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2025 Supreme(Online)(NCLT) 237
NATIONAL COMPANY LAW TRIBUNAL
JYOTI KUMAR TRIPATHI, RAVICHANDRAN RAMASAMY, JJ
Chinar Steel Segment Centre Private Limited – Appellant
Versus
NEXUS ELECTRO STEEL LTD – Respondent
IA(I.B.C) - 1819/2023
For the Petitioner:SHALYA AGARWAL
For the Respondent:T. Ravichandran
The sale of a Corporate Debtor as a going concern under the Insolvency and Bankruptcy Code ensures the purchaser is not burdened with past liabilities, adhering to the 'clean slate' principle.
Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Sections 32A and 53 - Liquidation process - Application for approval of sale of Corporate Debtor as a going concern - Successful bidder emerged after multiple failed auctions - Reliefs and concessions sought included extinguishment of past liabilities and claims - Sale approved with directions for smooth transition and reporting. (Paras 1, 23, 24)
(B) Corporate Debtor - Sale as a going concern - The court emphasized the principle of a 'clean slate' for the purchaser, ensuring no past liabilities burden the new owner post-sale. (Paras 21, 22)
Facts of the case:
The applicant, a successful bidder, sought approval for the acquisition of Nexus Electro Steel Limited after participating in an e-auction and paying the sale consideration of Rs.20,05,00,000/- following unsuccessful previous auctions. The application included requests for various reliefs related to the acquisition process.
Findings of Court:
The court allowed the application for sale of the Corporate Debtor as a going concern, granting the requested reliefs and concessions, including the extinguishment of past liabilities.
Issues: The main issues included the approval of the acquisition plan and the implications of past liabilities on the successful bidder.
Ratio Decidendi: The court ruled that the sale of the Corporate Debtor as a going concern would not burden the purchaser with past liabilities, aligning with the 'clean slate' principle established in prior judgments.
Result: Application for sale of Corporate Debtor as a going concern is Allowed.
ORDER
(Heard through Hybrid mode)
1. This application IA(IBC)/1819(CHE)/2023 has been filed by the Applicant/ Successful Bidder under Regulation 32A of IBBI (Liquidation Process) Regulations, 2016 read with Rule 11 of the NCLT, Rules, 2016 seeking for allowing the Interim application along with passing of suitable orders in respect of the reliefs, concessions, directions, dispensations and exemptions in relation to the acquisition of the Corporate Debtor, namely Nexus Electro Steel Limited. The prayer apart from the reliefs and concession sought in the application are extracted hereunder,
a. Allow the present application;
c. Pass appropriate order(s)/ direction(s) for taking on record the proposed Acquisition Plan of Applicant, for the smooth Acquisition of the Corporate Debtor on a going concern basis along with all reliefs, concessions and waivers set out thereunder;
d. Pass appropriate order(s)/ direction(s) that Direct that no penalty shall be levied on/payable by the Applicant for the time period taken by this Tribunal to approve the Acquisition Plan and the reliefs, waivers, exemptions and dispensations set out thereunder;
e. Pass appropriate order(s)/ direction(s) on the Liquidator to cooperate and assist the Applicant for the successful implementation Of the Corporate Debtor on a going concern basis;
2. The Corporate Insolvency Resolution Process (CIRP) in respect of the Corporate Debtor (CD) was ordered by this Tribunal vide order dated 30.05.2021 and one Mr. Mathur Sabhapathy Viswanathan was appointed as the Interim Resolution Professional (IRP). Later the respondent herein Mr. Radhakrishnan Dharmarajan was appointed as Resolution Professional (RP) vide order dated 17.01.2022. The CoC was composed of two financial creditors namely, State Bank of India holding majority 79% and ICICI Bank Limited holding 21% voting.
3. It is submitted that, during the 17th CoC meeting, CoC resolved to liquidate the CD and vide order dated 09.09.2022, liquidation was initiated against the CD and RP himself was appointed as the Liquidator.
4. It is stated that the Preliminary report, Asset memorandum with valuation of the Corporate Debtor and Revised List of Stakeholders were submitted before this Tribunal vide IA(IBC)/980(CHE)/2023 which was taken on record by the order dated 20.06.2023
5. It is stated that, liquidator conducted three auctions for the sale of the Corporate Debtor fixing Reserve Price at Rs.30 Crores, on 27.02.2023, Rs.25 Crores on 28.03.2023 & Rs.22.50 Crores on 08.05.2023, where all three failed without having a successful bidder.
6. It is stated that, liquidator published an e-auction sale notice on 20.05.2023 in Business Standard (English), Prathakal (Marathi) and Makkal Kural (Tamil) inviting prospective bidders with two options, wherein a. Sale of CD as a whole on going concern basis and b. Piecemeal sale of the CD.
7. It is stated that Applicant paid the earnest money deposit for a sum of Rs.2,00,00,000/- and submitted the Bid Application Form, Bid Declaration Form, undertaking under Section 29A of the Code and all other documents as required, for taking part in the e-Auction process to acquire the Corporate Debtor on a going concern under Regulation 32(e) of the IBBI (Liquidation Process) Regulations, 2016.
8. It is stated that the Applicant participated in the e-auction dated 11.06.2023 and emerged as Successful Bidder by quoting total sale consideration of Rs.20,05,00,000/- (Rupees Twenty Crores Five Lakhs Only) for purchasing the CD as a going concern basis.
9. It is submitted that the Liquidator declared the applicant as successful bidder and issued Letter of Intent (LoI) on 14.06.2023 for paying the remaining sale consideration pursuant to that, applicant has paid the entire consideration on 13.07.2023. The Liquidator has acknowledged the payment and issued a certificate of sale on 13.07.2023 under Reg. 32(e) of the Liquidation Regulations and sold the Corporate Debtor in liquidation as a going concern on “as is what is”,
