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Judgment
O R D E R
This is an application filed by the Applicant/Successful Bidder under section 60(5) of Insolvency and Bankruptcy Code read with rule 11 of the National Company Law Tribunal Rules, 2016 seeking following reliefs:
To direct the Respondent/Liquidator to cancel the sale of the Lot 8 of the E-Auction Sale held on 24.02.2022, confirmed on 28.03.2022 and consequently Direct the Respondent/ Liquidator to refund the entire amount paid by the Applicant for the sale of Lot 8.
In the alternate, direct the Respondent/ Liquidator to permit the Applicant to lift the entire lot of HCSD pipes of the Corporate Debtor sold in the auction to the Applicant.
Gist of the application:
a. This Tribunal vide its order dated 30.06.2021 in IA No.1185/2020 in C.P.No.(IB)-529/7/HDB/2018 approved the liquidation of Corporate Debtor. The respondent is appointed as liquidator. As a part of liquidation process, liquidator had undertaken efforts to sell the assets of the corporate debtor by way of e-auction.
b. It is stated that the Respondent/ Liquidator issued E-Auction notice on 13.01.2022, listing 8 Lots of assets for sale and proposed to sell those assets collectively/ on parcel basis. The E-Auction was scheduled to happen on 24.02.2022.
c. It is stated that the Applicant had submitted a bid application on 28.01.2022. Subsequently, the Liquidator vide email dated 04.02.2022, had informed that all the interested auction bidders can visit the Corporate Debtor’s plant site on 11.02.2022 and 12.02.2022 for inspection of the assets that were being put up for sale.
d. It is stated that as per the 1st Addendum, interested bidders were to keep the EMD amount in force till 08.03.2022. By email dated 06.03.2022, the Liquidator informed the bidders that the date of submission of EMD had been extended to 10.03.2022. On 09.03.2022, an addendum to the 2nd e-Auction sale notice was issued by the Liquidator, revising the date of the 2nd e-Auction to 24.03.2022.
e. The Applicant herein had placed bids for (i) Lot 1 – Furniture & Fixtures available at Plant Site in Wardha District (Maharashtra); (ii) Lot 2 – Furniture & Fixtures available at Corporate Office in Gurugram; and (iii) Lot 8 – Ash Handling plant – Pipes for HCSD system (9inch Seamless), by paying the respective earnest money deposit. The Applicant emerged as the highest bidder for Lot 2 and Lot 8 and was declared Successful Bidder for these 2 lots over email on 28.03.2022 by the Liquidator. The Applicant also paid the requisite additional amount of 5% of the total bid amount of Rs.24,35,390/- apart from the EMD of Rs.45,10,000/- already paid while placing the bid, following which it received a Letter of Intent dated 06.04.2022 from the Liquidator, inviting the Applicant to pay the balance sale consideration.
f. It is stated that the Applicant sent an email to the Liquidator on 22.04.2022 regarding the material difference and the misinformation made available to the Applicant and that post issuance of sale notice, inspection, bidding and confirmation of sale, the entire lot is being not made available and therefore requested that all pipes be allowed to be listed by the Applicant, as was shown to the Applicant on the day of inspection. In the alternative, the Applicant had agreed to hold the EMD for future bidding and sought for the refund of the additional amount of Rs.24,35,390/- paid by it in case the whole lot of pipes could not be handed over to the Applicant. The Liquidator replied to this request on 27.04.2022, shirking himself of any responsibility in the matter by reiterating that the auction was conducted in a strictly “As is What is", “Whatever there is”, and “Without Recourse Basis” and that the Liquidator could not be held liable for any claims/ disputes subsequent to the auction.
g. It is further stated that the liquidator is undertaking steps to give the 8.75inch seamless pipes to another bidder who was successful in bidding for another lot.
h. Thus, the applicant is preferring the present Application seeking for intervention of the Tribunal regarding the sale out of the liquidation process of the Corporate Debtor.
Respondent filed reply, inter-alia, stating that:
Learned liquidator denied the averments made by the Applicant and stated that the allegations made are false and incorrect and therefore is liable to be dismissed in limine.
It is submitted that based on the e-auction held on 24.03.2022 through NeSL e-auction platform, the Applicant was identified as the successful bidder for the assets put for sale in Lot 2 and Lot 8.
