NCLT Mumbai: Buyer In Liquidation Auction Sale Can't Step Back On Ill-Founded Ground Of Absence Of NCLT's Order Extending Period To Conclude Sale
Sachika Vij
20 Dec 2023 4:00 AM GMT
The National Company Law Tribunal ('NCLT'), Mumbai Bench, comprising Justice Shri V.G. Bisht (Judicial Member) and Shri Prabhat Kumar (Technical Member) held that a Buyer in a Liquidation Auction sale can't be allowed to step back on the ill-founded ground of the absence of an Order of NCLT extending the period of 90 days to conclude the sale. Background Facts Melker TTI...
The National Company Law Tribunal ('NCLT'), Mumbai Bench, comprising Justice Shri V.G. Bisht (Judicial Member) and Shri Prabhat Kumar (Technical Member) held that a Buyer in a Liquidation Auction sale can't be allowed to step back on the ill-founded ground of the absence of an Order of NCLT extending the period of 90 days to conclude the sale.
Background Facts
Melker TTI Biofuels Limited ('Applicant') filed an application in the Liquidation Process of Dhavalpratapsinh Mohitepatil Agro Industries Limited ('Corporate Debtor') to direct Mr. Dharit Kishorebhai Shah ('Liquidator') to refund the Earnest Money Deposit ('EMD') amounting to Rs. 1.54 Crores along with an interest of 24% for the unreasonable delay caused by him in refunding the said amount.
On 29.02.2022, the liquidation process of the Corporate Debtor' was commenced. Due to the failure of the e-auction on 25.01.2022, e-auctions were again conducted by the Liquidator on 03.02.2022, 04.03.2022, 14.03.2022, and 30.04.2022. The EMD was to be refunded by the Liquidator after 15 days of the auction date in case of failure of the auction as per the terms of the revised tender document dated 13.01.2022.
Contentions of the Applicant:
The Applicant argued that he had duly submitted the required Bid Application Form and made the prescribed payment of Rs. 1.54 Crores as EMD on 25.01.2022. Before the e-auction date, the Liquidator led him to believe that, despite the 90 days for selling the Corporate Debtor as a going concern having expired, the Tribunal had granted an extension, although the Order for the extension was not shared with him. Further, the revised tender document issued by the Liquidator on January 13, 2022, presented a contradictory statement.
Additionally, in the revised tender document the Liquidator concealed the fact that the Tribunal had reserved the Order for an extension on 03.01.2022, even though the Applicant was informed through an email on 25.01.2022, that the Tribunal had dictated the order and extended the period by 90 days. This fact is stated to have been communicated to the Applicant in private communication between the Applicant and the Liquidator. Accordingly, this dual approach of the Liquidator kept the Applicant in the dark till the very last day, and hence the Applicant had no other option but to seek a refund of the EMD and withdraw from participating in the e-auction dated 25.01.2022.
Contentions of the Liquidator:
The Liquidator argued that the Application is not maintainable in law and is an attempt to travel beyond the terms of the e-auction. Further, as per the third Stakeholder's Consultative Committee, it was decided that the Corporate Debtor will be sold as a going concern. The Liquidator had also taken permission from NCLT Mumbai which was allowed vide order dated 03.01.2022 as well as extending the time for a further 90 days to sell the Corporate Debtor as a going concern.
NCLT Verdict:
The NCLT Mumbai dismissed the application and held that a Buyer in a Liquidation Auction sale can't be allowed to step back on the ill-founded ground of the absence of an Order of NCLT extending the period of 90 days to conclude the sale.
The Tribunal observed that Applicant's only argument is that the 90-day extension Order for the conclusion of the sale of Corporate Debtor as a going concern was not brought to his knowledge as the same was not found uploaded on NCLT's website. There is no dispute that the contents of the Order were duly communicated to the Applicant by the Liquidator on 03.01.2022.
Further, it was highlighted that the E-Auction Bids were invited, and Bid documents were submitted after 03.01.2022. The fact that the Liquidator, appointed by the Tribunal to oversee the liquidation process, carried out these actions validates the accuracy of the information conveyed by the Liquidator regarding the 90-day extension. Without an official Order from the Tribunal, the Liquidator would not have been able to proceed with the publication of bid documents. Clause 22 of the Tender Documents empowers the forfeiture of the EMD in cases where the bid log is not obtained or, if obtained, the bidder does not participate.
The Tribunal pointed out that there is no dispute that the EMD condition is stipulated to ensure that the prospective bidders do not back out from the process in between thereby wasting time and delaying the process further. Presently, the Liquidator had unequivocally communicated to the Applicant that the Sale as a Going Concern was as per the process of Tender documents and IBC.
The NCLT Mumbai concluded that the Liquidator has correctly invoked his right to forfeit the EMD on failure specified in clause 22(5) of the Tender Documents and the Applicant has to suffer the consequences for such withdrawal as provided in the Revised Tender Documents.
Case Title: Melkar TTI Biofuels Ltd. vs. Mr. Dharit Kishorbhai Shah The Liquidator
Case No.: I.A. 1390 of 2022 in Company Petition (IB) No. 3610/MB/2019
Counsel for the Applicant: Mr. B. Gopalakrishnan, Advocate a/w Mr. Ashish Dalal, Advocate
Counsel for the Liquidator: Mr. Rohan Agarwal, Advocate a/w Mr. Amey Hadwale, Advocate, Ms. Geeta Lundwani, Advocate
