# M/S. R.K. INDUSTRIES (UNIT-II) LLP v. M/S. H.R. COMMERCIALS PRIVATE LIMITED AND OTHER

- **Citation:** [2022] 12 S.C.R. 667
- **Court:** Supreme Court of India
- **Decided:** 2022-08-26
- **Case number:** Civil Appeal No. 7722 of 2021
- **Bench:** N. V. Ramana, J.K. Maheshwari, Hima Kohli
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/m-s-r-k-industries-unit-ii-llp-v-m-s-h-r-commercials-private-limited-and-other-35470
- **Pages:** 53

## Headnote

Insolvency and Bankruptcy Code, 2016 - ss.7, 33, 34, 35,
61 - Insolvency and Bankruptcy (Application to Adjudicating
Authority) Rules, 2016 - r.4 - Insolvency and Bankruptcy Board of
India (Liquidation Process) Regulations, 2016 - Regulations 8, 31A,
32, 33, 33(2)(d), Schedule-I u/Regulation 33 - Gujarat Maritime
Board (GMB) leased out a parcel of land to Corporate Debtor for
a period of thirty years - ICICI Bank Ltd. moved an application for
initiation of Corporate Insolvency Resolution Process (CIRP) against
the Corporate Debtor - Interim Resolution Professional (IRP) was
appointed - Application moved by the IRP for initiating liquidation
proceedings - Adjudicating Authority (NCLT) ordered liquidation
of the Corporate Debtor and appointed Respondent No.2 as the
Liquidator - Five e-auctions were conducted by the respondent No.2
to sell the consolidated assets of the Corporate Debtor but first
four were unsuccessful - In the fifth e-auction, respondent No.2
offered sale of the assets on a stand-alone basis or singly or in
smaller lots, besides compositely - Except for the sale of two
residential assets, no purchasers stepped forward to purchase the
other assets - Respondent no. 2 moved an application before NCLT
for permission to sell the assets of the Corporate Debtor through
Private Sale, allowed - The Swiss Challenge Process was adopted
for sale of the assets of the Corporate Debtor through Private Sale
- The first Swiss Challenge Process was unsuccessful - In the
second round, as against the base price of ` 460 crores fixed for
the Dahej Material and scrap, the appellant made a bid of ` 431
crores that was accepted - Thereafter, the respondent No.2 published
an advertisement inviting bidders to submit their bids against the
Anchor Bid in response whereto, the appellant, respondents No.3,
4, 5, and 6 submitted their bids, but before the process could be
taken further, on an application moved by the respondent No.1,
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NCLT passed an order directing the respondent No.2 to carry
forward the stage upto announcement of the highest bidder, while
deferring the rest of the process - Matter pending before the NCLT,
the respondent No.2 was approached by the respondent No.7, who
evinced interest in purchasing the immovable and movable assets
of the Corporate Debtor - NCLT was approached for permission to
undertake a composite sale of the Dahej Material and the Shipyard,
which was duly granted - Challenged by appellant beforeNCLAT,
dismissed - However, modifying the said order,the NCLAT directed
respondent no. 2 to restart the entire process of Private Sale after
issuing an open notice to prospective buyers instead of confining
the process to those parties who had participated in the process
earlier - On appeal, held: Merely because the appellant 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 - Given the 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 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 - Decision taken by the respondent No.2
cannot be treated as arbitrary, capricious or unreasonable for
interference by this Court - The said decision is tempered with
sound reason and logic - It is a purely commercial decision centered
on the best interest of the stakeholders - The stakeholders having
unanimously endorsed the view of the respondent No.2, it is not for
Supreme Court to undertake a further scrutiny of the desirability
or the reasonableness of

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 [2022] 12 S.C.R. 667
667
M/S. R.K. INDUSTRIES (UNIT-II) LLP
v.
M/S. H.R. COMMERCIALS PRIVATE LIMITED AND OTHER
(Civil Appeal No. 7722 of 2021)
AUGUST 26, 2022
[N. V. RAMANA, CJI, J.K. MAHESHWARI AND
HIMA KOHLI, JJ.]
