Ekambareswara Rao Manne Vs Mr. Gonugunta Madhusudhan Rao (NCLT Hyderabad)
It may be stated that in terms of Clause 4 Schedule-I of IBBI Liquidation Process Regulations, 2016, the Liquidator is entitled to reduce the reserve price up to 25% whenever the auction fails. The record placed before us viz. minutes of the Stakeholders Consultation Committee meetings clearly disclose that the Liquidator discussed fixation of reserve price in every meeting and the members of the committee, which admittedly includes the Petitioner herein, have unanimously agreed for the reduced reserve price proposed by the Liquidator. According to the Liquidator, despite the Regulation allowing 25% reduction, the average of the reduced reserve price from time to time was only 8%.
It may be stated that it is natural that when there are no bids to take the property in auction at a particular minimum reserve price, the auction fails and unless the reserve price is altered suitably as per the norms, there might be no fresh bids. As already stated, in the case on hand, 15 times, the auction has failed and therefore, it became inevitable for the SCC to accept reduction in the reserve price, lest the sale can never happen and further delay result in deterioration of the asset value. We have perused the records and found that the reduction was around 8%, though the Regulations provide for reduction up to 25%. That aprt, the Applicant herein, is part of the committee that agreed unanimously for the reduction in the reserve price from time to time, and allowed the sale notices to be published.
Under these circumstances we find no reason at all in entertaining the plea of the Petitioner that too, when the sale ultimately fructified pursuant to the I 6th sale notice, that the reserve price as fixed was low. If really, the Applicant had any material information enabling fixation of the reserve price higher than the what was agreed, it was always open for the Applicant to place the same before the Stakeholders Consultation Committee meeting enabling the members to consider the same while fixing the reserve price. Mere oral contention that too after the sale fructified ultimately, that the reserve price is low, we hold that the same is devoid of any substance.
FULL TEXT OF THE NCLAT JUDGMENT/ORDER
The Applicant, who is one of the Members of the Stakeholders Committee of M/s Servomax India (P) Ltd (Corporate Debtor under Liquidation), has assailed actions of the Liquidator Mr Gonugunta Madhusuan Rao with respect to the e-auction proceedings dated 15.07.2021, inter-alia, contending that the same is not in conformity with mandatory provisions of Insolvency & Bankruptcy Code, 2016 (herein after referred to as Code) and IBBI (Liquidation Process) Regulations, 2016 and sought indulgence of the Tribunal to pass the following reliefs,
i) Directions to Respondent No.1 herein to produce the record before this Tribunal as to how the realizable value arrayed and the same reduced in every auction.
ii) Directions to Respondent No.1 to place the records/registers maintained by him with respect to the e-auctions conducted by him.
iii) Directions to Respondent No.1 to file an affidavit with respect to the difference in realizable value of ongoing concern and realizable value of collective price of individual assets mentioned from item no.2 in all sale notice.
iv) Restrain Respondent No.1 in taking any further actions to conclude the BID with respect to E-auction proceedings dated 15.07.2021 which is in violation of Regulation 32A of Insolvency & Bankruptcy Board of India (Liquidation Process) Regulations, 2016 to sell the Company as “ongoing concern”.
v) Directions to Respondent No.1 to place the records and documents submitted by all the bidders with respect to the above e-auction dated 15.07.2021.
vi) Directions to Respondent No.1 to produce the records maintained by him regarding deposit of bids vis-a-vis all the e-auctions conducted by him.
viii) Directions to Respondent No.1 herein not to take any coercive steps with respect to the above e-auction dated 15.07.2021, declaring the successful bidder or to issue letter of intent etc.
ix)Directions to Respondent No.1 to place on record with respect to the permission sought in terms of Regulation 10 of IBBI (Liquidation Process) Regulations, 2016.
x) Directions to Respondent 2 to 4 to look into the acts and activities done by Respondent No.1 during the CIRP and Liquidation period for gross violation of provisions under IBC and its rules and regulations.
xi) Restraint order against the Liquidator/Respondent No.1 herein or such other order as the Tribunal may deem fit and proper.
2. The facts that lead to the filing of this application in brief are that:
(i) M/s Servomax India (P) Ltd/ Corporate Debtor Applicant was ordered to be liquidated vide this Tribunal order dated 04.02.2019 and R-1 herein was appointed as Liquidator for conducting the liquidation process of the Corporate Debtor.
(ii) Pursuant to the aforesaid order, the Liquidator, made publication in leading newspapers on 08.02.2019 inviting claims from the stakeholders of the Corporate Debtor. In response to the publication, the Applicant filed its claim, which was admitted by the Liquidator and the Applicant became a member of Stakeholders Committee. The Stakeholders Consultation Committee Meeting was convened by the Liquidator on 10.10.2019 wherein the timeline was set as 90 days from the liquidation commencement date to sell the Corporate Debtor as an ongoing concern and the Reserve Price was fixed at Rs. 72 crores. Subsequently, the Reserve Price was reduced from time to time and ultimately fixed at Rs. 24.59 crores for auction to be held on 15.07.2021, post realization of sale of some of the assets of the Corporate Debtor.
(iii) The Applicant states that, the Liquidator, instead of taking action to sell the assets as per provisions of Regulation 32 of the IBBI (Liquidation Process) Regulations, 2016 i.e. to sell the assets of the Company as standalone basis, slump sale, set of assets collective or in parcels, continued making efforts to sell it as an ongoing basis even beyond 90 days from liquidation commencement date, which is against the provisions of law, when in the instant case, the Corporate Debtor is not a going concern company at the time of issuance of notice for e-auction. The Applicant accused the Liquidator of doing so, with an ulterior motive to facilitate the Promoters of the Corporate Debtor or his associates to purchase the assets at a cheap rate. It is stated that the Liquidator instead of taking action to sell the Corporate Debtor or its assets for maximization of the value of CD, had decreased the value as per his whims and fancies and acted against the provisions of the Code. The Applicant has tabulated the e-auction notices issued by the Liquidator and the realization value quoted by him vis-à-vis the value quoted for asset wise sale, which is as under:-
(in crores)