It is submitted that the Applicant has sent an email on 22.04.2022 expressing confusion about material put up for sale in Lot 8. The Respondent vide its email dated 27.04.2022 sent his reply clarifying that the Sale notice dated 13.01.2022 and Addendum issued on 09.03.2022 as well as in the 2nd E-Auction Process Information Document, the specifications relating to assets in Lot 8 were clearly written as i.e., “Lot 8: Ash Handling plant – Pipes for HCSD system (9 inch Seamless)”, so the contention of the Applicant that the lot comprised of big and small diameters of pipes does not arise at all.
It is further stated that the Applicant has also visited the Corporate Debtor site on 03.03.2022 at around 11.35 a.m., for inspection of assets and completed the entire inspection by 2.35 p.m., on the same day as against allocated two days. Therefore, the contention that material shown for Lot-8 during the site visits and specifications were different is denied.
Respondent further stated that the Applicant’s request for holding the EMD and refund of additional amount of Rs.24,35,390/-, the same is not in accordance with the terms and conditions of LOI, IBBI Liquidation Document and accordingly refused to accede to the request of the Applicant.
It is stated that the Respondent clearly informed the Applicant that in case it fails to pay the balance sale consideration after accepting the LOI, the entire EMD along with 5% Additional money shall be forfeited and the asset(s) indicated in Lot 8 will be put to re-auction or sold to the next highest Eligible Bidder and the Applicant shall have no claim/right in respect of this asset or the proceeds of such auction. However, the Applicant instead of complying the terms and conditions of LOI chose to file the present Application.
Further submitted that the pipes of 9 inches which were sold under Lot 8 were never mixed with 8.75 inches as alleged by the Applicant and were kept separately. The Applicant had also accepted the condition of “AS IS WHERE IS “, “AS IS WHAT IS”, “WHATEVER THERE IS”, AND “WITHOUT RECOURSE BASIS”, participated in the auction process and now cannot take u turn and state not bound to the terms and conditions of the 2nd e-auction notice process information document.
It is stated that in lights of above facts and circumstances stated above, it is humbly prayed that this Tribunal may be pleased to dismiss the present Application.
The Applicant filed Rejoinder to the Counter filed by the Respondent, inter-alia stating that:
Applicant herein denies all the averments made by the Respondent except for those which are specifically admitted. It is stated that various sale notices filed by the Respondent herein would show that the various movable assets of the Corporate Debtor were put up for sale as different lots on a standalone sale basis and the there was only one lot of assets, i.e. Lot 8, in which the HCSD (High Concentration Slurry Disposal) pipes, which are metal pipes, had been put up for sale in the entire auction. The only other lot of assets which consisted of pipes was Lot 5 consisting of GRP Pipes. However, it is pertinent to note that GRP Pipes are made of reinforced fiberglass and are entirely distinguishable from the HSCD Pipes that were sold in Lot 8 as HSCD Pipes are made of carbon steel. It is pertinent to note that no other lot has any reference of sale of pipes.
It is stated that the Applicant had placed its bid of Rs. 4,86,91,000/-(Rupees Four Crores Eighty-Six Lakhs Ninety-One Thousand Only) for the entire lot of HCSD pipes put up with the sign “Lot 8”.
The Respondent’s contention that the Applicant had spent only 3 hours at the inspection site is not relevant in substantiating the issue at hand and ought not to be given any weight. More particularly, the sale of HCSD pipes are referred in only one lot. The Applicant prays to allow the present application.
The Counsel for the Applicant filed written submissions by reiterating the pleadings apart from that it is stated that despite being willing and ready to lift the entire lot of pipes consisting of both 8.75-inch and 9-inch seamless HCSD pipes as seen by the Applicant on the day of inspection on 03.03.2022, due to the Liquidator/ Respondent’s mala fide acts in detriment to the Applicant’s interests, the Applicant was prevented from carrying out its end of the obligations.
The Counsel for the Respondent/Liquidator filed written submissions by reiterating the pleadings apart from that referred the following judgments in support of the case:
(2012) 8 SCC 197: “Para 17: We are of the view that the judgment in Amarjeet Singh (2009) 4 SCC 660: (2009) 2 SCC (Civ.) 273) is a complete answer to the various contentions raised by the respondents. We may reiterate that after having accepted the offer of the commercial plots in a public auction with a superimposed condition i.e., on “as-is-where-is” basis and after having accepted the terms and conditions of the allotment letter, including instalment facility for payment, the respondents cannot say that they are not bound by the terms and conditions of the auction notice, as well as that of the allotment letter. On facts also, we have found that there was no inordinate delay on the part of PUDA in providing those facilities.”