Insolvency and Bankruptcy Code, 2016 - ss.7, 33, 34, 35,
61 - Insolvency and Bankruptcy (Application to Adjudicating
Authority) Rules, 2016 - r.4 - Insolvency and Bankruptcy Board of
India (Liquidation Process) Regulations, 2016 - Regulations 8, 31A,
32, 33, 33(2)(d), Schedule-I u/Regulation 33 - Gujarat Maritime
Board (GMB) leased out a parcel of land to Corporate Debtor for
a period of thirty years - ICICI Bank Ltd. moved an application for
initiation of Corporate Insolvency Resolution Process (CIRP) against
the Corporate Debtor - Interim Resolution Professional (IRP) was
appointed - Application moved by the IRP for initiating liquidation
proceedings - Adjudicating Authority (NCLT) ordered liquidation
of the Corporate Debtor and appointed Respondent No.2 as the
Liquidator - Five e-auctions were conducted by the respondent No.2
to sell the consolidated assets of the Corporate Debtor but first
four were unsuccessful - In the fifth e-auction, respondent No.2
offered sale of the assets on a stand-alone basis or singly or in
smaller lots, besides compositely - Except for the sale of two
residential assets, no purchasers stepped forward to purchase the
other assets - Respondent no. 2 moved an application before NCLT
for permission to sell the assets of the Corporate Debtor through
Private Sale, allowed - The Swiss Challenge Process was adopted
for sale of the assets of the Corporate Debtor through Private Sale
- The first Swiss Challenge Process was unsuccessful - In the
second round, as against the base price of ` 460 crores fixed for
the Dahej Material and scrap, the appellant made a bid of ` 431
crores that was accepted - Thereafter, the respondent No.2 published
an advertisement inviting bidders to submit their bids against the
Anchor Bid in response whereto, the appellant, respondents No.3,
4, 5, and 6 submitted their bids, but before the process could be
taken further, on an application moved by the respondent No.1,
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NCLT passed an order directing the respondent No.2 to carry
forward the stage upto announcement of the highest bidder, while
deferring the rest of the process - Matter pending before the NCLT,
the respondent No.2 was approached by the respondent No.7, who
evinced interest in purchasing the immovable and movable assets
of the Corporate Debtor - NCLT was approached for permission to
undertake a composite sale of the Dahej Material and the Shipyard,
which was duly granted - Challenged by appellant beforeNCLAT,
dismissed - However, modifying the said order,the NCLAT directed
respondent no. 2 to restart the entire process of Private Sale after
issuing an open notice to prospective buyers instead of confining
the process to those parties who had participated in the process
earlier - On appeal, held: Merely because the appellant 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 - Given the 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 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 - Decision taken by the respondent No.2
cannot be treated as arbitrary, capricious or unreasonable for
interference by this Court - The said decision is tempered with
sound reason and logic - It is a purely commercial decision centered
on the best interest of the stakeholders - The stakeholders having
unanimously endorsed the view of the respondent No.2, it is not for
Supreme Court to undertake a further scrutiny of the desirability
or the reasonableness of the said decision or substitute the same
with its own views - Impugned judgment passed by NCLAT to the
extent that it modified the order passed by the NCLT and directed
restraining of the Private Sale Process, is quashed and set aside.
Insolvency and Bankruptcy Code, 2016 - Swiss Challenge
Process - Held: An Anchor Bidder has no vested right beyond the
Right of First Refusal (ROFR), being the origination of the proposal
- The Swiss Challenge Process is just another method of private
participation recognized for its transparency - Ultimately, the IBC
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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.
Insolvency and Bankruptcy Code, 2016 - Jurisdiction of the
NCLT and the NCLAT - Held: Powers vested in and the duties cast
upon the Liquidator have been made subject to the directions of the
Adjudication Authority (NCLT) u/s.35 - Once the Liquidator applies
to the Adjudicating Authority (NCLT) for appropriate orders/
directions, including the decision to sell the movable and immovable
assets of the Corporate Debtor in liquidation by adopting a
particular mode of sale and the Adjudicating Authority (NCLT)
grants approval to such a decision, there is no provision in the IBC
that empowers the Appellate Authority (NCLAT) to suo motu conduct
a judicial review of the said decision - The jurisdiction bestowed
upon the Adjudicating Authority [NCLT] and the Appellate Authority
[NCLAT] are circumscribed by the provisions of the IBC, they cannot
act as a Court of equity or exercise plenary powers to unilaterally
reverse the decision of the Liquidator based on commercial wisdom
and supported by the stakeholders.
Constitution of India - Judicial Review - Scope of -
Commercial Matters - Held: It is a well-settled principle that in
matters relating to commercial transactions, tenders, etc., the scope
of judicial review is fairly limited and the court ought to refrain
from substituting its decisions for that of the tendering agency.
Allowing CA No. 7731 of 2021 and dismissing CA No. 7722
of 2021, the Court
HELD: 1.1 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
M/S. R.K. INDUSTRIES (UNIT-II) LLP v. M/S. H.R.
