 10.25 crores in accordance with valuation conducted as per Regulation 35 and decision of the Stakeholders Consultation Committee, which was withdrawn due to the objections raised by the Appellant and due to the restrictions in view of the pandemic of Covid – 19.

k. Thereafter, the Respondent issued the second sale notice dated 02.07.2020 which was issued in accordance with valuation conducted as per Regulation 35 and the decision of the SCC to sell the assets of the Corporate Debtor collectively at a reserve price of Rs. 10.25 crores. That the Appellant filed an application challenging the reserve price which was disposed off as infructuous vide order dated 22.07.2020 without going into the merits of the Application since no bids were received at the reserve price of Rs. 10.25 crores. That it is pertinent to mention that the Appellant has raised the objections with regard to value of the reserve price for sale of assets of the corporate debtor collectively at a belated stage only when the Respondent issued sale notice. This shows the intention of the Appellant to delay and derail the Liquidation Process of the Corporate Debtor. It is further pertinent to mention that the Appellant was duly present in the First SCC meeting wherein the Reserve price of Rs. 10.25 crores was recommended by the State Bank of India. Further, the Respondent shared the first and second minutes of the SCC meeting with the Appellant and there were no objections raised by the Appellant in the first meeting or to the minutes of second meeting of the SCC. That at the third meeting of the Stakeholders Consultation Committee convened on 14.08.2020, where the objections raised by the Appellant regarding sale of Corporate Debtor as a going concern was discussed. Upon discussions and deliberations, it was decided in Consultation with all the SCC members that the sale of assets shall be conducted in the following manner;

It is pertinent to mention that there is no bar under the Code, and in the Liquidation Process Regulations, on the Liquidator of the Corporate Debtor on selling assets of the Corporate Debtor in Lots. Thus, it is a general practice carried on by most of the Liquidators to sell the assets of the Corporate Debtor in lots in order to facilitate the Liquidation Process and complete the process within the prescribed period of one year. The sale of assets of the Corporate Debtor in lots is as per the provisions under the Code and underlying Regulations and also with decision of the members of the Stakeholders Consultation Committee. That the different reserve price charged under each lot is being charged in accordance with provisions of the Code. Further, as per e-auction sale notice, the Corporate Debtor will be sold as a going concern in Lot No. 1 at reserve price of Rs. 13.78 crores, that only if no bids are received in Lot no. 1 then the assets of the Corporate Debtor will be sold collectively in Lot no. 2 at reserve price of Rs. 10.25 crores. That the difference in reserve price fixed under lot no. 1 and lot no. 2 is because under lot no. 1 there will be transfer of Corporate Debtor as a going concern under lot no. I which not only includes the Fixed assets of the Corporate Debtor but also current and financial assets, receivables etc. and also saving on accounts of transfer of assets taxes like GST and stamp charges etc. Further, the sale of assets of the Corporate Debtor collectively will be conducted only if bid under lot no. 1 fails. Thereafter, only if no bids are received in Lot No. 1 and Lot No. 2 then the plant and Machinery and miscellaneous Fixed assets of the corporate debtor will be sold separately in Lot no. 3 and Land and Building will be sold separately in Lot no. 4. It is to mention here that the Sale notice dated 16.12.2020 have become infructuous on the auction scheduled on 01.01.2021 no bids were received for any Lots for the Company (in liquidation) and therefore, the Sale notice dated 16.12.2020 has become infructuous and thereby, the present appeal has also become infructuous. The present Appeal has been filed by the Appellant assailing the impugned order dated 09.12.2020 on the solitary ground that the impugned order is a non-speaking order. However, a bare perusal of the impugned order shows that the Adjudicating Authority after considering the material on record and the respective submissions of the parties have passed the impugned order and thus, there is no infirmity in the impugned order.

This is a case where CD/Corporate Applicant has itself initiated petition for CIRP under Section 10 of the Code which was admitted by Adjudicating Authority/NCLT, Chandigarh on 05.10.2018.

The CoC in its meeting held on 12.11.2018 proposed to replace the IRP with the Respondent Mr.Mahesh Bansal as RP (Liquidator presently).

