NCLT Kolkata: Revival Of Corporate Debtor Is Primary Goal Of Resolution Plan And Going Concern Sale

Background Facts:

On 21.08.2018, Kohinoor Pulp & Paper Pvt. Ltd. (Corporate Debtor) was admitted into Corporate Insolvency Resolution Process ('CIRP') under Section 9 of Insolvency and Bankruptcy Code, 2016 ('IBC') by Sauria Construction (Operational Creditor). On 01.07.2019, NCLT Kolkata had ordered the Corporate Debtor to be liquidated. On 22.08.2022, Public announcement for E-auction of Corporate Debtor as a going concern was published following IBC and the Insolvency and Bankruptcy Board of India (Liquidation Process Regulation) 2016 with the E-auction to be conducted on 31.08.2022. The reserve price was set as Rs. 48 crores and the Earnest Money Deposit ('EMD') as Rs. 4.80 crores.

Universaltech Paper LLP (Applicant) made a bid of Rs. 60.20 crores in the E-auction and the Mr. Krishnaswami CVR (Liquidator) sent a Letter of Intent informing the completion of E-auction. The Applicant was selected as the successful bidder for the sale of the Corporate Debtor as a going concern excluding the imported cooking plant and fibre line lying at CFS, Balmer Lawrie Kolkata and cash and cash equivalents. The Applicant has paid the entire amount of consideration to the Liquidator with interest and a sale certificate was also issued in its favour.

The Applicant has filed the present interlocutory application under section 60(5)(C) of IBC for the grant of certain reliefs as the corporate debtor is sold as going concern in liquidation.

NCLT Verdict:

The NCLT Kolkata allowed the application and held that the primary goal of a resolution plan as well as the sale of a Corporate Debtor as a going concern remains the same i.e revival of the Corporate Debtor's business.

The Tribunal observed that the struggles of Successful Resolution Applicant and purchaser during the sale of a Corporate Debtor as a 'going concern' are similar and thus, comparable reliefs and concessions ought to be granted in both cases.

It noted that Supreme Court in Ghanashyam Mishra and Sons Pvt. Ltd. vs. Edelweiss Asset Reconstruction Company Ltd. held that the reliefs ought to be made applicable to cases in which the Corporate Debtor has been sold as 'going concern'. Further, in Jasamrit Designers Pvt. Ltd. vs. Mr. Gian Chand Narang Liquidator and Anr., NCLAT had also observed that while the successful bidder is allowed the liberty to file application before the Adjudicating Authority claiming reliefs and concessions, the said reliefs and concessions cannot be too elaborate and general and must be in consonance with the process document in the liquidation proceedings.

The Tribunal observed that presently some reliefs prayed for by the Applicant are within the purview of IBC and the Companies Act, 2013, however, others are too broad and non-specific falling under the power and jurisdiction of different government authorities and can be dealt only by the respective forums keeping in view the spirit of IBC. Thus, the Applicant must apply to the concerned regulatory authorities for renewal of business permits and supply of essential services, the Corporate Debtor being a 'Going Concern sale'. The Authorities must grant the reliefs in accordance with the intention of IBC and resolution of Corporate Debtor's insolvency.

NCLT pointed out that the prayer seeking carte blanche orders relating to contractual rights cannot be granted since there is no calrity on the contracts of the Corproate Debtor. It also noted that as per Supreme Court in Lalit Kumar Jain vs. Union of India & Ors., it was observed that sanction of a resolution plan and finality imparted to it by Section 31 of IBC does not per se operate asa discharge of the guarantor's liability shall apply. Thus, presently, the sale of the assets of the Corporate Debtor 'as a going concern' shall be binding on the Corporate Debtor and other persons, authorities etc.

In conclusion, it noted that all reliefs relating to inquiries, litigations, investigations and proceedings shall be granted strictly as per the section 32A of IBC.

Case Title: Universaltech Paper LLP vs. Mr. Krishnaswami CVR, Liquidator of Kohinoor Pulp & Paper Pvt. Ltd.

Case No.: I.A. (I.B.C.) 1055/KB/2023 In CP(IB) No. 511/KB/2019

Counsel for Liquidator: Ms. Shaunak Mitra and Mr. Avik Chaudhuri, Advocates

Counsel for Successful Liquidation Purchaser: Mr. Abhrajit Mitra, Mr. Vikram Wadhera, Ms. Asiya Hasan, and Mr. Mayukh Roy, Advocates

Click Here to Read/Download Order