Rajkumar Vishambernath Agarwal Vs. Sachani Developers LLP and Ors. - Liquidator, for conducting private sale is not to identify one buyer and sell the assets; rather, strategy has to be made to approach the interested buyer for assets which is with the object to attract more and more interested buyers to maximize the realization from the sale of assets.

 NCLAT (2024.04.16) in Rajkumar Vishambernath Agarwal Vs. Sachani Developers LLP and Ors..[(2024) ibclaw.in 244 NCLAT, Company Appeal (AT) (Insolvency) No. 452, 453 & 651 of 2024] held that; 

• Liquidator, for conducting private sale is not to identify one buyer and sell the assets; rather, strategy has to be made to approach the interested buyer for assets which is with the object to attract more and more interested buyers to maximize the realization from the sale of assets.

Excerpts of the order;

Both these Appeals have been filed against the order dated 13.02.2024 passed by the Learned Adjudicating Authority, (National Company Tribunal, Mumbai Bench, Court – II) in I.A. No.5737/2023 & I.A. No. 261/2024 in C.P. (IB)/03/MB/C–II/2017.

# 2. The Appellant in Comp. App. (AT) Ins. No. 452 & 453/2024 is a successful bidder in a private sale whereas Appellant in Comp. App. (AT) Ins. No. 651/2024 claimed to be a prospective bidder in the private sale of Corporate Debtor.

# 3. Facts of the case necessary for deciding the Appeal are:

i. Corporate Insolvency Resolution Process (CIRP) of the Corporate Debtor/Bhupen Electronic Ltd. commenced by order dated 17.01.2017 of the Adjudicating Authority. The Adjudicating Authority passed an order on 28.07.2017 directing for liquidation of the Corporate Debtor.

ii. The State Bank of India and Canara Bank are the Financial Creditors of the Corporate Debtor.

iii. The Respondent/Manish Gupta in both the Appeals is the Liquidator of the Corporate Debtor appointed by the Adjudicating Authority.

iv. Liquidator issued 6 e-Auction Notices to sell the property of the Corporate Debtor i.e., on 22.02.2019, 27.03.2019, 03.05.2019, 28.10.2020, 24.12.2020 and 08.10.2021, all the e-Auctions failed. Reserved price of the last e-Auction was Rs.15,71,06,250/-.

v. Eshan Minerals Pvt. Ltd. (Appellant in Comp. App. (AT) Ins. No. 452 & 453/2024) sent an offer of private sale on 20.09.2023, offering to take the property for an amount of Rs.15,72,00,000/- plus GST.

vi. The offer of Eshan Minerals Pvt. Ltd. was revised to Rs.15,80,00,000/- plus GST. The Eshan Minerals Pvt. Ltd. also made and payment of Rs.3,95,00,000/-, i.e., 25% of the sale consideration as Earnest Money Deposit (EMD) was approved by the Financial Creditor on 16.11.2023.

vii. The offer of the Appellant was also placed before the Financial Creditor, who approved in its Meeting of the Creditors dated 16.11.2023.

viii. On 21.11.2023, Letter of Intent (LoI) was issued by Liquidator to the Eshan Minerals Pvt. Ltd.

ix. On 23.11.2023, an email was received from M/s. Sachani Developers LLP & Ors. (Sachani Developers), expressing interest to participate in the purchase of rights in the property under private sale. Liquidator having already issued LoI did not respond to the letter of Sachani Developers.

x. Liquidator on 01.12.2023, filed I.A. No. 5737/2023 before the Adjudicating Authority seeking approval of Adjudicating Authority for private sale of the property in favour of Eshan Minerals Pvt. Ltd.

xi. Sachani Developers also filed an I.A. No. 261/2024 before the Adjudicating Authority seeking direction to the Liquidator to allow it to participate in the biding process.

xii. Both the applications have been disposed of by the order of the Adjudicating Authority dated 13.02.2024. Adjudicating Authority by impugned order rejected the I.A. No. 5737/2023 filed by the Liquidator seeking approval of the private sale, whereas I.A. No. 261/2024 was allowed.

xiii. In pursuance of the order of the Adjudicating Authority, 13.02.2024, Liquidator issued a Public Announcement dated 21.02.2024 in two newspapers in fixing last date of EMD as 02.03.2024 and 05.03.2024 from 02:00 PM to 04:00 PM as date of Auction.

xiv. Auction notice mentioned the auction as is where is, whatever there is and without recourse basis.

# 4. Comp. App. (AT) Ins. No. 452 & 453/2023 was filed by Eshan Minerals on 23.02.2024 in which following interim order was passed by this Tribunal on 05.03.2024:

“Learned counsel for the Appellant submits that the Adjudicating Authority by the impugned order has rejected the private sale whereas the Liquidator has already filed application for approval of the private sale and at that stage Respondent No.1 filed an application stating that he is interested to take the property and on whose instance the order reserved on the application for approval was de-reserved, application was heard and impugned direction was passed.

An Additional Affidavit has been filed by the Appellant where the Appellant has brought on record letter dated 26.02.2024 sent by the Respondent No.1 that he does not want to involve in any litigation matter, hence, he does not want to proceed further in the proposal.

Learned counsel for the Appellant submits that in view of the disinclination shown by Respondent No.1, the whole order is erroneous.

Learned counsel for the Liquidator also submits that she has also received letter dated 26.02.2024.

In view of the aforesaid, we are of the view that auction in pursuance of the impugned order may not be held till further order.

Let reply be filed by the Respondents within 10 days from today.

List this Appeal on 20.03.2024.”

# 5. In view of the interim order dated 05.03.2024, Auction scheduled to take place on 05.03.2024 could not take place. Liquidator has filed an Affidavit bringing on record the publication dated 21.02.2024.