Civil Appeal No. 7722 of 2021 : We are relying upon one of the judgments of Hon’ble Supreme Court where one of the disputes that arose was with regard to conduct of private auction and whether the liquidation has right to terminate/abandon the process.
Refer to paras 12 & 13 at page 12 and 13: One of the grounds that was challenged was whether the liquidator be permitted to drop the said process halfway.
Refer to para 17 at page 17: The liquidator relied upon bid document and referred to affidavit filed.
Refer to para 19 at page 19: Process is getting delayed
Analysis of Hon’ble Supreme Court starts from page no.23: Para 24 starts with overview of IBC
Refer to para 44 (page 43): The Hon’ble Supreme Court on the question of whether liquidator can be permitted to cancel the swiss challenge process referred to terms and conditions of bid documents.
It is stated that the auction process was initiated in month of January 2022 and the sale was confirmed and the Letter of Intent was issued in the month of April 2022 and if the Application is allowed at this stage, there are high chances of reduction in the value of the Lot, beside causing loss to the Corporate Debtor. The Respondent further submits that if the Application is allowed it would affect the liquidation process of the Corporate Debtor and opening the doors for similar applications being filed against auction processes.
In the light of the contest as aforementioned, the point that emerges for consideration by this Tribunal is: Whether the e-auction sale of the items of Lot No 8 held on 24.02.2022 and confirmed in favour of the petitioner on 28.03.2022 by the liquidator, is liable to be interfered with on the ground of illegal delivery of the items of Lot No8 to the successful bidder of another lot by denying the same to the petitioner? if so, for what relief?
We have heard the Learned Senior Counsel Shri Om Prakash assisted by Mr. Pratap & Ms.Sravya, for the petitioner and Shri P.Ravi Charan and Ms Niharika Agarwal, learned Counsels assisted by the Liquidator for the respondent, perused the records and the written submissions.
Point.
Whether the e-auction sale of the items of Lot No 8 held on 24.02.2022 and confirmed in favour of the petitioner on 28.03.2022 by the liquidator, is liable to be interfered with on the ground of illegal delivery of the items of Lot No8 to the successful bidder of another lot by denying the same to the petitioner? if so, for what relief?
At the outset we wish to state that we are conscious of the general legal principle that unless there is concrete material and it is established that there was any fraud and/or collusion or clear violation of mandatory provisions relating to the auction sale, a sale held pursuant to the public auction cannot be ordinarily be interfered with. We therefore proceed to discuss the Point above with this caveat.
Admittedly, the petitioner became the highest successful bidder of the Lot numbers 2&8 in the e auction held on 24.02.2022 and confirmed on 28.03.2022 in favour of the petitioner, in pursuance of the e auction sale notification published by the respondent vide newspaper publication dated 09.03.2022 upon payment of the required sum the liquidator on 06.04.2022 issued the letter of Intent (LOI) inviting the petitioner to pay the balance sale consideration in respect of Lot numbers 2&8.
While it is the case of the petitioner that the items covered by Lot 2, have been delivered pursuant to payment of balance sale consideration, in so far as the items covered by Lot No 8, namely, Ash Handling Plant-pipes for HCSD System (9 inch seamless) for short “HCSD Pipes” are concerned the petitioner cry foul, contending that when the petitioner has revisited the site on 21.04.2022 for obtaining delivery of the items covered by Lot 8, to its utter dismay the quantity of “HCSD Pipes” lying in Lot No 8 were found to be lesser than what was shown and found during its site visit on 03.03.2022, and on enquiry it was informed orally that HCSD Pipes of 8.75 dimension were segregated and clandestinely removed from Lot No 8.
In the above factual back drop, Shri. Om Prakash the Ld. Sr. Counsel, at the outset submitted that since the petitioner being the successful bidder of all the items (HCSD Pipes) that were kept in Lot No 8 found lying physically at the site during its inspection carried on 03.03.2022, the petitioner is entitled for the delivery of the said entire quantity and a minute difference of 0.6 cm centimetre diameter in the HCSD Pipes which the petitioner could not have spotted during its inspection cannot be the ground to deny the said quantity HCSD Pipes to the petitioner, especially when there was no separate lot for sale of Ash handling pipes of any another dimension as per the e auction sale notification.
