S Dhanapal vs M/s. Seshasayee Paper And Boards Limited

The present Application viz. IA(IBC)/1511(CHE)/2022 has been filed by the Applicant / Liquidator under Sec. 35(1)(n) of the Insolvency and Bankruptcy Code, 2016 read with Regulation 32(e) of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 seeking relief as follows;

Thus, in the light of the contrasting opinions of the Liquidator on the one hand and the COC on the other, this Tribunal vide its order date 13.03.2020 after analyzing the factual matrix of the case, has passed a detailed order, in and by which a direction was given to the Liquidator to resubmit both the Schemes by including the modifications to the terms of deposit of their committed amounts and its withdrawal by the stakeholders and also clearly specifying and quantifying the amount payable towards CIRP and Liquidation costs including the fees of the RP/Liquidator. For which purpose, a direction was also given to the Liquidator to constitute a Stakeholders committee in terms of Regulation 31A of the IBBI (Liquidation Process) Regulations, 2016.

It is seen that the on 19.09.2022 in the 7^th e-auction conducted by Liquidator turns out to be successful and M/s. Seshasayee Paper and Board Limited emerged to be the successful e-auction purchaser of the assets of the Corporate Debtor for a consideration of Rs.105 Crore.

This is an Application filed by one of the unsuccessful auction purchaser of the Corporate Debtor viz. Bego Cars Pvt Limited seeking relief as follows;

It is stated in the Application that since the stakeholder viz. Indian Overseas Bank has filed an IA seeking various relief including the direction to the Liquidator to conduct the e-auction afresh, the applicant herein, who has the capability to purchase the assets of the Corporate Debtor as a going concern for Rs.135 Crores, in the interest of justice wants itself to get intervened in the present I.A. for an effective adjudication.

The Applicant herein having been declared as an unsuccessful auction purchase is neither a proper party nor a necessary party to intervene in the application filed by the Stakeholder viz. IOB. In any event no concrete offer, supported by proof of funds was filed along with the IA. The absence of the same makes the applicant not a bonafide purchaser. Hence the present IA viz. IA(IBC)/1241(CHE)/2022 cannot be considered and accordingly stands dismissed.

This is an application filed by one of the unsuccessful auction purchasers viz. Panzarakan Industries Private Limited of the Corporate Debtor under Section 60(5) of IBC, 2016 seeking relief as follows;

The Learned Counsel for the Applicant submitted that the Applicant Company is doing business related to Sugar manufacturing and it has proposed to take over the assets of the Corporate Debtor by investing a sum of Rs.145 Crore. However, it was submitted that due to certain bonafide reasons, the Applicant was unable to participate in the e-auction held on 19.09.2022.

The Learned Counsel for the Applicant submitted that they have reliably learnt that the sale has not been concluded and the sale certificate is yet to be issued by the Respondent and hence they have approached this Tribunal seeking appropriate direction.

During the course of hearing, the learned counsel for the Applicant submitted that they wanted to revoke the vakalat.

The Learned Liquidator filed the counter and stated that the applicant had enclosed copy of the Bank Guarantee for an amount of Rs.65,00,000,00/- (Rupees Sixty Five Crores Only) as stated by them in the application. While perusing the attachment of Bank Guarantee and on verifying the details in the bank guarantee, it was found to be suspicious. Immediately, thereafter the Liquidator wrote an email communication on 12.12.2022 to the relevant branch of Bank of India to check the veracity and genuineness of the Bank Guarantee. The content of the said email communication is extracted hereunder:

In para 10 of the counter it is stated that on 13.12.2022, the Bank of India replied from their email id Nipaniya.Indore @bankofindia.co.in with a copy to HeadOffice.Legal @bankofindia.co.in and Legal.Indore@bankofindia.co.in, responding to the email communication of the Liquidator requesting confirmation on the Bank Guarantee and its genuineness.