# 6. It is further stated by the Liquidator that in pursuance of the said publication an EMD has been received by one party and EoI was submitted by Best One Infraventures Pvt. Ltd. but no EMD was submitted. One M/s. SD Reality has submitted EoI along with EMD and deposited the EMD which is kept in the Fixed Deposit.

# 7. Appellant in Comp. App. (AT) Ins. No. 651/2024, Best One Infraventures Pvt. Ltd., after e-Auction Notice issued by Liquidator dated 21.02.2024 sent a letter 27.02.2024 to the Liquidator enquiring about the outstanding dues of MIDC (Maharashtra Industrial Development Corporation) on the property. Best One Infraventures Pvt. Ltd. claimed to have prepared a Demand Draft of Rs.1,58,00,000/– towards deposit the EMD, but Demand Draft was not deposited.

# 8. Best One Infraventures Pvt. Ltd. filed Comp. App. (AT) Ins. No.651/2024 in this Tribunal on 28.03.2024, challenging the order dated 13.02.2024. Both the Appeals were heard on 04.04.2024 by this Tribunal.

# 9. We have heard Sh. Abhijeet Sinha, Learned Sr. Counsel appearing on behalf of the Appellant in Comp. App. (AT) Ins. No. 452 & 453/2024 and Sh. Amar Dave, Sr. Advocate appearing for the Appellant in Comp. App. (AT) Ins. No. 651/2024. Ms. Purti Gupta and Ms. Heena George has appeared for the Liquidator.

# 10. Sh. Abhijeet Sinha Learned Sr. Counsel for the Appellant appearing for the Eshan Minerals Private Ltd. submits that the private sale in favour of Eshan Minerals Pvt. Ltd. was made after 6 failed Auction. LoI was issued in favour of the Eshan Minerals Private Ltd. on 21.11.2023 and the Liquidator has filed an application being I.A. No. 5737/2023 seeking approval of the Adjudicating Authority which has been refused by the impugned order on insufficient grounds. It is submitted that Sachani Developers, who had filed an I.A. No. 261/2024 showing interest in participating in the bidding process of Corporate Debtor has subsequently by letter dated 26.02.2024 has withdrawn his offer which has been noticed by this Tribunal in its interim order dated 05.03.2024, when Sachani Developers have withdrawn their offer, there is no occasion to proceed with any Auction in pursuance of the order dated 13.02.2024 and the private sale in favour of the Appellant need to be confirmed. It is submitted that State Bank of India/Financial Creditor have also filed an Affidavit that private sale in favour of the Appellant be confirmed. The order dated 13.02.2024, directing for e-Auction be set aside.

# 11. Learned Counsel for the Liquidator advancing submission on behalf of the Liquidator submits that Liquidator has issued Auction Notice dated 21.02.2024, in pursuance of the order of the Adjudicating Authority dated 13.02.2024 and it has received one EoI from M/s. SD Reality but the Auction could not take place in view of the interim order passed by this Tribunal on 05.03.2024. Liquidator further submits that the Liquidator has also received the letter dated 26.02.2024 from Sachani Developers that they are no more interesting to participate in the sale of the Corporate Debtor.

# 12. Sh. Amar Dave, Learned Sr. Counsel for the Appellant appearing in Comp. App. (AT) Ins. No. 654/2024 submits that Appellant is interested in participating in the bidding process of the Corporate Debtor. It is submitted that Liquidator has not clarified about the dues of the MIDC. It is submitted that it was obligated for Liquidator to find out the current dues of the MIDC and transparency requires that dues of MIDC be informed to all the prospective bidders to submit their bid. It is submitted that Appellant has prepared a draft of Rs.1,64,00,000/- to submit EMD. Adjudicating Authority did not commit any error in issuing a fresh e-Auction Notice.

# 13. Learned Counsel for the Liquidator refuting the submission of Sh. Amar Dave submits that Appellant-Best One Infraventures Pvt. Ltd. although submitted the EoI but did not submit an EMD hence, they were not entitled to participate in the bid in the Auction. It is submitted that Liquidator has already filed an application before the Adjudicating Authority being I.A. No.830/2022 seeking a direction again the MIDC that no transfer charges are payable to the MIDC, which application is still pending. MIDC has already informed about its pending dues of Rs.17,16,64,355/- till 04.12.2020 and transfer fee which amount must have increased by time, sale is being as is where is basis. It is the bidder who has to pay all the dues of the MIDC and the Eshan Mineral Private Limited has undertaken to pay the dues of MIDC directly.

# 14. We have considered the submissions of the Counsel for the parties and perused the record.

# 15. In Comp. App. (AT) Ins. No. 452 & 453/2024, challenge is to the order dated 13.02.2024, by which Adjudicating Authority has refused to approve the private sale in favour of Eshan Minerals Private Limited as was prayed in I.A. No.5737/2023.

# 16. Submission has been made by the Appellant that Financial Creditor having also approved the private sale Adjudicating Authority ought to have approved the private sale in favour of the Appellant. Offer of the Appellant being higher than reserve price of the last failed Auction. It is submitted that Appellant Eshan Minerals Private Limited has already undertaken to pay all MIDC dues, including transfer charges directly to the MIDC. It is submitted that offer for private sale given by the Appellant was after 6 failed Auction and hence there was no reason for not approving the said sale.

# 17. Adjudicating Authority in paragraphs 11 & 12 made following observations:

• “11. While the Liquidator has taken various steps to ensure the private sale is reasonable and transparent, we cannot ignore the fact that the Liquidation Regulation provides for some more checks and balances on the private sale in Schedule 1 of the Liquidation Regulations which includes, inter alia, preparation of a strategy to approach interested buyers for assets to be sold by private sale, liaising with potential buyers or their agents, completion of sale in accordance with the terms of sale, etc. It is observed that the Buyer approached the Liquidator on his own and expressed interest to acquire the rights over the said Property above the reserve price fixed at the last failed auction. Though belated ie., after issue of letter of intent in favour of the Buyer, another person (the Applicant in IA.No.261/2024) has come out with an expression of interest to acquire the rights on the said Property. Thus it is evident that there is interest in the market to acquire the rights in the said Property even though there are other outstanding issues. Furthermore, substantial time has passed after the last public auction in October 2021.