COMMERCIALS PRIVATE LIMITED
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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. [Para 39][704-D-H; 705-A]
1.2 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-I (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
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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. [Para 40][705-BF]
1.3 A bare perusal of the clauses of the Anchor Bid
Document and the Second Swiss Challenge Process Document,
leave no manner of doubt that the prospective bidders were
informed that the Liquidator had reserved the right to abandon/
cancel/terminate/waive the said process and/or part thereof at
any stage; that issuance of the Anchor Bid Document did not
create any binding obligations on the Liquidator to proceed with
the sale of the assets of the Corporate Debtor; that the Anchor
Bid Document did not constitute an offer/commitment or an
assurance of the Liquidator. Identical rights were reserved with
the Liquidator even in the Second Swiss Challenge Process
Document. In fact, as noted above, Schedule IV goes a step further
and entitles the Liquidator to include a bidder to participate in
the sale process at any stage. He could even decide to sell the
composite assets of the Corporate Debtor during the said process.
[Para 47][709-D-F]
1.4 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 23rd March, 2021 filed by it,
undertaking inter alia that it would remain unconditionally and
irrevocably bound by the Swiss Challenge Process Document and
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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. 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. 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. [Paras 48, 49][709-G-H; 710-A-E]
Ravi Development v. Krishna Parishthan& Others
(2009) 7 SCC 462 : [2009] 8 SCR 654 - referred to.
1.5 It is not for the court to question the judiciousness of
the decision taken by the respondent No.2 - Liquidator with the
idea of enhancing the value of the assets of the Corporate Debtor
being put up for sale. The right to refuse the highest bid or
completely abandon or cancel the bidding process was available
to the respondent No.2 - Liquidator. The appellant has not been
able to demonstrate that the decision of the respondent No.2 -
Liquidator to discontinue the Second Swiss Challenge Process
and go in for a Private Sale through direction negotiations with
prospective bidders was a malafide exercise. [Para 52][711-E-F]
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State of Madhya Pradesh and Others v. Nandlal Jaiswal
and Others (1986) 4 SCC 566 : [1987] 1 SCR 1; 5 M
& T Consultants, Secunderabad v. S.Y. Nawab and
Another (2003) 8 SCC 100: [2003] 4 Suppl. SCR 187;
State of Jharkhand and Others v. CWE-Soma
Consortium (2016) 14 SCC 172: [2016] 4 SCR 157;
Laxmikant and Others v. Satyawan and Others (1996)
4 SCC 208 : [1996] 3 SCR 532; Montecarlo Limited v.
National Thermal Power Corporation Limited (2016)
15 SCC 272 : [ 2016] 8 SCR 224 - relied on.
1.6 The Statute enjoins the Liquidator to sell the immovable
and movable assets of the Corporate Debtor in a manner that
would result in maximization of value, lead to a higher and quicker
recovery for the stakeholders, cut short the delay and afford a
guaranteed timeline for completion of the process. On examining
the records, it is found that these were the considerations that
have weighed not only with the respondent No.2 - Liquidator,
but also with the stakeholders, who were unanimous in their
decision that the Second Swiss Challenge Process Document
ought to be abandoned in favour of the Private Sale process where
not only the appellant, but all the other prospective bidders who
had participated in the process were permitted by the Adjudicating
Authority (NCLT) to make a bid in respect of the consolidated
assets of the Corporate Debtor. In its anxiety to claim a vested
right as an Anchor Bidder, the appellant tends to forget that the
Swiss Challenge Process adopted by the respondent No.2 -
Liquidator also falls in the category of a Private Sale, referred to
in Schedule-I(2) under Regulation 33 of the Liquidation
Regulations. For conducting a Private Sale, all that the Liquidator
is required to do is to prepare a strategy to approach the
interested parties. He is authorized to directly liaise with the
potential buyers to ensure that realization from the sale of the
assets can be maximized. No infirmity in the said approach adopted
by the respondent No.2 - Liquidator. When compared to the
above protracted process, a single buyer for the Dahej land along
with the metal scrap, etc., lying at the complex was bound to
speed up the entire process inasmuch as the successful bidder
could be handed over the possession straightaway and the
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respondent No.2 - Liquidator would be in a position to receive
the payment for the composite assets in a timebound manner
with a higher rate of recovery. All these factors that fall in the
realm of commercial considerations were examined holistically
by the respondent No.2 - Liquidator who then placed the cards
before the stakeholders in the meeting conducted on 6th August,
2021. Even though the provisions of the IBC empower the
Liquidator to take an independent decision for the sale of the
assets of the Corporate Debtor in liquidation, it can be seen that