From the above, it is it is very apparent and clear that the application has been filed by the Applicant with a fake bank guarantee not issued by the bank concerned and has been placed in an attempt to mislead the Adjudicating Authority and is attempting to delay the process. It is an offence under the section 120-B, Section 420, Section 467, Section 468 and Section 471 of Indian Penal Code 1860. The Liquidator humbly submits that there are complete misrepresentations of facts by the Applicants to suit their convenience and they are trying to make an attempt to defraud and to derail the E-Auction process without participating in the E-Auction. It is pertinent to note that they have not participated in any of the earlier E-Auctions.

Heard the Submissions of both the parties. We have considered the submissions made by the Liquidator that the applicant has produced a false Bank Guarantees. The act of the applicant in producing a false or Forged Bank Guarantees prima facie is wrong and an offence as indicated above. In these circumstances the Applicant cannot be left to go scott free. The Applicant should face the repercussions of his unlawful actions. The Liquidator is directed to lodge a "Criminal Compliant" with regard to the aforesaid matter, before the appropriate forum in accordance with the provisions of law and pursue the same.

Since, it is prima facie evident that the applicant had produced a fake or forged bank guarantee in order to derail the E-Auction process of the Corporate Debtor This Application holds no merits and accordingly IA(IBC)/1241(CHE)/2022 stands dismissed.

This is an Application filed by the Liquidator of the Corporate Debtor under Section 60(5) of IBC, 2016 seeking relief as follows;

This Application has been filed by the Liquidator seeking exclusion and extension of the Liquidation period. As already alluded supra, it is seen that the sale has been concluded and only distribution of the amount to the stakeholders is pending. Thus, by taking into consideration the averments made in para 11 and 12 of the Application, the Liquidation period in respect of the Corporate Debtor is extended upto 01.06.2023. With the above said directions, this IA(IBC)/1510(CHE)/2022 stands disposed of.

This is an Application filed by the Liquidator of the Corporate Debtor under Section 60(5) of IBC, 2016 seeking relief as follows;

In this Application, it is seen that the Respondent has filed a memo on 26.02.2022 wherein it is stated that they have deposited 50% of the amount claimed by the Liquidator and has also submitted the proof in relation to the same. The said memo is taken on record. If the Applicant has not paid the balance 50% of the amount, the Liquidator is directed to adjust the said amount, from the disbursement to be made to the Applicant in terms of Section 53 of IBC, 2016.

With the above said directions IA(IBC)/188(CHE)/2021 stands disposed of.

This is an Application filed by Indian Overseas Bank, the stakeholder of the Corporate Debtor under Section 60(5) of IBC, 2016 seeking relief as follows;

The present Application filed by Indian overseas has become infructuous since the e-auction which was scheduled on 24.08.2022, in respect of the impugned sale notice dated 27.07.2022, did not fructify since there were no prospective bidders. Hence, IA(IBC)/907(CHE)/2022 stands dismissed.

IA/844/IB/2020 is an Application filed by the Liquidator of the Corporate Debtor under Section 60(5) of IBC, 2016 seeking relief as follows;

IA/846/IB/2020 is an Application filed by the Liquidator of the Corporate Debtor under Section 60(5) of IBC, 2016 seeking relief as follows;

It was submitted by the Learned Counsel for the Liquidator that the Liquidator has filed an Application CA/1266/2019 before this Tribunal under Section 230 of the Companies Act, 2013 for approval of either one of the schemes received from the Scheme Applicants viz. (i) Seshasayee Paper and Boards Limited and (ii) Sun Paper Mill Limited. This Tribunal vide its order dated 13.03.2020 has passed the final order with certain directions. In terms of the final order, the Liquidator issued a paper publication in Business Standard in English and Maalai Malar in Tamil and has also constituted a stakeholder committee in terms of Regulation 31A of IBBI (Liquidation Process) Regulations 2016 for considering the schemes and voting thereon.

In the meantime, it was submitted that one of the Scheme proponent M/s. Sun Paper Mill Limited filed an Appeal before Hon'ble NCLAT and the Hon'ble NCLAT vide its order dated 20.03.2022 has passed order as follows "ad-interim operation of the impugned order is kept on hold till the next date of hearing". Thereafter, on account of Covid – 19 pandemic, hearing could not take place.

