# V.S. Palanivel v. P. Sriram, CS, Liquidator, Etc

- **Citation:** 2024 INSC 659
- **Court:** Supreme Court of India
- **Decided:** 2024-08-28
- **Case number:** Civil Appeal Nos. 9059-9061 of 2022
- **Bench:** Hima Kohli, Ahsanuddin Amanullah
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/v-s-palanivel-v-p-sriram-cs-liquidator-etc-38034
- **Pages:** 58

## Headnote

(i) Whether the Tribunal was right in accepting the view taken by the
Adjudicating Authority that Covid-19 lockdown was a valid reason
for extension of time to deposit the balance sale consideration;
(ii) Whether the appellant was justified in alleging that the subject
property was under-valued; (iii) Whether it was incumbent for the
Liquidator to constitute a Stakeholders' Consultation Committee;
(iv) Whether Liquidator had violated Regulation 33 of the IBBI
Regulations, 2016; (v) What is the import of the order of attachment
issued by the Income Tax Authorities in respect of the auctioned
property.
Headnotes†
Insolvency and Bankruptcy Code, 2016 - Insolvency and
Bankruptcy Board of India (Liquidation Process) Regulations,
2016 - Regulation 47A - Whether the Tribunal was right in
accepting the view taken by the Adjudicating Authority that
Covid-19 lockdown was a valid reason for extension of time
to deposit the balance sale consideration:
Held: The Notice for sale of assets issued by the Liquidator for
conducting the e-auction of the land and building owned by the
Corporate Debtor that declared the reserve price of the subject
property as ₹29,55,96,375/- - The e-auction of the subject property
took place on 23.12.2019 - Going by the Notice for sale issued
by the Liquidator, the period of 90 days available to the Auction
Purchaser to deposit the balance sale consideration, if reckoned
from 24.12.2019, the date when the Liquidator informed that it was
the successful bidder, would have expired on 23.03.2020 - However,
the Letter of Intent issued by the Liquidator on 24.12.2019, was
received by the Auction Purchaser on 26.12.2019 - The period
of 90 days reckoned from 26.12.2019 would have expired on
* Author
1264
[2024] 8 S.C.R.
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25.03.2020 - Admittedly, the balance sale consideration was not
paid by the Auction Purchaser within the aforesaid timeline - The
said amount was deposited by the Auction Purchaser through
RTGS only on 24.08.2020 - The Supreme Court in a Sou Motu
writ petition took cognizance of the situation arising out of the
challenge faced by the country on account of Covid-19 virus and
extended limitation w.e.f 15.03.2020 - The Auction Purchaser
has also invoked Regulation 47A of the IBBI Regulations, 2016 -
The submission made on behalf of the appellant that the word
'Litigants' used in the order dated 23.03.2020 passed in the Suo
Moto Writ Petition ought to be given a narrow interpretation so
as to exclude a party like the Auction Purchaser herein as stricto
sensu, cannot be accepted - The appellant cannot be heard to
state that when the entire country was engulfed by the Covid-19
pandemic and a countrywide lockdown was imposed on 25.03.2020
that was extended from time to time, the Auction Purchaser
ought to have deposited the balance sale consideration within
the stipulated 90 days - In such a situation, a lenient view would
have to be taken by the Court - In the present case, as noticed,
the period of 90 days for depositing the balance sale consideration
had expired just after the crucial date, i.e., 23.03.2020 -
There is no merit in the submission made by the appellant
that the Tribunal ought not to have accepted the view taken
by the Adjudicating Authority that Covid-19 lockdown was a
valid reason for extension of time to deposit the balance sale
consideration. [Paras 32.2, 32.3, 32.5, 32.6, 32.12]
Insolvency and Bankruptcy Code, 2016 - Insolvency and
Bankruptcy Board of India (Liquidation Process) Regulations,
2016 - Whether the appellant was justified in alleging that the
subject property was under-valued:
Held: If the appellant was so confident that the subject property
would have fetched a much higher price, nothing precluded him
from identifying a bidder who was willing to offer a better price -
In fact, such a suggestion was made by the Liquidator in his
reply dated 15.11.2019 to the objection taken by the appellant
to the estimated value of the subject property in his lette

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[2024] 8 S.C.R. 1263 : 2024 INSC 659
V.S. Palanivel
v.
P. Sriram, CS, Liquidator, Etc.
(Civil Appeal Nos. 9059-9061 of 2022)
28 August 2024
[Hima Kohli* and Ahsanuddin Amanullah, JJ.]
Issue for Consideration
(i) Whether the Tribunal was right in accepting the view taken by the
Adjudicating Authority that Covid-19 lockdown was a valid reason
for extension of time to deposit the balance sale consideration;
(ii) Whether the appellant was justified in alleging that the subject
property was under-valued; (iii) Whether it was incumbent for the
Liquidator to constitute a Stakeholders' Consultation Committee;
(iv) Whether Liquidator had violated Regulation 33 of the IBBI
Regulations, 2016; (v) What is the import of the order of attachment
issued by the Income Tax Authorities in respect of the auctioned
property.
