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2025 Supreme(Online)(NCLT) 5192
NATIONAL COMPANY LAW TRIBUNAL
Sanjiv Jain, Venkataraman Subramaniam, JJ
Bharat Sanchar Nigam Limited – Appellant
Versus
M.S. Viswanathan, Liquidator of Gemini Communication Limited – Respondent
CP/699/IB/2017 | IA/1498(CHE)/2022 | IA/1215(CHE)/2021
For the Appellants/Petitioners: R. Vidhyashankar
For the Respondents: T.K. Bhaskar, Ganesh Raj, Kalyan Jhabakh
A sale as a going concern includes both assets and liabilities, mandating clear provisions for liability treatment in insolvency proceedings under IBC.
Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Section 60(5) - NCLT Rules, 2016 - Arbitration proceedings concerning a claim against Corporate Debtor - The Applicant sought a direction to continue arbitration proceedings concerning the claim against the Corporate Debtor and enforce any resultant award against the Corporate Debtor and the auction purchaser.
(B) Nature of 'going concern' sale - The Tribunal reiterated that a sale as a going concern includes both assets and liabilities, emphasizing that subsequent liabilities cannot be transferred to the auction purchaser without explicit stipulation.
(C) Authority of NCLT in arbitration-related matters - The NCLT found that while arbitration proceedings could continue, it cannot dictate outcomes to the Arbitrator.
(D) Legal interpretation of sale conditions - The Tribunal clarified that the sale must be interpreted holistically, encompassing all provisions, including those for extinguished liabilities as per IBC regulations. (Paras 21-32)
Facts of the case:
The application arose from a liquidation proceeding where the Corporate Debtor, having failed a national project, was sold as a going concern. The Applicant had claims pending against the Corporate Debtor unresolved due to arbitration, complicating enforceability against the auction purchaser post-sale.
Findings of Court:
The Tribunal recognized the complexities of the claims and allowed continuation of arbitration proceedings concerning claims to be treated as operational debt under the IBC, ensuring rightful creditors would benefit from any resultant awards.
Issues: Whether the auction purchaser is liable for unresolved claims stemming from pre-sale arbitration proceedings and the enforceability of potential awards against both the Corporate Debtor and auction purchaser.
Ratio Decidendi: The court underscored the principle that the auction purchaser should not inherit liabilities without clear provision and that arbitration outcomes must be independent and administratively pursued by the NCLT.
Result: Application disposed of with directions to allow arbitration proceedings to continue.
ORDER
(Heard Through Hybrid Mode)
This application has been filed seeking the following reliefs.
i. Issue a direction that further to the order of the NCLT Division Bench – I, Chennai in IA/1215/CHE/2021 in CP/699/IB/2017, the proceedings in A.F. No: 46 of 2018 before the Arbitration Tribunal of Justice (Retired) K.N. Basha can be continued to be prosecuted in respect of claim of the Applicant against Corporate Debtor and that award if any as may be passed in favour of the Applicant is liable to be enforced against the Corporate Debtor and Auction Purchaser in as much as the Sale of the Corporate Debtor as a Going Concern.
ii. Pass such further or other orders as it may deem fit and necessary and thus render justice.
Facts of the Case
2. Briefly the facts are that the Corporate Debtor, Gemini Communications Limited got a Purchase Order dated 28.06.2010 for Rs.378.0 Crores for supply, installation and commissioning of 2707 BTS across seven circles from BSNL, the Applicant herein. Even after 18 months of issuance of Purchase Order, it completed less than 2% of the project. A show cause notice dated 22.02.2012 was issued to the Corporate Debtor. On 29.03.2012, in CS/207/2012, the Corporate Debtor obtained ad-interim injunction against the Applicant restricting the termination of contract and encashment of Bank Guarantee. The stay was vacated on 21.09.2012 by the Hon’ble High Court. Thereafter, the Applicant terminated the contract on 22.09.2012 and initiated steps for the invocation of Bank Guarantee. The Corporate Debtor preferred an appeal against the order dated 21.09.2012 before the Division Bench of the Hon’ble High Court and the Hon’ble High Court vide order dated 19.12.2012 dismissed the appeal. Thereafter, the Applicant encashed the Bank Guarantee of Rs. 23.40 Crores given in favour of the Applicant. The Corporate Debtor preferred SLP (Civil) 4278 & 4279 of 2013 before the Hon’ble Supreme Court seeking an order of stay against the termination of the purchase order and encashing of the Bank Guarantee on which, the Hon’ble Supreme Court issued the notice and limited the appeal to the question "whether the parties can be referred to arbitration". In 2014 the matter was referred to arbitration. Shri. R.N. Prabhakaran (Retired) TRAI member was appointed as the Arbitrator on 24.06.2014. The Corporate Debtor filed the claims qua damages to the tune of Rs.1388.0 Crores while the Applicant filed the counter claims for Rs. 4698.0 Crores. The arbitration went for about 2 ‰ years. In June 2017, the Corporate Debtor in O.P./ No. 364 of 2017, requested for the change of Arbitrator and the Hon’ble High Court vide an order dated 24.01.2018, appointed Retd. Justice Shri. K.N. Basha as the Arbitrator. During the course of proceedings, one of the creditors of the Corporate Debtor filed an application for initiation of insolvency proceedings against the Corporate Debtor which was allowed vide an order dated 20.06.2018. The Applicant being one of the Operational Creditors filed a claim of Rs.4704 Crores before the RP, however, the RP vide letter dated 15.10.2018, rejected the claim stating that dispute is pending in the arbitration. Because of the pendency of CIRP, the arbitral proceedings did not progress. Since the resolution process failed, liquidation proceedings were initiated against the Corporate Debtor. During the proceedings, the Liquidator sold the Corporate Debtor to Pixtronic Global Technologies Private Limited (Respondent No.2) as a going- concern which was post facto approved by the Tribunal vide an order dated 15.02.2022 with reliefs & concessions. The Liquidator/Respondent No.1 filed a memo dated 05.07.2022 before the Arbitrator stating that as per the order of the Tribunal, the sale of the Corporate Debtor was as a going-concern with concessions. He however stated that the liquidation estate has retained both the assets and liabilities relating to the Corporate Debtor subject to litigation inter alia that if the Arbitrator passes a
