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Judgment
Per: SAMEER KAKAR, MEMBER (TECHNICAL)
This Application has been filed by Sherisha Technologies Private Limited under Section 60(5) of IBC, 2016 read with Rule 11 of NCLT Rules, 2016, which has emerged as the successful bidder in the e-auction process for the sale of M/s. Cauvery Power Generation Chennai Private Limited.
The Liquidation of the Corporate Debtor was ordered by this Tribunal on 19.09.2022. The e-auction for sale of the Corporate Debtor as a going concern was conducted on 10.01.2023 and the Applicant herein emerged as the highest bidder for an amount of Rs.75.80 Crores. The Applicant paid the entire sale consideration on 20.01.2023 and the Liquidator also issued the Sale Certificate to the Applicant.
The present Application has been filed by the Applicant seeking certain reliefs, concessions and approvals, alleging that they are necessary for taking over the Corporate Debtor as a going concern on a clean slate basis.
Heard the submissions made by the Learned Senior Counsel for the Applicant.
The Relief's and Concessions sought by the successful bidder and the order passed thereon are as follows;
| Sl. No | RELIEF AND/OR CONCESSIONS AND APPROVAL SOUGHT | ORDERS THEREON |
|---|---|---|
| 1 | Direct that the status of the Corporate Debtor in the records of the Registrar of Companies and on the website of the Corporate Debtor be reflected as "active" from the status of "liquidation". | Granted |
| 2 | Direct that pursuant to infusion of the Sale Consideration of INR 75,80,00,000/- (Rupees Seventy Five Crores Eighty Lakhs only) towards the acquisition of the Corporate Debtor under liquidation as a going concern sale (confirmed vide the Sale Certificate issued by the Liquidator), an amount of INR 1,00,00,000/- be considered (for accounting purposes) as share application money towards allotment of fresh equity shares of the Corporate Debtor to the Applicant and the Applicant may be permitted to account for the balance Sale Consideration of INR 74,80,00,000/- as a Secured Term Loan granted by the Applicant to the Corporate Debtor or such other instrument as may be decided from time to time, with terms and conditions as mutually agreed between the Applicant and the Corporate Debtor. | Granted, subject to the provisions and compliances of other law applicable for the time being in force. |
| 3 | Direct that the change in shareholding of the Corporate Debtor in favour of the Applicant be implemented as per below: (a) Corporate Debtor to issue 10,00,000 (Ten Lakh) fresh equity shares with a face value of Rs.10 each, aggregating to INR 1,00,00,000 to the Applicant and its nominees. (b) Except for the shares issued to the Applicant (and its nominees) by the Corporate Debtor, the entire issued share capital of the Corporate Debtor, including equity and preference shares and convertible instruments (whether pledged or not), held by shareholders of the Corporate Debtor, shall be entirely cancelled and extinguished, for a consideration equivalent to the amount, if any, to be received by the shareholders under Section 53 of the Code without any further approval from any creditor, shareholder, regulatory authority(ies) including the Registrar of Companies etc. The approval by this Adjudicating Authority shall be deemed to be due compliance with all the provisions of Applicable Law in this regard, and there shall be no requirement to add "and reduced" in the name of the Corporate Debtor. | Granted |
| 4 | To the extent any secretarial filings, corporate actions and compliances and/or any other actions, filings, intimations, etc. are required to be made in connection with the aforesaid, the Liquidator, shall be deemed to be fully authorized to act on behalf of the Corporate Debtor and to undertake all such actions. Without prejudice to the foregoing, the | Granted |
| Applicant may, if required and from time to time, seek necessary directions from the Adjudicating Authority in connection with actions to be undertaken or filings to be made with the ROC and/or any other statutory or regulatory authority in connection with matters contemplated herein. | ||
| 5 | Direct that the Board of Directors of the Corporate Debtor be re-constituted and the existing Board of Directors be removed and the nominees of the Applicant be permitted to be appointed as Directors of the Corporate Debtor, and direct the Registrar of Companies to do all such acts, deeds, and things that are necessary to enable appointment of such individuals as directors of the Corporate Debtor either online or though back end mode, including filing of relevant returns a required by applicable laws. Further direct that the Registrar of Companies remove the names of all existing Directors and Key Managerial Personnel appearing on the master data of Ministry of Corporate Affair's website either online or through back-end mode. | Granted |