Headnotes†
Insolvency and Bankruptcy Code, 2016 - Insolvency and
Bankruptcy Board of India (Liquidation Process) Regulations,
2016 - Regulation 47A - Whether the Tribunal was right in
accepting the view taken by the Adjudicating Authority that
Covid-19 lockdown was a valid reason for extension of time
to deposit the balance sale consideration:
Held: The Notice for sale of assets issued by the Liquidator for
conducting the e-auction of the land and building owned by the
Corporate Debtor that declared the reserve price of the subject
property as ₹29,55,96,375/- - The e-auction of the subject property
took place on 23.12.2019 - Going by the Notice for sale issued
by the Liquidator, the period of 90 days available to the Auction
Purchaser to deposit the balance sale consideration, if reckoned
from 24.12.2019, the date when the Liquidator informed that it was
the successful bidder, would have expired on 23.03.2020 - However,
the Letter of Intent issued by the Liquidator on 24.12.2019, was
received by the Auction Purchaser on 26.12.2019 - The period
of 90 days reckoned from 26.12.2019 would have expired on
* Author
1264
[2024] 8 S.C.R.
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25.03.2020 - Admittedly, the balance sale consideration was not
paid by the Auction Purchaser within the aforesaid timeline - The
said amount was deposited by the Auction Purchaser through
RTGS only on 24.08.2020 - The Supreme Court in a Sou Motu
writ petition took cognizance of the situation arising out of the
challenge faced by the country on account of Covid-19 virus and
extended limitation w.e.f 15.03.2020 - The Auction Purchaser
has also invoked Regulation 47A of the IBBI Regulations, 2016 -
The submission made on behalf of the appellant that the word
'Litigants' used in the order dated 23.03.2020 passed in the Suo
Moto Writ Petition ought to be given a narrow interpretation so
as to exclude a party like the Auction Purchaser herein as stricto
sensu, cannot be accepted - The appellant cannot be heard to
state that when the entire country was engulfed by the Covid-19
pandemic and a countrywide lockdown was imposed on 25.03.2020
that was extended from time to time, the Auction Purchaser
ought to have deposited the balance sale consideration within
the stipulated 90 days - In such a situation, a lenient view would
have to be taken by the Court - In the present case, as noticed,
the period of 90 days for depositing the balance sale consideration
had expired just after the crucial date, i.e., 23.03.2020 -
There is no merit in the submission made by the appellant
that the Tribunal ought not to have accepted the view taken
by the Adjudicating Authority that Covid-19 lockdown was a
valid reason for extension of time to deposit the balance sale
consideration. [Paras 32.2, 32.3, 32.5, 32.6, 32.12]
Insolvency and Bankruptcy Code, 2016 - Insolvency and
Bankruptcy Board of India (Liquidation Process) Regulations,
2016 - Whether the appellant was justified in alleging that the
subject property was under-valued:
Held: If the appellant was so confident that the subject property
would have fetched a much higher price, nothing precluded him
from identifying a bidder who was willing to offer a better price -
In fact, such a suggestion was made by the Liquidator in his
reply dated 15.11.2019 to the objection taken by the appellant
to the estimated value of the subject property in his letter dated
08.11.2019 - Again, the Liquidator wrote a letter dated 27.11.2019
to the appellant suggesting that ask eligible parties willing to
offer a better price to participate in the auction process - The
appellant did not follow up after that - Therefore, the appellant
[2024] 8 S.C.R.
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V.S. Palanivel v. P. Sriram, CS, Liquidator, Etc.
cannot be permitted to argue that since the tax value of the
subject property was estimated by the Registered Valuers at above
₹48 crores, the Liquidator ought not to have fixed the reserve price
at ₹39,41,28,500/- for the simple reason that though the reports
of the Registered Valuers mentioned the tax value of the subject
property at a little above ₹48 crores, but the liquidation value in
both the reports was much lower and the Liquidator arrived at the
average of the two estimated liquidation values to fix the reserve
price of the subject property. [Paras 33.5, 33.6]
Insolvency and Bankruptcy Code, 2016 - Insolvency and
Bankruptcy Board of India (Liquidation Process) Regulations,
2016 - Regulation 31A - Whether it was incumbent for
the Liquidator to constitute a Stakeholders' Consultation
Committee:
Held: By virtue of the Notification dated 28.04.2022, an Explanation
was appended at the foot of Regulation 31A which clarifies that the
requirement of constituting a Stakeholders' Consultation Committee
shall apply only to those liquidation processes that were to commence
on/after the date of commencement of the IBBI Regulation,
2016 - In the present case, the liquidation process in respect of
the company had commenced on 17.07.2019 and therefore, the
submission made by the appellant that the Liquidator has breached
Regulation 31A of the IBBI Regulations, 2016 by not constituting
a Stakeholders' Consultation Committee, is devoid of merits -
That apart, the record reveals, that the Liquidator had sent a
reply on 15.11.2019 to a written objection taken by the appellant
on the Valuation reports submitted by the Registered Valuers on
08.11.2019, wherein, it was stated that neither he nor the other
ex-Directors of the company had responded to the Liquidator's
suggestion for calling a meeting of the CoC - Despite this,
neither the appellant nor the other ex-Directors of the company
took any step to depute a person from amongst them to be
a part of the Stakeholders' Consultation Committee - In view
of the aforesaid facts, the objection taken by the appellant
that the Liquidator has breached Regulation 31A, does not
hold any water -Nor is the Court inclined to examine the
submission made at the instance of the appellant that in the
absence of any explanation appended to Regulation 31A as it
stood before 25.07.2019, it was incumbent for the Liquidator to have
constituted a Stakeholders' Consultation Committee. [Para 34.3]
1266
[2024] 8 S.C.R.
