Per: Sh. Charanjeet Singh Gulati, Member (Technical)

1. The above I.A. is filed by the Applicant, L7 Hitech Private Limited, under section 60(5) of the Insolvency and Bankruptcy Code, 2016 (“the Code”), seeking following reliefs:

a) Consider and allow this IA 315/2023 in terms of Section 60(5) read with Rule 11 of NCLT Rules, 2016;

b) Pass appropriate directions for transfer of ownership of the Auction Asset (including the legal entity i.e. EMI Transmission Limited) to the Applicant, along with certain essential reliefs and concessions as mentioned under Para 16 of the present Application;

c) Direct the Corporate Debtor/Applicant shall be at liberty in approach this Hon’ble Adjudicating Authority to address any difficulties faced with respect to implementation in taking over of the Corporate Debtor in liquidation;

d) Grant liberty to the Applicant to amend, alter, modify, delete, rescind and/or substitute any prayer(s); pass any further order(s) or directions that this Hon’ble Adjudicating Authority may deem fit and proper;

e) Issue such other orders as this Hon’ble Tribunal may deem fit.

Facts of the Case, in brief:

2. A Company Petition filed under Section 7 of the Insolvency and Bankruptcy Code, 2016 (‘Code’) by Dena Bank (Financial Creditor) against EMI Transmission Limited (Corporate Debtor) was admitted by this Tribunal on 11.04.2019. Subsequently, Corporate Insolvency Resolution Process (CIRP) was initiated against the Corporate Debtor and Mr. Shailesh Bhalchandra Desai was appointed as the Interim Resolution Professional (IRP) and was subsequently confirmed as Resolution Professional (RP).

2.1 Upon failure of the Resolution process, the Committee of Creditors (CoC) of the Corporate Debtor, in its 10th meeting held on 02.01.2020, unanimously passed a resolution for the liquidation of the Corporate Debtor as a going concern. On 14.08.2020, the Tribunal passed the Liquidation order commencing the Liquidation process of the Corporate Debtor. Mr. Shailesh Bhalchandra Desai, the Resolution Professional of the Corporate Debtor, was appointed as the Liquidator.

2.2 The Liquidator made a Public Announcement of the 34th E-auction Process was made on 19.10.2022 in the Newspapers namely ‘Business Standard’ (Mumbai edition – English) and ‘Navshakti’ (Mumbai edition – Marathi) for sale of Corporate Debtor as a Going concern. Bids were invited by an E-auction Process Memorandum wherein it was stated that the Company is proposed to be sold on a ‘going concern’ basis. The 34th Eauction Process was initially scheduled for 14.11.2022, however, due to certain technical difficulty, it was extended till 15.11.2022.

2.3 The assets of the Corporate Debtor that were put under Sale are as follows:

Submissions of the Applicant, in brief:

3. The Applicant submits that they were considered as Successful Bidder in this 34th e-auction process. The Applicant has paid the entire amount of sale consideration of Rs. 6.60 Crores in pursuance of which a Sale Certificate was issued by the Respondent on 18.11.2022. Below is the eauction result:

3.1 It is submitted that in the present case relating to sale of the Corporate Debtor under liquidation, only the legal entity is transferred, and the liabilities of the Corporate Debtor have to be settled in accordance with Section 53 of the Code from the proceeds of the sale (i.e. from the Sale Consideration). Thus, the Applicant, being the successful bidder is entitled to take over the Corporate Debtor without any claims, encumbrance or charge and free from action by any creditor. Similarly, any pending proceedings with respect to liabilities/ inquiries/ investigation/ assessments /charges of civil/ criminal nature /claims /disputes/litigation against the Corporate Debtor and/or its subsidiaries and/or its affiliates or its assets etc., shall not have any bearing on the assets of the Corporate Debtor survives pursuant to such sale.

3.2 There are certain requirements to be fulfilled for transfer of legal ownership of the Auction Asset in favour of the Applicant i.e. the requisite permissions/approvals being obtained by the Applicant, inter alia, required under the Companies Act and/or from this Adjudicating Authority, issuance of fresh equity in the name of bidder and completion of compliances with the Registrar of Companies (RoC) which can be done only after formal approval order passed by the Tribunal.

3.3 During the sale of the Corporate Debtor as a going concern under the liquidation process, grant of various approvals, reliefs and concessions are essential to continue with the operations of the Corporate Debtor on a clean slate basis with all claims being extinguished and no person being entitled to initiate or continue any proceedings in respect of the claim against Corporate Debtor. In support of the submission made above, the Applicant made reference to a plethora of decisions of various benches of the National Company Law Tribunal (NCLT).

