Janhavi Dixit VS. Rajat Mukherjee Liquidator of Enviiro Bulkk Handling Systems Pvt Ltd - Sale of CD as a Going Concern during Liquidation Process.

NCLT Mumbai-1 (21.06.2021) in Janhavi Dixit VS. Rajat Mukherjee Liquidator of Enviiro Bulkk Handling Systems Pvt Ltd [I.A. No. 741 of 2021 in C.P. (IB) No. 1319/MB/2017] held that; 

•  . . .since the Liquidator has already accepted the bid for ₹. 15.30 Crores and the auction sale of the Corporate Debtor as a going concern is completed on 18.03.2021, no specific order or ratification of the sale is required. The action of the Liquidator is in accordance with the relevant provisions of the Code and consequences thereof would follow according to law. Reiteration by the Tribunal is neither contemplated nor necessary.

 

Excerpts of the order;

# 1. The Applicants herein, being the successful bidders in the auction sale of the Corporate Debtor as a going concern, are before us with the following prayers: 

• a) That the Hn. Bench may approve and accept their bid for the amount of Rs.15.30 Crores in terms of the Auction Sale conducted on 18.03.2021 for the sale of M/s Enviiro Bulkk Handling Systems Pvt. Ltd. (under Liquidation) as a going concern

• b) That the Hn. Bench may consider and grant the reliefs as more particularly stated in Para 8(b) of the Application and as stated in the bid offer of the Applicants.

• c) That upon compliance of the terms of auction sale, all concerned authorities and parties be advised about the sale of the Corporate Debtor on going concern basis without antecedent liabilities of any kind as may be relevant for the operation of the Company post its release from the liquidation.

• d) That the Applicants be permitted to conduct the affairs of the company post its release from the liquidation in the manner as they may considered appropriate for the operation of the company’s business.

• e) Any other reliefs as the Hn. Bench may considered just and appropriate in the facts and circumstances of the case matter.

# 2. The facts leading to the present Application are as under.

i. On a Petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 (the Code), the Corporate Debtor was put under Corporate Insolvency Resolution Process (CIRP) by an order dated 04.12.2017 of this Bench

ii. Upon failure of the Resolution process, the Committee of Creditors (CoC) of the Corporate Debtor in its 10th meeting recommended for the liquidation of the Corporate Debtor as a going concern. This Tribunal vide Order dated 27.03.2019 ordered the Corporate Debtor to be liquidated as a going concern and appointed Mr. Rajat Mukherjee as the Liquidator.

XXXXX

vi. This Tribunal vide its order dated 26.02.2021 disposed of IA No. 02 of 2021, giving directions to the Liquidator to issue fresh advertisement for the sale of the Corporate Debtor as a going concern and also allowed the Applicants to take part in the auction after depositing ₹.75,00,000/- in the Liquidator's Account. The Application of the Liquidator (IA No. 2131 of 2020) was kept pending for hearing.

XXXXC 

viii. The Applicants in response to the said e-auction, submitted an expression of interest along with 5% upfront payment of ₹. 76,50,000/- on 06.03.2021 and subsequently participated in the e-auction held on 18.03.2021, wherein the Applicants were declared as the successful bidders/the sole eligible bidder. The Applicants have submitted a bid amount of ₹. 15,30,00,000/-. The Applicants paid 20% of the bid amount on 23.03.2021, aggregating the payment to 25% of bid amount which is ₹.3.825 Crores.

ix. The Liquidator then sent a Letter of Intent to the Applicants stating that the Applicants are bound to implement the successful bid.

x. The Applicants have mentioned consequential reliefs in their offer, which are prayed to be sanctioned under the present Application, for smooth and successful sale of the Corporate Debtor as a going concern.

xi. In the above circumstances, the Applicants are before us with the following consequential reliefs (Para 8(b) of the Application):

• a) The promoters be permitted to restructure the capital account of the company by cancellation of existing capital and substituting with the investment of the bid amount in such manner and for such amount as it may consider appropriate for the working of the capital base of the company.