he has taken the stakeholders into confidence at every step. Only
after finding them to be in agreement with the option sought to
be explored by him of halting the Second Swiss Challenge Process
and proceeding with the Private Sale of the consolidated assets
of the Corporate Debtor by directly liaising with the potential
buyers, did the respondent No.2 - Liquidator take such a decision
solely with the object of augmenting realization from the sale of
the assets. Thereafter, the matter was taken to the Adjudicating
Authority (NCLT) for necessary permissions under Section 35(1)
of the IBC that was duly granted. The decision taken by the
respondent No.2 - Liquidator cannot be treated as arbitrary,
capricious or unreasonable for interference by this Court. The
said decision is tempered with sound reason and logic. It is a
purely commercial decision centered on the best interest of the
stakeholders. The stakeholders having unanimously endorsed
the view of the respondent No.2 - Liquidator, it is not for this
Court to undertake a further scrutiny of the desirability or the
reasonableness of the said decision or substitute the same with
its own views. [Paras 56, 57][715-F-H; 716-A-D]
1.7 Therefore, the view expressed by the NCLAT that the
decision of the respondent No.2 - Liquidator was driven by the
desire of the stakeholders to complete the liquidation process in
the shortest possible time is concurred with. The aforesaid
exercise of selling the assets of the Corporate Debtor has been
ongoing for about three years, with several litigations spewed
throughout to cause further delay. The sooner the curtains are
drawn on the process, the better it would be for all concerned. It
is for the very same reason that this Court is inclined to set aside
the subsequent directions issued by the NCLAT of restarting
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the entire process of Private Sale by issuing fresh notices to all
the prospective buyers without limiting them to those who had
participated in the process. No doubt, a public auction entails the
procedure of issuing public notices. But that is not the case with
a Private Sale where the procedure prescribed permits the
Liquidator to directly liaise with the potential buyer and conduct
the negotiations. It may be emphasized that these are commercial
transactions and purely business driven decisions, which are not
amenable to judicial review. The insolvency regime introduced
under the IBC has placed fetters on the power of interference by
the Adjudicating Authority (NCLT) and the Appellant Authority
(NCLAT). The decision of the NCLT to have the sale of the
composite assets negotiated with the parties who had participated
in the earlier rounds of sale, cannot be described as a rushed
decision for the NCLAT to have modified the said order and direct
that the clock be set back to the initial stage of issuing notices to
the prospective buyers. No such relief was sought by any of the
parties to the lis, nor has the NCLAT given any plausible reason
for issuing such a direction. [Paras 58, 59][716-D-H; 717-A-B]
1.8 The powers vested in and the duties cast upon the
Liquidator have been made subject to the directions of the
Adjudication Authority (NCLT) under Section 35 of the IBC. Once
the Liquidator applies to the Adjudicating Authority (NCLT) for
appropriate orders/directions, including the decision to sell the
movable and immovable assets ofthe Corporate Debtor in
liquidation by adopting a particular mode of sale and the
Adjudicating Authority (NCLT) grants approval to such a decision,
there is no provision in the IBC that empowers the Appellate
Authority (NCLAT) to suo motu conduct a judicial review of the
said decision. The jurisdiction bestowed upon the Adjudicating
Authority [NCLT] and the Appellate Authority [NCLAT] are
circumscribed by the provisions of the IBC, they cannot act as a
Court of equity or exercise plenary powers to unilaterally reverse
the decision of the Liquidator based on commercial wisdom and
supported by the stakeholders. In fact, it has been brought to
notice by the respondent No.2 - Liquidator that close on the
heels of the impugned judgment passed by the NCLAT delivered
on 10th December, 2021, the Core Committee of Financial
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Creditors of the Corporate Debtor had conducted a meeting on
15th December, 2021 and had unanimously ratified the view of
the respondent No.2 - Liquidator that the bid process commenced
on 24th August, 2021, ought to be continued and not restarted
having regard to the fact that it had taken almost three years to
find such buyers and the sale was at the cusp of being closed. It
was also recorded in the minutes of the meeting that several
attempts had already been made to solicit interest from parties
but none had come forward to make an offer for the composite
purchase of the assets. The Core Committee constitutes 70.3%
of the financial creditors and when they have weighed in to support
the stand taken by the respondent No.2 - Liquidator to continue
the bid process commenced on 24th August, 2021, there is no
reason to foist the view of the NCLAT on the respondent No.2 -
Liquidator that he ought to restart the process for sale of the
composite assets of the Corporate Debtor from the scratch after
issuing an open notice to the prospective buyers. [Paras 60,
61][717-B-E; 718-B-E]
Committee of Creditors of Essar Steel India Limited v.
