Adjudicating Authority Can Extend Time For Payment Of Sale Consideration Beyond 90 Days U/S 35 Of IBC Read With Rule 11 Of NCLT Rules: NCLAT

The National Company Law Appellate Tribunal (NCLAT) New Delhi bench of Justice Ashok Bhushan (Judicial Member), Mr. Arun Baroka (Technical Member) and Mr. Barun Mitra (Technical Member) has held that the 90-day period for payment of sale consideration under Schedule 1, Clause 1(12) of the Liquidation Regulations, 2016, is mandatory and can only be extended by the Adjudicating Authority, not the Liquidator. Brief Facts: The Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor- Trans Fab Power India Pvt. Ltd. commenced by an order dated 30.08.2019. Appellant, Suspended Director of the Corporate Debtor submitted a Resolution Plan in the CIRP of the Corporate Debtor which came to be approved by the Adjudicating Authority by the order dated 25.03.2021. Appellant (Resolution Applicant) failed to execute the plan. The Committee of Creditors (CoC) decided to liquidate the Corporate Debtor. On an application filed by the Resolution Professional, an order dated 28.06.2023 was passed by the Adjudicating Authority directing for liquidation of the corporate debtor. The Successful Bidder declared in the e-auction paid 25 percent of the bid amount on January 1 2024 and 75 percent due amount had to be paid by January 28 2024. The Successful Bidder failed to pay the balance amount and requested to extend the time period for making the payment. This request came up for consideration before the Stakeholders' Consultation Committee (SCC). The SCC observed that the request for extension of timeline for the payment cannot be considered since there is no provision in the Liquidation Process Regulations authorising the liquidator or the SCC to extend the timeline. The liquidator after expiry of 90 days' period returned the sale consideration already paid to the successful bidder and issued a sale notice for re-auction on 05.02.2024. Successful bidder filed an application IA No.722 of 2024 praying for extension of time in making payment of balance sale consideration. The Adjudicating Authority vide impugned order dated 27.02.2024 directed the liquidator to accept post dated cheques payable on or before expiry of 60 days from the last date along with the interest. Aggrieved by the order dated 27.02.2024, this appeal has been filed by Rajabhau Shinde. Contentions: The Appellant submitted that the successful bidder has not been able to make the payment of the entire sale consideration within 90 days' time which was allowed by Liquidation Regulations 2016 Schedule 1 Clause 1(12). It was further argued that when the sale itself was liable to be cancelled and has rightly been cancelled by the liquidator, there is no question of approval of sale by the Adjudicating Authority by subsequent order dated 15.07.2024. The SRA submitted that Appellant has not even participated in the e-auction nor has submitted any bid, hence, they have no locus to challenge the orders. The Liquidator submitted that the liquidator has conducted the proceeding in accordance with the Liquidation Regulations 2016 and when successful bidder could not make the balance payment within 90 days, liquidator has intimated cancelling the sale and has issued notice for re-auction. It was further argued that in view of the order passed by the Adjudicating Authority dated 27.02.2024, liquidator accepted the balance payment consideration which was paid along with interest and thereafter application was filed for approval of the sale which has also been allowed on 15.07.2024. Observations: The Tribunal referred to the NCLAT judgment in Potens Transmissions & Power Pvt. Ltd. vs. Gian Chand Narang (2022) where the Adjudicating Authority had allowed the application filed by the liquidator seeking cancellation of the sale and cancelled the sale on account of failure by the auction purchaser to deposit the amount. In the above, the NCLAT also observed that the p provision of Clause 12 Schedule 1 is mandatory. Similarly, the Supreme Court in V.S. Palanivel vs. P. Sriram, CS, Liquidator, Etc.(2024) held that “Rule 12 would have to be treated as mandatory in character for the reason that it contemplates a consequence in the event of non-payment of the balance sale consideration by the highest bidder within the stipulated timeline of 90 days, which is cancellation of the sale by the Liquidator.” The Apex Court also observed that the liquidator is not empowered to extend the timeline once the time period stipulated in Clause 12 Schedule 1 expires. The Tribunal distinguished the above cases from the facts of the present case. In the present case, the time period for making the payment was not extended by the liquidator rather the Adjudicating Authority extended the time of payment. The Supreme Court in V.S. Palanivel (Supra) also held that the Adjudicating Authority exercised statutory powers under Section 35 read with Rule 11 of the...

Adjudicating Authority Can Extend Time For Payment Of Sale Consideration Beyond 90 Days U/S 35 Of IBC Read With Rule 11 Of NCLT Rules: NCLAT

Mohd Malik Chauhan

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