Learned Sr. Counsel further submits that on 22.04.2022 when the petitioner by an email requested the liquidator to deliver the same quantity of the “HCSD Pipes” which were lying in Lot 8 at the time of its inspection, the liquidator in his reply dated 27.04.2022 stated that auction was conducted strictly as “AS IS WHERE IS”, “AS IS WHAT IS”, WHATEVER THERE IS”, AND “WITHOUT RECOURSE BASIS”, hence the Liquidator can’t be liable for the claims raised subsequent to auction, especially as the petitioner was provided with sufficient opportunity for inspecting the pipes piled in Lot No8 before bidding and has been appraised of the relevant terms and conditions as mentioned in the sale process of the document. According to the Ld. Sr. Counsel the above contention of the liquidator is untenable, since the petitioner has paid sale consideration for the entire quantity of HCSD pipes kept and were physically lying in Lot No 8 as on the 03.03.2022 when the petitioner carried out inspection and the liquidator therefore is bound to deliver the entire quantity of HCSD pipes irrespective of size differences if any of Lot No 8. Therefore, according to the Ld. Sr. Counsel, removing sizable quantity of HCSD pipes from the pile of Lot No 8 purportedly of 8.75 size and delivering them to successful bidder of Lot-3 by the Liquidator, despite Lot-3 does not even contain HCSD pipes of any dimension as the same specifically confined only to Plant & Machinery including Civil Works/Structures (excluding materials lying in the Custom Bonded warehouse and certain other items) is not only contrary to the terms and conditions of the impugned sale but grossly illegal, fraudulent and collusive act of the liquidator hence liable to be set aside.
Learned Sr. Counsel also invited our attention to the gate passes dated 23/04/2022 & 24/04/2022 issued by the liquidator to the successful bidder of Lot-3 for the taking away the HCSD pipes which according to the Ld. Sr. Counsel are HCSD pipes removed from lot No 8 unauthorizedly. According to the Ld. Sr. Counsel the liquidator by his above wrongful and illegal acts has not only caused wrong full loss to the petitioner and also conferred wrongful gain on the successful bidder of Lot no3 as such the impugned sale is liable to be set aside and the sale consideration paid by the petitioner be returned to the petitioner or in alternative, direct the Liquidator to permit the Applicant to lift the entire lot of HCSD pipes of the Corporate Debtor sold in the auction to the Applicant.
Per contra, Shri Ravi Charan learned counsel for the liquidator contended that the plea of the petitioner that Lot No 8 comprised of HCSD Pipes other than 9 inch is absolutely wrong as the HCSD Pipes of 8.75 dimension were kept separately and never formed part of Lot-8. Learned counsel further submits that, the petitioner has been given complete opportunity to inspect the goods before submitting its bid and the petitioner through its representatives physically inspected the pipes in Lot No 8 for a few hours on as against the allowed time of two days and submitted the bid. As such post confirmation of the bid is not entitled to complain about quantity of the items or seek for cancellation of the bid. In support of this plea Ld. Counsel has relied on the following clauses of the 2nd E-auction process information document:
“The auction is being conducted strictly on an “AS IS WHERE IS”, “AS IS WHAT IS”, “WHATEVER THERE IS” AND “WITHOUT RECOURSE BASIS”. The liquidator assumes no responsibility of the quantity/ quality of material/items proposed for sale. The Information/ photos, if any, given on the web site of the Company are only indicative in nature. Buyers/Bidders/Applicants shall do their own due diligence. Some of the items at the site are not for sale and Buyers/Bidders/Applicants should clearly understand during their visits, the items which are available for sale. It will be assumed that the buyers/bidders/applicants have submitted their bid in full knowledge of all facts. No claim or dispute will be raised by them in respect of the items not for sale at any stage of the process.
“8. BALANCE SALE CONSIDERATION:
…………………………………………………….
8.2The sale shall be cancelled if the payment is not received within the required timelines.