Satish Kumar Gupta and Others (2020) 8 SCC 531 :
[2019] 16 SCR 275 - relied on.
K. Sashidhar v. Indian Overseas Bank and Others
(2019) 12 SCC 150: [2019] 3 SCR 845; Committee of
Creditors of Amtek Auto Limited v. Dinkar T.
Venkatasubramanian and Others (2021) 4 SCC 457 :
2021 (3) JT 110; Kalpraj Dharamshi and Another v.
Kotak Investment Advisors Limited and Another. (2021)
10 SCC 401 : 2021 (4 ) JT 128; Ghanashyam Mishra
And Sons Private Limited through the Authorized
Signatory v. Edelweiss Asset Reconstruction Company
Limited through the Director and Others (2021) 9 SCC
657 - referred to.
1.9 Therefore, the impugned judgment dated 10th
December, 2021, passed by NCLAT to the extent that it has
modified the order dated 16th August, 2021 passed by the NCLT
and directed restraining of the Private Sale Process, is quashed
and set aside. The Private Sale process of the composite assets
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of the Corporate Debtor should be taken further by the
respondent No.2 - Liquidator without losing any further time and
be concluded at the earliest. All the eligible bidders who have
made Earnest Money Deposits would be entitled to participate
in the negotiations to be conducted by the respondent No.2Liquidator for privately selling the consolidated assets of the
Corporate Debtor. Accordingly, it is directed that the process of
private negotiations that had commenced on 24th August, 2021,
shall be taken to its logical end and brought to a closure by the
respondent No.2 - Liquidator within four weeks from the date of
passing of this order. [Para 62][718-F-H; 719-A]
Tata Cellular v. Union of India (1994) 6 SCC 651:
[1994] 2 Suppl. SCR 122; Air India v. Cochin
International Airport Limited and Others (2000) 2 SCC
617 : [2000] 1 SCR 505; Agmatel India Private Limited
v. Resources Telecom and Others (2022) 5 SCC 362:
2022 (2) SCALE 554; Swiss Ribbons Private Limited
and Another v. Union of India and Others (2019) 4
SCC 17 : [2019] 3 SCR 535; EBIX Singapore Private
Limited v. Committee of Creditors of Educomp Solutions
Limited and Another (2022) 2 SCC 401; Jaypee
Kensington Boulevard Apartments Welfare Association
and Others v. NBCC (India) Limited and Others (2022)
1 SCC 401 : 2021 (5) SCALE 142; Innovative
Industries Limited v. ICICI Bank and another (2018) 1
SCC 407 : [2017] 8 SCR 33; Arcelormittal India Private
Limited v. Satish Kumar Gupta and Others (2019) 2 SCC
1 : [2018] 12 SCR 362; Sterling Computers Limited v.
M/s M & N Publications Limited and Others (1993) 1
SCC 445 : [1993] 1 SCR 81; Mauleshwar Mani and
Others v. Jagdish Prasad and Others (2002) 2 SCC
468 : [2002] 1 SCR 423; B.S.N. Joshi & Sons Limited
v. Nair Coal Services Limited and Others (2006) 11 SCC
548 : [2006] 8 Suppl. SCR 11; Jagdish Mandal v. State
of Orissa and Others (2007) 14 SCC 517; Afcons
Infrastructure Limited v. Nagpur Metro Rail Corporation
Limited and Another (2016) 16 SCC 818 : [2016] 3
SCR 551 - referred to.
M/S. R.K. INDUSTRIES (UNIT-II) LLP v. M/S. H.R.
COMMERCIALS PRIVATE LIMITED
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Case Law Reference
[2009] 8 SCR 654
referred to
Para 11
[1996] 3 SCR 532
referred to
Para 16
[2016] 4 SCR 157
relied on
Para 16
[1994] 2 Suppl. SCR 122
referred to
Para 17
[2000] 1 SCR 505
referred to
Para 17
[2016] 8 SCR 224
relied on
Para 17
[2019] 3 SCR 535
referred to
Para 20
[2017] 8 SCR 33
referred to
Para 25
[2018] 12 SCR 362
referred to
Para 34
[1987] 1 SCR 1
relied on
Para 52
[2003] 4 Suppl. SCR 187
relied on
Para 52
[1993] 1 SCR 81
referred to
Para 55
[2002] 1 SCR 423
referred to
Para 55
[2006] 8 Suppl. SCR 11
referred to
Para 55
[2016] 3 SCR 551
referred to
Para 55
[2019] 16 SCR 275
referred to
Para 60
[2019] 3 SCR 845
referred to
Para 60
CIVIL APPELLATE JURISDICTION : Civil Appeal No.7722
of 2021.