It is seen that the Liquidator vide his email dated 12.08.2020 has written to the Scheme proponents to renew their bank guarantee and to keep it alive till the disposal of the matter pertaining to the Scheme filed under Section 230 of the Companies Act, 2013. In the meantime, the Appellant before Hon'ble NCLAT viz. Sun Paper Mill Limited has withdrawn its appeal on 28.08.2020.

The Learned Counsel for the Liquidator submitted that the Scheme proponents have taken advantage of the appeal proceedings before Hon'ble NCLAT and allowed the Bank Guarantee to lapse. Further, it was submitted that the Scheme proponents has completely failed in submitting the comprehensive scheme as directed by this Tribunal vide its order dated 13.03.2020 and due to their inaction, the Respondents have neither complied the order of this Tribunal nor the conditions imposed by the Liquidator with regard to keeping the validity of the Bank Guarantee alive, but is only attempting abruptly run away from the situation by giving lame excuses. This has caused grave prejudice to the liquidation estate, loss of value, to all stakeholders. Under the said circumstances, the Learned Counsel for the Liquidator submitted that the Respondents be directed to pay Rs.2 Crore into the Liquidation account of the Corporate Debtor.

In response to this Application, M/s. Seshasayee Paper and Boards Limited have filed their reply and it is stated that M/s. Sun Paper Mill Limited has filed appeal before the Hon'ble NCLAT as against the order passed by this Tribunal dated 13.03.2020 and that the M/s. Seshasayee Paper and Boards Limited has filed its reply and prayed before Hon’ble NCLAT to modify the Scheme that it had submitted, without any constraint whatsoever including down – revision of the Scheme amount and then submit the same to the Liquidator for further consideration or in the alternative to permit the Respondent to withdraw the Scheme it had proposed. Thereafter, M/s. Seshasayee Paper and Boards Limited vide its letter dated 30.08.2021 has informed to the Liquidator that it was not interested in further pursuing its proposal to submit a Scheme and the same may be treated as formally closed. Also the appeal filed by M/s. Sun Paper Mill Limited came to be withdrawn on 28.08.2020 and the Hon’ble NCLAT has passed the following order in Company Appeal (AT)(Ins) No.451 of 2020:-

Thus, it was submitted that the claim of the Liquidator for the Bank Guarantee sum is unfounded as the Scheme proposed by the Respondent stood withdrawn and neither did it meet with the approval of the CoC / Stakeholders. Under such circumstances the Learned Counsel for the Respondent sought for dismissal of the present Application.

In so far as these Applications are concerned, it is seen that the Bank Guarantee in respect of the two scheme proponents have expired as early as on 30.04.2020. However on account of Covid – 19 pandemic and also due to nationwide lockdown imposed by the Central / State Government from time to time, it was submitted that the Liquidator could not access the documents which were lying in his office.

In the present case, it is seen from the averments made in the reply by the Respondent viz. Seshasayee Paper and Boards Limited that they have sought permission from Hon’ble NCLAT to withdraw the Scheme it had proposed. Thus, the Respondent very well knew that they cannot wriggle out from their obligation once they propound a scheme and just by sending a letter to the liquidator on 30.08.2021 would not absolve them from their liability. Hence, this Tribunal is of the considered view that the unilateral action of the Respondents in withdrawing from the Scheme, especially when an order has been passed by this Tribunal and when no application seeking leave of withdrawal of the same has been filed before this Tribunal is not legally sustainable. Moreover the order of this Tribunal dated 13.03.2022 assumed finality and the Appeal challenging the same was filed but later withdrawn.

Accordingly, we direct the Respondents viz. (i) Seshasayee Paper and Boards Limited and (ii) Sun Paper Mill Limited to deposit a sum of Rs.2 Crore each into the liquidation estate of the Corporate Debtor within a period of 7 days from the date of this order. With the above said directions, IA/844/IB/2020 and IA/846/IB/2020 stands disposed off.

