Srei Equipment Finance Ltd. Vs Viswa Infrastructures and Services Pvt. Ltd. (NCLT Hyderabad)
Summary: The NCLT Hyderabad Bench-I considered an application filed by Hemant Sharma, liquidator of Viswa Infrastructures and Services Private Limited, under Section 60(5)(c) of the Insolvency and Bankruptcy Code, 2016, read with Regulation 32A and Regulation 44 of the IBBI (Liquidation Process) Regulations, 2016, and Rule 11 of the NCLT Rules, 2016. The application arose from an earlier order dated 18 January 2021 permitting the corporate debtor to be sold as a going concern. The liquidator sought approval of the conditions proposed by the successful bidder and permission to distribute ₹57 crore in sale proceeds to lenders under Section 53 of the IBC.
Following deliberations with stakeholders, the lenders fixed a reserve price of ₹76 crore and earnest money deposit of ₹3.8 crore, representing 5% of the reserve price. The liquidator engaged an e-auction agency and invited bids through a notice dated 8 February 2021. After receiving no bids, a second auction notice was published on 25 February 2021, with the auction scheduled for 7 March 2021. Indus Projects Private Limited, together with Indvis Holdings Private Limited as a special purpose vehicle, submitted the required documents and earnest money deposit of ₹2.85 crore on 6 March 2021. The bid amount was ₹57 crore, and the bidder was subsequently confirmed as successful.
The successful bidder submitted a term sheet requesting various concessions and directions to facilitate the acquisition of the corporate debtor as a going concern. These included provisions concerning payment of the balance consideration, cash accruals, existing liabilities, guarantees, security interests, statutory proceedings, land records and the treatment of assets and obligations after acquisition. ICICI Bank and YES Bank raised observations regarding particular clauses, including the treatment of guarantees, possible future liabilities, disqualification provisions, payment obligations and the consequences of the proposed acquisition. The bidder responded to these concerns, explaining the intended scope of the concessions and the distinction between liabilities of the corporate debtor and obligations that might continue against other parties.
The Tribunal examined the application and observed that the sale of the corporate debtor as a going concern was broadly comparable to its resolution, particularly where the purchaser intended to continue the business. The successful bidder had already deposited ₹57 crore, and the liquidator sought directions necessary to complete the acquisition and permit the business to operate under the Companies Act, 2013. The Tribunal reasoned that the proceeds would be distributed to creditors in accordance with Section 53 of the IBC and that the sale could therefore be accompanied by appropriate relief in favour of the purchaser. It permitted the liquidator to disburse the ₹57 crore to lenders and directed that liabilities existing on the date of the order would stand extinguished as against the successful bidder.
The Tribunal further directed that pending proceedings concerning the corporate debtor’s liabilities, inquiries, investigations, assessments, claims, disputes and litigation would not affect the assets sold through the liquidation process, while expressly excluding proceedings against former promoters or members of the erstwhile management from that protection. It granted the successful bidder rights over the corporate debtor’s assets, contracts and interests, free from specified encumbrances and claims, and allowed review or termination of contracts entered into before the order. The former promoters and associated persons were restrained from conducting competing business connected with the corporate debtor’s existing products and services or transferring related intellectual property. The liquidator and successful bidder were directed to complete necessary accounting entries, statutory filings and other formalities for smooth transfer and continued operation.
On taxation and regulatory matters, the Tribunal held that the corporate debtor could seek the benefit of brought-forward losses, if otherwise eligible, subject to approval by the appropriate authority under the Income-tax Act, 1961. Regarding the bidder’s request to treat the bid as a resolution plan for Section 79 purposes, the Tribunal directed the bidder to approach the competent income-tax authority. Similar treatment was adopted for exemptions concerning income, gains, profits, stamp duty and tax liabilities arising from the acquisition, with the relevant authorities required to consider the requests. The Tribunal also allowed renewal or issuance of necessary licences and permissions subject to payment of applicable renewal fees. Accordingly, the application was disposed of, granting substantial protection to the successful bidder while leaving specific tax and statutory concessions for determination by the competent authorities.