The Respondent was appointed as RP by ‘Adjudicating Authority’ vide its order dated 28.11.2018.

On 01.11.2019, the ‘Adjudicating Authority’ passed the order under Section 33 of the Code for ‘Liquidation of the CD’ and Mahesh Bansal- RP was appointed as ‘Liquidator’.

It is also further clarified that in the first meeting of the SCC on 25.02.2020, the Liquidator has apprised the members of the SCC that the Liquidator has appointed registered valuers in accordance with Regulations 35(2) of the IBBI (Liquidation Process) Regulations, 2016. The Liquidator has also made ‘Stakeholders Consultation Committee’ (SCC) aware that in spite of a lapse of more than 90 days, the secured Financial Creditor has failed to relinquish their security interest in favour of the Liquidation Estate of the CD and has done the same on the 94^th day i.e. on 03.02.2020. The Liquidator also apprised the SCC Members that the CoC prior to liquidation order had authorized the sale of CD as a going concern in terms of Regulations 32(e) of IBBI (Liquidation Process) Regulations, 2016. If the Liquidator is unable to sale the CD as a going concern then he shall proceed to sale the assets of the CD under Regulation 32(a) to (d) of the IBBI (Liquidation Process) Regulations, 2016.

On the three occasions i.e. 29.05.2020, 22.07.2020 & 01.01.2021, multiple auctions have been conducted by the Liquidator in respect of the CD and its assets and all of which failed to attract any bidders.

As far as fixing the value of reserve price is concerned, SCC members were apprised by Liquidator that it is the State Bank of India which recommended the reserve price around Rs. 10 - 10.25 Crore during deliberation in SCC and should be above the liquidation value.

In the second meeting of SCC held on 19.03.2020, the liquidator has apprised the members of the SCC that the figure recommended by State Bank of India needs to be deliberated amongst and accordingly, the Indian Overseas Bank and NABARD decided to go in line with the lead Bank (State Bank of India) and recommended reserve price of Rs. 10.25 Crores for sale of assets collectively and accordingly Rs. 10.25 crore was fixed by the Liquidator.

First sale notice dated 08.05.2020 issued by the Liquidator in respect of e-auction dated 29.05.2020 for sale of assets of the CD collectively under Regulations 32(c) of the IBBI (Liquidation Process) Regulations, 2016 published in Financial Express (English) Rozana Spokes Person (Punjabi). However, the said sale notice was subsequently withdrawn considering the objection raised by suspended Board of Director and the Appellant herein the main Appeal – CA(AT)(Ins) No. 1114 of 2020.

The Liquidator published second sale notice dated 02.07.2020 for e-auction dated 22.07.2020 for sale of assets of CD collectively in accordance with the above stated Regulations and in the same newspaper on 02.07.2020. Again, the suspended Board of Director filed IA No. 258 /2020 challenging the said sale notice before the Adjudicating Authority but as no bids were receive in respect of the said sale notice, the Adjudicating Authority vide order dated 22.07.2020 was pleased to dismissed the application as infructuous. In the 3^rd Meeting of SCC held on 14.08.2020, the Liquidator apprised the SCC that no bids were received for collective sale of the assets of CD at the reserve price of Rs. 10.25 Crore, the Liquidator decided in consultation with all SCC Members that the sale of assets shall be conducted in the following manner:

During the course of the hearing, it was brought on board that why OTS proposal of Rs. 18 crore made by the CD/ Suspended Director, were not accepted by the banks whereas the banks are agreeable for a reserve price of Rs. 10.25 Crore? It was clarified that OTS proposal/ the amount offered was not only towards release of charge of Banks on the assets of the CD but was also towards the release of collateral securities as well which includes one of the prominent collateral securities i.e Nirmal Cold Storage valuing Rs. 12 to 15 Crore alongwith other collateral Securities. Hence, the reserve price as suggested by State bank of India of Rs. 10.25 Crore seems to be justified.

