NCLAT (16.09.2022) in Mr. V.S. Palanivel Vs. Mr. P. Shriram, Liquidator, M/s Sri Lakshmi Hotels Pvt. Ltd. [Company Appeal (AT) (CH) (Ins) No. 336, 339 & 343 of 2021 ] held that;
It is pertinent to mention that Liquidation Process Regulation 47 deals with the Model Timeline for Liquidation Process. Model Timeline is only a directory in nature. It cannot be considered a deadline. It is provided under Regulation as a guiding factor to complete the liquidation process in a time bound manner. In exceptional circumstances, such a time limit can be extended.
Further the delay in payment if reasonable, the ‘Adjudicating Authority’ by exercising its `inherent powers’ under Rule 11 of I & B Code, 2016, can grant extension of payment by the `Successful Bidder’.
Although, there is no scope for the `Liquidator’ to be treated at par with the ‘Committee of Creditors’, however we need to recognise the `Commercial Wisdom’ of the `Liquidator’ in conduct of an `Auction’ to realise `Maximum Value’.
Hon’ble Supreme Court of India in case of R.K. Industries LLP v. H.R. Commercial (P) Ltd., [Civil Appeal No.7722 of 2021 and Civil Appeal No.7731 of 2021] held that Liquidator’s commercial wisdom not open to judicial review by the Adjudicating Authority.
Excerpts of the order;
The present `Appeals’ i.e., Company Appeal (AT) (CH) (Insolvency) No. 336 and 339 of 2021 filed against the common ‘impugned order’ dated 17.11.2021 passed in MA/120/2020 in CP. No./1140/IB/CB/2018 and SR No. 944 of 2020 in CP. No./1140/IB/CB/2018 respectively and Company Appeal (AT) (CH) (Insolvency) No. 343 of 2021 filed against the ‘impugned order’ dated 05.05.2020 passed in IA No. 335/IB/2020 in MA No. 689/2019 in CP. No./1140/IB/CB/2018 passed by the ‘Adjudicating Authority’, (`National Company Law Tribunal’, Chennai Bench), whereby, the ‘Adjudicating Authority’ dismissed the Auction Proceeding challenged by the Appellant on 23.12.2019. These `Appeals’ are commonly dealt with in this Judgment.
Brief Facts:
# 2. ‘Shri Lakshmi Hotel Private Limited’ was incorporated on 27.10.1972 and there were four shareholders i.e. Appellant, his wife, his son and his daughter-in-law. The company purchased a property situated at Old No. 3A, New No. 27, Alexandria Road, Cantonment, Tiruchirappalli-620001. The total extent of the property is 67,533 sq. ft. and the company was carrying on the business of running a hotel and a bar in the said premises. This property is only immovable asset of the company till auction of the said property.
3. The company took loan from ‘M/s Shriram City Union Finance Ltd’ (‘Financial Creditor’) for an amount of Rs. 1,50,00,000 on 03.04.2006 through loan agreement @ 12% interest and was to be repaid within one year. The company took another loan form same ‘Financial Creditor’ for an amount of Rs. 7,25,000/- on 03.07.2006. Thus, total loan availed was Rs. 1,57,25,000/. Subsequently, dispute arose between both the parties on alleged unilateral interest rate hike by ‘Financial Creditor’ which compelled company in non-payment of EMIs. ‘Financial Creditor’ filed a claim petition before sole arbitrator for Rs. 2,21,08,244/- along with 12% interest from date of claim. The arbitrator passed an award on 27.12.2014 for the entire amount along with 24% interest from the date of claim petition till date of realisation. Company thereafter filed a petition under Section 34 of ‘the Arbitration and Conciliation Act, 1996’ before ‘High Court of Judicature at Madras’. High Court dismissed the petition of Company and confirmed ‘Arbitration Award’ on 16.11.2017. Due to non-payment of Arbitral Award, ‘Financial Creditor’ filed an Application under Section 7 of the I&B Code, 2016 by filing CP/1140/(IB)/CB/2018 before ‘Adjudicating Authority’, who admitted this petition on 28.02.2019 and ‘Mr. P. Sriram CS’ was appointed ‘Interim Resolution Professional’ (in short ‘IRP’) who was later confirmed as Resolution Professional’ and finally as Liquidator.