This is an Application filed by the successful auction purchaser of the Corporate Debtor under Section 60(5) of IBC, 2016 seeking relief as follows;

The Applicant is the successful auction purchaser who has paid the amount of Rs.105 Crore on 05.10.2022. It was submitted that the Applicant has sought permission from the Liquidator to visit the plant and to access the investment to restart the plant, and the Liquidator in his response email dated 06.10.2022 permitted the Applicant to visit the Corporate Debtor's plant for assessment and the Applicant visited the Corporate Debtor's plant on 10.10.2022 and upon preliminary assessment it was revealed that all the Electrical Transformers have been found tampered and the copper – windings, motors and instruments have been found pilfered and all the electrical instruments control systems have been found tampered with. It was submitted that the security deployed by the Liquidator is inadequate to guard the assets and that the land of an extent of 349 acres with building, plant and machinery are guarded by 7 security personnels on relay shift.

Further, it was submitted that since the Applicant had complied with all the procedures of E-Auction, and had remitted the full sale consideration of Rs.105 Crores, the Liquidator is duty bound to issue immediate Sale certificate and handover the possession of the Corporate Debtor to the Applicant. Hence, the present Application.

This is an Application filed by one of the stakeholders of the Corporate Debtor viz. Indian Overseas Bank under Section 60(5) of IBC, 2016 seeking relief as follows;

The Learned Counsel appearing for the Indian Overseas Bank submitted that the sale of the Corporate Debtor as a going concern in the present case has not happened in a fair manner and it was submitted that the Liquidator has not entertained many intending purchaser(s) by sharing the details of e-auction and virtually disabled them to participate in the e-auction proceedings by stating that their credit worthiness is not sound to pay the reserve price amount. It was submitted that some of the intending purchaser(s) have reported to the Applicant that they are having financial means to pay more than the reserve price as fixed by the Liquidator but unable to participate in the e-portal due to non-cooperation.

The Learned Counsel appearing for Indian Overseas Bank submitted that the Liquidator has caused a sale notice on 27.07.2022 fixing the reserve price at Rs.110 Crore which is far below as compared to the present value of the assets of the Corporate Debtor and after taking cognizance of the said sale notice one buyer M/s. BEGO HICONICS has agreed to purchase the same at Rs.135 Crore but the Liquidator was not interest to provide necessary information to the said buyer for obvious reasons.

It was submitted that the Liquidator has again reduced the Reserve price from Rs.110 Crore to Rs.105 Crore and issued a Sale Notice dated 02.09.2022 fixing the e-auction proceedings on 19.09.2022 and the said e-auction, only one bidder viz. Seshasayee Paper and Boards Limited reported to have participated and knocked down the bid for Rs.105 Crore. It was submitted that the said bidder had originally offered Rs.160 Crore to purchase the Corporate Debtor property during the CIRP period.

The Learned Counsel for IOB submitted that the Liquidator cannot reduce the reserve price drastically with ulterior motive thereby causing great prejudice not only to the stakeholders but also to the Corporate Debtor's property. Under such circumstances, the present Application is filed by IOB seeking thereof to quash the sale conducted by the Liquidator on 19.09.2022.

This is an Application filed by one of the unsuccessful auction purchaser of the Corporate Debtor seeking relief as follows;

The Learned Counsel for the Applicant submitted that in the E-Auction process of the Corporate Debtor, the Applicant herein has applied to become a bidder and has also furnished Refundable Participation Deposit Money of Rs.1,00,000/-. However, it was submitted that despite submission of the documents along with the Refundable Participation Deposit Money of Rs.1,00,000/- the Liquidator has sought information about KYC and other Financial Documents which were provided by the Application. It was submitted that the Liquidator vide his email dated 16.09.2022 communicated to the Applicant that sufficient documents with regard to proving the financial eligibility has not been furnished by the Applicant and so the Applicant cannot be allowed to continue in the process. Thus, the Applicant herein was not allowed to participate in the E-auction process. Aggrieved by the same, the Applicant has moved the present Application.