| 6 | Direct that from the date of the Sale Certificate, all past liabilities, penalties, and any form of payment by way of late fees, damages, etc., which occurred or become due because of any non-compliance related to Companies Act, 1956/2013 and rules and regulations framed thereunder, till the date of the Sale Certificate shall stand extinguished. | Granted in terms of Section 32A of IBC, 2016 |
| 7 | Direct that the sale of the Corporate Debtor to the Applicant in liquidation be treated in the same manner as a resolution plan approved under Section 31 of the Code (including but not limited to in respect of the operation of Section 31(1) and Section 32A of the Code) and all attendant benefits, privileges, and exemptions under various laws including but not limited to benefit of any tax holiday, benefit under Section 79(2)(c) of the Income Tax Act, 1961, exemption, deduction, carry forward of losses of any prior years and set-off against the income arising in the future years in accordance with the taxation laws, as they are available to a resolution plan shall be available to this sale of Corporate Debtor to the Applicant under the liquidation process: | Not Granted. Benefits of Section 32A of IBC, 2016 will apply. To approach appropriate authorities for Income Tax exemptions. |
| 8 | Direct the Corporate Debtor and the Applicant shall not be liable for any Taxes and shall be granted an exemption from all Taxes, levies, fees, transfer charges, transfer premiums, surcharges, and any such other levies, that arise from or relate to the sale of Corporate Debtor to the Applicant, since payment of these amounts may make the sale unviable. Any reference to Taxes shall include any transfer premiums or charges, change of ownership/ Control charges payable in connection with the Acquisition and the consequent change in ownership and Control of the Corporate Debtor. Further, any withholding tax, income-tax, and MAT liability or consequences (including interest, fine, penalty, etc.) on the Corporate Debtor, the Applicant, and its shareholders on account of the sale of Corporate Debtor to the Applicant, write back/write off of | Granted, subject to the provisions of IBC, 2016 |
| liabilities in the books of accounts of the Corporate Debtor and revaluation of assets of the Corporate Debtor to their realisable value pursuant to the sale of the Corporate Debtor, including but not limited to liabilities if any under Section 28, Section 41, Section 56, Section 43, Section 28, Section 115JB, Section 79, Section 45, Section 269SS, Section 269T and Section 271E of the Income-tax Act, 1961 will be written off without any impact on brought forward tax and book loss/ depreciation, pursuant to the acquisition. | ||
| 9 | Direct that all the assessments, proceedings, demand notices, penalty proceedings, show-cause notices and appeals, whether completed or uncompleted, initiated or not initiated with respect to Income Tax, Central Sales Tax, GST, VAT, CENVAT, MODVAT, Customs and any other applicable Taxes under any applicable laws, shall be deemed to have been completed and closed and the Applicant and/or the Corporate Debtor shall not be liable to pay any Taxes or interest or penalty or any prosecution arising out of such assessments or adjust its taxable income or brought forward losses under Income-tax Act, 1961 pertaining to any period prior to the date of the Sale Certificate including but not limited to claim arising out of any notice or order received by Corporate Debtor pertaining to any prior period having an impact on the taxable income, brought forward losses and/or Tax payable by the Corporate Debtor on account of any reason including non-compliances in relation to filings of Tax returns, non-deduction of TDS, underreporting or misreporting or non-reporting of income. Further, | Already covered as per Clause 6 and 7 above |
| all claims (whether contingent or crystallized, known or unknown, filed or not filed) of the Governmental Authorities in relation to all Taxes/ interest/ penalty which the Corporate Debtor was or may be liable to pay (including with respect to financial years under assessment), all deductions and all withholding Taxes on any payment, as required under applicable law and pertaining to the past period shall stand extinguished and any assessment, re-assessment, revision, or other proceedings under the provisions of the applicable laws relating to Taxes would be deemed to be barred in relation to any period prior to the date of the Sale Certificate, by virtue of an order of this Hon'ble Adjudicating Authority; |
| 1.1. Any non-compliance in relation to filing of Income-tax Return under Section 139 of Income-tax Act, 1961 including any other forms as required to be filed by Corporate Debtor under provisions of Income-tax Act, 1961 |
| 1.2. Non-deduction of TDS under provisions of Income Tax Act, 1961 |