# 4. The `Interim Resolution Professional’ on 02.03.2019, made a public announcement, calling upon the `Financial’ as well as `Operational Creditors’ to submit the `Claims’. Until 21.06.2019, no `Resolution Plan’ for revival of the Company was received. The ‘Committee of Creditors’ i.e. `CoC’ thereafter, had recommended for `Liquidation’ of the company in MA No. 689 of 2019 filed in CP/1140/IBC/CB/2018 before ‘Adjudicating Authority’.
# 5. By way of an order dated 17.07.2019, the ‘Adjudicating Authority’ passed an order of `Liquidation’ in MA/689/2019 in CP/1140/IB/CB/2018.
# 6. The Liquidator had engaged two `Registered Valuers’ and arrived at a valuation of the subject/said property at Rs.39,41,28,500/-. Based on this `Liquidation Value’, the `Liquidator’ fixed `Auction’ to be conducted on 25.11.2019, to `sell the property’ at a `Reserve Price’ of Rs. 39,41,28,500/-. Since there were no `Bidders’ in the said 1st Auction, the `Liquidator’ had decided to hold another `Auction’.
# 8. On 27.11.2019, the `Liquidator’ informed the auction date as 23.12.2019. The Reserve Price i.e. upset price was reduced by 25% @ Rs.29,95,96,375/-. M/s KMC Specialty Hospitals (India) Limited took part in the `Auction’ and was only `Bidder’ and auction was confirmed by the `Liquidator’ on the same date, to and in his favour.
# 9. The Appellant filed M.A. No. 120 of 2020 in CP/1140 (IB)/CB/2018 before the ‘Adjudicating Authority’ to set aside the proposed `Auction Proceedings’, alleging that the `Liquidator’ Mr. P. Sriram, sold the property at a lower value in `e-auction’ in fixing the `Upset price’ at Rs.29,95,96,375/-. Whereas, the purported market value of the property, was more than Rs.100 Crore. The `Appellant’ further stated that there was no requirement to sell the entire property of the company for paying only limited sum, to the Financial Creditor. According to the Appellant, the property of the company could have been divided and only the minimum portion of property could have been sold to pay the outstanding dues of the Financial Creditor.
# 10. Further, as per ‘Appellant’ the `Successful Bidder’ ought to have paid the balance amounts on or before 22.03.2020. The auction purchaser having not paid the said amounts on or before 22.03.2020, the Liquidator should have forfeited the amount already deposited and the Auction should have been cancelled. However, the liquidator had not communicated the same to an `Auction Purchaser’ and had colluded with the `Auction Purchaser’, in order to defraud the company.
# 11. The `Auction Purchaser’ has approached the ‘Adjudicating Authority’ in I.A. No. 335 of 2020, seeking `extension of time’ for making payment, stating that there were various issues, pertaining to the property, due to which, they could not make the `Payments’ within stipulated time. The `Auction Purchaser’ had highlighted one of the major issues that there was an `Order of Attachment’ made by the `Income Tax Authority’ on property.
# 12. The averment of the `Appellant’ is that the `Auction Purchaser’ could not seek an `Extension’, since the provisions of the `Insolvency Regulations’ are mandatory in character and under in any circumstances, `Time Period’ for making the `Payment’ cannot be extended.
# 13. Also the `Appellant’ had alleged that the `Auction Purchaser’ and the `Liquidator’ misled the ‘Adjudicating Authority’ by misinterpreting the `Orders of the Hon’ble Supreme Court of India and the National Company Law Appellate Tribunal’, to contend that the `Time Period’ for depositing the amount is extended.
# 14. The Appellant filed a `Special Leave Petition’ before the Hon’ble Supreme Court of India in SLP (c) No. 12300 of 2020 and the same is pending, as on date.
# 15. The Appellant filed an `Application’ before the ‘Adjudicating Authority’ for the purpose of setting aside the `Sale Deed’ dated 28.08.2020 (vide registered as Document no. 3551/2020) before the District Registrar, Tiruchirapalli.
# 16. The ‘Appellant’ has urged the ‘Adjudicating Authority’ to `Recall’ the ‘impugned order’ dated 05.05.2020l, passed in IA No. 335 of 2020 in M.A. No. 689 of 2019 in C.P. No. 1140/IBC/CB/2018 and the unnumbered `Application’ was SR No. 944 of 2020.