This is an Application filed by the suspended Director of the Corporate Debtor under Section 60(5) of IBC, 2016 seeking relief as follows;

The Learned Counsel for the Applicant submitted that the e-auction process which happened on 19.09.2022 is a collusion and fraud between the Liquidator and the 2nd Respondent viz. Seshasayee Paper and Boards Limited. It was submitted that the loss in the value from January 2022 is only owing to the inaction of the Liquidator and is linked to the collusion between the Liquidator and the 2nd Respondent and in no scenario whatsoever, the value of the assets have depleted by Rs.55 Crores when as late as in January 2022, the assets was asked to be sold in auction upon revision from Rs.160 Crore.

The Learned Counsel for the Applicant submitted that even the Financial Creditor viz. IOB has challenged the auction sale in IA/907/2022 and the complaints have been filed concerning the conduct of the Liquidator and an investigation regarding the same is pending. Further, it was submitted that the manner in which the instant auction is concluded in favour of the 2nd Respondent is also apparently collusive and fraudulent.

The Learned Counsel for the Applicant submitted that the 2nd Respondent ought to be estopped in participating in the auction and in any event from purchasing the Corporate Debtor for any value less than Rs.160 Crore offered at the time of submitting the Scheme before this Tribunal and if such estoppel is not ordered it will result in unjust enrichment to Seshasayee Paper and Board Limited to the tune of Rs.55 Crores. Under such circumstances the Learned Counsel for the Applicant sought to set aside the e-auction sale dated 19.09.2022 issued by the Liquidator.

In so far as the Applications filed by the stakeholders, unsuccessful auction purchasers, and suspended directors of the Corporate Debtor wherein they have impugned the e-auction sale made in favour of Seshasayee Paper and Boards Limited, the following issues arise for consideration and are required to be answered.

In so far as the issues relating to the manner in which the e-auction was conducted and the drastic reduction in the Reserve Price of the Corporate Debtor is concerned, it is seen that the Liquidator has filed his detailed reply refuting the said allegations. However, in order to better understand the said issues, it is necessary to refer to the earlier orders passed by this Tribunal.

This Tribunal vide its order dated 26.11.2021 passed in IA/839/IB/2020 has issued certain directions to the Liquidator in relation to the Liquidation process in respect of the Corporate Debtor, which are as follows;

It is seen that in compliance of the aforesaid order passed by this Tribunal, the Liquidator has carried the valuation through 6 (six) Registered Valuers. After carrying out the said process, the Liquidator has arrived at the Liquidation value as Rs.173 Crore and the same has been taken as the Reserve Price. It is to be noted here that even before the passing the order of Liquidation of the Corporate Debtor on 24.04.2018, the Corporate Debtor has ceased its operation 3 years prior to the said date.

Thereafter, it is seen that the Liquidator has filed IA(IBC)/231(CHE)/2022 before this Tribunal for exclusion of the Liquidation period. In the said matter, this Tribunal has passed a detailed order, which is as follows;

Thereafter, it could be seen that in accordance with the orders passed by this Tribunal, the Applicant undertook efforts for selling the Corporate Debtor as a going concern and has conducted the following e-auctions;

The 1st E-auction was scheduled on 31.01.2022 vide Sale notice dated 27.12.2021 and it was submitted that one interest person viz. M/s. Martin Happy Homes Private Limited showed their interest and submitted KYC documents along with interest free refundable deposit of Rs.10 Lakhs. It was submitted that the outcome of the E-auction was not successful as there was no EMD and final bid from the interested person.

The 2^nd E-auction was scheduled on 24.02.2022 vide Sale Notice dated 03.02.2022 and one interested person viz. M/s. Tirumala Construction showed their interest and submitted KYC documents along with interest free refundable deposit of Rs.10 Lakhs. It was submitted that the outcome of the E-auction was not successful as there was no EMD and final bid from the interested person.

The 3^rd E-Auction was scheduled on 31.03.2022 vide sale notice dated 25.02.2022 and the outcome of the E-auction was not successful as no one showed interest to participate.