From the Judgment and Order dated 22.11.2021 of the National
Company Law Appellate Tribunal, New Delhi in Company Appeal (AT)
(Insolvency) No.236 of 2021.
With
Civil Appeal No. 7731 of 2021.
Tushar Mehta, SG, K.M. Nataraj, ASG, Dr. Abhishek Manu
Singhvi, Gaurav Mitra, Arvind Datar, Jay Savla, Mukul Rohatgi,
Siddhartha Dave, Vikram Nankani, Sr.Advs., Sameer Pandit, Aman Raj
Gandhi, Parthasarathy Bose, Anuj Jain, Aditya Ladha, Ananya Pratap
Singh, Azeem Samuel, Nidhiram, Akash Kakade, Gurdeep Singh Sachar,
Vikrant Shetty, Shriya Ray Chaudhary, Swetab Kumar, Somanatha
Padhan, Abhishek Sharma, Ms. Ashly Cherian, Gaurav Arora, Kamlendra
Singh, Ms. Renuka, Ms. Renuka Sahu, Alok Tripathi, Rupesh Kumar,
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Kannu Agarwal, Mayank Pandey, Mukesh Kumar Maroria, Shiv Mangal
Sharma, Saurabh Rajpal, Ms. Shrinjan Khosla for M/S. Aura & Co.,
Jasdeep Singh Dhillon, Salil Thakore, Prabhay Chaurasia, Rahul Gupta,
Ms. R. Nair, Gaurav Mathur, Ms. Anushree Prashit Kapadia, Abhishek
Shah, Ms. Priyanka Rathi, Shashank Khurana, M/S. Cyril Amarchand
Mangaldas, Advs. for the appearing parties.
The Judgment of the Court was delivered by
HIMA KOHLI, J.
1. By this common judgment, we propose to decide both the
appeals one filed by M/s. R.K. Industries (Unit-II) LLP (appellant in
Civil Appeal No.7722 of 2021 and respondent No.1 in Civil Appeal
No.7731 of 2021) and Welspun Steel Resources Private Limited1
(appellant in Civil Appeal No.7731 of 2021 and respondent No.7 in Appeal
No.7722/2021) against the judgment dated 10th December, 2021 passed
by the Appellate Authority, National Company Law Appellate Tribunal,
Principal Bench, New Delhi2 in Company Appeal (AT) (Ins.) No. 690 of
2021 filed by R.K. Industries under Section 61 of the Insolvency and
Bankruptcy Code, 20163, assailing the order dated 16th August, 2021
passed by the Adjudicating Authority, (National Company Law Tribunal,
Ahmedabad)4 in Interlocutory Application No.273 of 2021 (filed by the
respondent No.1 - H.R. Commercial Private Limited, in IA No.698 of
2020 (filed by Liquidator) in Company Petition (IB) No.53 of 2017. For
the sake of convenience, we propose to refer to the facts narrated in
Civil Appeal No.7722 of 2021.
FACTS OF THE CASE
2. The facts of the case necessary to decide the present appeals
are as follows.
2.1 Vide Agreement dated 26th February, 2008, Gujarat Maritime
Board5 leased out a parcel of land to ABG Shipyard Limited6 for a period
of thirty years. On 1st August, 2017, ICICI Bank Limited moved an
application for initiation of Corporate Insolvency Resolution Process7
1 For short 'Welspun'
2 For short 'NCLAT'
3 For short 'IBC'
4 For short 'NCLT'
5 For short 'GMB'
6 For short 'Corporate Debtor'
7 For short 'CIRP'
M/S. R.K. INDUSTRIES (UNIT-II) LLP v. M/S. H.R.
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against the Corporate Debtor under Section 7 of the IBC read with Rule
4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority)
Rules8, 2016 before the Adjudicating Authority, NCLT, Ahmedabad
[CP(IB) No.53/NCLT/AHM/2017] wherein, Mr. Sundaresh Bhat was
appointed as an Interim Resolution Professional9. As no Resolution Plan
was approved during the CIRP, an application was moved by the IRP
for initiating liquidation proceedings. Vide order dated 25th April, 2019,
the Adjudicating Authority ordered liquidation of the Corporate Debtor
and appointed Mr. Sundaresh Bhat as the Liquidator. The respondent
No.2 - Liquidator made efforts to sell the assets of the Corporate Debtor
through an e-auction process, as contemplated in Sections 33 and 35 of
the IBC read with Schedule-I of the Insolvency and Bankruptcy Board
of India (Liquidation Process) Regulations, 201610. Five e-auctions were
conducted by the respondent No.2 - Liquidator to sell the consolidated
assets of the Corporate Debtor on 17th September, 2019; 27th September,
2019; 22nd October, 2019; 11th November, 2019 and 5th August, 2020.