# 17. The `impugned order’ was passed by the ‘Adjudicating Authority’, after hearing the `Applications’ MA No. 120 of 2021 and the SR No. 944 of 2020 and the same were dismissed, vide the common order dated 17.11.2021 in CP/1140/IB/CB/2018.
# 18. Hence the present `Appeals’.
Discussions:
# 62. Heard the Learned Counsel for both the parties and also perused record made available to us including ‘Written Submissions’, ‘Counter Statement’ and ‘Additional Written Submissions’ along with `Citations’ quoted therein. Several issues have been raised in the `Appeal’, which are required to be deliberated upon before coming to the final conclusion. These can be taken up as follows:-
(I) Whether the Auction held by the Liquidator, without proper Notice to Shareholders/Stakeholders of the Company is valid in accordance with the IBBI Rules and Regulations, 2016?
(II) Whether `Sale’ was valid, when `Payment’ from ‘Auction Purchaser’ is not received within 90 days. Can any extension be granted for the same?
(III) Whether the act of Auctioneer to `Sell’ the Property at Revised and Reduced upset price can be treated as valid?
(IV) Whether the `Liquidator’ was justified in selling the entire `Assets’ of the company when `Sale’ of a part of the `Assets’ of the Company would have been sufficient to discharge the liability of the company?
(V) Whether the `Liquidator’ was justified in conducting the `Auction Proceedings’ without forming the `Committee of Stakeholders’, as envisaged under the I & B Code, 2016?
(VI) Whether the `Adjudicating Authority’ can review its own order?
Since, all these issues are independent, it will be worthwhile to examine these issues one by one and we shall proceed accordingly in subsequent discussion.
In order to understand the above issue, we will like to refer to the following table:
Issue No. (I) Whether the Auction held by the liquidator, without proper Notice to the Shareholders/Stakeholders of the Company is valid in accordance with the IBBI Rules and Regulations, 2016?
In order to understand the exact issue raised and the implication, it will be imperative to go through the exact rules as provided in I & B Code, 2016, on this issue.
(i) Following are the relevant Rules provided in the I & B Code, 2016:
Chapter VI of Regulation 33 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016, prescribe Mode of Sale, the Liquidator shall ordinarily sell the assets of the corporate debtor through an auction in the manner specified in schedule I, which provides for detailed manner as to how an Auction must be proceeded.
“(2) The liquidator shall prepare a marketing strategy, with the help of marketing professionals, if required, for sale of the asset. The strategy may include-
(a) releasing advertisements;
(b) preparing information sheets for the asset;
(c) preparing a notice of sale; and
(d) liaising with agents.
(5) The liquidator shall [issue a public notice] of an auction in the manner specified in Regulation 12(3); [emphasis supplied]
i. The auction held without notice shall be invalid, as the language of the abovementioned Regulation seems to be a clear direction and mandatory.
ii. The `Liquidator’ followed the proper way of issuing Public Notice, as per Rules the 1st Auction Notice was released on 19.10.2019 for e-auction but no Bidders participated for Sale on 25.11.2019. The Respondent/Liquidator issued 2nd Sale Notice on 22/11/2019 and the Sale was scheduled on 23.12.2019 with the revised and reduced Reserve Price of Rs.29,55,96,375/-. The issue is that whether the proceeding of Sale can be carried out without proper Notice to the `Stakeholder’/`Shareholder’ stands unmaintainable as Public Notice was released through Newspapers.
iii. We have also taken note of the IBBI (Liquidation Process) Regulations, 2016 (Liquidation Regulations) as it stood before the amendment dated 25th July 2019, provided that the Liquidator shall Liquidate the Corporate Debtor (`CD’) within a period of two years from the Liquidation Commencement Date (LCD). Keeping in mind the principle of time value as enshrined in the BLRC report, the said time limit was reduced to one year vide amendment dated 25.07.2019.
Hence, this `Tribunal’ find that the required Notice was issued correctly by the `Liquidator’ in accordance with the Rules, as provided in I & B Code, 2016, and there was no infringement of rights of the `Appellant’. We do not find any error in the ‘impugned order’ on this issue.
Issue No. (II) Whether sale was valid when payment from the ‘Auction Purchaser’ is not received within 90 days. Can any extension be granted for the same?