The 4^th E-auction was scheduled on 27.06.2022 vide Sale notice dated 09.06.2022. It was submitted that four interested persons namely viz. M/s. Sherisha Technologies Private Limited, M/s. Shree Ram Vessel Scrab Private Limited, M/s. R.S. Developers and Trade Circle Enterprise LLC showed their interest and submitted KYC documents along with Interest free Refundable Deposit of Rs.1 Lakh except R.S. Developers. It was submitted that the outcome of the E-auction was not successful as there was no EMD and any final bid from any of the interested person.

The 5^th E-auction was scheduled on 15.07.2022 vide Sale notice dated 29.06.2022 and one interested person viz M/s. Sherisha Technologies Private Limited showed their interest and submitted the KYC documents with interest Free Refundable Deposit of Rs.1 Lakh for the said E-auction. It was submitted that the outcome of the E-auction was not successful as there was no EMD and final bid from the interested person.

The 6^th E-auction was scheduled on 24.08.2022 vide Sale Notice dated 27.07.2022 and that seven interest persons viz. (i) Usha Enterprises, (ii) Aqua World Exports Private Limited, (iii) MTC Business Private Limited, (iv) HR Commercials Private Limited, (v) Sherisha Technologies Private Limited, (vi) Trade Circle Enterprise LLC, (vii) Doshi Electrical and Metals, showed their interest and submitted KYC documents along with interest free Refundable Deposit of Rs.1 Lakh for the said E-auction. It was submitted that the outcome of the E-auction was not successful as there was no EMD and final bid from any of the interested person.

The 7th E-auction was scheduled on 19.09.2022 vide Sale notice dated 02.09.2022 and eight interested persons viz. (i) SGR Enterprises, (ii) Anton Engineering, (iii) Dr. Ganesan Subramanian, (iv) Seshasayee Paper and Board Limited, (v) Nextgen Geotrade LLP, (vi) SKS Foundation India Private Limited, (vii) VMS Industries Limited, (viii) Lavditya Polytech Private Limited, showed their interest. It was submitted that except Anton Engineering, others submitted the KYC documents along with interest free refundable deposit of Rs.1 Lakh. It was submitted that the outcome of the E-auction was successful as the EMD and final bid was received from only one bidder viz. M/s. Seshasayee Paper and Board Limited, who participated in the E-auction held on 19.09.2022 and became the successful bidder for the bid value of Rs.105 Crore. It was submitted that other than the successful bidder no one has given the certificate for net worth and source of funds and has not paid the Earnest Money Deposit.

Thus, it could be seen that the Liquidator has conducted the e-auction process in respect of the Corporate Debtor as per the procedure laid down under Schedule I of the IBBI (Liquidation Process) Regulations, 2016, which is as follows;

In the present case, it is seen that the Liquidator has conducted a total of 7 E-auctions. The 1^st E-auction failed since there was no EMD and final bid from the interest person and hence the Liquidator in terms of Regulation 4A and 4B of Schedule I of IBBI (Liquidation Process) Regulations, 2016 has reduced the Reserve Price of the Assets of the Corporate Debtor. Further, the same process has been followed till the 7^th E-auction dated 02.09.2022. Hence the Reserve Price of Rs.105 Crore fixed by the Liquidator for the 7^th E-auction Sale notice dated 02.09.2022 cannot be termed as illegal or irregular and the arguments made by the Learned Counsel for the Stakeholders that the Liquidator has reduced the reserve price drastically with ulterior motive thereby causing great prejudice to the stakeholders sans merit and required to be eschewed. The mode of e-auction for price discovery is a time-tested mode.

