The National Company Law Court (“NCLT”), Ahmedabad Bench, consisting of Sri Madan B. Gosavi (Judicial Member) and Shri Kaushalendra Kumar Singh (Technical Member), while ruling on a motion filed in State Bank of India and Anr. against Shirpur Power Pvt. ltd.ruled that once a successful bidder has accepted and purchased the debtor company in a down sale under the IBC, the bidder cannot request to convert that sale into a sale of the debtor company as a going concern.
The State Bank of India had filed a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 (“IBC”), requesting the commencement of corporate insolvency resolution proceedings (“CIRP”) against Shirpur Power Pvt. ltd. (the “debtor company”). On 04.03.2020, the petition was granted and the CIRP was initiated by the NCLT Ahmedabad Bench. Subsequently, a liquidation order was issued. The liquidator endeavored to sell the debtor company as a going concern and repeatedly reduced the reserve price to attract potential buyers. However, when no potential buyer came forward to buy the Debtor Company as a going concern, the Liquidator issued a new notice dated 20.07.2021 declaring the sale at half mast of the Debtor Company. The reserve price for the hungry sale was set at Rs. 4,77,84,50,000/-, which was further reduced to Rs. 3,14,38,49,770/-. Jindal Power Ltd. (“Claimant/Successful Bidder”) appeared as the successful bidder of the Debtor Company and agreed to buy the Debtor Company as a short sale and tendered the bid amount.
Subsequently, the winning bidder filed a petition with NCLT Bench requesting that the debtor company’s stalled sale be converted into an active sale and to order the liquidator to issue the certificate of sale accordingly.
The plaintiff argued that the primary purpose of BAC is to promote entrepreneurship and preserve the existence of the debtor company. If the liquidator is instructed to treat the sale as a going concern, all stakeholders will benefit and jobs will be generated. Furthermore, it is the duty of the liquidator to protect as far as possible the existence of the Debtor Company and to avoid its death by not pushing it towards dissolution.
After accepting the debtor company in a crisis sale, can the bidder request to treat this sale as a sale of the debtor company as a going concern?
The bench ruled that once a winning bidder accepts the debtor company in a down sale, it cannot request to treat that sale as a sale of the debtor company as a business in activity. It was observed that according to BAC’s objective, the liquidator’s first effort should be to sell the debtor company as a going concern and the liquidator had done all he could in that direction, but he only got no answer. It is not known why the plaintiff did not accept the debtor company’s offer as a going concern at the first moment.
In addition, there was a large difference between the selling price of the debtor company as a going concern and the selling price of the debtor company in a down sale. If the claimant’s request is successful, the members of the rights stakeholder committee will be adversely affected. The Chamber rejected the Applicant’s request and found the candidacy inadmissible.
Case title: State Bank of India and Anr. against Shirpur Power Pvt. Ltd, CP(IB) No. 487/NCLT/AHM/2018
Advice from the applicant/winner: Lo. Sr Adv. Mr. Kamal Trivedi with Ld. Adv. Mr. Anuj K. Trivedi, Ld. Adv. Mr. Vinay Baigra, and Ld. Adv. Mrs Vaidehi Parikh
Board of the Stakeholder Committee: Lo. Sr Adv. Mr Saurabh Soparkar
Liquidator’s advice: Lo. Adv. Mrs. Prachiti Shah with Ld. Adv. Mr. Urjit Dave
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