We will refer to exact rules as provided in I & B Code, 2016 on this issue, and see precedent Judgments.
(i) Following are the relevant rules as provided in I & B Code, 2016. Chapter VI of Regulation 33 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 Schedule IMode of sale,
a. (12) On the close of the auction, the highest bidder shall be invited to provide balance sale consideration within ninety days of the date of such demand:
Provided that payments made after thirty days shall attract interest at the rate of 12%:
Provided further that the sale shall be cancelled if the payment is not received within ninety days.
b. (13) On payment of the full amount, the sale shall stand completed, the liquidator shall execute certificate of sale or sale deed to transfer such assets and the assets shall be delivered to him in the manner specified in the terms of sale. [emphasis supplied]
(ii) This Appellate Tribunal passed a Judgment in the case of Standard Surfa Chem India Pvt. Ltd vs. Kishore Gopal Somani vide order dated 09.08.2021, reported in 2022 SCC OnLine NCLAT 305 held that:-
a. Para 24– In the instant case, the Appellant, i.e. successful auction purchaser by filing IA 3377 of 2021 dated 25 May 2021, sought an extension of 90 days for making the full payment to complete the auction proceedings. However, before the expiry of the 90 days’ timeline, the appellant/applicant filed the said Application on the ground of Regulation 47A of Liquidation Process Regulation, 2016.
b. Para 25 – Regulation 47A was brought by the amendment in liquidation process regulation by Government Notification dated 20 April 2020 with retrospective effect from 17 April 2020. This Regulation provided that the period of Lockdown imposed by the central government in the wake of the Covid 19 outbreak shall not be counted for computation of the timeline for any task that could not be completed due to such Lockdown in relation to any liquidation process.
c. Para 26 – It is pertinent to mention that the Government of India vide notification dated 20 April 2020 brought similar notification 40C, as a special provision relating to the timeline under the Insolvency Resolution Process Regulation 2016. Accordingly, this Regulation was effective with effect from 29 March 2020.
d. Para 28 – It is pertinent to mention that Liquidation Process Regulation 47 deals with the Model Timeline for Liquidation Process. Model Timeline is only a directory in nature. It cannot be considered a deadline. It is provided under Regulation as a guiding factor to complete the liquidation process in a time bound manner. In exceptional circumstances, such a time limit can be extended.
e. Para 32– Further, paragraph 4 of the declaration of the bidders is also relevant to consider, which is as under; Paragraph 4 of the declaration by bidders “The timeline for payment of final sale consideration may be extended by the sole discretion of Liquidator, to the extent permissible under the applicable laws and regulations. However, in case final sale consideration is not paid within stipulated timeline, the Liquidator shall forfeit earnest money.” [emphasis supplied]
(iii) As per above mentioned provisions and decision of this Appellate Tribunal, the extension was granted due to the Covid-19 lockdown. The order passed by the ‘Adjudicating Authority’ stands valid on the grounds that almost all functioning were restricted during Covid-19 outbreak, vide Order dated 05.05.2020.
(iv) Moreover, the property was said to be in subsistence of attachment of Income Tax Department, and due to the same, the Registrar was not registering the property in the name of the `Successful Bidder’ and subsequently the ‘Adjudicating Authority’ directed the Income Tax Department to issue a NOC, and then the property was registered successfully in name of Successful Bidder.
(v) Further the delay in payment if reasonable, the ‘Adjudicating Authority’ by exercising its `inherent powers’ under Rule 11 of I & B Code, 2016, can grant extension of payment by the `Successful Bidder’. We may also refer to Section 424 of the ‘Companies Act, 2013’.
“Rule 11 of NCLT Rules, 2016
Inherent Powers- Nothing in these rules shall be deemed to limit or otherwise affect the inherent powers of the Tribunal to make such orders as may be necessary for meeting the ends of justice or to prevent abuse of the process of the Tribunal.
Section 424 of the Companies Act, 2013.
Procedure before the Tribunal and Appellate Tribunal.- (1) The Tribunal and the Appellate Tribunal shall not, while disposing of any proceeding before it, or the case may be, an appeal before it, be bound by the procedure laid down in the Code of Civil Procedure, 1908 (5 of 1908) but shall be guided by the principles of natural justice, and subject to the other provisions of this Act or of the Insolvency and Bankruptcy Code, 2016 (31 of 2016) and of any rules made hereunder, the Tribunal and the Appellate Tribunal shall have power to regulate their own procedure.”