When the first four e-auctions were unsuccessful, in the fifth e-auction,
the respondent No.2 - Liquidator offered sale of the assets on a standalone basis or singly or in smaller lots, besides compositely. Except for
the sale of two residential assets, no purchasers stepped forward to
purchase the other assets.
2.2. Faced with the above situation, the respondent No.2 -
Liquidator moved an application (IA No.698 of 2020) before the NCLT
for permission to sell the assets of the Corporate Debtor through Private
Sale, in terms of Regulation 33(2)(d) of the Liquidation Regulations, which
was duly allowed. On receiving offers from potential buyers, the
respondent No.2 - Liquidator approached the Stakeholders, who in the
Meeting conducted on 28th January, 2021, took a decision to go in for the
sale of the Dahej Material and Scrap11 at amounts higher than the reserve
price of the Dahej Material fixed at ` 516 crores in the fifth round of the
e-auction. The Stakeholders' Consultative Committee12 resolved that
the prospective bidders, who proposed to participate in the Private Sale,
ought to be encouraged to participate in the Swiss Challenge Process.
As a result, the Swiss Challenge Process was adopted for sale of the
assets of the Corporate Debtor through Private Sale.
8 For short 'IBC Rules'
9 For short 'IRP'
10 For short 'Liquidation Regulations'
11 For short 'Dahej Material'
12 For short 'SCC'
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2.3. The first Swiss Challenge Process that commenced on 12th
March, 2021, was unsuccessful as the highest offeror failed to deposit
the earnest money amount of 10% of the reserve price. The SCC decided
to conduct a second Swiss Challenge Process at a base price of ` 460
crores (being lower than the earlier calculated reserve price of ` 516
crores) as some assets from the Dahej Material were kept reserved for
a potential buyer. The second Swiss Challenge Process was initiated on
22nd March, 2021 and at the Anchor Bid stage, the respondent No.2 -
Liquidator received bids from R.K. Industries, appellant in Civil Appeal
No.7731/2021-, respondent No.4 - V.K. Industrial Corporation Limited
and respondent No.5 - M/s Ankit International.
2.4. On 23rd March, 2021, the appellant submitted its bid of ` 431
crores along with Expression of Interest and deposited a sum of ` 1.00
crore in terms of the bid requirement. Though the last date for submitting
the Earnest Money Deposit13 in terms of the Process Document was as
24th March, 2021, the appellant deposited the EMD of ` 43.10 crores
with the respondent No.2 - Liquidator for selection as an Anchor Bidder
on 26th March, 2021 along with an affidavit stating inter alia that it
agreed to be bound by the terms of the Swiss Challenge Process.
2.5. The second stage of the Swiss Challenge Process commenced
on 27th March, 2021 when the respondent No.2 - Liquidator published
an advertisement inviting bidders to participate in the Swiss Challenge
Process and submit their bids against the Anchor Bid. In response thereto,
the appellant, respondents No.1, 3, 4, 5 and 6 submitted their bids. On
2nd April, 2021, the respondent No.1 - HR Commercials Private Limited
proposed to bid in a consortium comprising of itself and the respondents
No.3 to 6. The said consortium also submitted an EMD in the second
stage of the Swiss Challenge Process.
COMMENCEMENT OF LITIGATION
ORDER OF THE ADJUDICATING AUTHORITY (NCLT)
3. On 6th April, 2021, respondent No.1 - HR Commercials Private
Limited filed an application before the Adjudicating Authority (NCLT),
being IA No.273 of 2021, challenging the bid process in the second Swiss
Challenge Process wherein, the appellant was selected as the Anchor
Bidder. The NCLT passed an interim order on the aforesaid application
on 7th April, 2021 directing the respondent No.2 - Liquidator to complete
13 For short 'EMD'
M/S. R.K. INDUSTRIES (UNIT-II) LLP v. M/S. H.R.
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the second Swiss Challenge Process only upto the stage of announcement
of the highest bidder and for deferring the rest of the process to a date
after 12th April, 2021. The said interim order dated 7th April, 2021 was
subsequently extended by the NCLT on 27th April, 2021 and 3rd May,
2021.