• 12. It is also pertinent to observe from the Liquidation Regulations that the private sale has to be conducted in a manner so as to maximize the realizations from the sale of assets. The Hon’ble NCLAT in the case of State Bank of India Vs. Bhuvee Stenovate Private Limited and Ors. Comp. App. (AT) (Ins) No. 1013/2022 observed that the Liquidator, for conducting private sale is not to identify one buyer and sell the assets; rather, strategy has to be made to approach the interested buyer for assets which is with the object to attract more and more interested buyers to maximize the realization from the sale of assets. Keeping in mind the above decision and considering the interest shown by the Applicant in IA.No.261/2024, we feel it appropriate to give an opportunity to the Applicant in IA No.261/2024 and other interested parties, if any, to participate in the sale process.”

# 18. The Adjudicating Authority after noticing the sequence of the event and the fact that offer of private sale was received from the Appellant/Eshan Minerals Private Ltd. and the Liquidator had not to identify one buyer and sell the assets rather strategy has to be made to approach the interested buyer for asset with the object to attract more and more to maximise the realisation from the sale of assets. Adjudicating Authority in paragraph 12 of the order as noted above with the object of giving opportunity to the Applicant in I.A. No. 261/2024 and other `interested parties’ to participate in the sale of the process directed for issue of a fresh Notice for conducting sale in two newspapers.

# 19. We have already noticed that fresh Auction Notice was issued on 21.02.2024 fixing 05.03.2024 for Auction which Auction could not take place due to interim order passed on 05.03.2024 by this Tribunal.

# 20. It is relevant to notice that Adjudicating Authority himself has directed that bid offered by the Appellant be treated as anchor bid and in the event higher bid is received than the anchor bid the buyer shall have the option to match the same. It is useful to extract the directions issued in paragraph 13 of the impugned order which are as follows:

• “13. For the foregoing reasons, we disallow private sale in terms of the Letter of Intent annexed as Exhibit O in IA. No. 5737 of 2023 and dismiss IA No. 5737 of 2023 with the following directions to the Liquidator under Section 35 of the Code:

• (i) The Liquidator shall issue fresh notice of conducting sale in two newspapers circulating in the area where the said Property is situate and invite bids above the bid submitted by the buyer by adopting Swiss Challenge method, thereby treating the bid offered by the Buyer as an anchor bid. The interested bidders will have to submit 10% of the bid amount as EMD along with the bid. In the event of receipt of higher bid than the anchor bid of the Buyer, the Buyer shall have the option to match the same.

• (ii) The Liquidator may finalize other terms relating to MIDC dues, time period for making deposit of consideration, documentation, etc.

• (iii) The entire sale process to be completed within one month from the date of the order and there is no requirement of obtaining fresh consent/approval of financial creditors for confirming the private sale in favour of the highest bidder subject to satisfaction of other terms and conditions as may be specified by the Liquidator.”

# 21. We have already noticed that Liquidator has submitted that in pursuance of the Auction Notice dated 21.02.2024, one EMD has already been received and the Appellant-Best One Infraventures Pvt. Ltd. has sent EoI, but EMD was not paid.

# 22. We are of the view that Adjudicating Authority did not commit any error in issuing a direction for issue of a fresh Notice of conducting sale to other interested parties one party had been already expressed interest and filed I.A. No.261/2024.

# 23. The submission of Sh. Abhijeet Sinha that Sachani Developers who had shown interest and filed an I.A. No.261/2024 subsequently withdrawn his offer by letter dated 26.02.2024 there is no occasion to proceed with the Auction any further. The Auction Notice was already issued on 21.02.2024 and the letter dated 26.02.2024 was issued by Sachani Developers on 26.02.2024 subsequent to e-Auction and in pursuance of Notice for fresh Auction, EMD has already been received at least by one party.

# 24. We thus are of the view that fresh Auction need to be conducted by issuance of corrigendum by Liquidator in continuation of the e-Auction Notice by 21.02.2024 by fixing a date within two weeks from today for conduct of the e-Auction. The Liquidator in the corrigendum may also state that the successful bidder has to pay all the dues of MIDC.

# 25. The interest of the Appellant Eshan Minerals Private Limited are also protected by the impugned order since the bid given by the Appellant has been treated to be anchor bid. We are of the view that in event no higher bid is received in a Swiss Challenge Method, private sale in favour of the Appellant as per LoI dated 21.11.2023, need to be confirmed without requiring any further approval from the Adjudicating Authority.

# 26. Coming to the Comp. App. (AT) Ins. No. 651/2024, the prayer in the Appeal by the Appellant is as follows:

• “a) Stay the effect of the Impugned Order, effectively, the auction process adopting the Swiss Challenge Method allowed by the Impugned Order till the hearing and adjudication of the present Appeal.

• b) In the alternative, stay the Corporate Insolvency Resolution Process of the Corporate Debtor till the hearing and disposal of the present Appeal.

• c) Pass such further and other relief or directions as the nature and circumstances of the case may require.”

# 27. The prayer of the Appellant Best One Infraventures Pvt. Ltd., challenging the order of the Adjudicating Authority insofar as it direct for adopting Swiss Challenge Method cannot be accepted. Appellant- Best One Infraventures Pvt. Ltd. in event intend to participate in the Swiss Challenge Method. It is open for Best One Infraventures Pvt. Ltd. to submit an EMD in pursuance of EoI already issued by the Appellant and subject to this liberty to the Appellant- Best One Infraventures Pvt. Ltd., no other relief can be granted in Comp. App. (AT) Ins. No. 651/2024.

