-By Lovkesh Batra
BRIEF FACTS & DISCUSSION ON THE PERTINENT ASPECTS
An application bearing no. IA 391(AHM)/2021 in CP (IB)(37)(AHM) 2017 under Section 35(1)(n) read with Section 60(5) of the IBC & Reg. 32A filed by the Liquidator (LQ) before the Hon’ble Adjudicating Authority (AA) seeking approval/directions for implementing the sale of the Corporate Debtor (CD) as a going concern to the Successful Bidder(SB) under the Liquidation Process of the CD.
The AA before passing the Order considered it pertinent to look into the following aspects:
- What is the role & responsibility of a Liquidator as regard to sale of assets and distribution of sale proceeds in respect of CD going under Liquidation?
(Relevant discussions on Para 27-28/Page 29-33 of the Order)
- What is scope of authority/jurisdiction of AA in this regard under Section 60(5)(c) of the IBC, 2016 while issuing directions or passing order under Section 35(1)(n) of the IBC, 2016?
(Relevant discussions on Para 29-39/Page 33-55 of the Order)
Reliefs/Concessions allowed by AA:
- Approved the sale of the CD as a going concern (GS) and allowed 30 days period from the AA’s Order to pay balance sale consideration.
- Distribution of the proceeds out of GS sale shall be in terms of Section 53 of the IBC.
- All permits, licenses, copy rights, trademarks etc. shall remain vested with the CD. Procedural Compliances to be ensured by the Successful Bidder (SB).
- Title, Rights and interest of the CD in its assets shall become free from Security Interest and remain with the CD. This Order shall be sufficient proof to satisfy the charges.
- Authorised LQ to issue fresh equity shares/any other security/interment of the CD to the RA/its nominees without any approval required under CA, 2013 or SEBI Laws. Procedural Compliances to be ensured by the Successful Bidder (SB) or LQ.
- Existing Share Capital other than existing public shareholding stand extinguished. Public shareholding shall be maintained as per SBEI Laws.
- Board of CD to be reconstituted with RA’s 29A qualified nominees.
- ROC to change status from “Under Liquidation” to “Active”.
- Any future recovery from the CD’s Debtors shall be distributed to the Creditors in terms of Section 53.
- PUEF’s transactions proceeds were outside the Asset’s Bucket put for sale and the same shall be distributed in accordance with the directions of the AA.
- SB shall have a right to review/terminate the contracts entered prior to CIRP.
- Liquidator to ensure the change in signatories in the bank account(s) of the Corporate Debtor except the Liquidation Account by adding the signatories nominated by the SB.
- The Liabilities prior to the Effective Date shall stand extinguished qua the SB and the same shall be settled in accordance with Section 53 of IBC.
- After settlement in terms of Section 53, no other liabilities of any creditor shall remain pending or alive qua SB.
- The SB shall not be held responsible for past liabilities/enquires/investigations/asssesments/notices/suits/claims/disputes/litigations/arbitrations/or other judicial, regulatory or administrative proceedings in relation to or in connection with the CD.
- Liquidation Cost to be paid out of Sale Consideration.
Reliefs/Concessions NOT allowed by AA:
- Exemption to SB from any consequences in terms of Section 29A of IBC arising out of the GS sale.
- Carry forward of losses under Income Tax.
Relevant Links:
About the Author: Above write-up has been demystified by CS Lovkesh Batra.
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