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Insolvency and Bankruptcy Code, 2016 - S. 35 - Insolvency and
Bankruptcy Board of India (Liquidation Process) Regulations,
2016 - Regulation 33, Schedule I, Rule 12 - National Company
Law Tribunal Rules, 2016 - R.11 - Whether Liquidator had
violated Regulation 33 of the IBBI Regulations, 2016:
Held: Schedule I under Regulation 33 lays down the manner in
which the assets of the Corporate Debtor are to be sold by the
Liquidator - Rule 12 under Schedule I, would have to be treated
as mandatory in character for the reason that it contemplates a
consequence in the event of non-payment of the balance sale
consideration by the highest bidder within the stipulated timeline
of 90 days, which is cancellation of the sale by the Liquidator - To
that extent, there is substance in the submission made on behalf
of the appellant that since the second proviso under Rule 12
contemplates a consequence of cancellation of the auction on
non-payment of the balance sale consideration within 90 days,
the Liquidator was not empowered to extend the timeline - In the
present case, records reveal that when the Auction Purchaser had
approached the Liquidator seeking extension of time to deposit the
balance sale consideration - The Liquidator had rightly expressed
his inability to do so and indicated that such a power vests only in
the Adjudicating Authority - On receiving the aforesaid response,
the Auction Purchaser did take steps to move the Adjudicating
Authority for seeking extension of time for making the payments - It
is a matter of record that the said application was allowed by the
Adjudicating Authority on 05.05.2020 and time was granted to the
Auction Purchaser to pay the balance sale consideration on the
Central Government/State Government lifting the lockdown - The
said order was passed by the Adjudicating Authority in exercise of
its inherent powers under Rule 11 of the NCLT Rules, 2016 - In
the facts of the present case, the Adjudicating Authority exercised
statutory powers under Section 35 of the IBC read with its inherent
powers under Rule 11 of the NCLT Rules, 2016 for extending the
time to deposit the balance sale consideration on sufficient cause
being shown, i.e., in view of the countrywide lockdown due to the
Covid-19 pandemic - This latitude that was given in the aforesaid
extraordinary circumstances to meet the ends of justice, cannot
be faulted. [Paras 35.1, 35.11, 35.14, 35.16]
Insolvency and Bankruptcy Code, 2016 - Insolvency and
Bankruptcy Board of India (Liquidation Process) Regulations,
2016 - Schedule I, Rule 12 and Rule 13 - What is the import of
[2024] 8 S.C.R.
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V.S. Palanivel v. P. Sriram, CS, Liquidator, Etc.
the order of attachment issued by the Income Tax Authorities
in respect of the auctioned property:
Held: Rule 12 is held to be mandatory in character because nonpayment within the timeline has consequences attached to it -
However, in contrast thereto, there are no adverse consequences
spelt out in Rule 13 for it to be treated as mandatory - The said
Rule lays down the procedure for completion of the sale and
would have to be treated as directory since some procedural steps
have been set out for purposes of completion of the sale process,
but nothing beyond that - This Court is therefore not inclined to
accept the submissions made by the respondents that none of the
activities as contemplated in Rule 12 could have been completed
unless and until the attachment order passed by the Income Tax
Authorities was lifted or that the Liquidator was not in a position
to complete the sale under Rule13 on that count - On an overall
conspectus of the facts of the present case which brings out the
glaring default on the part of the Auction Purchaser in making
deposit of the balance sale consideration even after permission
was granted by the Adjudicating Authority on 10.02.2020 to lift the
attachment order, the only question that needs to be answered
is as to whether this Court should proceed to set aside the
auction and as a sequence thereto, declare as null and void, the
sale certificate issued by the Liquidator in favour of the Auction
Purchaser, as has been pleaded by the appellant - The Subject
land is now an operational hospital - Huge amounts have been
pumped into the project by the Auction Purchaser - In contrast,
the appellant has not been a vigilant litigant - He has dragged
his feet at every stage - It took 19 months for the appellant to
prefer an appeal before the Tribunal against the order passed by
the Adjudicating Authority - Also, it is a well settled legal position
that once auction is confirmed, it ought to be interfered with on
fairly limited grounds - In the given facts, the sale deed cannot
be declared void. [Paras 36.9, 36.12, 36.14]
Case Law Cited
Sharifud-din v. Abdul Gani Lone [1980] 1 SCR 1177 : (1980) 1 SCC
403; Vidarbha Industries Power Limited v. Axis Bank Limited [2022]
12 SCR 139 : (2022) 8 SCC 352; C.N. Paramasivan and Another
v. Sunrise Plaza through Partner and Others [2013] 4 SCR 1 :
(2013) 9 SCC 460; State of Bihar v. Bihar Rajya Bhumi Vikas
Bank Samiti [2018] 7 SCR 1147 : (2018) 9 SCC 472 - relied on.
1268
[2024] 8 S.C.R.
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GPR Power Solutions Pvt. Ltd. v. Supriyo Chaudhuri (2021) 17
SCC 312; Sagufa Ahmed v. Upper Assam Polywood Products Pvt.