8.3Where the Successful Bidder has provided Earnest Money Deposit and the additional 5% of the total bid amount, the balance sale consideration shall be an amount equal to the bid sum (plus any applicable GST/taxes, registration fees, etc. if any, on 100% of the bid sum) as reduced by the Earnest Money and the additional 5% of the total bid amount already paid. With respect to the ‘balance sale consideration’ Clause 12 of Schedule I (Mode of Sale) of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 states that “On the close of the auction, the highest bidder shall be invited to provide balance sale consideration within ninety days of the date of such demand: Provided that payments made after thirty days shall attract interest at the rate of 12%: Provided further that the sale shall be cancelled if the payment is not received within ninety days”. Accordingly, in view thereof, the Successful Bidder shall pay the balance sale consideration (plus any applicable GST/taxes, registration fees, duties, etc. if any, on 100% of the bid sum) within 90 (Ninety) days of the date E-Auction. However, the payments made after 30(Thirty) days of the date E-Auction, it shall attract interest at the rate of 12% p.a. Further, it may be noted that the sale shall be cancelled if the payment is not received within 90 (Ninety) days of the date E-Auction.”
“6. Rejection of Successful Bid
Notwithstanding anything contained in this document, the Liquidator reserves the right to reject the Bid of the Successful Bidder and/or revoke the LoI and/or forfeit the entire amount deposited by the Successful Bidder(s) at any stage in following cases including but not limited to: ……………………………….
c. it is discovered that the Successful Bidder has breached the terms of any of the Undertakings or this document or terms of any undertakings provided hereunder;
d. the Successful Bidder breaches or does not comply with any Condition Subsequent (within the timelines prescribed) or any term of the LoI”
ANNEXURE TO THE BID APPLICATION FORM (Duly accepted by Applicant).
(II) BID DECLARATION FORM / DECLARATION BY BIDDERS:
……………………………
7.I/We also agree that in the eventuality of forfeiture of the amount by the Liquidator, the I/We shall neither have claim on the business for which my/our bid was approved nor on any part of the sum for which it may be subsequently sold.”
“4.17. Forfeiture of Earnest Money and the additional 5% of the total bid amount paid by the Successful Bidder
The Earnest Money Deposit and the additional 5% of the total bid amount paid by the Successful Bidder will be forfeited, upon the occurrence of any of the following events:
a)If any of the conditions under this 2nd E-Auction Process Information Document (Ver. 2.0) are breached by the Eligible Bidder or in case the Eligible Bidder is found to have made any misrepresentation; or
b)If the Eligible Bidder or any person acting jointly or in concert with such Eligible Bidder is found to be ineligible to submit a bid under Section 29A of the IBC or is found to have made a false or misleading declaration of eligibility under Section 29A of the IBC; or
c)If the Successful Bidder does not accept the Letter of Intent issued by the Liquidator within the period specified in the E-auction Process Schedule in Para 15 and in the manner specified or
d)If the Successful bidder fails to pay the balance sale consideration (plus any applicable taxes, registration fees, if any, on 100% of the bid sum) before the expiry of the period for payment of the same for reasons other than specified in Para 4.16 of this E -Auction Process Document.”
“8.7. Default in Payment
Default in payment of the balance sale consideration and any applicable GST/taxes, registration fees, interest etc. if any, on 100% of the bid sum by the Successful Bidder will result in disqualification of the Successful Bidder including forfeiture of Earnest Money and the additional 5% of the total bid amount (including applicable taxes), unless such default in payment is pursuant to any event stipulated under Para 4.16 of this E -Auction Process Document. Any auction may be put to re-auction or sold to the next highest Eligible Bidder and the defaulting Successful Bidder shall have no claim/right in respect of such auction.”
Annexure – I (Affidavit-cum-Undertaking) to the 2nd E-Auction Process Information Document submitted by the Applicant and we reproduce para (F) thereof:
“F. Further, I also understand, undertake and confirm that some of the items at the site are not for sale and I/we have clearly understood/shown during our visits, the items which are available and not available for sale. Further, I/we have submitted our bid in full knowledge of all facts. I/we undertake not to raise any claim or dispute will be raised in respect of any of the items not for sale at any stage of the process or hold the Liquidator or any of his representative(s) liable on any account in this regard.”
