Praxis Corporate Services Pvt. Ltd. vs M/s. Powai Cubicles Pvt. Ltd.

ORDER

a)

Allow the present application; and

b)

Pass an order declaring that as on the date of the sale certificate being 28.04.2023, the applicant is vested with all the rights, title and interest in whole and every part of the Corporate Debtor including but not limited to fixed assets, all immovable and movable assets, and intellectual property rights, free from security interest, encumbrance, claim or counterclaim;

c)

Pass an order issuing a direction that on and from the date of sale certificate, all the claims or demands made by, or liabilities or obligations owned or payable to any actual or Potential creditor, Financial Creditors, Employees, Workmen including claims related to their social security contributions, Suppliers, Governmental Agencies, tax authorities of the Corporate Debtor (including but not limited to liabilities, interest, fines, penalties, duties, taxes, cess, surcharge, late fees etc. on account of income-tax, tax deduction at source, tax collection at source, goods and services tax, custom duty, value added tax, service tax, wealth- tax, cess, DGFT dues; dues relating to provident fund, gratuity, fire, electricity, SEBI, weights and measures, state Boiler, stock exchange, Depositories (CDSL, NSDL) etc.; and pollution control board, Land revenue, Municipal tax, Water tax, Water cess, Factories Act dues, ROC dues etc.) whether direct or indirect, whether filed/admitted/verified or not, due or contingent, asserted or unasserted, crystallized or un-crystallized, known or unknown, secured or unsecured, disputed, undisputed, present or future, including any liability arising out of non-compliance of provision of any laws, rules, regulations, directions, notifications, circulars, guidelines, policies, licenses, approvals, consents or permissions as applicable on the Corporate Debtor, in relation to any period prior to the date of sale certificate that is prior to 28.04.2023 will be written off in full and shall stand permanently extinguished by the Liquidator in accordance with section 53 of IBC 2016;

d)

Pass an order quashing of any notices that may be received from any party including governmental authorities for the period prior to 28.04.2023 including the Notice dated 28.09.2023 issued by the Income Tax Department to the Corporate Debtor under Section 263 of the Income Tax Act, 1961 for Hearing in respect of Revision proceedings for the assessment year 2018-2019;

e)

Pass an order holding that no past claim or liability, shall be recoverable in any form or manner whatsoever from the Applicant and the payment of Sale Consideration by the Applicant into the liquidation account is a full and final settlement by the Applicant towards such claims, liabilities, etc.; and

f)

Pass an order directing that on and from the date of the sale certificate, i.e., 28.04.2023, all the assets including as specified in the E-Auction Process Information Document and reproduced below shall continue to be the assets of the Corporate Debtor free from any encumbrance:

i.

Block No. 1601, Lodha Supremus, Saki Vihar Road, Opposite MTNL Office, Tunga Village, Chandivali, Powai, Mumbai Maharashtra 400072 (1353 Sq. Ft. Carpet)

ii.

Block No. 1602, Lodha Supremus, Saki Vihar Road, Opposite MTNL Office, Tunga Village, Chandivali, Powai, Mumbai Maharashtra 400072 (1000 Sq. Ft. Carpet) iii. 1604, Lodha Supremus, Saki Vihar Road, Opposite MTNL Office, Tunga Village, Chandivali, Powai, Mumbai Maharashtra 400072 (1201 Sq. Ft. Carpet).

g)

Pass an order issuing a direction that from the date of the Sale Certificate i.e. from 28.04.2023, the Applicant shall be entitled to the benefit of Section 32A of the Code, any and all the legal proceedings (including any show cause, notice, adjudication proceedings, assessment proceedings, regulatory orders, etc.,), arbitration or other legal, judicial, regulatory or administrative proceedings, initiated before any court, tribunal or authority by or on behalf of any creditor or governmental authorities, to enforce any rights or claims against the company shall be withdrawn, abated, settled and/or extinguished with effect from the date of the Sale Certificate and the Applicant shall no longer be required to make any payments in relation to such litigations proceedings;

h)

Pass an order issuing a direction that any non-compliance with provisions of any laws, rules, regulations, directions, notifications, circulars, guidelines, policies, licenses, approvals, consents, or permissions prior to the date of execution of the sale certificate shall be deemed to be extinguished; and

i)