Ltd, [2020] 9 SCR 472 : (2021) 2 SCC 317; Standard Surfa Chem
India Private Limited v. Kishore Gopal Somani, 2022 SCC Online
NCLAT 305; Prakash Chandra Kapoor v. Vijay Kumar Iyer, 2021
SCC Online NCLAT 622; Union Bank of India v. Rajat Infrastructure
Private Limited and Others, 2020 SCC Online SC 1491; Pioneer
Urban Land and Infrastructure Limited and Another v. Union of
India and Others [2019] 10 SCR 381 : (2019) 8 SCC 416; Prakash
Chandra Kapoor and Another v. Vijay Kumar Iyer and Another, 2021
SCC Online NCLAT 622; Swiss Ribbons (P) Ltd. and Another v.
Union of India and Another [2019] 3 SCR 535 : (2019) 4 SCC 17;
Yashowanta Narayan Dixit v. Orient Insurance Company Limited
(2022) 15 SCC 569; Union Bank of India v. Rajat Infrastructure
Private Limited and Other [2023] 14 SCR 666 : (2023) 10 SCC
232; Bombay Mercantile CIVIL APPEAL NOS. 9059-9061 OF 2022
Page 23 of 57 Corporative Bank Limited v. U.P. Gun House and
Others (2024) 3 SCC 517; R.K. Industries (Unit-II) LLP v. H.R.
Commercials Private Limited and Others [2022] 12 SCR 667 :
(2024) 4 SCC 166; Arun Kumar Jagatramka v. Jindal Steel and
Power Limited [2021] 3 SCR 114 : (Refer Para 81) (2021) 7 SCC
474; Valji Khimji and Co. v. Hindustan Nitro Product (Gujarat) Ltd.
(Official Liquidator) [2008] 12 SCR 1 : (2008) 9 SCC 299; Celir
LLP v. Bafna Motors (Mumbai) Private Limited and others [2023]
13 SCR 53 : (2024) 2 SCC 1; K. Kumara Gupta v. Sri Markendaya
and Sri Omkareswara Swamy Temple and Others [2022] 8 SCR
968 : (2022) 5 SCC 710 - referred to.
List of Acts
Insolvency and Bankruptcy Code, 2016; Insolvency and Bankruptcy
Board of India (Liquidation Process) Regulations, 2016; National
Company Law Tribunal Rules, 2016.
List of Keywords
Covid-19 Pandemic; Lockdown; Auction; E-Auction; Sale
consideration; Regulation 47A of IBBI Regulations, 2016; Undervaluation of Property; Stakeholders Consultation Committee;
Regulation 33 of IBBI Regulations, 2016; Mandatory; Directory;
Rule 12 of Schedule I of IBBI Regulations, 2016; Rule 13 of
Schedule I of IBBI Regulations, 2016; Attachment order by
Income Tax Authorities; Vigilant litigant; Extension of time; Auction
Purchaser; Public Auction.
[2024] 8 S.C.R.
1269
V.S. Palanivel v. P. Sriram, CS, Liquidator, Etc.
Case Arising From
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 9059-9061 of
2022
From the Judgment and Order dated 16.09.2022 of the National
Company Law Appellate Tribunal, Chennai in CAAT (CH) (I) Nos. 336,
339 and 343 of 2021
Appearances for Parties
P Chidambaram, Sr. Adv., B Ragunath, Prassana Venkat, Mrs. NC
Kavitha, Sriram P., Advs. for the Appellant.
C. U. Singh, Arvind Datar, Sr. Advs., K. V. Vijayakumar, K V Sriwas
Narayanan, K V Vibu Prasad, Sathiyanarayanan, V Balachandran,
Siddharth Naidu, Prithvi Raj JS, M/s. KSN & Co., Advs. for the
Respondents.
Judgment / Order of the Supreme Court
Judgment
Hima Kohli, J.
A.
BACKDROP
1.
The appellant - V.S. Palanivel (shareholder/former Managing Director
of M/s Sri Lakshmi Hotel Private Limited) has filed the present appeals
against the judgment and order dated 16th September, 2022, passed
by the National Company Law Appellate Tribunal, Chennai Bench1
in three Company Appeals2 preferred by him. The details of the said
Company Appeals are (i) Company Appeal No. 336 of 2021 (subject
matter of Civil Appeal No. 9059 of 2022) filed against the common
judgment dated 17th November, 2021 passed by the National Company
Law Tribunal, Chennai Bench3 rejecting an application4 moved by the
appellant praying inter alia that directions be issued to the Liquidator,
Sri Lakshmi Hotel Private Limited to stall all proceedings in respect
of the e-auction conducted by him on 23rd December, 2019, to work
1
In short 'Tribunal'
2
Company Appeal (AT) (CH) (Ins} No. 336 of 2021; Company Appeal (AT) (CH) (Ins) No. 339 of 2021 and
Company Appeal (AT) (CH) (Ins) No. 343 of 2022
3
In short 'Adjudicating Authority'
4
MA No. 120 of 2020
1270
[2024] 8 S.C.R.
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on an alternative manner of dividing the property put to auction and
sell only a part of the land and for grant of sufficient time to make
payment to the financial creditor. (ii) Company Appeal No. 339 of
2021 (subject matter of Civil Appeal No. 9060 of 2022) arose from the
common order dated 17th November, 2021 passed by the Adjudicating
Authority on an Interim Application5 seeking recall of its order dated
05th May, 2020 passed on an application6 filed by the appellant.