| 1.3. Any transaction entered by Corporate Debtor having an impact on taxable income, brought forward losses and/or Tax payable/ Tax refund of such entity for any period prior to Transfer Date and any underreporting or misreporting in relation to the same. |
| 1.4. Any non-recording/reporting of income by Corporate Debtor in its books of account. |
| 1.5. Any tax losses which may not be available due to tax returns not filed by the Corporate Debtor or in case of erroneous filed for which the statutory due date for rectification has lapsed for the Corporate Debtor as per the provisions of Income Tax Act, 1961 should also be available to the Bidder. | ||
| 10 | Direct that the Corporate Debtor shall be entitled to all the assets including all benefits with respect to CENVAT, MODVAT, input tax credit of various Taxes including but not limited to central excise duty, service tax, sales tax, goods, and service tax or cess by whatever name known, available as balance in its financial statements which pertains to the transactions of the Corporate Debtor for the period prior to the date of the Sale Certificate. Any liability relating to a prior period arising out of or relating to any such benefit/asset accruing or to be accrued to the Corporate Debtor, will be treated as settled under the Liquidation and no additional payment shall be made or be payable with respect to such liability by the Corporate Debtor and/or the Applicant. | Granted so as to Input Creditor covered under Clause 7 |
| 11 | Direct that on and from the date of the Sale Certificate, respective statutory authorities shall deemed to have allowed carry forward losses and depreciation as per the provision of Section 79 of the Income Tax Act, 1961 or such other applicable provisions; allowed total loss brought forward (including unabsorbed depreciation) to be reduced from the book profit for the purposes of levy of | Already Covered under Clause 7 |
| MAT under Section 115JB of the Income Tax Act, 1961; | ||
| 12 | Direct that the Corporate Debtor shall not be liable for any non- compliance under the Income-tax Act, 1961 including but not limited to the filing of Income-Tax Returns under Section 139 of the Income-tax Act, 1961 including any other forms as required to be filed by the Corporate Debtor under the provisions of Income-Tax Act, 1961. | Granted, in terms of Section 32A of IBC, 2016 |
| 13 | Direct that the Corporate Debtor/Applicant shall be allowed to carry forward Income-tax assets (MAT credit, TDS Credit) available as per the provisions of the Income Tax Act, 1961 and utilize the same appropriately. | Granted, subject to the provisions of other applicable laws |
| 14 | Direct that the requirement of obtaining a no objection certificate under section 281 of the Income-tax Act, 1961 and provisions of taking over its predecessor's Tax liability under section 170 of the Income Tax Act, 1961 shall not be applicable. Further, the transaction shall not be treated as void under section 281 of the Income Tax Act, 1961 for any claims in respect of Tax or any other sum payable by the Corporate Debtor or any shareholder of the Corporate Debtor. Similarly, any requirements to obtain waivers from any Tax Authorities including in terms of Section 79 and Section 1 15JB and any other provision of the Income Tax Act, 1961 is deemed to have been granted. | This is for the appropriate authorities to consider, keeping in view the object of IBC, 2016 |
15 Direct that all claims by any person against the Corporate Debtor or any liabilities or obligations or costs or expenses owed or payable by the Corporate Debtor to any person, including liabilities arising from corporate insolvency resolution process costs, liquidation costs, financial or operational debt, contractual liabilities, statutory liabilities, employee or workmen liabilities, claims of any Government authority or department, Tax liabilities, penalties, claims of any shareholders, whether direct or indirect, admitted or not, due or contingent, asserted or un-asserted, crystallized or un-crystallized, known. or unknown, secured or unsecured, disputed or undisputed, in relation to any period prior to the date of the Sale Certificate, whether admitted by the Liquidator or not in full or part, shall be settled only and solely from the proceeds of the liquidation estate (being the Sale Consideration) in accordance with the Code. Consequently, upon distribution by the Liquidator to the stakeholders under Section 53 of the Code, all such claims/ liabilities/ obligations shall stand permanently extinguished without requirement of paying any additional amounts to the stakeholders of the Corporate Debtor. Further, in case there is any pending gratuity or provident fund liability (including interest and damages) payable to employees, workmen or provident fund authority and in case the existing provident and gratuity fund (if any) of the Corporate Debtor is not sufficient to pay such liabilities in full, such liabilities will be discharged by the Liquidator from the Sale Consideration and the Applicant shall not be