Pass an order issuing a direction that from the date of the sale certificate i.e., 28.04.2023, the Board of Directors of the Corporate Debtor be re- constituted as per the Companies Act, 2013 and that the following individuals be appointed as Directors of the Corporate Debtor duly appointed under the provisions of the Companies Act, 2013 and the earlier members of the board of directors shall be deemed to have resigned, and direct the Registrar of Companies to take on record the above reconstitution of the corporate structure of the Corporate Debtor without imposition of any costs, charges, penalties etc. and enable filing of such returns as may be relevant and applicant in the facts of the present case as required by applicable law without requiring any further action/ transaction at the end of the Corporate Debtor or its former shareholders:

Sr. No.	Name of Proposed Director	DIN No.
1.	Gurpal Singh	00204798
2.	Jaideep Singh Dhamija	03430126

j)

Pass an order directing the Ministry of Corporate Affairs, Registrar of Companies, and other relevant authorities to give necessary effect to the change in Shareholding upon the sale of the Corporate Debtor to the Applicant by virtue of the sale certificate dated 28.04.2023. The new shareholders and their respective shareholding of the Corporate Debtor is proposed to be as follows of a face value of Rs. 10/- per share with share premium of Rs. 52.211/- per share-

Sr. No.	Name of Shareholder	Number of Shares
1.	M/S. Metro Transit Private Limited	999999
2.	Gurpal Singh (nominee of M/s. Metro Transit Private Limited)	1

k)

Pass an order issuing a direction that all the existing shares/equity share capital of the Corporate Debtor shall be extinguished/cancelled without any consideration, and rights and liabilities arising out of the same shall also be extinguished; and

l)

Pass an order directing that all subsisting consents, licenses, approval rights, entitlements, benefits, and privileges whether under law, contract, lease, or license, granted in favor of the Corporate Debtor or to which the Corporate Debtor is entitled shall, notwithstanding any provision to the contrary in their terms and irrespective of the commencement of the insolvency/liquidation proceedings under the Code, in relation to the Corporate Debtor be deemed to continue without disruption, for the benefit of the Corporate Debtor and all additional licenses, registrations and consents required by the Corporate Debtor be made available immediately from the Date of the sale certificate i.e., 28.04.2023; and

m)

Pass an order directing that the Corporate Debtor shall have a right to review and terminate any contracts that were entered into prior to the date of the issuance of the sale certificate i.e., 28.04.2023;

n)

Pass an order directing the Liquidator to cooperate with, and provide all necessary support and assistance to the Applicant, including but not limited to perfecting/amending/modifying /creating the land records in relation to all parcels of land, the immovable properties and assets, belonging to the Corporate Debtor in favour of the Corporate Debtor;

o)

Pass an order enabling the Applicant to, immediately, write off all the liabilities of the Corporate Debtor, including creditors, term loans, working capital loans, tax liabilities, other statutory liabilities, etc. which are not payable and make necessary entries in the books of accounts and direct the Liquidator to render the necessary co-operation in this regard;

p)

Pass an order directing that the brought forward tax losses of the Corporate Debtor be permitted to be carried forward and set-off against future income as change of shareholding of the Corporate Debtor is pursuant to the bid submitted by the Applicant under the E-Auction Process;

q)

Pass an order directing the Registrar of Companies under the Ministry of Corporate Affairs to appropriately remove the charge reflected on the assets of the Corporate Debtor, as appearing in the Master Data of the Corporate Debtor on the website of the Ministry of Corporate Affairs and record satisfaction of charges and direct the creditors of the Corporate Debtor to render necessary co-operation in this regard by issuing such documents and affidavits including but not limited to issuance of no dues certificate and filing requisite forms as may be necessary;

r)

Pass an order directing the secured financial creditors and/ or their appointees to forthwith handover all the documents including originals handed over at the time of creating of security by the Corporate Debtor and report satisfaction of their respective charge to all relevant governmental authorities;

s)

Pass an order directing all rating agencies like CRISIL, CIBIL, etc., to delete all negative ratings for the Corporate Debtor and not to consider them as defaulters;

t)