# 28. In view of the abovementioned discussions and conclusions, the Appeals as above are decided in following manner:

• i. The order dated 13.02.2024 passed by the Adjudicating Authority, challenged in the above Appeals is upheld.

• ii. The Liquidator to issue a corrigendum fixing a date of e-Auction within two weeks from today in continuation of e-Auction Notice dated 21.02.2024 to conduct the e-Auction by Swiss Challenge Method as directed by Adjudicating Authority by order dated 13.02.2024.

• iii. Appellant-Best One Infraventures Pvt. Ltd. who has send its EoI but has not given the EMD is at liberty to submit its EMD to the Liquidator within a week from today.

• iv. On submission of the EMD and other necessary compliances by Appellant- Best One Infraventures Pvt. Ltd., Appellant shall also be permitted to participate in the Swiss Challenge Process.

• v. That in event in the Swiss Challenge Method in pursuance of the e- Auction as directed herein above, no other bid is received higher to the consideration offered by the Appellant, i.e., Eshan Minerals Private Limited the private sale in favour of the Eshan Minerals Private Limited as per LoI dated 21.11.2023 shall stand confirmed without requirement of any approval by the Adjudicating Authority.

• vi. In Swiss Challenge Method, the Liquidator after completion of the Swiss Challenge Method shall issue LoI to highest successful bidder and take all other steps as per Auction Notice.

Parties shall bear their own cost.

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State Bank of India Vs. Bhuvee Stenovate Pvt. Ltd. & Ors. - To avoid the pitfalls of disposing of the assets by conducting a Private Sale for the Pittance, Regulation 33 has prescribed some stringent conditions that the Liquidator is under an obligation to comply.

 NCLAT (25.01.2023) in State Bank of India Vs. Bhuvee Stenovate Pvt. Ltd. & Ors. [Comp. App. (AT) (Ins.) No. 1013 of 2022 ]  held that;

• Regulation 33 of the Liquidation Regulations is couched in a language which shows that ample latitude has been given to the Liquidator, who may “ordinarily” sell the assets through auction thereby meaning that in peculiar facts and circumstances, the Liquidator may directly go in for a Private Sale. 

• To avoid the pitfalls of disposing of the assets by conducting a Private Sale for the Pittance, Regulation 33 has prescribed some stringent conditions that the Liquidator is under an obligation to comply.

• IBC has left it to the discretion of the Liquidator to explore the best possible method for selling the assets of the Corporate Debtor in liquidation, which includes Private Sale through direct negotiations with the object of maximizing the value of the assets offered for sale.”

• The Hon’ble Supreme Court in the above judgment has held that it is not for the Court to substitute its decision taken by the Liquidator.

• the Adjudicating Authority by adopting a process of taking two bids, one by the Applicant and another by intervenor could not have concluded the sale of the Corporate Debtor without giving an opportunity to the liquidator to take steps for private sale.

• The Appellant, who is a Financial Creditor has stake in the assets of the Corporate Debtor, has every right to question the order of the Adjudicating Authority even though the Liquidator has chosen not to challenge the order.

Excerpts of the order;

This Appeal has been filed against the order dated 16.06.2022 passed by the Adjudicating Authority (National Company Law Tribunal), Kolkata Bench-I, Kolkata in I.A (I.B.C)/469(KB)2022, IVN.P (IBC)/9(KB)2022 in C.P.(IB)/515(KB)2018. The Corporate Insolvency Resolution Process (CIRP) was initiated against ‘Bhuvee Stenovate Private Limited’ (Corporate Debtor) by order dated 12.03.2019. An order was passed on 07.02.2020 to liquidate the Corporate Debtor and the Respondent No.1 was appointed as the liquidator of the Corporate Debtor. The liquidator issued seven public announcements for the sale of the Corporate Debtor as a going concern under Regulation 32A of the IBBI (Liquidation Process) Regulations, 2016. Although during the second e-auction process, second lot of the then Asset Blocks were sold successfully, however, the Corporate Debtor could not be sold as a going concern. The liquidator published the 8th auction notice on 21.01.2022, certain inventories of the Corporate Debtor consisting mainly of finished goods were successfully sold. 11th public announcement dated 15.05.2022 was issued by the Liquidator for sale of the rest of the unsold assets of the Corporate Debtor. On 04.03.2022, 4th Stakeholders’ Consultation Committee meeting took place where the Liquidator updated the Stakeholders’ Consultation Committee with respect to the liquidation process of the Corporate Debtor. Certain suggestions were received in the meeting regarding the manner of sell of the assets. The State Bank of India indicated that the revaluation is required to be done. It was also noticed in the minutes that the offer price of Rs.50 to Rs. 60 Crores is on a lower side than the expected amount of realization. The Liquidator stated before the Stakeholders’ Consultation Committee that suggestions shall be examined and fruitful action be taken. On 12.05.2022, the Respondent No.2- ‘Laser Solar LLP’ submitted a proposal to the Liquidator for acquisition of the unsold assets of the Corporate Debtor by way of private sale for a sum of Rs.50.05 Crores. The Liquidator by e-mail dated 13.05.2022 informed the Respondent No.2 that offer of Rs. 50.05 Crores is well below the last reserve price published. Therefore, the offer was not acceptable. The Respondent No.2- ‘Laser Solar LLP’ after rejection of his offer by the Liquidator filed an I.A. No. 469 of 2022 before the Adjudicating Authority.