(iii) Company Appeal No. 343 of 2021 (subject matter of Civil Appeal
No. 9061 of 2022) filed by the appellant on 27th October, 2021 under
Section 61 of the Insolvency and Bankruptcy Code, 20167 against
order dated 05th May, 2020 passed by the Adjudicating Authority
allowing an application moved by the successful bidder, M/s KMC
Speciality Hospitals (India) Limited8 for extension of time to deposit
the balance sale consideration after the Central/State lockdown was
lifted. All the aforesaid appeals were dismissed by the Tribunal under
the impugned judgment and order dated 16th September, 2022.
2.
It may be noted at the outset that Civil Appeal No. 9059 of 2022
does not survive inasmuch as the auction proceedings have already
been concluded and upon the Auction Purchaser depositing the
sale amount, the Liquidator has executed a Sale Deed in its favour.
Therefore, the scope of the present judgment is confined to Civil
Appeals No. 9060 and 9061 of 2022.
B.
SEQUENCE OF EVENTS
3.
The facts of the case lie in a narrow compass. Sri Lakshmi Hotels
Private Limited,9 a family held concern having four shareholders
namely, the appellant herein, his wife, his son and his daughter-in- law
purchased an immovable property10 at Tiruchirappalli measuring
67,533 sq. ft. The company started running a hotel and a bar from
the said premises. In the year 2006, the company took a loan from
a financial creditor to the tune of ₹1,57,25,000/- (Rupees One crore
fifty seven lakh twenty five thousand only). When disputes arose
between the company and the financial creditor, the latter invoked
5
IA SR No. 944 of 2020 on 25th September, 2020
6
IA 335 of 2020 in MA/689/2019 in CP/1140/IB/2018
7
In short 'IBC'
8
In short 'Auction Purchaser'
9
In short 'company/Corporate Debtor'
10
situated at Old No. 3A, New No. 27, Alexandria Road, Cantonment, Tiruchirappalli-620001
[2024] 8 S.C.R.
1271
V.S. Palanivel v. P. Sriram, CS, Liquidator, Etc.
the arbitration clause governing the parties. The Arbitral Tribunal
passed an award on 27th December, 2014, for a sum of ₹2,21,08,244/-
(Rupees Two crore twenty one lakh eight thousand two hundred and
forty four only) in favour of the financial creditor along with interest
at the rate of 24 % per annum from the date of claim petition till the
date of realisation. The company challenged the said award11 under
Section 34 of the Arbitration and Conciliation Act, 1996, but the said
petition was dismissed by the High Court of Madras vide order dated
16th November, 2017.11
4.
On non-payment of the amounts awarded under the Arbitral Award,
the financial creditor filed an application12 under Section 7 of the IBC
before the Adjudicating Authority for initiating corporate insolvency
resolution process against the company. The said petition was
admitted on 28th February, 2019 and the respondent No. 2 was
appointed as an Interim Resolution Professional.13 Later on, he was
confirmed as a Resolution Professional and finally, as a Liquidator. As
per the records, no resolution plan for revival of the Corporate Debtor
was received and the Committee of Creditors14 recommended that the
company be liquidated. The said recommendations were accepted
by the Adjudicating Authority, vide order dated 17th July, 2019.
5.
Pursuant to the above, the Liquidator engaged two Registered
Valuers to give an estimate of the valuation of the subject property.
The Valuers submitted their Reports as follows:
S.
No.
Name of the Valuer
Tax Value
Liquidation Value
1.
Ms. Vijayalakshmi
Rs.48,03,00,000
Rs.40,82,57,000
2.
Mr. R.S. Babu Rajendran
Rs.48,48,00,000
Rs.38,00,00,000
Average Liquidation
Value for the purpose of
E- auction Upset Price
Rs.39,41,28,500
Based on the above Reports, the Liquidator arrived at the average
value of the subject property, i.e., ₹39,41,28,500/- (Rupees Thirty
nine crore forty one lakh twenty eight thousand five hundred only)
11
Original Petition No.137 of 2015
12
CP/1140/(IB)/CB/2018
13
In short 'IRP'
14
In short 'CoC'
1272
[2024] 8 S.C.R.
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and scheduled an auction on 25th November, 2019, with a reserve
price set at the above figure. Vide letter dated 08th November, 2019,
the appellant objected to fixation of the reserve price. The Liquidator
replied to the said communication and turned down his objections. He
also requested the appellant to nominate a person in the Stakeholders
Committee, which the appellant failed to do.
6.
When the Liquidator did not receive any bid in the first auction, he
published a notice scheduling a second auction on 23rd December,
2019. This time, the reserve price was reduced by 25% i.e. it came
down from ₹39,41,28,500/- (Rupees Thirty nine crore forty one lakh
twenty eight thousand five hundred only) to ₹29,55,96,375/- (Rupees
Twenty nine crore, fifty five lakh ninety six thousand three hundred
and seventy five only). M/s KMC Speciality Hospitals (India) Limited
was the sole bidder in the second auction process and on depositing
an earnest amount of ₹2,95,59,698/- (Rupees Two crore ninety five
lakh fifty nine thousand six hundred and ninety eight only), it emerged
as the successful bidder.
7.
In terms of Rule 12 of Schedule-I under Regulation 33 of the
Insolvency and Bankruptcy Board of India (Liquidation Process)
Regulations, 2016,15 the successful bidder was required to pay the
balance sale consideration within 90 days from the date of demand.
The Liquidator despatched a letter dated 24th December, 2019 to
the Auction Purchaser demanding the balance sale amount. Though
arguments were initially advanced on behalf of the appellant that the
period of 90 days for paying the balance amount ought to be reckoned
from 24th December, 2019 and not from 26th December, 2019, the
date on which the Auction Purchaser received the communication
from the Liquidator, later on the said plea was not seriously pressed.