Further, the Learned Counsel for IOB submitted that one buyer M/s. BEGO HICONICS has agreed to purchase at a sum of Rs.135 Crores however the Liquidator has not provided necessary information to the said buyer. In response to the same, the Learned Counsel for the Liquidator has submitted that the Liquidator has verified the credentials by making inspection of record in the portal of MCA and that the said company was incorporated on 30.07.2020 and the paid-up capital is Rs.10 Lakh and the said Company is in default in filing Financial Statement / balance Sheet and Annual Return for the Financial year ended 31.03.2021 and is yet to be filed. Thus, the reliance made by the stakeholder of the Corporate Debtor that another prospective buyer is ready to pay more amount cannot be a ground to quash the sale which has been concluded by the Liquidator. At this juncture we wish to refer to the Judgment of the Hon'ble High Court of Punjab and Haryana in the matter of Scanomax India Limited -Vs- PSIDC [2008] 146 Comp Cas 102 at p.104 (P&H) wherein:-

Merely because the stakeholder viz. IOB has brought in one buyer for an higher offer however the same is not supported with any deposit or bank guarantee to show the seriousness of the buyer and thus it would not constitute a valid ground for refusing confirmation of sale.

Thus, it is seen that the E-auction sale process in respect of the Corporate Debtor has been done by the Liquidator in a fair and equitable manner and there are no documents placed on record to show that the property has been sold for inadequate consideration or there has been any fraud or collusion or any material irregularity or illegality in conducting the E-auction. Accordingly, issue no. (i) and (ii) is answered in favour of the Liquidator.

In so far as the issue whether there is any statutory bar for Seshasayee Paper and Boards Limited to acquire the assets of the Corporate Debtor through e-auction when they have already propounded a Scheme under Section 230 of the Companies Act, 2013 and backed off, eventhough a plea of such sort has been raised by the Learned Counsel for the stakeholders and by the suspended Directors, they have miserably failed to place on record the position of law to state that Seshasayee Paper and Boards Limited is barred to participate in the E-auction process.

Further, this Tribunal has directed Seshasayee Paper and Boards Limited to deposit a sum of Rs.2 Crore into the liquidation estate of the Corporate Debtor within a period of 7 days from the date of this order for unilaterally withdrawing from the Scheme which was propounded by them.

Hence there is no statutory bar on the Seshasayee Paper and Boards Limited to acquire the assets of the Corporate Debtor through the e-auction sale. Accordingly issue No. (iii) is answered.

This issue pertains to whether the suspended Director / ex-promoter of the Corporate Debtor has any locus standi to challenge the e-auction sale process in respect of the Corporate Debtor. It is seen from the averments made in the Application that the Suspended Director of the Corporate Debtor has made a sweeping allegations of fraud and collusion on the part of the Liquidator in finalizing the Sale process in favour of Seshasayee Paper and Boards Limited. However, no corroborating documents have been placed on record in order to substantiate the said statement.

Further, the suspended Directors of the Corporate Debtor has not set forth as to how the sale in favour of Seshasayee Paper and Boards Limited constitutes a fraud. In the case of Mercator Oil & Gas Limited -Vs- Oil & Natural Gas Corporation Limited, in O.S. Appeal No. 318 of 2019 in Arbitration Petition (L.) No.1085 of 2018, the Division Bench of the Hon'ble Bombay High Court, in para 22, 26 and 27 had held as follows;

In any case, already this Tribunal in Issue No. (i), (ii) and (iii) has held that there is no material irregularity or illegality in conducting the E-auction and also there is no statutory bar on the Seshasayee Paper and Boards Limited to acquire the assets of the Corporate Debtor through the e-auction sale. Thus, on merits, the grounds raised by the Suspended Director sans merit and hence the issue of locus is not answered by this Tribunal.

The Issue No. (v) and (vi) pertains to whether the unsuccessful auction purchaser who has not participated in the e-auction has any vested interest to challenge the E-auction sale made by the Liquidator and whether the e-auction sale which is complete in all respects can be set aside on the ground that a prospective party is ready to offer a higher price.

In the present case it is seen that one M/s. Nextgen Geotrade LLP has evinced interest for purchasing the Corporate Debtor on a going concern basis and accordingly approached the Liquidator by its email dated 08.09.2022. It is seen that the Liquidator had replied to the Nextgen Geotrade LLP to provide the pending documents as mentioned in E Auction Process Information Document vide email dated 12.09.2022 and on the same day, Nextgen Geotrade LLP informed vide their email that Nextgen does not have the net worth of Rs. 50 crores (which is basic eligibility criteria for any interested person to express their interest in eAuction participation as per eAuction Process Information Document) and further informed to the Liquidator that only partners and family members are having cash to conclude the sale.