Having heard the learned counsels for both sides and on perusal pleas put forth by the liquidator in his counter and the additional affidavit filed on 16.11.2022, at the very outset, we intend to state that the existence of HCSD Pipes of 8.75 dimension and delivering them to the successful bidder of the items of Lot No 3 has been admitted BY the liquidator. Therefore, the crucial task that remains for us is to find whether the HCSD Pipes of 8.75 dimension formed part of the Lot 3 or Lot 8 of the Lots mentioned in impugned e auction sale notice dated 09.03.2022?
Before we proceed further on our above endeavour, we feel it necessary to refer to our order dated 28.10.2022 which we passed in the light of the specific contention of the petitioner that its bid was for the entire quantity of HCSD Pipes which were lying in Lot No 8 at the time of its pre-bid site visit held on 03.03.2022 however, on 21.02.2022 when it went to the site to obtain delivery of the said lot it found the quantity of pipes in Lot 8 were far less than what it found on 03.03.2022 and on enquiry it came to know that, post 3.03.2022 some pipes of the dimension of 8.75 which formed part of Lot 8 were clandestinely removed form Lot 8 at the behest of the liquidator. Order dated 28.10.2022 is as below:
“to furnish details as to in which of the lot of pipes of size 8.75 inches were offered for sale, and whether they were actually sold, along with the supporting documentary evidence.”
Pursuant thereto, the liquidator on 16.11.2022 filed an additional affidavit, where in in paras 11,12&13 it has been stated as follows:
a. Para 11: It is humbly submitted that the Lot No. 3 comprising Plant & Machinery including Civil Works/Structures (excluding materials lying in the Custom Bonded warehouse and certain other items) lying at the plant site of LVTPL has been sold to one M/s HR Commercials Pvt. Ltd. who emerged as the successful bidder and the full bid amount of Rs. 2,88,68,41,000.00 was paid by it in 30 days instead of the permissible 90 days. The relative Letter of possession and Delivery of material with respect to the items purchased has also been issued to them to start the dismantling of plant and machinery.
b. Para 12: It is humbly submitted that the first truck/ trailer loaded with lot No. 3 material had gone out from LVTPL on dated 23.04.2022 and till 13.11.2022, 2178 trucks/ trailers have been loaded with lot no. 3 material which has been taken out from the premises of the Corporate Debtor. Hence, detailed specifications (including pipes of smaller diameters less than 9 inches) could not be provided because of thousands of items were included in Lot No. 3 since lot no. 3 was an omnibus lot. Only a few items were carved out from the omnibus lot whose specifications including Lot No 8 were clearly given and communicated. The SCC was of the view that it may not be possible to sell the entire assets in one Lot. We should identify smaller Lots which could be easily sold so that CIRP and Liquidation expenses are met out of the Liquidation proceeds.
c. Para 13 It is humbly submitted that accordingly, most of the material including the pipes (other than the one mentioned in Lot No. 8) have been delivered to M/s HR Commercials Pvt. Ltd. and approximately 75% of the material has been dismantled and transported out of the plant.
Thus, for the first time, that too upon being directed by the Tribunal, supra, the liquidator in his additional affidavit has come out with the statement that, “most of the material including the pipes (other than the one mentioned in Lot No. 8) have been delivered to M/s HR Commercials Pvt. Ltd. and approximately 75% of the material has been dismantled and transported out of the plant”.
This statement of the liquidator on oath not only establishes that the HCSD pipes of 8.75 dimension were illegally delivered to M/s HR Commercials Pvt. Ltd, which is the purchaser of items of Lot No 3, but also runs contrary to his earlier statement in his Counter Affidavit to the present Petition filed on 20/07/2002, as in para 23 of his counter affidavit he had stated that “ the present application alleging inability to distinguish between pipes of 8.75 and 9 inches put together in the same pile which actually were kept separately (*no reference to Lot no 3), *this observation is Ours) cannot be said to be an act of negligence so as to warrant the defence of caveat emptor by the liquidator/respondent’
The above contradictory submissions of the liquidator prompted us to examine the descriptive particulars of the items in Lot No. 3 and 8 given himself by the liquidator in the impugned sale notice, which is as below
Thus, from the above it is as clear as crystal even to one’s naked eye, that Lot No 3 contained only Plant & Machinery including Civil Works/Structures (excluding materials lying in the Custom Bonded warehouse and certain other items) and the HCSD pipes of Ash Handling plant System of whatever dimension were never shown as part of items of Lot no3 and on the other hand, HCSD pipes of Ash Handling plant System (9inch seamless) were shown exclusively in Lot No 8.