If one takes the outer limit for calculating the period of 90 days for the
Auction Purchaser to pay the balance sale consideration reckoned
from 26th December, 2019, the date when the Auction Purchaser
received the letter despatched by the Liquidator, the said period
would have expired on 25th March, 2020. It is not in dispute that the
balance sale consideration was not paid by the Auction Purchaser
within the period of 90 days. The said amount was paid only on 24th
August, 2020.
15
IBBI Regulations, 2016
[2024] 8 S.C.R.
1273
V.S. Palanivel v. P. Sriram, CS, Liquidator, Etc.
8.
The appellant filed a Miscellaneous Application4 before the
Adjudicating Authority for setting aside the auction proceedings. The
said application was dismissed by the Adjudicating Authority, vide
common order dated 17th November, 2021. In the meantime, due to
the onset of the Covid-19 pandemic, Government of India imposed
a countrywide lockdown on 25th March, 2020. On 22nd April, 2020,
the Auction Purchaser moved an application6 before the Adjudicating
Authority for extension of time for making payment of the balance
sale consideration. Besides taking the plea of the onset of Covid 19
pandemic, one of the grounds taken by the Auction Purchaser for
extension of time was that the Income Tax Authority had passed an
order attaching the auctioned property. The said application was
allowed by the Adjudicating Authority3, vide order dated 05th May, 2020
and the time granted for depositing the balance sale consideration
was deferred till the lockdown was lifted by the Central Government/
State Government, respectively.
9.
Dissatisfied with the aforesaid order, the appellant filed a Company
Appeal,16 after 19 months, on 27th October, 2021. Well before that,
the Auction Purchaser paid the balance sale consideration in respect
of the auctioned property on 24th August, 2020 and a Sale Deed was
executed by the Liquidator in favour of the Auction Purchaser on 28th
August, 2020. One month after completion of the sale transaction,
the appellant filed an application on 25th September, 2020,5 seeking
recall of the order dated 05th May, 2020, passed by the Adjudicating
Authority and challenging the execution of the Sale Deed. By virtue
of the common order dated 17th November, 2021, the Adjudicating
Authority dismissed both the applications filed by the appellant, one
for stalling the e-auction that was conducted on 23rd December, 20194
and the other for setting aside the Sale Deed dated 28th August, 2020.
The said orders were carried in appeal by the appellant before the
Tribunal. Vide common judgment and order dated 16th September,
2022, the Tribunal dismissed the appeals filed by the appellant,
giving rise to the present appeals.
C.
ARGUMENTS ADVANCED ON BEHALF OF THE APPELLANT
10. Mr. P. Chidambaram, learned Senior advocate appearing for the
appellant submitted that the Tribunal failed to appreciate that the
16
Company Appeal (AT) (INS) No. 334 of 2021
1274
[2024] 8 S.C.R.
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auction conducted by the Liquidator was in violation of the provisions
of the IBBI Regulations, 2016 particularly, Regulation 31A that requires
a Liquidator to constitute a Stakeholders' Consultation Committee
and Regulation 33 that prescribes the mode of sale of the assets
of the Corporate Debtor through an auction in the manner specified
in Schedule I. Relying on the decision in C.N. Paramasivam and
Another v. Sunrise Plaza through Partner and Others,17 it has
been contended that Schedule I, Rule 12 of the IBBI Regulations,
2016 is mandatory and any non-compliance thereof should result in
cancellation of the sale. The decision in Sharif-ud-din v. Abdul Gani
Lone18 was cited by learned counsel to make a point that when the
rule provides a consequence for failure to comply, then it ought to be
treated as mandatory and not directory in character. It was argued
that having regard to the mandatory character of the regulations, the
Tribunal has erred in failing to appreciate that the Auction Purchaser
could neither have sought extension of time to deposit the balance
sale consideration nor could such an indulgence have been granted to
it. Dovetailed to the above, is the submission that the Liquidator was
selective in applying the amended provisions of the IBBI Regulations,
2016, based on a Circular dated 26th August, 2019.
11. The second submission made by learned senior counsel appearing
for the appellant was that the Tribunal ought not to have concurred
with the Adjudicating Authority to hold that the extension granted to
the Auction Purchaser to deposit the balance sale consideration on
account of the Covid-19 lockdown, was valid. It was submitted that
since banks were functioning during that time, the Auction Purchaser
had all the opportunity to deposit the balance sale consideration.
Therefore, it had no defence for not making the payment on time.
It was further submitted that the order passed by the this Court and
relied on by the Auction Purchaser in GPR Power Solutions Pvt. Ltd.
v. Supriyo Chaudhuri,19 as also the order dated 02nd March, 2020
and the order dated 12th May, 2020 passed in Civil Appeal No. 1902
of 2020,20 could not have enured to its benefit for the reason that the
said orders applied to filing of petitions, applications, suits, appeals
17
[2013] 4 SCR 1 : (2013) 9 SCC 460
18
[1980] 1 SCR 1177 : (1980) 1 SCC 403
19
(2021) 17 SCC 312
20
Union Bank of India v. Rajat Infrastructure Pvt. Ltd. and Others
[2024] 8 S.C.R.
