Prakash Traders vs Avil Menezes, Liquidator of Varron Autokast Limited

Per: Shyam Babu Gautam, Member Technical

This is an Application filed by the Applicant, Prakash Traders, seeking certain reliefs and concessions from this Tribunal with respect to the sale of the Corporate Debtor in Liquidation as a going concern in order to carry on the business of the Corporate Debtor expediently and thereby achieve value maximisation.

The relevant facts in brief are as follows. The Financial Creditor filed a Petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “the Code”). This Tribunal admitted the Petition and initiated Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor vide Order dated 13^th December 2019. The Respondent was appointed as the Resolution Professional (RP) of the Corporate Debtor on 17^th January 2020. Thereafter, as no resolution plan was received, the Respondent filed an Application before this Tribunal seeking initiation of liquidation proceedings against the Corporate Debtor. Accordingly, vide Order dated 23^rd December 2021, liquidation proceedings were initiated and the Respondent was appointed as the Liquidator of the Corporate Debtor. Subsequently, the Respondent conducted an e-auction for sale of the Corporate Debtor as a going concern wherein the Applicant emerged as the successful bidder with the highest bid of Rs. 121,00,00,000/- on 19^th May 2022. By 18^th June 2022, the Respondent declared and confirmed the Applicant, a sole proprietorship firm, as the successful bidder after which the Applicant paid the entire consideration to the Respondent. The Applicant then filed this Application on 11^th August 2022 seeking certain reliefs and concessions for the purpose of acquisition of the Corporate Debtor as a going concern.

The Applicant submits that mere purchase of the Corporate Debtor as a going concern during liquidation is not sufficient for the revival of the Corporate Debtor and, in fact, the Applicant requires certain reliefs and concessions for effective acquisition of the Corporate Debtor on a “fresh slate” basis. It is stated that the acquisition of the Corporate Debtor as a going concern during Liquidation can be treated like a Resolution Plan. Therefore, the successful acquisition and revival of the Corporate Debtor is possible only if these reliefs/ concessions/ permissions are granted by this Tribunal as is granted while approving a Resolution Plan under Section 31 of the Code. The Applicant submits that this Tribunal is, in fact, empowered to grant such necessary reliefs and cites several Orders of various benches of this Tribunal and the Appellate Tribunal (NCLAT) to support this averment.

The Respondent has filed Reply dated 2^nd February 2023 to this Application wherein it is submitted that the Respondent, as the Liquidator of the Corporate Debtor, can neither object to nor consent to such reliefs and concessions as sought by the Applicant and hence leaves such decision to the discretion of this Tribunal. Further, it is also submitted that an Application being I.A. 2844 of 2022 has been filed by the Respondent seeking closure of the Liquidation process of the Corporate Debtor and the same is pending for adjudication before this Tribunal.

We have heard the Counsel appearing for the Applicant and the Counsel appearing for the Respondent. On perusal of the instant Application and other documents on record, it is seen that the Applicant is the bonafide purchaser of the Corporate Debtor as a going concern in Liquidation for a total consideration amount of Rs. 121,00,00,000/- (Rupees One Hundred and Twenty-One Crores only) including the Earnest Money Deposit (EMD) of Rs.7,20,00,000/-(Rupees Seven Crores Twenty Lakhs only). We have noted the confirmation of receipt of the entire Sale consideration issued by the Respondent vide Letter dated 28^th July 2022. However, the transfer of the control of the Corporate Debtor in favour of the Applicant is yet to take place. It is submitted that upon issuance of the Sale Certificate and upon occurrence of the Transfer Date, whichever is later, the entire control of the Corporate Debtor along with all the rights, title and interest, will be transferred to the Applicant.

In order to buttress the argument with respect to the reliefs sought, the Applicant, inter alia, relies on the Hon’ble NCLAT’s Order in the case of M/s Shiv Shakti Inter Globe Exports Pvt. Ltd. Vs. KTC Foods Pvt. Ltd. Through Liquidator Mr. Anup Kumar Singh (Company Appeal (AT) (Insolvency) No. 650 of 2020) wherein it was observed that:

Keeping this in view and with regard to the facts and circumstances in the instant Application, it is observed that the request of the Applicant is reasonable and justified. The reliefs and concessions as sought in Paragraph 22 of the Application by the Applicant are indeed necessary and essential to facilitate the full acquisition of the Corporate Debtor and subsequently, revive its business. We are, therefore, inclined to grant those reliefs that pertain to the period prior to the Transfer Date in the following manner:

In view of the foregoing, we deem it is fit and proper to allow this Application for facilitating the effective revival of the Corporate Debtor by the Applicant. With the above observations, I.A. No. 2183 of 2022 is partly allowed and disposed of in the above terms.