As rightly contended by the Ld. Sr. Counsel and as the photograph herein below,
depicts HCSD (seamless) Pipe of 8.75 dimension is a distinct item/product used in Ash Handling Plant in Thermal Power Plants and as such categorising the same as a “small item’ by the liquidator purportedly at the behest of SCC or as ‘Plant & Machinery including Civil Works/Structures’ is unconscionable, when admittedly the very same HCSD (seamless) Pipes of 9 inch dimension have been distinctly identified and put for sale by way of a separate Lot NO 8 by the very same liquidator besides a shear absurdity. The plea that “The SCC was of the view that it may not be possible to sell the entire assets in one Lot, we should identify smaller Lots which could be easily sold so that at CIRP and Liquidation expenses are met out of the Liquidation proceeds’, apart from being a feeble, baseless and unacceptable submission, in the absence of any pleading as to the so-called resolution of SCC or filing of a copy of the same we do not wish to give any credence to the said submission of the liquidator. Moreover as already stated when lot no 3 of the impugned e-auction sale notification, supra, did not contain Ash handling/pipes for HCSD system of whatever dimension, even assuming that SCC had passed resolution to pass on HCSD pipes of 8.75 dimension to the successful bidder of lot no.3, the same is illegal and unenforceable being contrary to the terms and conditions of sale.
Moreover, having taken a firm stand that HCSD Pipes of 8.75 dimension did not form part of Lot No 8 and as the HCSD Pipes of 8.75 dimension as per his own description of various Lot’s in the e auction sale notice HCSD Pipes are not included in Lot No 3, the liquidator ought is bound by the provisions of the IB Code, to preserve and protect the entire liquidation estate of the corporate debtor until the same is liquidated as per the provisions of IB Code and has no right what so ever to dispose of the same as per his whims and fancies, by arranging gate passes to the successful purchaser of Lot no 3 and ensured that the same were taken away clandestinely from out of the site, even without the same being formally handed over to the said unjust beneficiary. Thus, illegality in disposal of valuable portion of the liquidation estate by the liquidator in the case on hand is at its peak, as things speaks for itself - Res ipsa loquitur.
We are also shocked not only by the submission of the liquidator, that ‘the SCC was of the view that it may not be possible to sell the entire assets in one Lot, we should identify smaller Lots which could be easily sold’, but also by their insensitivity to swindling out the liquidation estate of huge value at the behest of the liquidator, given their so called stand that this item did not form part of Lot no 8.
Therefore, from what has been stated by us as above, the only irresistible conclusion that one can draw is that ‘HCSD -seamless pipes of Ash Handling Plant, did not form part of sale items of Lot No 3, hence the question of entitlement of these pipes by the successful bidder of Lot No3 does not even arise, consequently delivery of these items to the said bidder is grossly illegal and untenable. This conclusion of ours since is based on the factual analysis, strengthens the contention of the petitioner that, ‘8.75 dimension HCSD seamless pipes of Ash Handling Plant were part of the quantity of pipes it found during its inspection carried on 03.03.2022, and its bid being for the entire quantity of Lot No 8 it is entitled for the said entire quantity and a minute difference of 0.6 cm centimetre diameter in the HCSD Pipes which the petitioner could not have spotted during its inspection cannot be the ground to deny the petitioner the same quantity, especially when there was no other Lot for sale of Ash handling pipes of any another dimension has been earmarked in the impugned e auction sale notification’.
Yet another ground that lends support to the version of the petitioner that 8.75 HCSD Pipes have formed part of Lot No8 is the false statement made by the liquidator in the letter of possession dated 25.06.2022 issued by him in favour of the successful purchaser of Lot 3, wherein the liquidator unequivocally declared at the very outset, that, ‘I am in possession of the assets in Lot3 i.e. Plant & Machinery, including Civil/works (excluding materials lying in the Custom Bonded Warehouse and certain other items) , even after himself enabled the successful bidder of Lot no 3 to remove HCSD Pipes of 8.75 dimension, from 23.04.2022 onwards by arranging gate passes dated 23.04.2022 and 24.04.2022 to take away the “ Dismantling and disposal of decommissioned power plant consisting of 2*660 MW decommissioned units of LVTPL, Mandwa, including all the plant & machinery, civil structure, pipe line etc from the site in post haste in back drop of the protest of the petitioner vide its email dated 22.04.2022.