1275
V.S. Palanivel v. P. Sriram, CS, Liquidator, Etc.
or other proceedings within the prescribed period of limitation. Citing
the decision in Sagufa Ahmed v. Upper Assam Polywood Products
Pvt. Ltd.21 learned senior counsel submitted that the order passed by
this Court on 23rd March, 2020 in Suo Moto Writ Petition (Civil) No.
3/2020, was only intended for the benefit of vigilant litigants who were
prevented from initiating proceedings within the period of limitation
due to the pandemic and the lockdown. The Auction Purchaser was
not a litigant before the Court and could not have availed of the said
order. The Auction Purchaser was neither required to approach the
Adjudicating Authority, nor to file any petition before the Tribunal for
remitting the balance sale consideration.
12. It was next canvassed on behalf of the appellant that the order of
attachment by the Income Tax Authorities in respect of the auctioned
property is an irrelevant consideration insofar as it relates to deposit
of the balance sale consideration by the Auction Purchaser within
90 days. Alluding to the terms and conditions of the auction, learned
counsel argued that the e-auction was conducted on an 'As Is Where
Is' basis and clause 12 of the said Notice of auction clearly stated
that the sale would be subject to the IBC and the IBBI Regulations,
2016. Therefore, the Auction Purchaser cannot be heard to state that
it was unaware of the Income Tax attachment order. Having bid for
the subject property and agreed to the condition that the balance sale
amount had to be deposited within 90 days, the Auction Purchaser
was under an obligation to comply with the terms of the auction and
on failure to do so, the Liquidator ought to have cancelled the sale
instead of accommodating the Auction Purchaser.
13. Lastly, learned counsel submitted that even assuming that the last
date for making the payment towards the balance sale consideration
was 25th March, 2020, as was urged by the other side, the period
of limitation would have recommenced on 23rd July, 2020, since
the Liquidator had moved an application22 seeking exclusion of the
period between 23rd March, 2020 and 23rd July, 2020. In view of the
above, there was no justification for the Auction Purchaser to have
made the payment on 24th August, 2020 i.e. after a period of one
month reckoned from the date when the exclusion period had ended.
21
[2020] 9 SCR 472 : (2021) 2 SCC 317
22
lA No. 202 of 2021 in CP/1140/IB/20181.
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D.
ARGUMENTS ADVANCED BY LEARNED SENIOR COUNSEL
FOR THE AUCTION PURCHASER
14. Rebutting the submissions made by learned counsel for the appellant,
Mr. Arvind Datar, Senior Advocate appearing for the Auction
Purchaser submitted that the time to complete all actions under
the IBC stood extended from 15th March, 2020 onwards in view of
the Covid-19 circulars and orders passed by this Court in the Suo
Motu Writ Petition23 initiated by this Court read in conjunction with
Regulation 47A of IBBI Regulations, 2016. Therefore, there was no
default on the part of the Auction Purchaser in making payment of the
balance sale consideration at a later date. Referring to the decision
of this Court in GPR Power Solutions Private Limited (supra)
learned senior counsel submitted that the extension orders were
applied by this Court even to submissions of claims by creditors to
the resolution professionals. For this reason, it would be erroneous
to state that extension could apply only to litigants before courts and
Tribunals, as sought to be urged by the other side. The decisions
in Standard Surfa Chem India Private Limited v. Kishore Gopal
Somani24 and Prakash Chandra Kapoor v. Vijay Kumar Iyer 25 were
cited by learned counsel to argue that timelines prescribed under the
IBBI Regulations, 2016 are directory and not mandatory in character.
Learned counsel submitted that reliance placed by the appellant on
C.N. Paramasivam (supra) to contend that the timeline of 90 days
is absolute, is misplaced for the reason that the provisions governing
the Debt Recovery Tribunal26 and the Adjudicating Authority are not
pari materia. Learned senior counsel submitted that unlike DRT's,
Adjudicating Authority has special inherent powers under Rule 11
of the National Company Law Tribunal Rules, 2016.27 Furthermore,
even in cases initiated under the Securitization and Reconstruction
of Financial Assets and Enforcement of Security Interest Act,28 this
Court had granted extension to an Auction Purchaser to deposit
the balance sale consideration in view of the Covid-19 lockdown
23
Suo Motu Writ Petition (C) No.3 of 2020 in 'Cognizance for Extension of Limitation, In Re', reported as
(2020) 19 SCC 10
24
2022 SCC Online NCLAT 305
25
2021 SCC Online NCLAT 622
26
For short 'DRT'
27
For short 'NCLT Rules, 2016'
28
For short 'SARFAESI Act'
[2024] 8 S.C.R.
1277
V.S. Palanivel v. P. Sriram, CS, Liquidator, Etc.
situation. For this, learned senior counsel referred to the order dated
12th May, 202029 passed by this Court in Union Bank of India v.
Rajat Infrastructure Private Limited and Others.30 Similarly, he
submitted that the Sagufa Ahmed case (supra) referred to on behalf
of the appellant, cannot apply to the facts of the instant case for the
reason that in the captioned case, the timeline for filing an appeal
before the Tribunal had expired before 15th March, 2020, which was
not so here as the timeline for the Auction Purchaser to deposit
the balance sale consideration had expired after declaration of the
COVID-19 lockdown by the Government of India on 22nd March, 2020.
