Nagaragro Farmer Producer Company Ltd vs Harneshwar Agro Products Power & Yeast (I) Ltd

JUSTICE RAKESH KUMAR, MEMBER (JUDICIAL)

The present Appeal has been preferred under Section 61 of the Insolvency & Bankruptcy Code, 2016 (hereinafter referred as the ‘IBC Code’) against an order dated 29.06.2021 passed by the Adjudicating Authority/ National Company Law Tribunal Mumbai Bench, Mumbai in IA No.1129/2021 in CP(IB) No.162(MB)/2019.

As per the materials available on record, which is not in dispute in respect of assets of one M/s Harneshwar Agro Products Power and Yeast (I) Ltd, a liquidation proceeding was initiated and an order passed under Section 33(1) of the IBC. The Liquidator on 31.03.2021issued an Auction Notice. In the Auction Notice date and time of auction was mentioned as 20.04.2021 between 10 AM to 4 PM whereas last date and time of submission of EMD was 15.04.2021 before 4 PM. Regarding inspection of the site, date and time was from 01.04.2021 to 13.04.2021 from 11 AM to 2 PM. The EMD was fixed as Rs.107.58 lakhs.

It is the case of the Appellant that after Auction Notice he sent an email on 15.04.2021 at 14.03 (2.03 PM) which was addressed to Liquidator. The Appellant claimed that through the said email he requested the Liquidator for providing Detailed Process Memorandum and also for extension of time of the bid. As per the Appellant case, he was refused his request by the Liquidator. Subsequently the Appellant sent another email on 06.05.2021 offering a sum of Rs.15 crores for auction property. The said mail was replied by the Liquidator that auction process was already complete. The Appellant thereafter filed an IA seeking direction to consider his offer. To the IA, the liquidator also filed reply affidavit. It is further case of the Appellant that the Adjudicating Authority after hearing the parties vide order dated 15.06.2021 directed the Appellant to pay the entire bid amount by 29.06.2021. In the meanwhile, the Liquidator also filed affidavit in sur-rejoinder in reply to the Rejoinder. As per earlier order, on 21.06.2021 the IA was listed for hearing. As per the Appellant, he informed the Adjudicating Authority that he would not be able to pay the entire bid amount by 29.06.2021. The case was adjourned to 22.06.2021. On 22.06.2021 an additional affidavit was filed by the Appellant before the Adjudicating Authority and a stand was taken that the Appellant was willing to pay Rs.2,25,00,000/- and thereafter again on 29.06.2021 by filing additional affidavit the Appellant informed the Adjudicating Authority about raising of Rs.15 crores through a loan consortium of three financial institutions. The Appellant admits that since he was unable to pay Rs.15 crores as ordered by the Adjudicating Authority by 29.06.2021, the Adjudicating Authority has passed the impugned order rejecting the IA petition of the Appellant which has been assailed in the present Appeal.

In the present Appeal a Reply has been filed by the Liquidator of Harneshwar Agro Products Power and Yeast (I) Ltd, Corporate Debtor, by Mr. Jigar Shah, which has not been controverted by the Appellant not any rejoinder has been filed by the Appellant. In reply a detailed chart showing dates and events has been sated in para 3 which is quoted hereunder:-

Primarily a stand has been taken in the Reply by the Liquidator that the Appellant has not come to this Tribunal with clean hands and many important facts were concealed. In some and substance a plea has been taken in the Reply that the present proceeding has been initiated by the Appellant only and only with a view to defeat the finalisation of the Auction Sale.

Shri Shivek Trehan, learned counsel appearing on behalf of the Appellant has raised three points assailing the impugned order which are as follows:

The Learned counsel for the appellant has emphatically argued that the impugned order does not reflect any reason for rejection of his application. He has taken us to the impugned order and tried to persuade that the same is liable to be set aside as the same is non-speaking.

Learned Counsel for the Appellant has further argued that his application has not been decided on merit. He has argued that the Appellant who was ready to deposit much more amount than the amount settled in favour of the highest bidder. Learned counsel for the Appellant had taken this Court to Annexure ‘C’ (Page 36) and Annexure ‘D”’ (Page 37), Annexure ‘G’ (Page starting from 41) and other documents while referring to statement made in reply by the RP which is Annexure G. It has been argued that the request of the Appellant for providing detailed process memorandum was rejected on untenable grounds. He has specifically referred to paragraph 5 at running page 43 and paragraph 7 at Page 44. It has been highlighted that there was no reason for the Respondent to reject the request of the appellant on the plea that the Appellant was neither Director of the Company nor email which had come from the registered email of the Company. He submits that Liquidator as responsible Officer of the Court has not shared process of memorandum which was not correct. It has been emphatically argued that once before the time for submission of EMD the Appellant had sent an email, the Official Liquidator was duty bound to provide the details to enable him to participate in the bid. The Appellant was ready to offer much more than the highest bidder. Of course, learned counsel for the Appellant at the initiation of the arguments had argued that the application was rejected on extraneous reasons, however, at the time of argument no such fact was brought to the notice of the Court.