# 2. During pendency of the above Application ‘M/s. Jindal Stainless Limited’ has also submitted a proposal dated 04.06.2022 to acquire the Corporate Debtor as a going concern by way of private sale which offer was also rejected by liquidator by e-mail dated 06.06.2022. Thereafter, ‘M/s. Jindal Stainless Limited’ filed an Intervention P. No. 9 of 2022 in I.A. No. 469 of 2022 before the Adjudicating Authority praying for following reliefs:-

• “a. Pass an order allowing Jindal Stainless Limited to intervene into the proceeding initiated by Laser Solar LLP in I.A. No. (I.B.C.)/469/(KB)2021 in CP(IB) No. 515/KB/2018;

• b. Pass an order dismissing I.A. No. (I.B.C.)/469/(KB)2021 in CP(IB) No. 515/KB/2018;

• c. Pass an order directing the Liquidator to consider the bid of Jindal Stainless Limited to run any fair and transparent process in accordance with the Liquidation Regulations for the sale of the Corporate Debtor and/or its assets”

# 3. I.As filed by the Respondent No.2- ‘Laser Solar LLP’ and ‘M/s. Jindal Stainless Limited’ were listed before the Adjudicating Authority on 07.06.2022 and 10.06.2022. By an order dated 10.06.2022, the Adjudicating Authority directed both Respondent No.2 and ‘M/s. Jindal Stainless Limited’ to submit their respective bids under cover of sealed envelope before the Adjudicating Authority on or before 13.06.2022. The Liquidator was present before the Adjudicating Authority on the said dates. The competitive bids which were received by the Adjudicating Authority from Respondent No.2 and ‘M/s. Jindal Stainless Limited’ were opened on 16.06.2022 in open Court and the Adjudicating Authority noted that the Respondent No.2 has submitted a bid of Rs.61.05 Crores for the properties, whereas ‘M/s. Jindal Stainless Limited’ has submitted a bid of Rs.52.50 Crores. The Adjudicating Authority by the order dated 16.06.2022 confirmed the sale by private treaty in favour of the highest bidder i.e. Respondent No.2- ‘Laser Solar LLP’ and directed the liquidator to take further steps in accordance with law. ‘M/s. Jindal Stainless Limited’ made a request before the Adjudicating Authority to stay the confirmation for 48 hours to see if ‘M/s. Jindal Stainless Limited’ wanted to match the offer. The said prayer was declined. The Appellant who is a Financial Creditor of the Corporate Debtor and is also 36% shareholder in the Shareholders’ Consultation Committee has filed this Appeal challenging the order dated 16.06.2022.

# 4. We have heard Shri Vaibhav Gaggar, Learned Counsel for the Appellant, Shri Rishav Banerjee, Learned Counsel for the Respondent No.1 and Shri Abhijeet Sinha, Learned Counsel for the Respondent No.2. We have also heard Learned Counsel for the other Respondents.

# 5. Learned Counsel for the Appellant challenging the impugned order submits that the Adjudicating Authority exceeded its jurisdiction in asking the only two Applicants who were before the Adjudicating Authority to submit their bids and on the basis of the said bid has confirmed auction of assets of the Corporate Debtor. It is submitted that the IBC provides manner and procedure for liquidation and as per Section 33, it is the liquidator who has to conduct the sale of the assets either by public auction or by private sale. For conducting private sale, procedure is prescribed under Schedule-I of the IBBI (Liquidation Process) Regulations, 2016. For conducting a private sale also, a manner and procedure is prescribed. Liquidator has not conducted any private sale as per the IBBI (Liquidation Process) Regulations, 2016 and the Adjudicating Authority could not have itself conducted the private sale and confirmed the private sale. The last reserve price of public auction was about Rs.181 Crores. The confirmation of the sale in favour of the Respondent No.2 by the Adjudicating Authority is not in accordance with the manner and procedure prescribed in the IBC. The Liquidator has already rejected the offer made by the Respondent No.2. It is further submitted that the Appellant was not even informed of the Application I.A No. 469/2022 nor the Stakeholders’ Consultation Committee was informed about the proceedings before the Adjudicating Authority and without taking consultation from the Stakeholders’ Consultation Committee the order has been passed. It is submitted that the Liquidator has also during the hearing before the Adjudicating Authority has expressed its objection to the offer of the Respondent No.2.

# 6. Learned Counsel for the Liquidator submitted that the Liquidator has already rejected the offer received by the Respondent No.2 as it being much lower to the last reserve price which was Rs.181 Crores. It is submitted that the liquidator was present before the Adjudicating Authority and has communicated its objection to the offer of the Respondent No.2. However, after the order was passed by the Adjudicating Authority, the liquidator under the direction issued by the Adjudicating Authority has issued the Sale Certificate in favour of the Respondent No.2. On 25.06.2022, the liquidator has also distributed sale proceed to the Appellant also. It is submitted that before the Adjudicating Authority, liquidator has informed that Stakeholders’ Consultation Committee has already rejected the proposal of private sale and has formed an opinion that an Application has to be filed before the Adjudicating Authority for revaluation of the Corporate Debtor.

# 7. Shri Abhijeet Sinha, Learned Counsel appearing for the Respondent No.2 refuting the submissions of the Counsel for the Appellant submits that in spite of several public auctions, no bidder came to take the Corporate Debtor. The Stakeholders’ Consultation Committee in its minutes has also noted that the offer which was being received before the Adjudicating Authority where between range of Rs.50 Crores to Rs. 55 Crores whereas sale in favour of the Respondent No.2 has been confirmed of Rs.61.05 Crores. It is submitted that the Appeal has neither been filed by the Liquidator nor by ‘M/s. Jindal Stainless Limited’ and the Appellant has also not brought before this Tribunal any prospective buyer who can submit a better offer than one given by the Respondent No.2. After various failed attempts in auction process, the Adjudicating Authority thought it fit to accept the private bid for which there is no bar in law. It is submitted that the Liquidator has already issued sale certificate to the Respondent No.2. Respondent No.2 has taken the possession of the assets of the Corporate Debtor and is running the Corporate Debtor and incurring expenses.

