NCLAT (13.05.2022) in Ayan Mallick Vs. Pratim Bayal, Liquidator & Ors. [Company Appeal (AT) (Insolvency) No. 456 of 2022] held that;
When the Adjudicating Authority is satisfied that joint sale shall bring maximization of assets of the Corporate Debtor and the possession of the properties of the Guarantors have already been taken under SARFAESI and both land and factory need to be sold together to maximize the value of the assets, we fail to see that how the Appellant shall be prejudiced in any manner.
Excerpts of the order;
13.05.2022: Heard learned counsel for the Appellant, Shri Ashish Makhija, learned counsel for the Liquidator and learned counsel appearing for the Bank. This Appeal has been field against the order dated 01.02.2022 by which the Adjudicating Authority (National Company Law Tribunal), Kolkata Bench, Kolkata has dismissed the I.A. No. 32/KB/2022 filed by the Applicant/Appellant. In the I.A. the prayer made by the Appellant who is Suspended Director of the Corporate Debtor was that e-auction sale notice dated 16.12.2021 for sale of the assets of the Corporate Debtor under liquidation and assets of the guarantor under SARFAESI Act be stayed until the disposal of the I.A.
# 2. The e-auction notice was issued for sale of factory and land. Apart from the assets of the Corporate Debtor, the land was owned by the Promoter/ Guarantor, hence, e-auction notice was for a joint sale of the assets. It was submitted before the Adjudicating Authority that joint sale will maximize the value of assets of the Corporate Debtor, hence the Court should permit the same. After hearing the learned counsel for the parties, the Adjudicating Authority rejected the application and observed that if there is maximization of the assets, selling it as a combined should not prejudice the applicant in any manner as it is going to get a better value for the corporate guarantor.
# 3. With regard to value of both properties i.e. of the Corporate Debtor and the guarantors, Rs.16.15 crores is the joint reserved price mentioned in the e-auction notice. Learned counsel for the Appellant submits that by selling the assets of the guarantors also, he will lose his rights which are given under SARFAESI Act, 2002 qua the properties.
# 4. Learned counsel for the Respondent has also referred to judgment of this Tribunal in Company Appeal (AT) (Ins.) No.147/2022 – ‘Prateek Gupta and Ors. vs. Kotak Mahindra Bank Ltd. and Anr.’. The above judgment do support the submissions raised by learned counsel for the Respondent.
# 5. We have considered submissions of learned counsel for the parties and perused the record. When the Adjudicating Authority is satisfied that joint sale shall bring maximization of assets of the Corporate Debtor and the possession of the properties of the Guarantors have already been taken under SARFAESI and both land and factory need to be sold together to maximize the value of the assets, we fail to see that how the Appellant shall be prejudiced in any manner. We do not find any error in the order of the Adjudicating Authority rejecting the I.A. We dismiss the Appeal. We, however, observe that it shall be open to the Appellant to take such remedy under SARFAESI with regard to auction in accordance with law.
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Blogger’s comments; The following questions needs to be answered;
Whether Liquidator can include the property of guarantor in the Liquidation Estate.
Whether Liquidator can deal/auction any property outside the Liquidation Estate.
Whether Liquidator has powers to take into possession any property under the provisions of SARFAESI.
Whether a bank/financial institution can appoint Liquidator as its authorised officer to deal with the property (secured asset) under the provisions of SARFAESI.
Whether a Liquidator can work as representative of a stakeholder during the liquidation process.
In joint reserve price /joint auction notice how the money will be distributed of the realisation post auction.
Now lets look into various provisions of the Code & regulations’
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# Section 36. Liquidation estate. -
(1) For the purposes of liquidation, the liquidator shall form an estate of the assets mentioned in sub-section (3), which will be called the liquidation estate in relation to the corporate debtor.
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(3) Subject to sub-section (4), the liquidation estate shall comprise all liquidation estate assets which shall include the following: -
(a) any assets over which the corporate debtor has ownership rights, including all rights and interests therein as evidenced in the balance sheet of the corporate debtor or an information utility or records in the registry or any depository recording securities of the corporate debtor or by any other means as may be specified by the Board, including shares held in any subsidiary of the corporate debtor;
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(4) The following shall not be included in the liquidation estate assets and shall not be used for recovery in the liquidation: -
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(c) personal assets of any shareholder or partner of a corporate debtor as the case may be provided such assets are not held on account of avoidance transactions that may b avoided under this Chapter;
As per the provisions of the Code, personal assets of any shareholder can not be the part of the “Liquidation Estate” and can not be used for recovery in the liquidation process under the Code. However, a bank (SFC) can deal/realise mortgaged properties, other than those owned by CD , held by the bank as collateral security, outside the liquidation process as per existent laws.
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Although, Liquidator, in his personal capacity, can accept assignment for disposal of properties mortgaged (owned by shareholders) to the bank,, as authorised agent/representative of the bank, but the moment Liquidator, agrees to act as agent/representative of a stakeholder (bank), he renders himself ineligible to work as Liquidator & has to voluntarily vacate the office of Liquidator.
Liquidation Regulations
# Regulation 3. Eligibility for appointment as liquidator.
(1) An insolvency professional shall be eligible to be appointed as a liquidator if he, and every partner or director of the insolvency professional entity of which he is a partner or director, is independent of the corporate debtor.
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(3) An insolvency professional shall not continue as a liquidator if the insolvency professional entity of which he is a director or partner, or any other partner or director of such insolvency professional entity represents any other stakeholder in the same liquidation process.
To my mind the only option in the present situation is for the bank to enforce its security interest for the property of CD (Factory) under section 52 and realise the same, as permitted under section 52 (4) read with Liquidation Regulation 37(7), along with the property of guarantor (Land), under the provisions of SARFAESI.
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