Granted, subject to provisions of IBC, 2016
required to pay any additional amounts towards such liabilities (over and above the Sale Consideration paid by it to the Liquidator); 16 Direct that claims of any Government Authority or TANGEDCO, including for Electricity Duty/Electricity Tax, Open Access Charges, Wheeling Charges or any other Statutory Dues, pertaining to period prior to the date of the Sale Certificate shall stand settled and extinguished in accordance with Section 53 of the Code and no additional amounts shall be payable by the Corporate Debtor or the Applicant towards such dues; Granted in terms of Section 32A of IBC, 2016 17 Direct that on and from the date of the Sale Certificate, the Liquidator (and not the Corporate Debtor or the Applicant) shall be responsible for making distributions to the existing stakeholders of the Corporate Debtor in accordance with law (including under Section 53 of the Code) and no claim, liability, costs, expenses, penalties or interest shall be recoverable in any form or manner whatsoever from the Corporate Debtor/Applicant or their successors or assignees or the new management and the payment of Sale Consideration by the Applicant shall be considered as a full and final settlement towards all such claims, liabilities, costs, expenses, interest etc. by the Applicant. Further, the Liquidator (and not the Corporate Debtor or the Applicant) shall be responsible for classification of any creditor (including Tax authority) as secured or unsecured and all such Granted
creditors shall be paid by the Liquidator from the Sale Consideration and the Corporate Debtor or the Applicant shall not be liable to make any additional payments for distribution towards any unsecured or secured creditor, including if subsequently an unsecured creditor is classified as a secured creditor. 18 Direct that on and from the date of the Sale Certificate, all claims by any person (including financial and operational creditors, employees and workmen, lessors and contractual counterparties, Government and Tax authorities, municipal, land and revenue authorities) against any assets, owned by or leased to the Corporate Debtor, including immovable property and any liabilities or obligations owed or payable by the Corporate Debtor in respect of such assets to any person, including contractual liabilities, liability to the Government (including but not limited to property taxes) whether direct or indirect, whether admitted or not, due or contingent, asserted or un-asserted, crystallized or un-crystallized, known or unknown, secured or unsecured, disputed or undisputed, in relation to any period prior to the Sale Certificate, whether admitted by the Liquidator or not in full or part, shall stand permanently extinguished and no such claim, liability etc. shall be recoverable in any form or manner whatsoever from the Corporate Debtor/Applicant or their successors or assignees and the payment of sale consideration by the Applicant is a full and final settlement towards such claims, liabilities etc. Granted in terms of Section 32A of IBC, 2016
19 Direct that on and from the date of the Sale Certificate, the assets of the Corporate Debtor shall continue to vest in the Corporate Debtor free from any security interest, encumbrance, attachment, claim, counter claim, or charge of any creditor and free from any liability that may arise under any pending proceedings or litigations, without payment of any additional consideration and that the creditors holding any charge or encumbrance on the assets of the Corporate Debtor shall duly return all documents relating to such charges/ encumbrances and co-operate with the Corporate Debtor/ Applicant in removal of any such charges/ attachment/ encumbrances from the public registries/ Registrar of Companies. Further, if any assets of the Corporate Debtor are under attachment, the same shall stand released from the date of the Sale Certificate; Granted 20 Direct that all demands, inquiries, investigations, assessments, notices, causes of action, suits, claims, disputes, litigations, arbitration, or other judicial, regulatory or administrative proceedings against, or in relation to, or in connection with the Corporate Debtor or its assets or the affairs of the Corporate Debtor (other than against the erstwhile promoters or former members of the management of the Corporate Debtor), pending or threatened, present or future, in relation any period prior to the Sale Certificate (including S. Vishnuvarma v. Cauvery Power Generation Chennai Private Limited pending before the Additional District Court- IV-Ponneri) shall not be continued and/or instituted in future Granted, in terms of Section 32A of IBC, 2016
