SUNDARESH BHATT, LIQUIDATOR OF ABG SHIPYARD VERSUS CENTRAL BOARD OF INDIRECT TAXES AND CUSTOMS

SUNDARESH BHATT,  LIQUIDATOR OF ABG SHIPYARD VERSUS CENTRAL BOARD OF INDIRECT  TAXES AND CUSTOMS

Landmark Cases of India / सुप्रीम कोर्ट के ऐतिहासिक फैसले


IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL No. 7667 of 2021
SUNDARESH BHATT, 
LIQUIDATOR OF ABG SHIPYARD                       …APPELLANT(S)
VERSUS
CENTRAL BOARD OF INDIRECT                         …RESPONDENT(S)
TAXES AND CUSTOMS         
J U D GM E N T
    N.V.    RAMANA    , CJI
1 The present Civil Appeal under Section 62(1) of the Insolvency
and Bankruptcy Code, 2016 (“IBC”) arises out of the impugned
judgment  dated  22.11.2021  passed  by the  National  Company
Law Appellate Tribunal, New Delhi (“NCLAT”) in Company Appeal
(AT) (Insolvency) No. 236 of 2021. Vide the impugned judgment,
the NCLAT has allowed the appeal filed by the respondent against
the order of the National Company Law Tribunal, Ahmedabad
(“NCLT”)  /Adjudicating   Authority   whereby   the   Adjudicating
Authority   directed   the   release   of   certain   goods   lying   in   the
Customs Bonded Warehouses without payment of custom duty
1
REPORTABLE
and other levies.
2 A conspectus of the facts necessary for the disposal of the present
appeal is as follows: ABG Shipyard (“Corporate Debtor”) was in
the business of shipbuilding prior to the initiation of corporate
insolvency   proceedings   against   it.   As   a   part   of   its   business
enterprise, it used to regularly import various materials for the
purpose   of   constructing   ships   which   were   to   be   exported   on
completion. Some of these goods were stored by the Corporate
Debtor in Custom Bonded Warehouses in Gujarat and Container
Freight Stations in Maharashtra. Bills of entry for warehousing
were submitted at the relevant time. The Corporate Debtor also
took the benefit of an Export Promotion Capital Goods Scheme
(“EPCG   Scheme”)   and   was   granted   a   license   under   the   said
scheme (“EPCG  License”) with respect to the said warehoused
goods. 
3 On 01.08.2017, the National Company Law Tribunal, Ahmedabad
(“NCLT”) passed an order commencing the Corporate Insolvency
Resolution Process (“CIRP”) against the Corporate Debtor, and
the   appellant   was   appointed   as   the   Interim   Resolution
Professional.   In   the   same   order,   the   NCLT   also   declared   a
moratorium under Section 13(1)(a) of the IBC. 
4 On 21.08.2017, the appellant informed the respondent of the
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initiation of CIRP and sought custody of the warehoused goods
and requested the respondent not to dispose of or auction the
same. On 29.03.2019, the respondent for the first time, issued a
notice to the Corporate Debtor regarding non­fulfilment of export
obligations in terms of the EPCG license demanding customs
duty   of   Rs.   17,13,989/­   with   interest.   From   02.04.2019   to
07.04.2019, the respondent issued five different demand notices
to   the   Corporate   Debtor   regarding   non­fulfillment   of   export
obligations under different EPCG licenses for various amounts.
The details of the demand notices issued by the Respondent for
non­fulfilment   of   EPCG   License   conditions   by   the   Corporate
Debtor are tabulated herein for ease of reference:
S.
NO. 
DATE DETAILS OF DEMAND
NOTICE
DEMANDED AMOUNT
(PLUS INTEREST AS
APPLICABLE)
1. 29.03.2019 EPCG   License   No.
5230007265   dated
16.07.2010
Rs. 17,13,989
2. 02.04.2019 EPCG   License   No.
5230008206   dated
16.11.2010
Rs. 96,20,325
3. 04.04.2019 EPCG   License   No.
5230007016   dated
17.05.2010
Rs. 53,29,072
4. 05.04.2019 EPCG   License   No.
5230007082   dated
03.06.2010
Rs. 2,05,73,402
5. 05.04.2019 EPCG   License   No.
5230006881   dated
31.03.2010
Rs. 6,64,646
3
6. 07.04.2019 EPCG   License   No.
5L32206936   dated
20.04.2010
Rs. 12,04,09,501
5 On   25.04.2019,   the   NCLT   passed   an   order   commencing
liquidation against the Corporate Debtor under Section 33(2) of
the IBC. Vide the said order, the NCLT declared that the earlier
moratorium imposed under Section 13(1)(a) of the IBC shall cease
to   have   effect   by   the   operation   of   Section   14(4)   of   the   IBC.
However, a fresh direction was passed under Section 33(5) of the
IBC barring the institution of any suit or legal proceeding by or
against the Corporate Debtor. Further, the NCLT also appointed
the appellant as the liquidator vide the same order. 
