The National Company Law Tribunal (NCLT) held that the benefit of the amendment under Clause 12 of Schedule-I of the Liquidation Regulation can not be granted retrospectively.
The Applicant, Mr. Sundaresh Bhat, Liquidator of ABG Shipyard Limited, the Corporate Debtor, under Section 60(5) of 33(2)(b) of Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016, prayed before the tribunal to allow the Liquidator to apply Clause 12 of Schedule-I of the Liquidation Regulation as amended on 25 July 2019, for the liquidation process of the Corporate Debtor in exercise of power under Rule 11 of NCLT Rules, 2016.
The issues raised in this case was whether the Liquidator, with respect to the assets of the Corporate Debtor of which liquidation process had commenced before 25 July, 2019, can be permitted to grant the benefit of the amendment regarding the payment of the balance consideration within 90 days to the highest bidder instead of 15 days, as applicable to the liquidation processes commenced before the date of amendment.
Before the amendment in Clause 12 of the Schedule I to the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations 2016 the position of law was that on the close of the auction, the highest bidder shall be invited to provide balance sale consideration within fifteen days of the date when he is invited to provide the balance sale consideration. 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.
However, after the amendment the period of the highest bidder for paying the balance sale consideration was increased from 15 days to 90 days of the date when he is invited to provide the balance sale consideration.
The other issue raised was whether the Liquidator can be permitted to sell or dispose of the assets of the Corporate Debtor (in liquidation) by way of private sale after having failed to sell or dispose of the said assets by way of e-auction.
The Coram consisting of Chockalingam Thirunavukkarasu and Manorama Kunari observed that the liquidation order with regard to the present Corporate Debtor was passed under section 33 of the IB Code, 2016, and the Applicant was appointed as the liquidator on 25th April, 2019 i.e. much prior to the date of the amendment to the regulations relating to the liquidation process which are under consideration.
The Adjudicating Authority As per the provisions of section 35 (1) (1) of the Code clarified that the liquidator is under obligation to sell/dispose of the assets of the Corporate Debtor (in liquidation) by way of public auction or private contract or in parcels as may be specified by the Board through the Insolvency and Bankruptcy Board of India(Liquidation Process) Regulations, 2016.
The Tribunal held that the failure of four e-auctions and during the pendency of the fifth e-auction, it is felt by the applicant that time frame of payment of sale consideration within fifteen days as applicable to the Corporate Debtor is considered to be too short especially keeping in mind the quantum of sale consideration and the ongoing economic slow-down due to the COVID-19 pandemic.
However, the NCLT mentioned that the applicant had commenced the e-auction processes with effect from 17th September, 2019 and the COVID-19 pandemic and imposition of the lockdown thereto had taken effect from 25th March, 2020.
The NCLT said that the Liquidation application was allowed much prior to the amendment and thereafter, the amendment came into force. Hence, the amendment benefit cannot be granted to the Applicant retrospectively in view of the clarification made therein dated 26.08.2019. Therefore, the only option left is a private sale which is allowed by this order.
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