# 8. We have heard Learned Counsel for the parties and perused the record.

# 9. The manner and procedure under which liquidator shall proceed to auction/ sell the assets of the Corporate Debtor has been provided in the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016. Regulation 32 provides for ‘sale of assets’. Regulation 32-A provides for ‘sale as a going concern’. Regulation 33 deals with ‘mode of sale’. Regulation 33 which is relevant for the present case is as follows:-

“33. Mode of sale.-(1) The liquidator shall ordinarily sell the assets of the corporate debtor through an auction in the manner specified in Schedule

(2) The liquidator may sell the assets of the corporate debtor by means of private sale in the manner specified in Schedule I when-

(a) the asset is perishable;

(b) the asset is likely to deteriorate in value significantly if not sold immediately;

(c) the asset is sold at a price higher than the reserve price of a failed auction; or

(d) the prior permission of the Adjudicating Authority has been obtained for such sale:

Provided that the liquidator shall not sell the assets, without prior permission of the Adjudicating Authority, by way of private sale to-

(a) a related party of the corporate debtor;

(b) his related party; or

(c) any professional appointed by him.

(3) The liquidator shall not proceed with the sale of an asset if he has reason to believe that there is any collusion between the buyers, or the corporate debtor’s related parties and buyers, or the creditors and the buyer and shall submit a report to the Adjudicating Authority in this regard, seeking appropriate against the colluding parties.”

# 10. Regulation 33(1) provides that ordinarily the liquidator shall sell the assets of the Corporate Debtor through an auction in the manner specified in Schedule I. Sub-regulation (2) of Regulation 33 also empowers the liquidator to sell the assets of the Corporate Debtor by means of private sale in the manner specified in Schedule I. Schedule I of the Regulations has two clauses. Clause (1) deals with ‘auction’ and Clause (2) deals with ‘private sale’. Clause (2) of Schedule-I is as follows:-

“2. PRIVATE SALE

(1) Where an asset is to be sold through private sale, a liquidator shall conduct the sale in the manner specified herein.

(2) The liquidator shall prepare a strategy to approach interested buyers for assets to be sold by private sale.

(3) Private sale may be conducted through directly liaising with potential buyers or their agents, through retail shops, or through any other means that is likely to maximize the realizations from the sale of assets.

(4) The sale shall stand completed in accordance with the terms of sale.

(5) Thereafter, the assets shall be delivered to the purchaser, on receipt of full consideration for the assets, in the manner specified in the terms of sale.”

# 11. Present is a case where assets were notified for public auction. Last public auction was notified on 01.06.2022 by notice dated 15.05.2022. Auction was to be held in four lots. The reserve price as mentioned in the last public auction was about Rs. 181 Crores. While noticing the facts as above, we have noted that the Respondent No.2 has given an offer to the liquidator on 12.05.2022 to acquire the assets by way of private sale of Rs.50.05 Crores which offer was rejected by the Liquidator on 13.05.2022 and it was thereafter Respondent No.2 filed an Application being I.A No. 469 of 2022 before the Adjudicating Authority where making following prayers:-

• “a. An order directing the Respondent to allow the Applicant to accept the offer of the Applicant and sale and transfer the Corporate Debtor through a private sale on a going concern basis in accordance with the provisions of the Code and the relevant regulations made there under.

• b. Ad Interim order restraining the Respondent to proceed with any auction in respect of the assets of the Corporate Debtor.“

# 12. In the Application, the Respondent No.2 was praying for a direction to liquidator to accept the offer of the Respondent No.2 and transfer the Corporate Debtor through a private sale on a going concern basis in accordance with the provisions of the Code. The manner and procedure of conducting the private sale is governed by Regulations and the liquidator is empowered to conduct sale of the assets by means of private sale in the manner specified in Schedule-I. We have noticed the provisions of Clause (2) of Schedule-I which is a procedure for private sale. One of the requirements of the Regulation is that Liquidator is to prepare a strategy to approach interested buyers for assets to be sold by a private sale. As per the Regulations, the private sale has to be conducted in a manner so as to maximise the realisations from the sale of assets. The liquidator, thus, for conducting private sale is not to identify one buyer and sell the assets rather strategy has to be made to approach the interested buyer for assets which is with the object to attract more and more interested buyers to maximise the realisations from the sale of assets. 4th meeting of the Stakeholders’ Consultation Committee held on 04.03.2022 has been brought on record where several suggestions were given to the Liquidator for the sale of the assets by different means. With regard to fresh valuation as suggested by the State Bank of India, the Bank of Baroda has also agreed to the suggestion and it was noted that the said can be done with the permission from the Adjudicating Authority. From the record, it is also clear that the liquidator did not file any application for obtaining any permission from the Adjudicating Authority for private sale and the Adjudicating Authority, on an application submitted by the Respondent No.2 making an offer and another intervenor- ‘M/s. Jindal Stainless Limited’, directed both to submit their bids in a sealed cover. The Adjudicating Authority on being satisfied that two bidders have come up before the Court showing their interest to acquire the Corporate Debtor, the Adjudicating Authority could have directed the liquidator to conduct the private sale so that apart from Respondent No.2 and ‘M/s. Jindal Stainless Limited’ if any other interested person wanted to participate, opportunity ought to have been given. The liquidator under the statutory Scheme of the IBBI (Liquidation Process) Regulations, 2016 have been empowered to take a decision regarding sale of the assets of the Corporate Debtor. It is relevant to notice that the offer of the Respondent No.2 was rejected by the Liquidator.

