Mr. Padmanabhan vs Priya S. Anand & Anr.

These are two connected Company Appeals Viz. Comp. App (AT) (CH) (INS) No. 167 / 2024 and Comp. App (AT) (CH) (INS) No. 168 / 2024, which has been preferred by the Appellant(s), who happens to be the erstwhile Director(s) of M/s. RRP Housing Private Limited (the `Corporate Debtor’), which were engaged in the Real Estate Projects.

The challenge in the instant Company Appeal Viz. Comp. App (AT) (CH) (INS) No. 167 / 2024, as it has been given by the Appellant is to the Impugned Order dated 13.03.2024, by virtue of which, the Appellant’s Application being IA (IBC)/ 118 (CHE) / 2023 has been rejected.

The other connected Comp. App (AT) (CH) (INS) No. 168 / 2024, it arises out of the Impugned Order, as it was passed on 13.03.2024, by the Learned Adjudicating Authority in IA (IBC) / 129 (CHE) / 2023, which almost engages consideration of the same question of facts in issue.

There are certain facts which are uncontroverted, i.e. the Corporate Debtor was put into Liquidation and the Order of Liquidation which has been put to challenge by the Appellant(s) has attained finality, and the process thereafter has commenced.

The Appellant has come with the case, that as far as the Corporate Debtor is concerned, who was engaged in the business of Real Estate Projects, owned certain properties and the property which would be in dispute and of concern in this case is situated at Maraimalai Nagar, Chennai, which is the subject matter of auction, upon the culmination of the Liquidation proceedings.

The Corporate Debtor was subjected to the CIRP proceedings, at the behest of M/s. Adinath Enterprises and the Company was put into Liquidation by an Order of 04.04.2019.

The Applicant, to the CIRP proceedings had not filed any Claim. The grievances of the Appellant is that the 1^st Respondent had conducted the Auction Sale, of the property referred to above which is said to be owned by the Corporate Debtor, which was sold to the 2^nd Respondent, at the Reserve Price only, hence allegedly it would render the Sale itself to be defective and contrary to the Rules, because there was no satisfactory publication made by the Liquidator, inviting the potential purchasers, as per the Rules. He further contends that the Sale itself would be defective, also because it is only the Respondent No. 2, who had submitted his Offer in the Auction proceedings.

In the Interlocutory Application thus preferred by the Appellant before the Learned Adjudicating Authority, he has questioned the validity of the Auction Sale, as it was conducted by the Liquidator / Respondent No. 1 herein and primarily the ground of challenge by the Appellant was to the Auction Sale as made on 05.05.2022, which later on stood confirmed on 13.03.2024, was on the ground of mala fides contending thereof that the Auction Sale was in fact made in connivance with the 2^nd Respondent in order to sell the Property of the Corporate Debtor by under valuing the same and without making wide publicity; which would ultimately be depriving the Appellant(s) of the Dividends which could have accrued to the present Applicant.

The Learned Counsel for the Appellant submits that the Liquidator is bound to ensure, that while conducting the Auction Sale, he should act in a manner to procure higher value and maximise the realisation of the Sale Proceeds of Assets of the Corporate Debtor which had been put to Auction.

He questions the publication on the ground, that since the Advertisement itself was published in one English Daily and in a corresponding Regional Language Daily Newspaper which do not have wide circulation in Chennai and thus he contends that the action of the Liquidator who has proceeded for the Auction Sale on 05.05.2022, would be in violation of Sub Regulation 3 of Regulation 12 of IBBI (Liquidation Process) Regulations, 2016.

Besides this, he argues that the area of the subject land as described in the Sale Notice, which was proposed to be sold, too could be disputed, apart from the other contentions raised by him in his IA which has been decided by the Impugned Order.

The Appellants’ further grievance was that the Liquidator was bound to make an effort to arrive at a Scheme of Compromise or Arrangement as per Section 230 of the Companies Act, 2013, before the proceeding to sell the Assets of the Corporate Debtor, was resorted to.

After giving a thoughtful consideration to the arguments extended by the Learned Counsel for the Appellant(s), the fact which would emerge from records is that the status of the present Appellant(s) happens to be that of the Erstwhile Director / Shareholder of the Corporate Debtor, as against whom the Order of Liquidation has already attained finality up to the Appellate stage before this Tribunal.

The Liquidator stood appointed by an Order dated 04.04.2019 and consequent to it, the Sale proceedings was completed on 05.05.2022, whereafter the Sale Certificate was issued. The Interlocutory Application which was thus filed by the Appellant was after the confirmation of the Auction Sale which was made by the Respondent No. 1, in favour of the Respondent No. 2.

Looking in to the circumstances particularly when the Appellant(s) questions the Sale Certificate and Sale made by the Liquidator, it would have been apt on his part to have earlier approached the Liquidator himself at the time of publication of Sale inviting the bids from the Prospective Buyer, which was made by the Liquidator. Having not done so and having waited till the same was actuated upon by publication on 05.05.2022, this inaction would not give the liberty to the Appellant(s) to open a new chapter by putting a question to the Sale Certificate which has been affirmed by the Liquidator who has filed the IA No. 1301 dated 12.03.2024 and who has further proceeded to distribute the Funds of the Liquidation to satisfy the Claims raised. To this, the Appellant contends that the pleadings which he had agitated in the respective Interlocutory Applications, filed before the NCLT were not addressed upon by the Learned Adjudicating Authority as no finding has been recorded while deciding the same by the Impugned Order.

After having perused the Impugned Order under challenge and considering the argument extended by the Learned Counsel for the Appellant(s), it is felt that the same may not be sustainable for the reason, firstly, since his status being that of an Ex-Director / Shareholder, the Appellant(s) ceases their rights for questioning the Auction proceedings, secondly, as the Liquidation process had attained finality against them by the Order of the Appellate Tribunal and that too, further when the Auction held on 05.05.2022 has already been affirmed by the Order of 31.03.2024 and thirdly, the funds accrued from the such Sale have already been distributed, as notified by the Liquidator on 12.03.2024.

At this belated stage questioning the Auction Sale made on 05.05.2022 by the Liquidator, on the alleged procedural discrepancies as argued by the Learned Counsel for the Appellant without substantiating it, may not be a subject which could de-novo be scrutinised and be considered by this `Tribunal’, particularly when he has not placed his grievances at the appropriate stage, before the Liquidator himself at the stage when he issued the publication of Notice and was proceeding with the Auction Sale, when the Appellant has never questioned the publication, which was issued for Sale of the Property under Liquidation and rather had accepted the Auction Sale without raising any objection and since he had filed the IAs belated for setting aside the Auction Sale by filing the same only on 19.12.2022.

In view of the stage at which the Interlocutory Application was filed, coupled with the fact that since the proceedings for Liquidation in the present case has already attained finality and his status being that of an Ex-Director / Shareholder of the Corporate Debtor, the prayer made in his Application may not be taken as to be a ground to re-open the entire proceedings of Auction Sale, which was held as a consequence to the finality attached to the Order of Liquidation.

Owing to the reasons as recorded above, we do not find any merit in the instant Comp. App (AT) (CH) (INS) No. 167 / 2024 in question and the same would stand dismissed and the Impugned Order would stand affirmed. Consequently, the connected Comp. App (AT) (CH) (INS) No. 168 / 2024 would also stand dismissed, for the same reasons. The connected pending Interlocutory Applications are closed.