4. Aggrieved by the aforesaid orders, the appellant - R.K.
Industries filed an appeal before the Appellate Authority/NCLAT, which
was disposed of, vide order dated 18th June, 2021 with a direction issued
to the NCLT to expeditiously decide IA No.273 of 2021, moved by the
respondent No.1 - HR Commercials Private Limited. [In the meantime,
respondent No.7 - Welspun sent an e-mail dated 19th May, 2021 to the
respondent No.2 - Liquidator expressing its interest in the Dahej Material
as well as the land that was leased out by GMB to the Corporate Debtor].
A series of e-mails were exchanged between the respondent No.2Liquidator and the respondent No.7-Welspun on its offer to acquire the
consolidated assets of the Corporate Debtor at a price of ` 627.50 crores.
When the request of the respondent No.7-Welspun for permission to
inspect the Dahej Material at the site was turned down by the respondent
No.2 - Liquidator on the ground that the matter was sub judice and the
material was not available for bidding, it filed an application before the
NCLT (IA No.445 of 2021) for issuing directions to the respondent No.2
- Liquidator to consider and accept its offer for buying the consolidated
assets of the Corporate Debtor. Around the same time, the respondent
No.8 - Kanter Steel India Private Limited also moved an application
(IA No.379 of 2021) before the NCLT for quashing of the second Swiss
Challenge Process.
5. On 5th July, 2021, the NCLT directed the respondent No.2 -
Liquidator to permit the respondent No.7 - Welspun to inspect the assets
of the Corporate Debtor. After the said inspection, vide letter dated 2nd
August, 2021, the respondent No.7 - Welspun hiked its offer for the
consolidated assets from ` 627.50 crores to ` 650 crores on an 'as is
where is basis'; 'as is what is basis' and 'wherever there is basis'.
6. On 6th August, 2021, a Meeting of the SCC was convened
wherein, the respondent No.2- Liquidator appraised the stakeholders of
the further developments that had taken place and the offer letter dated
2nd August, 2021 issued by the respondent No.7-Welspun bidding for
the consolidated assets of the Corporate Debtor. The SCC advised the
respondent No.2-Liquidator to place the relevant facts and the bid
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received from the respondent No.7-Welspun before the NCLT. It is the
stand of the respondent No.2-Liquidator that in the hearing conducted
on 9th August, 2021, the NCLT had orally directed him to place the offer
made by the respondent No.7-Welspun before the stakeholders.
7. Pursuant to the aforesaid direction, a Meeting of the SCC was
conducted on 13th August, 2021 and it was decided that it would be
beneficial if the Dahej Material and the Shipyard are sold as composite
assets to maximize realization to the stakeholders in the shortest possible
time and for quick disposal of the assets. In other words, the stakeholders
were of the view that a composite sale of the Dahej Material and the
Shipyard would be more beneficial vis-à-vis the sale of the Dahej Material
alone, subject matter of the second Swiss Challenge Process.
8. On 16th August, 2021, the respondent No.7-Welspun sent an email to the respondent No.2-Liquidator once again increasing its offer
for the consolidated assets of the Corporate Debtor from ` 650 crores
to ` 675 crores. It also offered to pay a sum of ` 67.50 crores as EMD
with an assurance that full payment would be made on or before 30th
September, 2021. On the very same day, when the matter was listed
before the NCLT, the respondent No.2-Liquidator apprised the NCLT
of the recommendations made by the SCC for entertaining the
consolidated offer received from the respondent No.7-Welspun. Noting
the aforesaid submission that removal of the Dahej Material will take
upto 15 to 20 months and only thereafter, could the process for conducting
sale of the land be undertaken, which would further delay the entire
liquidation process and having regard to the view of the stakeholders
that consolidated sale of all the assets of the Corporate Debtor at one go
will save time and maximize the value to the stakeholders, the NCLT
passed an order on 16th August, 2021, permitting the respondent No.2Liquidator to go in for Private Sale of all the assets of the Corporate
Debtor and complete the entire sale process in consultation with the
SCC within a period of three weeks. The respondent No.2-Liquidator
was also directed to permit all the parties before the NCLT to participate
in the bidding process.
ORDER OF THE APPELLATE AUTHORITY (NCLAT)
9. It was the aforesaid order that was challenged by the appellantR.K. Industries before the NCLAT, which has been dismissed, by the
impugned judgment dated 10th December, 2021. However, the NCLAT
has gone on to modify the order dated 16th August, 2021 passed by the
M/S. R.K. INDUSTRIES (UNIT-II) LLP v. M/S.