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Judgment
[Per: Justice Rakesh Kumar Jain (MJ)] (ORAL)
This Appeal is directed against the Order dated 20.03.2023 by which an Application filed by the Appellant seeking permission to deposit the balance amount of sale consideration through third-party Bank Accounts, who are the Joint Ventures Partners of the Applicant, to grant extension of time and permit the Applicant/Appellant to deposit the balance amount till 31.05.2023, waive off interest on the amount from the date of cancellation of bid to the date of reinstatement i.e., from 20.09.2022 to 19.01.2023, has been partly allowed and the Applicant has been directed to deposit the balance amount on or before 31.05.2023 alongwith interest @ 12% per annum through third party account as sought for failing which the Application has been ordered to be considered as having been dismissed.
The prayer made by the Appellant regarding waiver of interest on the amount from the date of cancellation of bid to the reinstatement i.e., from 20.09.2022 to 19.01.2023 has not been allowed and in this regard reference could be had to para 8 of the Impugned Order which read as hereunder:
8.Though the interest was sought to be waived, we are not inclined to waive the interest as there was an undertaking given by the applicant, time and again, that they would pay the interest on the delayed payment and the order of this tribunal dt 19-01-2023 also made it clear that interest would be paid. ln fact it was the reason which the tribunal considered for extending the time, as no prejudice would occur if interest is paid.
In brief, an Application bearing C.P. (IB) No.678/7/HDB/2018 was filed by the Financial Creditor under Section 7 of the Insolvency and Bankruptcy Code, 2016, (for short `The Code’) to initiate the Corporate Insolvency Resolution Process (`CIRP’) of the Corporate Debtor. The said Application was admitted on 23.04.2019.
Shorn of unnecessary details, the Tribunal, vide its Order dated 16.04.2021, placed the Corporate Debtor under Liquidation and appointed the Respondent as the Liquidator. The Liquidator issued Public Announcement in accordance with law, to invite Expression of Interest (`EoI’) from the Prospective Bidders for participation in the e-Auction process of the sale of the Corporate Debtor as a whole on a going concern basis of Phase-I along with identified assets of a going concern and sale of assets of Phase-II and Phase-III as parcel separately and sale of assets of Corporate Debtor collectively.
Liquidator issued the e-Auction process, a process document dated 08.04.2022 as amended and supplemented from time to time. Pursuant to the announcement and process document, the Applicant/Appellant submitted the bid in the e-Auction process with financial proposal of 1,36,11,30, 698/-. The entire purchase consideration was to be paid by the Appellant within 90 days of the receipt of the Letter of Intent (`LoI’) from the Liquidator. The Appellant made the payment of Rs.15,44,23,947/- to the Liquidator but it could not deposit the remaining amount within the stipulated time (90 days). The Appellant filed I.A. (IBC) No.972/2022 before the Adjudicating Authority for extension of time for depositing the balance amount. But in the meantime, the Respondent vide mail dated 20.09.2022, cancelled the sale, LoI issued to the Applicant and forfeited the amount of Rs.15,44,23,947/-.