• b) The direction be issued that after payment of the entire bid amount, the Consortium gets all the rights, title and interest in the whole and every part of the Corporate Debtor including contracts, free from security interest, encumbrances, claim, counter claim, or any demur in the Consortium and the sale proceeds shall be disturbed against accordance with section 53 of the IBC.

• c) A direction be issued that upon completion of the sale of the Corporate Debtor as a going concern all the claims or demands made by or liabilities or obligations owned or payable to any actual or potential creditors of the Corporate Debtor including Government dues whether direct or indirect, whether admitted or not, due or contingent, asserted or unasserted, crystalized or uncrystallized known or unknown, secured or unsecured, disputed or undisputed in relation to any period prior to the e auction date or arising on account of the acquisition of control by the consortium over corporate debtor pursuance to e-auction, will be written off in full and shall stand permanently extinguished.

• d) A direction be issued that the cases pending/decreed against the Corporate Debtor by any court and/or tribunal and/or any quasi-Judicial authority will not be enforced against the Consortium or the Corporate Debtor.

• e) A direction be issued that upon all the existing shares of the Corporate Debtor be extinguished and existing shareholders will become claimants from liquidation proceeds u/s 53 of the Code. 

• f) A direction be issued that to show that status of the corporate debtor in the ROC records as ‘active’ from the status of ‘liquidation’.

• g) A direction be issued that upon sale of the company as going concern, the Board of Director of the Corporate Debtor be re-constituted as per the Companies Act and that consortium be permitted to nominate Directors of the corporate debtor duly appointed under the provisions of the Companies Act, 2013, and direct the Registrar of Companies to do all such acts, deeds and things that are necessary to appoint the consortium nominee individuals as directors of the corporate debtor, who are individuals recommended by the consortium, in order to enable the company to file relevant returns required by applicable law;

• h) A direction be issued that all subsisting consents, licenses, approval, rights, entitlements, benefits and privileges whether under law, contracts, 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, be deemed to continue without disruption for the benefit of the corporate debtor and all additional licenses, registrations and consents to operate required by the corporate debtor be made available immediately on payment of the entire bid amount.

• i) A direction be issued that the corporate debtor shall have a right to review and terminate any contract that was entered into prior to the date of liquidation order.

•  j) A direction be issued that all the benefits availed by the corporate debtor as MSME company, will be continued to new Corporate Debtor.

• k) A direction be issued exempting the corporate debtor from payment of registration fee/stamp duty and other local levies, taxes, duties with respect to transfer of the bid amount.

• l) Pass an order to provide the applicant 100% exemption on stamp duty and registration fee and all local taxes and levies imposed by the appropriate Government, applicable in respect of any transaction required to be undertaken pursuant to the e-auction, and taxes thereon.

• m) A direction be issued that upon completion of sale of the corporate debtor as a whole as a going concern all the assets specified in the complete e-auction process document shall continue to be the assets of the corporate debtor, towards which the consortium has made payment without encumbrances of any kind.

• n) That the Secured creditors be directed to handover the title documents deleting all encumbrances mentioned in the assets secured to them including by way of assignment to any person other than the Corporate Debtor.

xii. The Applicants have submitted that they are the promoters of the Corporate Debtor which is a MSME company and are eligible to make application u/s. 29A read with Section 240A of the Code. That the Corporate Debtor has been conducting business in regular manner even while the company was under liquidation.

xiii. The Applicants submit that, for resumption and restructuring of the company after the auction sale and for the compliance of the statutory regulations subsequent to the auction sale, the consequential reliefs sought, may be considered and granted as they are in administrative nature and also for other statutory compliances. Hence the Application.

# 3. The Applicants have relied upon the following judgements in support of the grant of the above reliefs:

• a) Gaurav Jain V/s Sanjay Gupta – IA No. 2264 of 2020 in CP (IB) No. 1239/MB/2018 – NCLT Mumbai.