Pass an order directing that the sale of the Corporate Debtor as a going concern shall be binding on all stakeholders including the utility providers and all the utility providers shall continue to supply the utilities as may be required for the survival of the Corporate Debtor;

u)

Pass an order directing the State Electricity Board to enable enjoyment of power connection to the factory premises of the Corporate Debtor as per the provision of the applicable Electricity Act/ Rules without enforcing the past liabilities existing on the date when CIRP started including but not limited to for which the claim has already been filed during CIRP/ Liquidation Process;

v)

Pass an order directing that any bond, surety, guarantee, power of attorney, or undertaking issued by the Corporate Debtor or authorities executed by the Board of the Corporate Debtor to any person, either in India or outside India before the sale certificate i.e., 28.04.2023 shall stand cancelled and permanently revoked;

w)

Pass an order directing all claims of the Corporate Debtor against third parties and its related parties, shall remain outstanding, due, and recoverable in accordance with their respective terms. Corporate Debtor / successful bidder shall have full right to recover/ proceed against the party, whose account is recoverable in the books of the Corporate Debtor as on the Effective Date;

x)

Pass an order issuing a direction that on and from the Date of Sale Certificate, the status of the Corporate Debtor in the records of the Registrar of Companies should be reflected as 'active' from the status of 'inactive'/'under liquidation'; and

y)

Pass an order Pass an order enabling the RA to prepare the finalised balance sheet by passing the necessary entries in the books of accounts towards:

i.

writing off liabilities of the Corporate Debtor, including creditors, term loans, working capital loans, tax liabilities, other statutory liabilities, etc. which are not payable; and

ii.

an amount of Rs. 1,00,00,000/- (Rupees One Crore) out of the sale considerations towards share capital comprising of 10,00,000 (Ten Lakh) shares of face value Rs. 10/- being held in the manner described in Paragraph 4(viii) of the present application;

iii.

an amount of Rs. 5,22,11,000/- (Rupees Five Crore Twenty Two lakh Eleven Thousand) out of the sale considerations towards share premium in respect of the newly constituted share capital in the manner described in Paragraph 4(viii) of the present application; and issuing a direction to the Liquidator to render the co-operation in this regard and to file such financial statement with the relevant regulators such as Registrar of Companies, Income Tax Authorities and any other Government Authorities; and

z)

Pass an order directing that the Corporate Debtor and/or the Applicant being the successful bidder shall be at liberty to seek remedy if any available before the Hon'ble Tribunal to address any difficulties faced with respect to the implementation of the acquisition of the Corporate Debtor as a going concern;

aa. To grant any other/further relief(s) as this Hon'ble Tribunal may deem fit in the interest of justice.

2. Submissions of the Applicant, in brief:

Observations/Findings

“21.

… it is a settled law that when the sale proceeds of a ‘Corporate Debtor’ are duly distributed in the Order of priority and in the manner prescribed under Section 53 of the Code, claims of any other Creditor cannot be entertained contrary to the provisions entailed under Section 53; subsequent to the distribution of sale proceeds under Section 53 no other entity including any Government entity can claim any past unpaid or outstanding dues against the Appellant who has purchased the ‘Corporate Debtor Company’ as a ‘going concern’….. The Hon’ble Supreme Court in ‘Ghanshyam Mishra & Sons Pvt. Ltd.’ Vs. ‘Edelweiss Asset Reconstruction Company Ltd. & Ors.’, Civil Appeal No. 8129 of 2019 and in ‘CoC of Essar Steel India Ltd.’ Vs. ‘Satish Gupta & Ors.’ (2020) 8 SCC 531 has laid down the proposition that the purchaser of the Company even in the Liquidation stage cannot be burdened with past liabilities when it is not mentioned in the ‘Sale Notice’.

22.

It is no longer Res Integra that while approving a ‘Corporate Debtor’ sale as a ‘going concern’ in Liquidation Proceedings without its dissolution in terms of Regulation 32(e) of the Liquidation Process Regulations, 2016, it is essential to see that the ‘Corporate Debtor’ is not burdened by any past or remaining unpaid outstanding liabilities prior to the sale of the Company as a ‘going concern’ and after payment of the sale proceeds distributed in accordance with Section 53 of the Code.”