15. Learned senior counsel clarified that the Auction Purchaser had
applied to the Liquidator on 28th February, 2020, for extension of
time to deposit the balance sale consideration after the Income Tax
attachment orders were lifted. The Liquidator responded to the said
communication only on 02nd April, 2020 stating that he did not have
the powers to extend the time and for which, an application would
have to be moved before the Adjudicating Authority after it resumed
functioning partially. For purposes of clarification, it may be noted that
Adjudicating Authority had issued a notification that it would hear only
urgent matters between 16th March, 2020 and 27th March, 2020. On
22nd March, 2020, the Adjudicating Authority announced closure in
the light of the lockdown and it was clarified that liquidation matters
would not be considered as urgent. The Auction Purchaser filed an
application31 before the Adjudicating Authority seeking extension
of time. Vide order dated 5th May, 2020, the Adjudicating Authority
allowed the said application and granted extension of time to the
Auction Purchaser to deposit the balance sale consideration. It is
submitted that the appellant did not take any steps to prefer an appeal
against the aforesaid order within the period prescribed in Section 61
of the IBC. Instead, after the entire sale transaction was completed,
the appellant filed an application for review, which was dismissed by
the Adjudicating Authority. After waiting for 15 months, the appellant
filed an appeal on 27th October, 2021. Even at that stage, the appellant
did not seek any interim orders before the Adjudicating Authority or the
Tribunal. As a result, the Auction Purchaser proceeded to construct
29
Order dated 12th May, 2020 passed in Civil Appeal No.1902 of 2020
30
2020 SCC Online SC 1491
31
IA No. 335/IB/2020 in MA No.689 of 2019 in CP No./1140/IB/CB/2018
1278
[2024] 8 S.C.R.
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a 200-bed Mother and child hospital at the auctioned property after
demolishing the existing building on which a sum of ₹1,70,00,000/-
(Rupees One crore and seventy lakhs only) has been invested. The
said hospital is now complete and fully functional and is stated to
cater to the needs of seven surrounding districts in the area.
16. Coming next to the submission made on behalf of the appellant
that the order of attachment issued by the Income Tax authorities in
respect of the auctioned property is not a relevant consideration when
it came to depositing the balance sale consideration by the Auction
Purchaser within 90 days, learned senior counsel for the Auction
Purchaser sought to urge that sale of properties that are the subject
matter of Income Tax attachment orders, must be treated on a different
footing. Such sale transactions cannot be completed because of the
bar placed under the Income Tax Act, 1961.32 A specific reference
in this regard has been made to Sections 222 and 281 read with
Rule 48 Part-III, Schedule 2 of the IT Act. Several decisions of the
Adjudicating Authority33 have been cited by the learned senior counsel
to canvass that in such circumstances, the Liquidator has no option
but to approach the Adjudicating Authority for appropriate directions.
Even in the present case, the Liquidator had to move an application
before the Adjudicating Authority for appropriate directions. The said
application was allowed on 10th February, 2020. However, the order
passed on 10th February, 2020 was received by the Liquidator only
on 14th May, 2020. Due to several hindrances on account of the
COVID-19 situation, the actual attachment of the subject property
was lifted only on 27th August, 2020. Just a few days before that,
the Auction Purchaser deposited the balance sale consideration on
24th August, 2020 and the sale transaction was finally completed on
28th August, 2020.
17. Countering the submission made on behalf of the appellant that
Clause 12 of Schedule I under Regulation 33 of the IBBI Regulations,
2016 requires the successful bidder to pay the balance sale
consideration within 90 days from the date of the demand which
32
For short 'IT Act'
33
BMM Ispat Ltd. v. Ramdas Ispat, 2019 SCC Online NCLT 21322, Allahabad Bank v. Biotor, 2019
SCC Online NCLT 26716, Sanjay Kr. Agarwal v. Tax Recovery Officer, 2019 SCC Online NCLT
28888, Abhudaya Coop. Bank v. Shivkripa, 2020 SCC Online NCLT, 11935, UBI v. Guruashish
Construction, 2020 SCC Online NCLT 14829, Ashok Kr. Dewan v. AC of IT, 2021 SCC Online 4368,
Mauritius Commercial Bank v. Varun Corporation, 2021 SCC Online NCLT 6814, Milind Kasodekar
v. P. Mahajan, 2021 SCC Online NCLT 11616.
[2024] 8 S.C.R.
1279
V.S. Palanivel v. P. Sriram, CS, Liquidator, Etc.
timeline could not be extended, learned senior counsel for the
Auction Purchaser argued that the time limit fixed under Rule 12 of
Schedule I has to be read in conjunction with Rule 13 of the IBBI
Regulations, 2016 and in cases of attachment, the full amount has
to be paid simultaneously with the completion and execution of the
Sale Deed. In the present case, the said steps could be taken only
after the attachment was lifted by the Income Tax authorities.
18. Learned senior counsel relied on Pioneer Urban Land and
Infrastructure Limited and Another v. Union of India and Others34
and Prakash Chandra Kapoor and Another v. Vijay Kumar Iyer
and Another,35 to contend that the model timeline for the liquidation
process contemplated under Regulation 47 of the IBBI Regulations,
2016 for completing the liquidation process, are only directory in
nature.
19. Learned senior counsel for the Auction Purchaser concluded by
highlighting the conduct of the appellant and stated that he had
repeatedly failed to pay the monies due; he attempted to stall the
auction process; he refused to remove the bar operating from the
subject premises and police assistance had to be taken to take over
physical possession of the subject property. Therefore, concurrent
findings returned by the Adjudicating Authority and the Tribunal being
well reasoned, do not deserve interference.