On 13.09.2022, the Liquidator replied to Nextgen Geotrade LLP to refer to Clause 4.5 in E-Auction Information Process Document issued in respect of sale notice dated 02.09.2022 and arrange to provide eligibility documents and requirements as required under E-Auction Process Information Documents for submission of the same in order to facilitate the inspection immediately on receipt and verification of those documents as provided therein. That on 13.09.2022, reply email communication dated 13.09.2022 has been sent by the Authorised Representative of Nextgen to the Liquidator.

The Liquidator replied to the above email communication on the same day 13.09.2022 stating that the Liquidator is legally obligated to follow the same process to any interested person and informed that the Liquidator was not in receipt of the documents for which the Liquidator had sent as requirements in his email. NEXTGEN has replied to the Liquidator vide email dated on 14.09.2022 informing again that NEXTGEN is not able to comply the clause mentioned E-Auction Process Information in Document. The extract of said email communication dated 14/09/2022 is given below for easy reference;

Nextgen Geotrade LLP had subsequently sent Affidavit and Undertaking, Confidentiality Undertaking, Bid Application Form, Declaration, Board Resolution on 15.09.2022 through email. Liquidator has sent the reply email to the NEXTGEN requested the shortfall documents namely Certificate evidencing source of fund and Net worth certificate as required to be provided as per E-Auction Process Information Documents to move forward immediately. It is seen that immediately started sending certain documents of different company namely VMS INDUSTRIES LIMITED who did not approach the liquidator directly with documents expressing interest in e-Auction.

It was submitted that with regard to source of fund, VMS Industries Ltd had given in the form of self declaration that source of fund will be arranged by them from their own sources and with combination of secured and unsecured loans from friends and relatives followed by an another email communication dated 16.09.2022 received from the same person at 2.28 PM requesting inspection before 3 PM without even giving the time to liquidator to verify the documents forwarded by them.

The Liquidator submitted that though the Applicants were given sufficient opportunity to provide documents evidencing source of fund and to proceed further for inspection on 17.09.2022 at anytime but they have chosen not to do so within the timeline as provided in the e-auction process information document purposefully but attempted only to hinder the e-auction process with some hidden agenda only known to them by sending legal notice to stop the e-auction process by the Liquidator on baseless and false accusations against the Liquidator.

Thus, it is evident from the facts as narrated above, the Applicant has failed to provide the networth certificate and as such he not fulfilled the condition laid down in the E-auction process document. Thus, the unsuccessful auction purchase has no vested interest to challenge the E-auction sale process which has been concluded by the Liquidator.

Further the Hon'ble Supreme Court of India in the matter of K. Kumara Gupta v. Sri Markendaya & Sri Omkareswara Swamy Temple, (2022) 5 SCC 710 : 2022 SCC OnLine SC 196 at page 726 has held as under:-

(emphasis supplied)

Thus, the e-auction sale which is complete in all respects can be set aside on the ground that a prospective party is ready to offer a higher price. Accordingly, issue No. (v) and (vi) are answered.

As a necessary sequitur, the Application filed by the Liquidator for approving the 'Sale as Going Concern' viz. IA(IBC)/1511(CHE)/2022 stands allowed.

In view of the dispositive reasoning stated supra, the IA(IBC)/1083/2022; IA(IBC)/1108/2022; IA(IBC)/1390/2022; IA(IBC)/1084/2022; IA(IBC)/1099/2022; stands dismissed. The IA(IBC)/1241/2022 stands dismissed in terms of para 4 of this order. The IA(IBC)/1510/2022 stands disposed of in terms of para 5 of this order. The IA(IBC)/188/2021 stands disposed of in terms of para 6 of this order. The IA(IBC)/907/2022 stands dismissed in terms of para 7 of this order. The IA/844/2020 and IA/846/2020 stands disposed of in terms of para 8 of this order.