In view of all the above discussions, including Rules, cited Judgments, we do not find any error on the part of the liquidator. The ‘Adjudicating Authority’ correctly gave the ‘impugned order’ on this issue.
Issue No. (III) Whether the act of Auctioneer to Sale the property at revised and reduced Upset Price can be treated as valid.
(i) Following are the relevant Rules are provided in I & B Code, 2016:
(ii) Schedule I – Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 MODE OF SALE (Under Regulation 33 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016)
(3) The liquidator shall prepare terms and conditions of sale, including reserve price, earnest money deposit as well as pre-bid qualifications, if any.
Provided that the liquidator shall not require payment of any non-refundable deposit or fee for participation in an auction under the liquidation process:
Provided further that the earnest money deposit shall not exceed ten percent of the reserve price.
(4)(4) The reserve price shall be the value of the asset arrived at in accordance with regulation 35.
(4A) Where an auction fails at the reserve price, the liquidator may reduce the reserve price by up to twenty-five percent of such value to conduct subsequent auction.
(4B) Where an auction fails at reduced price under clause (4A), the reserve price in subsequent auctions may be further reduced by not more than ten percent at a time.”; [emphasis supplied]
(iii) We need to note that after admitting Section 9 Application by the ‘Adjudicating Authority’, a complete drill was carried out for ‘Corporate Insolvency Resolution Process’. Even then, it is noted that no proposal was received for Resolution.
(iv) Subsequently, based on the `Application’ of `Resolution Professional’, the ‘Adjudicating Authority’ ordered for `Liquidation’ of the company.
(v) As required by the Rules relating to `Liquidation’, as provided in I & B Code, 2016, the `Liquidator’ engaged two `Registered Valuers’ to arrive at right price of the property of the company. Following table gives clear picture and how the `Liquidator’ came to the conclusion of `Reserve Price’ against a plea of the `Appellant’ that, prevailing market rate of the property is more than Rs.100 Crore.
(vi) Thus, from the above table, it is evident that Rs.39,41,28,500/- was `Average of Liquidation Value’ for the purpose of E-auction Upset Price, which is as stipulated in the relevant Rules.
(vii) We also need to appreciate that different property may have different value depending upon location, size of property, economic situation prevailing at the particular time, demand and supply of properties at the relevant time. The sale of distressed assets, more so, if it is along with dispute, may also impact the valuation of the property adversely. Although, many parameters like last `Auction’ of similar property or notified rates by relevant `Authority’ of the area etc., also need to be kept in view. However, the fact remain that, when any property is put to `Sale’ for `Auction’, what truly matter is the market response at that time. Only thing, which is required to be ensured that the process was conducted in a fair and transparent manner. This `Tribunal’ already seen from the ‘Written Submissions’ and `Averments’ made during hearing, that the `Liquidator’ indeed has followed the required norms. Hence, it will be difficult to accept pre-notion of the `Appellant’ that the property is valuing approximately Rs.100 Crore and it was deliberately valued at a `Lower Price’ and `Sold’ to `Defraud’ the company.
(viii) It has already been brought to the notice of this `Tribunal’ that the property in dispute was not in use for a long time, which may also have some impact on valuation.
(ix) This `Tribunal’ will also like to note that Liquidator’s powers are different than that of an `Insolvency Resolution Professional’ or the `Resolution Professional’ who are given administrative powers, not decisive, whereas the `Liquidator’ is having partial judicial powers. This position was upheld by this `Tribunal’ in one another case i.e.JJE Adornment Pvt. Ltd. Vs. Pingle Builders Pvt. Ltd. & Anr. in Company Appeal (AT) (Ins.) No. 97 of 2021, reported in 2021 SCC OnLine NCLAT 471.