3.4 The Adjudicating Authority is empowered under the Code and the Liquidation Process Regulations to grant the necessary and consequential reliefs, concessions, approvals and directions, as prayed for by the Applicant/successful bidder to effectuate and consummate the transfer of the ownership of the Auction Asset (including the legal entity i.e. EMI Transmission Limited) to the Applicant/successful bidder.

3.5 The Applicant further submits that since the Insolvency and Bankruptcy Board of India (IBBI) is the only body which intimate the RoC through a “Formal Change Request Form to the e-governance Cell, MCA (HQ) at the earliest for the change in status of EMI Transmission Limited i.e. the Corporate Debtor from ‘Under Liquidation’ to ‘Active’ once this Tribunal passes the necessary orders in the present Application.

3.6 The Applicant submits that the Tribunal is empowered to grant necessary reliefs in relation to the Corporate Debtor, sold as a ‘going concern’ under the provisions of the Liquidation Process Regulations, under Section 60(5)(c) of the Code. Therefore, the Applicant has sought for certain concessions and reliefs, which are set out in Para 16 of the Interlocutory Application.

Findings

4. We have perused the facts pleaded and the reliefs sought in the present Application. The Applicant in the instant case is praying for certain reliefs and concessions in order to effectuate the sale of the Corporate Debtor as a going concern.

5. The E-auction process commenced through an electronic auction on an online portal, wherein the interested buyers could register, bid and receive confirmation of the acceptance of their bid online. The Liquidator made a public announcement on 19.10.2022 in two Newspapers namely ‘Business Standard’ (Mumbai edition- English) and ‘Navshakti’ (Mumbai edition- Marathi) advertising about the 34th E-auction Process which was proposed to be held on 14.11.2022. It is submitted that the e-auction date was extended till 15.11.2022 due to some technical difficulties (the Sale certificate mentions the date of e-auction as 15.11.2022).

6. It is an undisputed fact that the Applicant was declared as the successful bidder. Further, upon payment of the entire sale consideration of Rs. 6,60,00,000 (Rupees Six Crores Sixty Lacs), the sale was considered to be completed, in acknowledgment of which a Sale Certificate was issued by the Liquidator on 18.11.2022.

7. Part H of the E-auction Process Information Document issued by the Liquidator highlights the proposal of selling the Corporate Debtor on a ‘going concern’ basis in accordance with Regulation 32A of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016.

8. The Liquidator, in Part H (Para 7) of the E-auction Process Information Document, stated that the Successful bidder may not be liable to pay any of the outstanding dues pending before the Liquidation commencement date i.e. 14th August 2020 as the same is to be addressed by the Liquidator in line with the mechanism provided under Section 53 of the Code. It is further stated that the Bidder may also be eligible to the benefits as provided under section 32A of IBC.

9. In this regard, this Tribunal makes reference to the observations of the Hon’ble NCLAT in M/s Shiv Shakti Inter Globe Exports Private Limited [Company Appeal (AT) (Insolvency) No. 650 of 2020]:

“21. … it is a settled law that when the sale proceeds of a ‘Corporate Debtor’ are duly distributed in the Order of priority and in the manner prescribed under Section 53 of the Code, claims of any other Creditor cannot be entertained contrary to the provisions entailed under Section 53; subsequent to the distribution of sale proceeds under Section 53 no other entity including any Government entity can claim any past unpaid or outstanding dues against the Appellant who has purchased the ‘Corporate Debtor Company’ as a ‘going concern’….. The Hon’ble Supreme Court in ‘Ghanshyam Mishra & Sons Pvt. Ltd.’ Vs. ‘Edelweiss Asset Reconstruction Company Ltd. & Ors.’, Civil Appeal No. 8129 of 2019 and in ‘CoC of Essar Steel India Ltd.’ Vs. ‘Satish Gupta & Ors.’ (2020) 8 SCC 531 [LQ/SC/2019/1723] has laid down the proposition that the purchaser of the Company even in the Liquidation stage cannot be burdened with past liabilities when it is not mentioned in the ‘Sale Notice’.

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

10. Accordingly, the reliefs and concessions sought under Para 16 of the Application are directed as follows:

11. Any other relief and concession not mentioned in the above table shall be deemed to have been not granted.

12. The Interlocutory Application No. 315 of 2023 is disposed of in above terms.