against the Corporate Debtor/Applicant or their successors or assignees or the new management and all such demands/ inquiries/ investigations/ claims/proceedings etc. shall stand extinguished qua the Corporate Debtor and its assets to enable the Applicant to acquire the Corporate Debtor on a clean slate basis. Further, in the event of any attachment order passed by any Governmental Authority in relation of assets of the Corporate Debtor (including assets that are the subject matter of the pending legal proceedings) shall stand released from such attachment and the Applicant, Corporate Debtor (or its assets) shall at no point of time be, directly or indirectly, held responsible or liable in relation thereto; 21 Direct that any non-compliance of provisions of any laws, rules, regulations, directions, notifications, circulars, guidelines, policies, licenses, approvals, consents or permissions as applicable to the Corporate Debtor including but not limited to any liability arising out of non-compliance under the provisions of the Companies Act, 1956 and the Companies Act, 2013, Employees Provident Fund and Miscellaneous Provisions Act, 1952, Employees State Insurance Act, 1948, Securities Exchange Board of India Act, 1992, Foreign Exchange Management Act, 1999 and under various labour legislations including liability in respect of employee welfare dues such as gratuity, leave encashment etc., prior to the Sale Certificate shall be settled only from the Sale Consideration and no amounts shall be payable by Granted in terms of Section 32A of IBC, 2016
the Corporate Debtor/Applicant and no proceedings in respect thereof shall be undertaken in future against the Corporate Debtor/Applicant or their successors or assignees. Further, the Corporate Debtor/ Applicant shall have immunity in respect of all past offences of the Corporate Debtor in terms of Section 32A of the Code; 22 Direct that any claim made under any existing bank guarantee or letter of credit issued by banks to any third party based on the applications made by the Corporate Debtor or any guarantee or indemnity or counter indemnity issued by the Corporate Debtor to any third party including to any bank for issuance of bank guarantees or letter of credit and all liability of the Corporate Debtor under such guarantees/ indemnities/ counter indemnities shall stand extinguished on and from the date of the Sale Certificate and that the beneficiaries of such guarantees/ indemnity/ counter-indemnity, including the banks issuing bank guarantee shall not have any recourse against the Corporate Debtor and/or the Applicant in future and the payment of sale consideration by the Applicant is a full and final settlement towards all such claims, liabilities etc; Granted 23 Direct that no right of subrogation shall be available to third parties/ existing promoters/ shareholders/guarantors of the Corporate Debtor under any guarantees/ indemnities/ contractual comforts/collateral provided by such parties to any creditor of the Corporate Debtor and all such subrogation rights shall stand extinguished; Granted 24Direct that all subsisting consents, licenses, approvals, rights, entitlements, benefits and privileges whether under law, contract, lease or license, granted in favour of the Corporate Debtor or to which the Corporate Debtor is entitled to 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/Applicant.Granted 25Direct the Liquidator to, immediately, (a) write back 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 reflect the total liabilities at the amount of the consideration (as reduced by the amount of insolvency resolution process costs and the liquidation costs) determined in the auction be de-recognised in the books of accounts of the Corporate Debtor by credit to Capital Reserve'; (b) The carrying value of the assets shall be restated at their realizable value (simultaneous to the above restructuring of liabilities) including but not limited to the following: (i) The trade receivables to the extent notThe Liquidator is directed to ensure smooth transition of records of the Corporate Debtor to the Applicant. receivable shall be written off to the Profit & Loss Account as bad debts. (ii) The other current assets (including the Inventory and other receivables) shall be analyzed to determine the assets that are not recoverable or the realizable value of such assets shall be determined and the difference between the carrying value and realizable value, shall be provided for/ written off to the Profit & Loss Account. (iii) The realizable value of the Investments & Long-term loan advances to be estimated and the difference between the carrying value and realizable value, shall be provided for/written off in the Profit & Loss Account. (iv) The residual estimated useful life of the Fixed Assets shall be evaluated and revaluation of the fixed assets shall be undertaken. (c) The carrying amount of the equity, debts, loans, liabilities, dues to creditors (including