Perfect Day Inc. vs Ms. Mamta Binani, Liquidator for Sterling Biotech Limited

The Corporate Insolvency Resolution Process (CIRP) was initiated vide Order dated 11.06.2018 by this Tribunal. During the CIRP Shri Sundaresh Bhat had been appointed as the Interim Resolution Professional (IRP) and subsequently was confirmed as the Resolution Professional (“Resolution Professional”) by the Committee of Creditors of the Corporate Debtor. As No Resolution Plan was approved by the Committee of Creditors during the CIRP of the Corporate Debtor, this Tribunal vide order dated 08.05.2019, effective from 05.11.2019, ordered liquidation of the Corporate Debtor and appointed the Respondent as the Liquidator of the Corporate Debtor. A Copy of the Admission Order dated 11.06.2018 is annexed to Application as Annexure – 1. Copy of the liquidation order dated 08.05.2019 passed by the Tribunal is annexed to Application as Annexure – 2.

Subsequently, the Respondent issued the Public Notice in terms of Regulation 12 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 (Liquidation Regulations) and the Process Document for calling the stakeholders to submit their claims with proof for acquisition of the Corporate Debtor as a whole on a going concern basis. A copy of the Public Notice dated 21.10.2021 issued by the Respondent is annexed to Application as Annexure – 3.

The Respondent then undertook the process of selling the Corporate Debtor as a whole, on a going concern in terms of Regulation 32(3) of the Liquidation Regulations to maximize the value of the Corporate Debtor.

Pursuant to the said Public Notice and Process Document, the Applicant submitted a binding bid of INR 638,00,00,005/- (Indian Rupees Six Hundred and Thirty Eight Crores and Five only) “Final Consideration”, and pursuant to the review of the expression of interest (EOI), supporting documents submitted with the Respondent and submission of the earnest money deposit (EMD) in terms of the Process Document, the Applicant was declared as a ‘qualified bidder’. Thereafter, the bid was undertaken by way of an e-auction process on 04.04.022, whereby the Applicant was declared as the Successful Bidder.

Subsequently, the Respondent issued a Letter of Intent dated 05.04.2022 (LOI) to Applicant, subject to the fulfilment of the conditions specified therein, including inter alia, the payment of INR 127,60,00,001/- (Indian Rupees One hundred twenty seven crores sixty lakhs and One only), being equivalent to 20% (Twenty percent) of the Final Consideration (Upfront Payment) and the Balance Consideration i.e. an amount of INR 510,40,00,004/-(Indian Rupees Five hundred and Ten crores Forty Lakhs and Four only), being equivalent to 80% (Eighty percent) of the Final Consideration (Balance Consideration) in the manner and within the timelines prescribed therein.

The Applicant, pursuant to issuance of LOI, and in compliance of the terms and conditions of the LOI, has duly paid the Upfront Payment on 20.04.2022 into the Liquidation Account which has been duly acknowledged and accepted by the Respondent. A copy of the email/ letter dated 21.04.2022 sent by the Respondent acknowledging the receipt of the Upfront Payment by Applicant is annexed to the Application as Annexure – 4.

The Applicant respectfully submits before us that while it is in the process of taking steps for the payment of the Balance Consideration within the timelines as setout in the LOI, the Applicant submitted detailed Acquisition Plan to the Respondent for acquiring the Corporate Debtor as a going concern (Acquisition Plan). Copy of the Acquisition Plan submitted by the Applicant to the Respondent is annexed to this Application as Annexure – 5.

It is submitted that in accordance with the regulatory requirements for foreign investment by a non-resident in an entity engaged in pharmaceutical sector herein and undertaking a brownfield project i.e. the Corporate Debtor, the Applicant will directly acquire 73.9% (Seventy Three point Nine percent) of the share capital of the Corporate Debtor and the balance will be acquired by Perrya, LLC, having its registered office at 1209 Orange Street, City of Wilmington, Delaware – 19801, which has been incorporated by some of the founders of the Appellant who are non-resident Indians/ overseas citizens of India (Perrya). Perrya will acquire the shares of the Corporate Debtor on a non-repatriation basis. The Applicant and Perrya shall be collectively referred to as the “Acquirers”.

The Applicant further submits that the Process Document also enable the Applicant to acquire the Corporate Debtor either in its name or through ‘special purpose vehicle’ (SPV) as defined in the Process Document. Further, it is submitted that the construct of SPV under the Process Document only requires the Applicant to acquire majority of the voting rights and management in the SPV. Therefore, it is open for a third-party to indirectly acquire voting and management rights upto 49% (forty nine percent) in the Corporate Debtor. It is submitted here that the Acquisition Structure, as set out in the Acquisition Plan, is in compliance with the provisions and spirit of the Process Document, given that the Applicant will itself be acquiring 73.9% (seventy-three-point nine percent) of the share capital of the Corporate Debtor and Perrya will not have investments from any third-party but from the founders of the Applicant.