“Para 3 The liquidator, being a quasi-judicial authority, is empowered to admit or reject the claim, in whole or in part and such determination is subjected to appeal under the provisions embodied in Section 42 of the ‘I & B Code’….” [emphasis supplied]
(x) Time value in any commercial transaction is of paramount importance. It is the onerous responsibility of the `Liquidator’ to ensure maximum realisation of the property and therefore, it is expected that he shall take decisions in the sale of the property to `Auction’, based on the `Commercial Wisdom’ as being done in case of ‘Corporate Insolvency Resolution Process’ by the ‘Committee of Creditors’. In catena of Judgment of the Hon’ble Supreme Court of India, it has been clearly held that the ‘Adjudicating Authority’ or the `Appellate Authority’, need not to dwell upon the `Commercial Wisdom’ of the ‘Committee of Creditors’. Although, there is no scope for the `Liquidator’ to be treated at par with the ‘Committee of Creditors’, however we need to recognise the `Commercial Wisdom’ of the `Liquidator’ in conduct of an `Auction’ to realise `Maximum Value’.
(xi) In view of the above discussions, the act of `Liquidator’ stands to be valid as the process was conducted in accordance with the IBBI Rules and Regulations, especially as per Rule 4A and 4B, the `Liquidator’ has power to reduce the Reserve Price by 25% for subsequent action. There is no error in the ‘impugned order’ w.r.t. this aspect.
Issue No. (IV) Whether the Liquidator was justified in selling the entire assets of the company when sale of a part of the `Assets’ of the company would have been sufficient to discharge the liability of the company.
(i) The counsel for the `Applicant’ in CP No. 336 of 2021, contended that the liability was not even the 1/10th and could have been satisfied with only selling some particular part of the property and there was no need to sell the whole property. It can be argued both ways as stated in ‘CHAPTER VI REGULATION 32 OF IBBI Rules and Regulations’
“32 Sale of Assets, etc.
The liquidator may sell-
(a) an asset on a standalone basis;
(b) the assets in a slump sale;
(c) a set of assets collectively;
(d) the assets in parcels;
(e) the corporate debtor as a going concern; or
(f) the business(s) of the corporate debtor as a going concern:
Provided that where an asset is subject to security interest, it shall not be sold under any of the clauses (a) to (f) unless the security interest therein has been relinquished to the liquidation estate.”
“(ii) Also, Amendment Regulation 32A describes `Sale’ as a going Concern;
“Sub-regulation (1) Where the committee of creditors has recommended sale under clause (e) or (f) of regulation 32 or where the liquidator is of the opinion that sale under clause (e) or (f) of regulation 32 shall maximize the value of the corporate debtor, he shall endeavor to first sell under the said clauses.
Sub-regulation (4) If the liquidator is unable to sell the corporate debtor or its business under clause (e) or (f) of regulation 32 within ninety days from the liquidation commencement date, he shall proceed to sell the assets of the corporate debtor under clauses (a) to (d) of regulation 32.”
As per above mentioned provisions, it is the discretion of the `Liquidator’, as to in what way he wants to conduct the `Sale’ procedure, subject to above rules.
(iii) The concept of `Commercial Wisdom’ has to be interpreted with prudence and its evolution has to be vigilantly observed for striking the balance between the `Liquidation’ and `Reorganisation’, which is enshrined to be the base for the design of the Insolvency and Bankruptcy Code, 2016. The value of property(s) as a whole and in parts, if sold may experience a depreciation in their value or appreciation. The determinants of market value of a property differ in many aspects, sometimes a property as whole holds more market value and if sold in parts, the value may depreciate and vice versa. The `Commercial wisdom’ of the `Liquidator’ is not questionable by the ‘Adjudicating Authority’, and if the `Liquidator’ is of the idea that, then, it should be understood that the `Liquidator’ is appointed to benefit and improve the situation of the `Corporate Debtor’ and not degrade it. We do not know that what would appreciate or depreciate the value of the property, but the `Liquidator’ is a person who has knowledge on the ground and can identify the best possible way to benefit the `Corporate Debtor’ and understands the practical aspects of Commercial Real Estate Markets, then, it should not be questioned. Also, the Hon’ble Supreme Court of India in case of R.K. Industries LLP v. H.R. Commercial (P) Ltd., reported in MANU/SC/1069/2022 held that Liquidator’s commercial wisdom not open to judicial review by the Adjudicating Authority.
(iv) The ‘Adjudicating Authority’ finds the Liquidator’s action justified and reasonable and in accordance with `Law’, hence this issue is not maintainable in the `Appeal’. This `Tribunal therefore, do not find any error on the part of the `Liquidator’ and uphold the decision of the `Adjudicating Authority’ on this aspect. [emphasis supplied]
Issue No. (V) Whether the `Liquidator’ was justified in conducting the `Auction Proceedings’ without forming the `Committee of Stakeholders’, as envisaged under the I & B Code, 2016?