It is quite strange that, in the reply email dated 27.04.2022 to the email dated 22.04.2022, the liquidator even though has taken all pains in reiterating various clauses in the process document in order to buttress his contention that the petitioner claim is unacceptable, conveniently and consciously, refrained himself from mentioning that HCSD pipes of 8.75 dimension have formed part of items of Lot3 and therefore were handed over to the successful purchaser of Lot No 3, whereby he enabled the successful bidder of Lot No3 to make a wrongful gain by causing wrongful loss to the petitioner. In fact, the liquidator has not even indicated anywhere in his pleadings, the location, quantity and the value of the HCSD pipes of 8.75 dimension which he illegally handed over to the successful bidder of Lot No3 in an illegal manner. Needless to say, that but for our order dated 28.10.2022 the above narrated facts and events would not have seen the light of the day. Therefore, in the above factual back drop it is quite probable that HCSD pipes of 8.75 dimension also formed part of Lot No 8 alone.
Now coming to the plea of the liquidator that the petitioner had signed the undertaking that it will not claim items which are listed in “List of Assets of Lanco Infra Limited”, filed at pages 86&87 of the counter affidavit of the respondent, on careful perusal of the said list of assets we are unable to find any reference to HCSD Pipes of whatever dimension much less of 8.75 dimension in the said list of items, so much so the said list of assets is of no help to the liquidator.
Therefore, we are of the firm view that, the case on hand is not a case of refusal to take the delivery of the items which the petitioner herein, has contracted to buy but a classic case of denial of the contracted quantity to the buyer(petitioner) by the seller(liquidator). We, therefore usefully refer here to Section 37 of Sale of Goods Act, 1930, which is as below.
37. Delivery of wrong quantity. —
(1)Where the seller delivers to the buyer a quantity of goods less than he contracted to sell, the buyer may reject them, but if the buyer accepts the goods so delivered he shall pay for them at the contract rate.
(2)Where the seller delivers to the buyer a quantity of goods larger than he contracted to sell, the buyer may accept the goods included in the contract and reject the rest, or he may reject the whole. If the buyer accepts the whole of the goods so delivered, he shall pay for them at the contract rate.
(3)Where the seller delivers to the buyer the goods he contracted to sell mixed with goods of a different description not included in the contract, the buyer may accept the goods which are in accordance with the contract and reject the rest, or may reject the whole.
(4)The provisions of this section are subject to any usage of trade, special agreement or course of dealing between the parties.
Thus, the petitioner herein is well within its right to reject the goods as the liquidator has acted in total violation of the terms & conditions of the impugned sale, the provisions of the IB Code, the rules and Regulations made there under and thus denied the petitioner the contracted quantity of goods of Lot No8.
Therefore, for the reasons we have stated supra, we are of the firm view that, the submission of liquidator that the prayer of the petitioner if allowed it would tantamount to the violation of terms of the sale process document is unsustainable and un tenable, hence the same is hereby rejected , consequently, we hereby hold that it is a fit case to interfere with the sale of the items covered under Lot No 8 which was held on 24.02.2022 and confirmed in favour of the petitioner on 28.03.2022 by the liquidator.
Accordingly, we hereby set aside the sale of the items covered under Lot No 8 held on 24.02.2022 and confirmed in favour of the petitioner on 28.03.2022 and we further direct the liquidator to refund the sale consideration received from the petitioner, within 15days from the date of receipt of this order and report compliance.
Since the impugned sale has been set aside, let there be a fresh sale of all the items of Lot No8 in the interest of all the stake holders of the corporate debtor, as expeditiously as possible. We therefore direct the Chairman of the SCC of the corporate debtor under liquidation, to forthwith call the meeting of the members of SCC to decide on conducting fresh auction sale of all the items of Lot No8 as expeditiously as possible, but not later than 15 days from the date of receipt of this order. The liquidator shall place the minutes of the SCC meeting before this Tribunal.
Registry is directed to communicate a copy of this order to IBBI forthwith and report compliance.
In the result this petition is partly allowed to the extent indicated above, however without costs.
List this matter after 15 days for reporting compliance.