The Tribunal vide its Order dated 12.10.2022, dismissed the I.A. (IBC) 972/2022 filed by the Appellant. Aggrieved against this Order, the Appellant filed Comp. App. (AT) (CH) (Ins.) No.416/2022, which was also dismissed on 28.11.2022. The Appellant stated to have requested the Respondent, to reconsider the cancellation of the bid, requesting for time upto 21.03.2023, to deposit the remaining amount. The Respondent alleged to have informed the Appellant vide email dated 30.12.2022, that the proposal of the Appellant was placed before the Stakeholders Consultations Committee in its Meeting held on 27.12.2022. The Stakeholders Consultations Committee did not object to extention of time but it was subject to the approval of the Adjudicating Authority. Pursuant thereto, it is stated that the Liquidator filed an Application bearing I.A.No.66/2023 before the Adjudicating Authority which was allowed on 19.01.2023. In this regard Para 7 & 8 of the Order is being reproduced as hereunder:
“7.Heard both the counsel. Mr. Chandrasen Reddy, Sr. Counsel appeared on behalf of the Applicant and Liquidator was present. Liquidator admitted that by virtue of an email dated 07.01.2023, there was novation of contract agreeing to restore the bid of the Applicant and to receive the remaining amount with 12% interest alongwith GST and other applicable taxes and duties. By virtue of an email dated 26.12.2022, the Applicant requested the Respondent to restore his bid. The Liquidator consents for allowing this application. The counsel for the Petitioner however seeks this Tribunal to give time of 45 days from the date of this order, since the foreign exchange transaction would consume considerable time. The Respondent’s Counsel does not raise any objection. However, since the Applicant agreed to pay the remaining amount with an interest @ 12% p.a., there would not be any prejudice caused to the Respondent in granting such time.
8.In view of the facts stated in the application, this Tribunal allows the application. The bid of the Applicant stands restored and No Objection is granted to the Applicant for depositing the balance amount of the LOI dated 21.06.2022 within 45 days from the date of this order.”
Counsel for the Appellant has submitted that by virtue of the aforesaid order passed on 19.01.2023, there was novation of contract to restore the bid of the Applicant and to receive the remaining amount with 12 % interest alongwith GST and other applicable taxes, therefore, the Appellant is liable to pay only interest, GST and other applicable taxes after that period and is entitled to waiver of interest on the amount from the date of cancellation of bid to its reinstatement i.e. from 20.09.2022 to 19.01.2023 which has been declined by the Adjudicating Authority by recording its finding in Para 8 and 12 of the impugned order which deserves to be set aside.
On the other hand, Counsel appearing on behalf of the Respondent has submitted that no new contract has come into being with the restoration of the cancellation bid and the terms and conditions contained in LOI would remain the same for the conclusion of the sale process in which it is provided that the Appellant would be liable to pay @ 12% from the date of LOI i.e. 21.06.2022. She has also referred to the email dated 07.01.2023. It is submitted that the Appellant was to pay balance amount, interest @ 12%, GST and other applicable taxes within a period of 45 days. It is also submitted that the restoration of the contract is not a novation of contract because reinstatement would mean to restore it to the erstwhile position. It is also submitted that for the purpose of novation of the contract the old contract has to be substituted with the new contract but a mere restoration of the old contract does not by itself render the contract novated. It is rather argued that not only the Appellant is liable to pay the interest of the period for which the waiver is being sought i.e. 20.09.2022 to 19.01.2023 but is also liable to make payment of the interest component till the entire balance sale consideration is paid in the liquidation account of the Corporate Debtor, as specified and detailed in the LOI and the process document.
We have heard Counsel for the parties at length and perused the record with their able assistance.
The short point involved in this appeal, having been raised by the Appellant, is that in terms of the order passed in I.A. No. 66 of 2023 on 19.01.2023 much less the observation made in Para 7 of the said order, there was novation of the contract and thus the Appellant is not liable to pay the interest on the amount from the period the bid was cancelled and restored, is not made out, because it is not the case of novation of contract rather it is a case of restoration of bid which was cancelled on account of non-payment of entire balance sale consideration within the prescribed time and by virtue of order passed by the Adjudicating Authority on 19.01.2023 in I.A. No. 66 of 2023, the bid of the Appellant was restored and balance amount of the LOI dated 21.06.2022 was ordered to be paid within 45 days from the date of order. As per the terms and conditions of the LOI and process document, the Appellant is liable to pay the balance consideration, interest @ 12 % after the expiry of 30 days alongwith 18% GST and other applicable taxes and duties and in this regard, the Adjudicating Authority has not committed any error while recording its findings in the impugned order in Para 8 and 12 which has been impugned herein.
Thus, looking from any angle, there is hardly any scope to interfere in this appeal and the same is thus hereby dismissed. No costs.