Mr. Surinder Manchanda vs Nolsar International Limited

PER: SHRI L. N. GUPTA, MEMBER (T)

The present IA No. 6280 of 2022 has been filed by Mr. Sajeve Bhushan Deora, Liquidator of Orchid Salon Services Private Limited (hereinafter referred to as the ‘Applicant/Liquidator’) under Section 35(1)(f) r/w Section 60(5) of IBC 2016 and Regulation 32 of Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 Seeking the following reliefs:

Through the present application the Applicant/Liquidator is seeking permission of this Adjudicating Authority to sell the Corporate Debtor as a going concern.

It is stated by the Liquidator that he had conducted the following rounds of auctions till date in respect of the Corporate Debtor:

It is stated by the Liquidator that one Mr. Surender Kumar Bansal has shown interest in purchasing the CD as a going concern. He has further stated that Mr. Bansal had voluntarily handed over a bank draft of Rs. 66 Lakh drawn in favour of the CD, which is 10% of the offered price of Rs. 6.60 Crore. It is added that few other potential buyers have shown interest in purchasing only the immovable assets of the CD.

It is submitted by the Liquidator that the matter was placed before the Stakeholders Consultation Committee (SCC), which considered the matter in its 13^th and 14^th Meetings. The SCC Members discussed that the earlier decision of the COC at the meeting held on 13.11.2019 that sale of CD as a going concern be not explored by the Liquidator, the unsolicited bid received by the Liquidator from a potential bidder for purchase of CD as a going concern be re-examined and the matter be placed for consideration by way of e-voting to be held in the matter and the said bid be tested through e-auction under Swiss Challenge method.

The Liquidator has further submitted that he had obtained Confidentiality and Non-disclosure Undertaking (CNDU) from the potential bidder on 16.11.2022, and copies of drafts of Information Memorandum & e-auction Process Document (IM&P) and Preliminary Information (PI) Document, containing information about the Sale of CD and terms and conditions governing its sale, which was also considered by the members of SCC. The potential bidder also handed over bank draft of balance Rs. 2.50 lakhs to make up the amount of EMD, which had been determined at Rs.68.50 lakhs. The EMD of Rs.68.50 lakhs have been placed in a fixed deposit in the bank account of the liquidation estate.

It is further stated by the Liquidator that the SCC, inter alia, has allowed the sale of the Corporate Debtor as going concern, for which the voting took place from 11.00 a.m. on 07.12.2022 to 11.00 a.m. on 14.12.2022. The Resolutions passed by the SCC in this regard are reproduced below, for the sake of immediate convenience:

During the course of hearing on 13.01.2023, it was submitted by the Liquidator that he was not successful in selling the Corporate Debtor as going concern in the first Auction. He is, therefore, seeking indulgence of this Adjudicating Authority to sell the Corporate Debtor as a going concern, as he is barred to do so by Regulation 32A (4) of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016.

We have heard the Ld. Liquidator/Applicant and perused the Application. The issue which emerges for our consideration is Whether there is any bar in selling the Corporate Debtor as a going concern after the first auction and whether the Liquidator is required to seek any permission of this Adjudicating Authority for such a sale?

At this juncture, we refer to Regulation 32A of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016, which reads as under –

(Emphasis placed)

Since the Regulation 32A (4) refers to “clause (e) of Regulation 32”, we would like to visit the Regulation 32 as well, which reads as below:

(Emphasis placed)

From the conjoint reading of the provisions under Regulation 32A(4) and Regulation 32(e), it can be inferred that the Corporate Debtor can be sold as going concern in the first auction. However, as regards to the word “exclusively” mentioned in the Regulation 32A(4), we are of the view that whereas the liquidator may sell the assets of the corporate debtor under clause (e) of regulation 32 exclusively only at the first auction, we find no such bar in selling the assets of the Corporate Debtor in the subsequent auctions, where the Liquidator has all other options of sale as stipulated under Regulation 32A, available including selling of the Corporate Debtor as going concern.

As seen from the record, in the instant case, sale of assets through more than one auction has already taken place, therefore, in our considered view, the Liquidator has the entire basket of options available for the sale of assets as stipulated under Regulation 32 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 and we find no legal disability for the Liquidator in exercising any of the methods of sale stipulated under Regulation 32 including the sale of the Corporate Debtor as going concern.

Accordingly, when the Regulation 32 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 itself provides requisite flexibility in choosing the methods of sale during the auctions subsequent to the first auction, and there being no requirement in law seeking permission of this Adjudicating Authority, we are not inclined to grant the payer of the Liquidator.

However, we make it clear that while deciding this application, we have not expressed any view on the method/manner of sale adopted by the SCC/Liquidator of the CD in the present case and the process/ procedure of sale followed by them.

The IA is accordingly Dismissed.