Shri Dhiren R Dave, Learned PCS for Respondent at the very outset has argued that in the pleading there was no allegations against the Liquidator. However, at the time of arguments a subsequent case was tried to be developed that the order was passed due to extraneous reasons. He has specifically referred to Annexure C to show that the appellant’s intention was not to participate in the bid proceeding but his prime object was to delay the auction which is reflected from email dated 15.04.2021 which is placed at Annexure C. He by way of referring to fact enumerated in the reply submits that on the date of auction i.e. 20.04.2021, 16 bidders participated and auction was complete on the fixed date at Rs.2.5 crore which was much higher than the reserve price. Thereafter, Letter of Intent to successful bidder was also sent and in between 26.4.2021 to 28.4.2021 unsuccessful bidders were refunded their EMD. About after 16 days of this events an email was received from the Appellant with false statement that he became aware of the auction notice on 14.4.2021 whereas admittedly the Appellant visited the site on 07.04.2021 for inspection. In the reply Certificate of Sale for plant and machinery as well as custody letter has been brought on record. Learned Counsel for the Respondent by way of referring to running page 109 i.e. one of the documents brought on record by the Appellant alongwith his additional affidavit filed before the Adjudicating Authority/National Company Law Tribunal, Mumbai Bench, Court III, submits that it is surprising that this sanction of capital bridge funding is of Rs.700 lakh whereas the contents of letter makes it clear that the application was filed by the Appellant for capital bridge fund of Rs.300 only. It has been concluded by the Learned Counsel for the Respondent that despite the fact that auction in the case had taken place long back on 20.04.2021 till date on one pretext or the other the Appellant has succeeded in keeping the dispute alive. He submits that the Appeal is fit to be rejected with imposing heavy costs.

Besides hearing learned counsel for the parties, we have perused the entire material available on record. Prima facie on examination of the record and pleading we are satisfied that Appellant has adopted undue steps for abusing process of the Court. In normal course such appeals are required to be rejected with imposing heavy costs. However, at the moment we are refraining to impose such costs. The intention of the Appellant is to defeat the object of auction as is evident from the initial sending of email by the Appellant. As per the auction notice 15.4.2021 before 4 PM was the time fixed for last date for submission of EMD and inspection date was fixed for 1.4.2021 to 13.4.2021. In the reply filed by the Respondent, which has not been rebutted, it has been indicated that the Appellant himself had inspected the site on 07.04.2021. However, no such fact has been disclosed by the Appellant either before the Adjudicating Authority or in the present memo of appeal. The Appellant as per reply visited the site on 07.04.2021 still at the last hour i.e. at 2.03 PM on 15.4.2021 he sent an email primarily for extending the date for bid for 30 more days time and at the sametime he requested to send detailed process memorandum for further study. It is profitable to reproduce the email dated 15.4.2021 of the Appellant which is Annexure C hereunder:

On examination of the email of the Appellant there is no difficulty to infer that the Appellant was not at all interested to participate but his sole object was to delay the bid. Even though as per auction notice which was held on the date fixed i.e. 20.04.2021 total 16 bidders participated but much belatedly the Appellant started raising dispute and finally he filed IA Petition before the Adjudicating Authority assailing the bid. Of course, the order of the Adjudicating Authority is not elaborate but on perusal of the same it is reflected that despite indulgence given by the Adjudicating Authority for depositing the amount as stated by the Appellant, he never comply with the same and one way or the other he was trying to delay the proceeding and as such the learned Adjudicating Authority was left with no option but to reject the same. The affidavit filed before the Adjudicating Authority enclosing with letter of sanction by one of the so called lender i.e. Jyoti Kranti Cooperative Credit Society Ltd prime facie also appears to be doubtful. We are in agreement with the submissions of the learned counsel for the Respondent that no one can offer funding much beyond demanding. The sanction letter which was annexed with the additional affidavit of the Appellant filed before the Adjudicating Authority makes it clear that the Appellant’s application for capital bridge funding was of Rs.300 lakhs whereas sanction of funding was shown as Rs.700 lakhs. Such stand taken by the appellant itself creates serious doubts on the conduct of the appellant.

After going through material available on record we are of the opinion that the Appeal is required to be rejected. We are of the opinion that the appellant has initiated the present proceeding only and only with a view to defeat the auction sale. We do not find any point to interfere with the impugned order or grant any relief to the Appellant. Rather it was a fit case for rejection of Appeal with imposing heavy costs. However, taking lenient view we are refraining to impose costs. The appeal stands dismissed. No order as to costs.