6 Thereafter, the respondent filed claims before the appellant for
goods   warehoused   in   both   Gujarat   and   Maharashtra   on
20.05.2019,   27.05.2019   and   29.05.2019   under   the   IBC.   On
27.06.2019, the appellant informed the respondent through its
officers that liquidation proceedings had commenced against the
Corporate Debtor and that the goods were to be released to the
appellant. 
7 Due to inaction by the respondent, the appellant filed I.A. No. 474
of 2019 before the NCLT under Section 60(5) of the IBC seeking a
direction   against   the   Respondent   to   release   the   warehoused
goods belonging to the Corporate Debtor on 01.07.2019. 
8 At this juncture, for the first time on 11.07.2019, the respondent
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issued a notice to the Corporate Debtor under Section 72(1) of the
Customs Act for custom dues amounting to Rs. 763,12,72,645/­
on 2531 Bills of entries. The respondent filed a concurrent claim
for the said amount before the appellant under the IBC. Details of
the amount claimed by the respondent before the appellant are
as follows:
S.
NO. 
DATE DETAILS OF CLAIMS FILED BY
RESPONDENT BEFORE
APPELLANT UNDER FORM C
CLAIMED AMOUNT
(PLUS INTEREST AS
APPLICABLE)
1. 20.05.2019 Non­fulfilment   of   obligations
under 11 EPCG Licenses
Rs. 37,92,29,749
2. 27.05.2019 Non­fulfilment   of   obligations
under 37 EPCG Licenses
Rs.
151,33,06,859
3. 29.05.2019 Non   clearing   of   imported
goods from Jawaharlal Nehru
Port   Trust,   Nhava   Sheva,
Maharashtra
Rs. 22,70,50,898
4. 18.09.2019 Dues for all cargo in custom
bounded   warehouses   in
Gujarat
Rs.
763,12,72,645
9 On 25.02.2020, the NCLT allowed I.A. No. 474 of 2019 filed by
the appellant and passed the following directions: 
“14) Therefore, the present IA deserves to be allowed.
Accordingly, it is allowed in terms of its prayer clause
as well as with following directions.
i) The   Respondents   are   directed   to   allow   the
applicant­liquidator   to   remove   the   Material,
which   is   lying   in   the   Customs   Bonded
Warehouses   without   any   condition,   demur
and/ or payment of Customs Duty.
ii) The Respondents are at  liberty to  lodge its
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claim   with   the   Applicant­Liquidator   with
regard to the Customs Duty charges payable
on the release of material, which form part of
the assets of the Corporate Debtor company
(in liquidation), before the  Liquidator under
the provisions of Insolvency and Bankruptcy
Code, 2016 and in accordance with law. 
iii) The Customs Department shall allow removal
of goods/material within two weeks, from the
date of receipt of an authentic copy of this
order from the Liquidator.
iv) Meanwhile, the Respondents shall not proceed
for   auctioning,   selling   or   appropriating   the
Materials   owned   by   the   Corporate   Debtor
company, for the purpose of recovery of its
Customs   Duty,   which   may   tantamount   to
violation   of   the   l&B   Code   and   put   the
applicant/liquidator of the Corporate Debtor
company   (under   liquidation)   in
disadvantageous position.”
10 The NCLT considered Section 238 of the IBC and held that the
non­obstante clause in the IBC, being part of a subsequent law,
shall have overriding effect on proceedings under the Customs
Act. Further, looking to the waterfall mechanism under Section
53 of the IBC, the NCLT held that distribution of proceedings
from   sale   of   liquidation   of   assets   shall   also   prevail   over   the
Customs Act provisions. The NCLT held that, as Government
6
dues, the claims by the respondent would have to be dealt with in
accordance with Section 53 of the IBC. Apart from the above, the
NCLT also placed reliance on a circular issued by the Central
Board of Excise and Custom, being Circular No. 1053/02/2017­
CX   dated   10.03.2017   relating   to   Section   11E   of   the   Central
Excise Act, 1944. The abovementioned circular clarifies that dues
under the Central Excise Act would have first charge only after
the   dues   under   the   provisions   of   the   IBC   are   recovered.   As
Section 142A of the Customs Act is pari materia with Section 11E
of   the   Central   Excise   Act,1944,   the   NCLT   applied   the   same
rationale   to   interpret   the   said   section   in   holding   that   the
provisions of the IBC have priority. 
11 Subsequent to the above judgment, the appellant sold the goods
warehoused in Surat for a consideration of Rs. 169.11 crores. The
sales process with respect to the goods warehoused in Dahej,
Gujarat is currently ongoing, and is challenged before this Court
in C.A. No. 7722 of 2021 and C.A. No. 7731 of 2021. 