(i) The Liquidator was appointed by the `Adjudicating Authority’ vide order dated 17.07.2019 and the `Auction’ has been successfully carried out. The property has been sold, and the Appellant has objected that the `Liquidator’ did not form `Committee of Stakeholders’, as per I & B Code, 2016.
(ii) We will need to refer to the Amendment, Regulation 31A vide Notification No. – IBBI/2019-20/GN/REG047 w.e.f. 25.07.2019 and the Amendment Regulation 31A vide, which states that;
“31A (1) – The liquidator shall constitute a consultation committee within sixty days from the liquidation commencement date, based on the list of stakeholders prepared under regulation 31, to advise him on the matters relating to sale under regulation 32.”
(iii) IBBI vide circular No. IBBI/LIQ/024/2019 dated 26.08.2019 also clarified that the amendment regulations are not applicable to the liquidation processes, which had commenced before coming into force of the said Amendment Regulations and that they are applicable to liquidation processes, which commenced on or after 25.07.2019. It is therefore clear that the processes of `Liquidation’ started before the amendment for the formation of `Stakeholders Committee’, came into force.
(iv) `Retrospective effect’ is `restricted’ and `prohibited’ in `Law’, and are not `enforceable’ in the rule of `Law’. This `Tribunal’, therefore do not find any error in the `Impugned Order’, on this ground.
Issue No. (VI) Whether the `Adjudicating Authority’ can review its own order?
Power of NCLT to review its own order:
The `Applicant’ filed an `Appeal’ to NCLT to review and revise their order regarding commencement of `Liquidation Proceeding’, here arises the principle of Res judicata the principle that a cause of action may not be pursued further once it has been judged on the merits. “Finality” is the term which refers to when a court renders a final judgment on the merits.
To understand, we must refer to the following;
“Rectification of Order: Rule 154 of the NCLT Rules, 2016 provides that: (1) Any clerical or arithmetical mistakes in any order of the Tribunal or error therein arising from any accidental slip or omission may, at any time, be corrected by the Tribunal on its own motion or on application of any party by way of rectification.”
“General power to amend: Further, Rule 155 of the NCLT Rules, 2016, provides that the Tribunal may, within a period of thirty days from the date of completion of pleadings, and on such terms as to costs or otherwise, as it may think fit, amend any defect or error in any proceeding before it; and all necessary amendments shall be made for the purpose of determining the real question or issue raised by or depending on such proceeding.”
From the above mentioned points, this `Tribunal’ can easily differentiate between `Review’ and `Recall’. The Hon’ble Supreme Court of India in the case of Lily Thomas vs. Union of India, reported in (2000) 6 SCC 224 held:
“That the power of review can only be exercised for correction of a mistake and not to substitute a view and that the power of review could only be exercised within the limits of the statute dealing with the exercise of such power. The review cannot be treated like an appeal in disguise. The mere possibility of two views on the subject is not a ground for review. Once a review petition is dismissed no further petition of review can be entertained.”
Therefore, the `Adjudicating Authority’ was right in taking a decision that it has no power to `Review’/`Recall’ its own order.
# 63. Based on the aforesaid qualitative and quantitative discussions and reasons, this `Tribunal’, is of the considered opinion that no ground is made out for any interference by this `Tribunal’ with the Company Appeal (AT) (CH) (Insolvency) No. 336 and 339 of 2021 filed against the common ‘impugned order’ dated 17.11.2021 passed in MA/120/2020 in CP. No./1140/IB/CB/2018 and SR No. 944 of 2020 in CP. No./1140/IB/CB/2018 respectively and Company Appeal (AT) (CH) (Insolvency) No. 343 of 2021 filed against the ‘impugned order’ dated 05.05.2020 passed in IA No. 335/IB/2020 in MA No. 689/2019 in CP. No./1140/IB/CB/2018 by the `Adjudicating Authority’, (`National Company Law Tribunal’, Chennai Bench). Consequently, the `Appeals’ fail. In fine, the Comp. App (AT) (CH) (Ins.) Nos. 336, 339 & 343 of 2021 are dismissed. No costs. The connected pending `Interlocutory Applications’, if any, are Closed.
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