• b) Kalpana G, Liquidator of Southern Online Bio- Technologies Ltd. V/s Satish Kumar and Ors – IA No. 122/2020 in CP (IB) 343/7/HDFB/2018, NCLT, Hyderabad Bench 1I.

• c) Bank of India V/s Southern Online Bio-Technologies Ltd., IA No. 1083/2019 in CP (IB) 343/7/HDFB/2018, NCLT, Hyderabad Bench – I.

# 4. The Liquidator has filed a reply to the Application and has reiterated all the above facts. It is submitted by the Liquidator that the Applicants have paid the entire bid amount of ₹. 15.30 Crores and accordingly the e-auction process has been successfully completed. With respect to the consequential reliefs sought by the Applicants, the Liquidator has submitted that the Adjudicating Authority has power to grant such reliefs and such reliefs maybe granted as per the discretion of the Tribunal.

# 5. It is submitted that unless the said reliefs are granted, the Corporate Debtor cannot function as a going concern and the revival and working of the Company as a going concern will be adversely affected post its release from the liquidation.

# 6. We have heard the learned counsel appearing for the Applicant as well as the Liquidator. It would be beneficial to refer to the following paras of the Judgment of this Bench in Gaurav Jain V/s Sanjay Gupta – (IA No. 2264 of 2020 in CP (IB) No. 1239/MB/2018 – decided on 09.03.2021):  . . . . .

# 7. As a consequence to the above discussions and on perusal of the pleadings and submissions made by the learned counsel for the Applicants and the Liquidator the following order is passed.

ORDER

The Application be and the same is allowed subject to the following.

I. In respect of prayer 1.(a), since the Liquidator has already accepted the bid for ₹. 15.30 Crores and the auction sale of the Corporate Debtor as a going concern is completed on 18.03.2021, no specific order or ratification of the sale is required. The action of the Liquidator is in accordance with the relevant provisions of the Code and consequences thereof would follow according to law. Reiteration by the Tribunal is neither contemplated nor necessary.

II. As far as the consequential reliefs sought for in Para 8(b) of the Application are concerned, the following orders are passed.

• a. The promoters are permitted to restructure the Capital account as prayed for.

• b. The Liquidator shall distribute the sale proceeds as per Section 53 of the Code. No separate order in that regard is required.

• c. As far as prayer “c” is concerned, since already the purchase consideration is paid by the Applicants, the Applicants shall not have any more liability as far as the debts of the Corporate Debtor are concerned.

• d. The Applicants will not be responsible for any cases/proceedings pending or decreed against the Corporate Debtor till this date.

• e. The existing share capital of the Corporate Debtor shall stand extinguished. 

• f. The Registrar of Companies (RoC) concerned is directed to show the status of the Company as “Active” from “Liquidation” in their records.

• g. The Applicants are at liberty to reconstitute the Board of Directors as per provisions of the Companies Act, 2013 and the appropriate filings may be effected before the RoC concerned.

• h. All subsisting licenses, approvals, rights, entitlements, benefits, privileges, contract, lease etc., wherein the Corporate Debtor is entitled / involved will continue, subject to payment of statutory dues with effect from this date.

• i. Prayer “h” is allowed subject to the payment of renewal fees, if any, from this date to the licensing authorities.

• j. Prayers “i” & “j” are allowed. 

• k. In respect of the prayers “k” & “l” the Applicants are required to approach the Authorities concerned for exemptions, if any, and the said Authorities will decide the issue in accordance with the law. 

• l. In respect of the prayers “m” & “n”, since the Applicants are the successful bidders in the auction sale, they become the owners of the assets mentioned in the auction sale. The secured creditors are directed to handover the title documents of the properties covered under the auction sale process by deleting all the encumbrances created previously.

III. No order as to costs.

----------------------------------------------