# 13. The Hon’ble Supreme Court had occasion to consider the provisions of Liquidation Regulations, 2016 in reference to conduct of sale by liquidator in “R.K. Industries (Unit-II) LLP vs. H.R. Commercials Private Limited and Ors.- 2022 SCC OnLine SC 1124”. In the above case, Stakeholders’ Consultation Committee adopted the Swiss Challenge Process for sale of the assets of the Corporate Debtor. The second Swiss Challenge process was initiated where certain bids were received by the liquidator which was not completed. In second Swiss Challenge process, one ‘H.R. Commercials Private Limited’ filed an I.A challenging the bid process in second Swiss Challenge process where interim order was passed. The Appellant- ‘R.K. Industries’ filed an Appeal before the Appellate Tribunal which Appeal was disposed of directed the Adjudicating Authority to decide the I.A filed by ‘H.R. Commercials Private Limited’. NCLT has passed an order permitting the liquidator to go for private sale of the assets of the Corporate Debtor which order was challenged by ‘R.K. Industries’ in the Appeal which was dismissed. In the above context, the Hon’ble Supreme Court had occasion to consider the provisions of Sections 33 & 35 of the Code as well as the Regulations 32, 33 and Schedule-I of the IBBI (Liquidation Process) Regulations, 2016. The Hon’ble Supreme Court after noticing the aforesaid provisions laid down in paragraphs 43 and 44:-

• “43. On a conjoint reading of the aforesaid provisions of the IBC and the Liquidation Regulations, it is evident that the Liquidator is authorized to sell the immovable and movable property of the Corporate Debtor in liquidation through a public auction or a private contract, either collectively, or in a piecemeal manner. The underlying object of the Statute is to protect and preserve the assets of the Corporate Debtor in liquidation and proceed to sell them at the best possible price. Towards this object, the provisions of the IBC have empowered the Liquidator to go in for a public auction or a private contract as a mode of sale. Besides reporting the progress made, the Liquidator can also apply to the Adjudicating Authority (NCLT) for appropriate orders and directions considered necessary for liquidation of the Corporate Debtor. The Liquidator is permitted to consult the stakeholders who are entitled to distribution of the sale proceeds. However, the proviso to Section 35(2) of the IBC makes it clear that the opinion of the stakeholders would not be binding on the Liquidator. Regulation 8 of the Liquidation Regulations refers to the consultative process with the stakeholders, as specified in Section 35(2) of the IBC and states that they shall extend all necessary assistance and cooperation to the Liquidator for completing the liquidation process. Regulation 31A has introduced a Stakeholders’ Consultation Committee that may advise the Liquidator regarding sale of the assets of the Corporate Debtor and must be furnished all relevant information to provide such advice. Though the advice offered is not binding on the Liquidator, he must give reason in writing for acting against such advice.

• 44. When it comes to the mode of sale of the assets of the Corporate Debtor, whether immovable or movable and other actionable claims, Regulation 33 of the Liquidation Regulations comes into play and states that ordinarily, the Liquidator will sell the said assets through auction, as specified in Schedule-I(1). Sub-section (2) of Section 33, IBC gives an option to the Liquidator to sell the assets of the Corporate Debtor through a Private Sale, in the manner set out in Schedule-1 (2). Regulation 33 of the Liquidation Regulations is couched in a language which shows that ample latitude has been given to the Liquidator, who may “ordinarily” sell the assets through auction thereby meaning that in peculiar facts and circumstances, the Liquidator may directly go in for a Private Sale. To avoid the pitfalls of disposing of the assets by conducting a Private Sale for the Pittance, Regulation 33 has prescribed some stringent conditions that the Liquidator is under an obligation to comply. The said pre- conditions are that (i) the asset is perishable; (ii) the asset is likely to deteriorate in value significancy if not sold immediately; (iii) the asset is sold at a higher price than the reserved price of the failed auction; and (iv) the Adjudicating Authority (NCLT) must grant prior permission for such a sale. The proviso appended to Regulation 33(2) of the Liquidation Regulations places yet another embargo to the effect that when the Liquidator intends to sell the assets of the Corporate Debtor by way of a Private Sale to a related party of the Corporate Debtor, his relative party or any professional appointed by him, it is mandatory to obtain prior permission of the Adjudicating Authority (NCLT). Even the mode of sale has been regulated under the Liquidation Regulations for both, a public auction and a Private Sale. All the above dos and don’ts have been inserted to protect the assets of the Corporate Debtor and safeguard the interest of the stakeholders.”

# 14. The Hon’ble Supreme Court in the above case has laid down that Regulation 33 prescribed some stringent conditions that the liquidator is under an obligation to comply. The Hon’ble Supreme Court has further held in the above case that the Appellant- ‘R.K. Industries’ who was submitted a bid and was declared as the Anchor Bidder does not have any right to insist that the said process be taken to its logical conclusion. Thus, a person who was selected as Anchor Bidder i.e. highest bidder in a Swiss Challenge Method is not clothed with any right to insist that he be treated as Anchor Bidder so that process be completed. In paragraphs 52 & 53, following has been laid down:-

• “52. Merely because the appellant herein had submitted a bid under the Anchor Bid Document and was declared as the Anchor Bidder in the  Second Swiss Challenge Process, could not vest a right on it for it to insist that the said process must be taken to its logical conclusion. The appellant has been harping about the vested right that had allegedly accrued in its favour on being declared as the Anchor Bidder. But it has conveniently glossed over an affidavit dated 23 March, 2021 filed by it, undertaking inter alia that it would remain unconditionally and irrevocably bound by the Swiss Challenge Process Document and the decision of the respondent No. 2 Liquidator. Given the aforesaid terms and condition of the Anchor Bid Document and the Second Swiss Challenge Process Document, read collectively with the unqualified undertaking given by the appellant acknowledging that the respondent No. 2 – Liquidator was well empowered to cancel/modify or even abandon the said process, it does not lie in the mouth of the appellant to urge that once it was set into motion, there was no justification to discontinue the Second Swiss Challenge Process. No special rights came to be bestowed on the appellant as the Anchor Bidder for it to insist that the said process ought to be taken forward and concluded, irrespective of the subsequent decision taken by the respondent No. 2 Liquidator, backed to the hilt by the stakeholders of discontinuing the Swiss Challenge Process and opting for Private Sale of the consolidated assets of the Corporate Debtor to be conducted through direct negotiations

