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

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

Where the Liquidator, within the powers conferred by the IBC and Liquidation Regulations and the specific rights reserved in the sale/process documents, in consultation with stakeholders and with NCLT approval, decides to discontinue a Swiss Challenge process in favour of a composite private sale that promises higher and quicker realization, such a commercial decision is not amenable to substitution by the NCLAT; the NCLAT’s direction to restart the private sale with open notice was unjustified and is quashed, and the Liquidator was directed to conclude the approved private negotiation process within four weeks.

Parties
Appellant (civil Appeal No.7722 of 2021): M/s. R.K. Industries (Unit-II) LLP; Respondent (respondent No.1): M/s. H.R. Commercials Private Limited; Appellant (civil Appeal No.7731 of 2021) / Respondent (respondent No.7): Welspun Steel Resources Private Limited; Liquidator (respondent No.2): Sundaresh Bhat; Corporate Debtor: ABG Shipyard Limited; Applicant (moved Application Under Section 7 for Cirp): ICICI Bank Limited; Lessor of Land to Corporate Debtor: Gujarat Maritime Board
Jurisdiction
India
Judgment Date
26 August 2022
Procedural Posture
Civil Appeal / Final Judgment on Appeals Arising From Nclt/nclat Orders
Outcome
Civil Appeal No.7722 of 2021 dismissed; Civil Appeal No.7731 of 2021 allowed to the extent specified
Legal Topics
Liquidation, Swiss Challenge Process, Private Sale, Anchor Bidder and ROFR, Stakeholders' Consultation Committee, Judicial Review of Commercial Decisions, Nclt/nclat Jurisdiction
Insolvency and Bankruptcy Company Law Commercial Law Administrative Law Liquidation Swiss Challenge Process Private Sale Anchor Bidder and ROFR +3 more

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Parties

M/s. R.K. Industries (Unit-II) LLP

Appellant (civil Appeal No.7722 of 2021)

M/s. H.R. Commercials Private Limited

Respondent (respondent No.1)

Welspun Steel Resources Private Limited

Appellant (civil Appeal No.7731 of 2021) / Respondent (respondent No.7)

Sundaresh Bhat

Liquidator (respondent No.2)

ABG Shipyard Limited

Corporate Debtor

ICICI Bank Limited

Applicant (moved Application Under Section 7 for Cirp)

Gujarat Maritime Board

Lessor of Land to Corporate Debtor

Procedural Posture

Civil Appeal / Final Judgment on Appeals Arising From Nclt/nclat Orders

Legal Issues

  1. 1 Whether the Liquidator was justified in discontinuing the Second Swiss Challenge Process and opting for a private/composite sale of the Corporate Debtor's assets
  2. 2 Whether the NCLAT was justified in directing restart of the Private Sale process with open notice to all prospective buyers instead of allowing continuation of the process as approved by NCLT and supported by stakeholders

Ratio Decidendi

Where the Liquidator, within the powers conferred by the IBC and Liquidation Regulations and the specific rights reserved in the sale/process documents, in consultation with stakeholders and with NCLT approval, decides to discontinue a Swiss Challenge process in favour of a composite private sale that promises higher and quicker realization, such a commercial decision is not amenable to substitution by the NCLAT; the NCLAT’s direction to restart the private sale with open notice was unjustified and is quashed, and the Liquidator was directed to conclude the approved private negotiation process within four weeks.

Court Disposition

Civil Appeal No.7722 of 2021 dismissed; Civil Appeal No.7731 of 2021 allowed to the extent specified

Orders

  • Impugned judgment dated 10th December, 2021 of NCLAT insofar as it modified NCLT order dated 16th August, 2021 and directed restraining of the Private Sale process is quashed and set aside
  • Private Sale process of the composite assets of the Corporate Debtor to be taken forward by the Liquidator and concluded at the earliest