related parties) and provisions for liabilities of any nature whatsoever which are extinguished, cancelled, waived or remitted pursuant to this application shall be de-recognised in the books of accounts of the Corporate Debtor by credit to 'Capital Reserve' which shall form part of Other Equity" in the Balance Sheet of the Corporate Debtor. (d) The Capital reserve balance (being the amount credited pursuant to clause above) along with the balances existing in securities premium reserve in aggregate will be adjusted against the debit balance of Profit and Loss account (including the amount debited pursuant to write-off of assets pursuant to clause above). (e) make requisite accounting entries for smooth transmission - the accounting treatment set out in this application shall be an integral part of the application; (f) prepare and file the said financial statements with the relevant regulators such as Registrar of Companies, Income Tax Authorities etc; (g) complete all compliances in respect of the Corporate Debtor for the period up to the Transfer Date including filing of necessary documents and returns with the Registrar of Companies, Income Tax Authorities any other Government Authorities; (h) cooperate with, and provide all necessary support and assistance to the Applicant, including but not limited to handing over of the original copies of the title deeds and other relevant documents of the land and other assets owned by the Corporate Debtor, 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;
26Direct that all claims that the Corporate Debtor may have against third parties and related parties and all receivables of the Corporate Debtor, including without limitation, in relation to any litigations/proceedings initiated by the Corporate Debtor and/or for the benefit of the Corporate Debtor shall continue to remain recoverable by the Corporate Debtor in accordance with law and in case of any such claim/recovery in future, the benefits of the same shall be solely available to the Corporate Debtor;Granted, subject to provisions of IBC, 2016 and other applicable laws 27Direct that the Corporate Debtor/Applicant shall be solely entitled to all future cash flows and receivables of the Corporate Debtor and no such future cash flows/ receivables shall be available for distribution to the stakeholders of the Corporate Debtor as on the date of the Sale Certificate, except for recoveries/realisations by the Liquidator/stakeholders pursuant to any pending application(s) under Section 43, 45, 49, 50 or 66 of the Code, which proceeds shall be available for distribution as per the Code to the stakeholders of the Corporate Debtor, subject however to the cost of such proceedings being borne by the Liquidator/ stakeholders and not the Applicant or the Corporate Debtor;Granted, subject to the provisions of IBC, 2016 28Direct that all notifications with regards to defaults filed with Credit Information Bureau (India) Limited, any information utility, RBI or any other regulatory authority for and on account ofGranted, subject to the provisions of IBC, 2016 Corporate Debtor shall be withdrawn by the respective financial creditors and any invocation or enforcement action already undertaken before Debt Recovery Tribunal ("DRT") against the Corporate Debtor and any of its assets shall stand automatically revoked and cancelled and deemed null and void and financial creditors shall take requisite action to ensure that all such pending matters before the DRT shall stand withdrawn. Further, all accounts of the Corporate Debtor shall stand regularized and their asset classification shall be "standard" for the purposes of all Applicable Laws.: 29Direct that the relevant State Pollution Control Boards shall approve renewal of the consents to establish/ operate obtained by the Company under applicable provisions of the Water (Prevention and Control of Pollution) Act, 1974, Air (Prevention and Control of Pollution) Act, 1981, in accordance with law;This is for the appropriate authorities to consider 30Direct that the Corporate Debtor shall be entitled to utilities such as water, gas and electricity from the relevant suppliers/ departments in accordance with law, without such suppliers/ departments insisting on payment of past dues to them;This is for the appropriate authorities to consider 31Direct that the Corporate Debtor/ Applicant would not be liable for any disability of the Corporate Debtor or Applicant in terms of Section 29A of Code for default of existing associates or subsidiaries of Corporate Debtor;Granted, subject to the provisions of IBC, 2016
32Direct that the Corporate Debtor/Applicant shall be at liberty to approach this Hon'ble Adjudicating Authority to address any difficulties faced with respect to implementation in taking over of the Corporate Debtor in liquidation:Granted
With the above said directions, IA(IBC)/558(CHE)/2023 stands disposed of.