• 53. To put it otherwise, an Anchor Bidder has no vested right beyond the ROFR, being the origination of the proposal. It must be borne in mind that the Swiss Challenge Process is just another method of private participation that has been recognized by this Court for its transparency [Refer Ravi Development (supra)]. Ultimately, the IBC has left it to the discretion of the Liquidator to explore the best possible method for selling the assets of the Corporate Debtor in liquidation, which includes Private Sale through direct negotiations with the object of maximizing the value of the assets offered for sale.”

# 15. In the present case, Respondent No.2 who was the Applicant making an offer to acquire the assets of the Corporate Debtor was at best an offeror whose offer was required to be tested with any other willing interested person and the Adjudicating Authority ought to have asked the liquidator to conduct the private sale and give opportunity to others to compete since the maximisation of the assets of the Corporate Debtor is the object of the IBC. Merely on the basis of one application and other by an intervenor, the Adjudicating Authority could not have concluded the sale in favour of the Respondent No.2. The liquidator has earlier rejected the offer given by the Respondent No.2 which clearly meant that the liquidator was not satisfied with the offer made by Respondent No.2 which was far below the last reserve price of Rs.181 Crores. The Hon’ble Supreme Court in the above judgment has held that it is not for the Court to substitute its decision taken by the Liquidator.

# 16. In the facts of the present case, we are of the view that the Adjudicating Authority by adopting a process of taking two bids, one by the Applicant and another by intervenor could not have concluded the sale of the Corporate Debtor without giving an opportunity to the liquidator to take steps for private sale. In the present case, the facts clearly indicate that the liquidator has not embarked upon private sale process nor had sought any permission from the Adjudicating Authority to proceed with the private sale. Thus, private sale procedure by the liquidator was not in place to know as to whether there are other interested bidders who are interested to acquire the Corporate Debtor by means of private sale. Without giving opportunity to the liquidator to take steps to sell the assets of the Corporate Debtor by private sale, the Adjudicating Authority itself has taken two bids and confirmed the sale, which according to us, is not the proper procedure for maximisation of the assets of the Corporate Debtor.

# 17. Learned Counsel for the Respondent No.2 submitted that the Appellant has not brought any prospective bidder who is ready to offer any higher amount. Learned Counsel for the Appellant has submitted that after passing of the impugned order, he has received a letter from one ‘Jagdamba Cutlery Limited’ where it has written that it is ready to offer a better price. The Appellant, who is a Financial Creditor has stake in the assets of the Corporate Debtor, has every right to question the order of the Adjudicating Authority even though the Liquidator has chosen not to challenge the order. Liquidator issued the Sale Certificate in favour of the Respondent No.2 only as per the direction issued by the Adjudicating Authority dated 16.06.2022. We also need to notice the fact that in pursuance of the impugned order, the Sale Certificate has also been issued to Respondent No.2.

# 18. In view of the foregoing discussions, we are unable to uphold the order of the Adjudicating Authority dated 16.06.2022 confirming the sale in favour of the Respondent No.2 on the basis of bids received by the Respondent No.2 and one intervenor before the Adjudicating Authority. An opportunity has to be given to the Liquidator to explore the possibility of conducting a private sale to elicit any higher offer for the assets of the Corporate Debtor than to one given by the Respondent No.2. We also are of the view that in event no higher offer comes in a process which is undertaken by the liquidator in pursuance of this order to one which has been given by the Respondent No.2, the Respondent No.2 be allowed to retain the Corporate Debtor. Ends of justice be served in disposing this Appeal with following directions:-

• (i) The order dated 16.06.2022 passed by the Adjudicating Authority approving the private sale of the Corporate Debtor by private treaty in favour of Respondent No.2 is set aside.

• (ii) The liquidator is permitted to conduct a private sale of the assets of the Corporate Debtor by adopting Swiss Challenge Method treating the bid offered by the Respondent No.2 as an Anchor Bid.

• (iii) The Liquidator shall issue public notice of the Swiss Challenge Method and publish terms and conditions for participating in the Swiss Challenge Method by the interested bidders. On completion of Swiss Challenge Method, in event any higher bid is received than the bid offered by the Respondent No.2 of Rs.61.05 Crores, the bid of the higher bidder shall be confirmed, consequently rejecting the bid of Respondent No.2

• (iv) Consequent to acceptance of bid of any higher bidder, the effect of the order dated 16.06.2022 including the sale certificate issued in favour of Respondent No.2 shall be reversed and Respondent No.2 shall be obliged to restore the assets of the Corporate Debtor to the Liquidator to be handed over to the highest bidder.

• (v) The Liquidator shall be entitled to return the amount of consideration received from the Respondent No.2 out of the sale proceeds of higher bid, of course, with liberty to adjust any loss and damage to the assets of the Corporate Debtor which could have happened in the interregnum period.

• (vi) In event no higher bid is received, the bid of Respondent No.2 of Rs. 61.05 Crores shall be confirmed and Sale Certificate be issued in favour of the Respondent No.2, to be operative from the date of earlier sale certificate.

# 19. The process as directed by this order shall be completed by the Liquidator within the period of three months from today and an appropriate report of the proceedings taken by the liquidator and the outcome shall be filed before the Adjudicating Authority by the liquidator. No costs.

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