It is also observed that the suspended board of Director filed an application bearing IA No. 389 of 2020 seeking set aside of sale notice dated 24.08.2020 issued by the Liquidator before the Adjudicating Authority which was listed on 04.09.2020 and the Adjudicating Authority after hearing the parties stayed the e-auction sale notice dated 24.08.2020 till next date of hearing. The Adjudicating Authority also allowed the Liquidator’s IA No. 450 of 2020 for exclusion of Lockdown period from 25.03.2020 to 31.07.2020 from the Liquidation period of the CD. After the considering the period of exclusion, the liquidator period of the CD was due to expire on 09.03.2021. The Adjudicating Authority dismissed the IA No. 389 of 2020 vide its order dated 09.12.2020.

It was also pointed out by this Tribunal on 23.12.2020 that this Tribunal is not staying e-auction proceedings but the result would be subject to the decision of this Appeal. Then this Tribunal on 27.08.2021 again observed that this Tribunal has never stayed e-auction and if earlier e-auction has failed, we have not restrained the Liquidator from proceedings in term of law.

The Liquidator issued e-auction notice dated 27.11.2021 and the bid process memorandum for e-auction for the sale of lot of plant and machinery and fixed of the CD wherein the E-auction fixed for 21.12.2021 between 11:00AM to 1:00PM on the specified platform for a reserve price of Rs.5,30,55,000/-. The said e-auction for sale of lot of plant and machinery and fixed assets of the CD as conducted on 21.12.2021 resulted into Respondent No.2 herein M/s. Pagro Frozen Foods Pvt. Ltd was declared as Successful Bidder for a price of Rs. 5,30,55,000/- plus applicable GST and other taxes and the said firm has deposited earnest money deposit of Rs. 53,05,500/- and the said bidder was declared successful bidder also by the Liquidator.

In any case, the challenge to the order of the Adjudicating Authority is in respect of IA No. 389 of 2020 in CP(IB) No. 124/Chd/PB/2018 vide which the Adjudicating Authority has dismissed the IA of the Appellant and the Appellant is seeking setting aside and quashing the impugned order dated 09.12.2020 in the above IA. Since, this IA has already become infructuous, in view of the further e-auction notified on 21.12.2021.

All this suggests that the Applicant in main Company Appeal i.e CA(AT) (Ins) No 1114 of 2020 is only interested in delaying and causing hindrance even in Liquidation proceedings of the CD by filing multiple IAs. The deliberation in SCC wherein the Applicant has also participated has elaborately covers related issues and the Liquidator in some form and other has revealed its actions and has taken SCC into confidence at every stage. The Liquidator has also deliberated the mode of sale of assets in the SCC and, thereafter, has gone ahead for multiple mode in the e-auction dated 24.08.2020. Although, going ahead with such multiple mode in one auction is not a healthy trend. In any case, no bid was received against the said auction and hence, the main appeal – CA(AT) (Ins) No.1114 of 2020 is prima facie infructuous. This is also not a healthy trend that the CD who himself has initiated CIRP under Section 10 of the Code obstruct and create hindrance at every stage even in Liquidation. All this has resulted, a petition filed on 05.10.2018 for revival of CD or maximization of value of CD has miserable failed as even after four years, the matter has not come to a closing stage resulting into either revival of CD or maximation of value of asset of CD which is depleting in course of lapse of time. Hence, we are dismissing the Appeal - CA(AT) (Ins) No.1114 of 2020.

As far as IA No. 188 of 2022 is concerned, which has been filed by the Liquidator seeking permission to confirm sale of lot of plant and machinery and fixed assets of the CD whereby M/s. Pagro Frozen Food Pvt. Ltd- R2 has been declared as successful bidder pursuant to e-auction conducted on 21.12.2021 requires consideration by this Tribunal. From the analysis and observations as stated supra this merits consideration on multiple counts. Multiple auctions conducted by Liquidator from May, 2020 to January, 2021 has failed to attract any bidders and the current e-auction has resulted into a bid which is not lower than reserve price and the successful bidder has deposited the earnest money with the bid and may be directed to deposit the balance amount within a period of one month which the liquidator is to keep in a separate account till all the assets are realized in accordance with the provisions of the Code.