Judgments

Eva Argo Feeds Vs. Punjab National Bank : The Supreme Court Observes That If The Liquidator Does Not Want To Accept Bid Of The Highest Bidder He Has To Apply His Mind To Relevant Factors

The Supreme Court in Eva Argo Feeds Pvt. Ltd. Vs. Punjab National Bank & Anr (Civil Appeal No. 7906 of 2021) has held that if the Liquidator does not want to accept the bid of the highest bidder he has to apply his mind to the relevant factors. Such application of mind must be visible or manifest in the rejection order itself.  The Supreme Court has also held that the stage of ineligibility under Section 29A attaches when the resolution plan is submitted by the resolution applicant thus the disqualification applies in praesenti.

BRIEF FACTS

CIRP was initiated in the matter of  M/s Amrit Feeds Ltd vide order dated  22.10.2019 of NCLT. CIRP was not successful and Liquidation Order was passed on 19.02.2021.  E -auction was conducted for sale of assets of the Corporate Debtor. First auction did not materialize and hence second auction was conducted.  Eva Agro Feeds Pvt. Ltd. (Appellant)   participated in the e-auction and also deposited earnest money deposit of Rs. 1 Crore.  The Appellant was informed that it had won the bid through e-mail dated 20.07.2021.   On 21.07.2021, the Appellant was informed that e-auction has been cancelled under clause 3 (k) of the Disclaimer Clause of the E-auction Process Information Memorandum.  The Appellant was also informed that a fresh auction will take place.

The Appellant filed application before NCLT against the decision of the Liquidator which was   allowed by NCLT. One of the financial creditors filed appeal before NCLAT against the order of the NCLT which was allowed by NCLAT.

Aggrieved by the same, the Appellant filed an appeal before the Supreme Court.

THE FINDING OF THE SUPREME COURT

The Supreme Court observed that no reasons were assigned by the Liquidator for cancellation of the E-auction held on 20.07.2021. Appellant was simply informed that the E-auction was cancelled in terms of Clause 3(k) of the E-Auction Process Information Document.

The Supreme Court relied on  S. N. Mukherjee Vs. Union of India ( (1990) 4 SCC 594), State of Orissa versus Dhaniram Luhar ((2004) 5 SCC 568), East Coast Railway versus Mahadev Appa Rao (2010) 7 SCC 678,     Kranti Associates (P) Ltd. Versus Masood Ahmed Khan (2010) 9 SCC 496 and observed  that  the furnishing of reasons are integral facet of principle of natural justice.

There was another issue involved regarding ineligibility of the Appellant under Section 29A of the Code. Shri Vijay Kumar Ghidia, director and principal shareholder of the appellant, was in the past   also one of the promotor director and principal shareholder of the corporate debtor. Whether he was related party and as such the Appellant was barred under under Section 29A of the Code.

The Court relied on judgments of the Supreme Court in Swiss Ribbons Private Limited and Another Versus Union of India and Others ((2019) 4 SCC 17), Phoenix ARC Private Limited versus Spade Financial Services Limited ((2021) 3 SCC 475), Arcelor Mittal (India) (P) Ltd. V. Satish Kumar Gupta ((2019) 2 SCC 1) and observed that related party had ceased to be in the helm of affairs of the corporate debtor more than a decade ago.

The order of the NCLAT was set aside and order of the NCLT was restored.

___________________________

Mukesh Kumar Suman is an advocate and legal author based at Delhi. He regularly appears before various Judicial Forums including NCLT, NCLAT, High Courts and the Supreme Court. He can be approached at mukesh_suman@outlook.com or +91 9717864570.

Mukesh Kumar Suman

Mukesh Kumar Suman

Mukesh Kumar Suman is an advocate based at Delhi. He has rich experience in civil, criminal, commercial, arbitration and corporate insolvency matters. He regularly appears before District Courts, NCLT, NCLAT, High Court and the Supreme Court. He can be approached at mukesh_suman@outlook.com or +91 9717864570.

Leave a Reply

Your email address will not be published. Required fields are marked *