That the Applicant has submitted the letters issued by the Acquirers confirming the acquisition of shares of the Corporate Debtor in the manner envisaged in the Acquisition Plan (and as set out in Paragraph 6.09 above). Copies of the consent letters are annexed to Application as Annexure – 6.

That the Applicant has also submitted a declaration to the Respondent stating that Perrya is not barred from acquiring the Corporate Debtor under section 29A of the Code.

It is submitted that the Acquisition Plan submitted by the Applicant to the Respondent is akin to a resolution plan under Section 31 of the Code since Regulation 32(e) of the Liquidation Regulations clearly provides that the Liquidator may sell the Corporate Debtor as a going concern. Reference has also been made to the definition of ‘resolution plan’ under Section 5(26) of the Code which provides that a resolution plan means a plan for insolvency resolution of the Corporate Debtor as a going concern in accordance with Part II of the Code, which also includes Chapter III (Liquidation Process). By the combine reading of these provisions of the Code indicates that the scheme of the Code and the Liquidation Regulations intend to confer benefits and reliefs to an applicant acquiring the Corporate Debtor as a going concern during liquidation proceedings of the same nature as contemplated for a resolution plan approved under Section 31 of the Code. It is also pertinent to mention that the exemptions/ relaxations provided under Applicable Laws shall apply mutatis mutandis to the Corporate Debtor as a going concern in liquidation, as applicable to a successful resolution applicant on approval of resolution plan under Section 31 of the IBC. The NCLT, Ahmedabad in the matter of Nitin Jain, Liquidator of PSL Limited vs. Lucky Holdings Private Limited, IA 391(AHM)/2021 in CP(IB) 37 of 2017 held the similar view.

Further, pursuant to the issuance of LOI, and in accordance with the Process Document, the Applicant has submitted the Acquisition Plan for acquiring the Corporate Debtor on a going concern in accordance with the Section 32A of the Code and for setting out the reliefs, concessions, exemptions in respect of the acquisition of the Corporate Debtor and for providing a clean break from the period prior to the Effective Date, as envisaged under the Acquisition Plan. In this regard, it is pertinent to mention that the Hon’ble Delhi High Court in the matter of Nitin Jain, Liquidator of PSL Limited vs. Enforcement Directorate, 287(2022) DLT 625, held as follows:

The Applicant further submits that this Tribunal has already granted similar reliefs in similar cases wherein the Corporate Debtor is bring acquired as a ‘going concern’ by the successful bidder and the Applicant craves leave of this Tribunal to rely on the similar orders/ reliefs being granted by various Tribunals including this Tribunal, at the time of hearing.

It is also submitted that the reliefs and concessions sought by the Applicant are necessary and important for the acquisition of the Corporate Debtor on a going concern basis and to enable the Applicant to run the business of the Corporate Debtor with a clean break from the past. In the absence of such reliefs and concessions, the Acquisition Plan may become unviable and unfeasible leading to further depletion of value of the assets of the Corporate Debtor and may create hardship to numerous employees and labours.

It is submitted that this Tribunal in the matter titled Bank of Baroda vs. Topworth Pipes & Tubes Private Limited CP(IB) No. 1239/MB/2018 vide Order dated 09.03.2021 granted reliefs similar to the ones prayed for by the Applicant in the present Application. This Tribunal while allowing the reliefs prayed for by the applicants therein observed as follows:

Only two qualified bidders participated in the active bidding i.e. the Applicant and ACG Associated Capsules Private Limited (hereinafter referred to as “ACG).

In the said e-auction process of Corporate Debtor, it was Perfect Day Inc. that was declared as the successful bidder by the Liquidator, in light of its highest bid amount of Rs.6,38,00,00,005.00 (Rupees Six hundred Thirty Eight Crores and Five only) and ACG submitted next highest bid amount of Rs.6,30,00,00,000/- (Rupees Six hundred Thirty Crores). Copy of the result published on the portal of the e-auction organizer is annexed as Exhibit – C.

Subsequently, a Letter of Intent dated 05.04.2022 issued by the Liquidator was accepted and signed by the authorized representative of Successful Bidder. Copy of the Letter of Intent dated 05.04.2022 is annexed as Exhibit – D to Reply.

It is submitted that along with the Earnest Money Deposit of Rs.27,42,00,000/- deposited by the Successful Bidder at the time of submission of Expression of Interest, a further amount of Rs.127,60,00,001/- (Indian Rupees One Hundred Twenty-Seven Crores Sixty lakhs and one only) was submitted as the upfront payment on 20.04.2022. It was requested by the Applicant vide letter dated 21.04.2022 not to distribute the said funds and informed that the Applicant is in the process of getting the captioned application filed. The Liquidator had informed that at that point of time, she was not proposing to forthwith distribute the same and that she would abide by the directions passed by this Tribunal, vide email dated 21.04.2022 (available at page 87 of the Application). Copy of the said letter dated 21.4.2022 issued by the Applicant to Respondent is annexed to the Reply as Exhibit – E.