12 On 04.03.2021, the respondent filed an appeal before NCLAT
challenging the order dated 25.02.2020 passed by the NCLT. On
22.11.2021, the NCLAT passed the impugned order, whereby it
allowed the appeal filed by the respondent and set aside the
directions of the NCLT requiring the respondent to release the
7
warehoused goods to the  possession  of the appellant without
seeking the custom dues. The NCLAT rather directed that the
warehoused   goods   can   be   “released   or   disposed   of   as   per
Applicable Provisions of Customs Act by the Proper Officer”. 
13 The NCLAT, in allowing the appeal of the respondent, held that
the goods lying in the customs bonded warehouse were not the
Corporate Debtor’s assets as they were neither claimed by the
Corporate Debtor after their import, nor were the bills of entry
cleared for some of the said goods. By not filing the said bills of
entry,   the   NCLAT   held   that   the   importer,  i.e.,   the   Corporate
Debtor, had relinquished his title to the imported goods. The
NCLAT held that the Corporate Debtor is deemed to have lost his
title to the imported goods by action of Sections 48 and 72 of the
Customs Act. As such, the respondent is empowered to sell the
goods and recover the government dues.
14 The NCLAT held that ‘imported goods’, which are subject to levy
of Customs, stand on a different footing as payment of customs
duty   is   a   consequence   of   importing   the   goods   rather   than   a
liability on the Corporate Debtor to pay it. The appellant cannot
stand   at   a   better   footing   than   the   Corporate   Debtor   that   he
represents   and   cannot   take   possession   of   assets   which   the
Corporate Debtor itself could not have obtained. Customs duty
8
therefore needs to be paid for the release of the warehoused
goods.
15 The NCLAT held that the Customs Act is a complete Code which
provides that  warehoused goods  cannot  be released  until  the
import duties are paid. Mere filing of claims under ‘Form C’ by
the respondent before the appellant cannot be taken to signify
the   relinquishment   of   the   right   of   the   respondent   over   the
warehoused goods. 
16 On the issue of priority of IBC over the Customs Act, the NCLAT
held that the issue did not arise in the present case, as the goods
in question were imported prior in time to the initiation of the
CIRP. While the containers were imported between 2012 to 2015,
the CIRP was initiated only in 2017 and the Corporate Debtor
went into liquidation in 2019. By not paying the import duties,
the Corporate Debtor had lost the right to the warehoused goods
prior to the initiation of the CIRP. The NCLAT held that these
warehoused goods stand on a different footing and cannot be
considered assets of the Corporate Debtor which were subject to
the IBC provisions. 
17 Aggrieved   by   the   above   judgment   passed   by   the   NCLAT,   the
appellant has filed the present Civil Appeal against the impugned
judgment.
9
18 Mr. Arvind Datar, learned Senior Counsel appearing on behalf of
the appellant, submitted as follows: 
i. The   Corporate   Debtor   is   the   owner   of   the   goods.   The
learned   Senior   Counsel   referred   to   Section   48   of   the
Customs Act and stated that it only applies to goods which
are neither cleared nor warehoused by the importer. This
Section, however, is not applicable to the present case as
the notice issued and Form C filed by the respondent are in
relation to warehoused goods. Thus, the notice issued by
the respondent under Section 72 of the Customs Act and
the consequent Form C does not in any manner attract
Section 48 of the Customs Act.
ii. The Corporate Debtor has not lost ownership of the goods
as alleged by the respondent. The respondent, by issuing
notice under Section 72 of the Customs Act and filing its
claim with the liquidator, has admitted that the Corporate
Debtor is the owner. Neither Sections 72 nor 48 of the
Customs Act signifies any transfer to the respondent. The
Corporate Debtor has also never relinquished title to the
goods and no communication regarding the same has been
made to the respondent.
iii. By submitting  claims under Section 38 of the IBC, the
respondent has elected to subject its dues to be governed
by IBC, and more specifically, to the distribution matrix
provided Section 53 of the IBC. The claims made by the
respondent before the appellant are based solely on the
Corporate Debtor’s ownership of the goods. The respondent
cannot   blow   hot   and   cold   at   the   same   time   by   again
10
claiming before this Court that the Corporate Debtor has
lost ownership of the said goods.
iv. The respondent could not have exercised its right under the
Customs Act, as the statutory charge of the respondent
under   Section   142A   of   the   Customs   Act   is   expressly
subordinate to the IBC. 
v. The respondent’s custody of the Corporate Debtor’s goods
is in violation of Sections 14 and 33 of the IBC. Section
14(1)(a) of the IBC expressly prohibits the institution or
continuation of proceedings against the Corporate Debtor
during   the   moratorium   period.   Further,   Section   14(1)(c)
states   that   foreclosure,   recovery,   or   enforcement   of   any
security interest against the Corporate Debtor is prohibited.
19 Mr. K.M. Nataraj, learned Additional Solicitor General of India
appearing for the respondent, submitted as under:
i. The goods left in the Custom Bonded Warehouse are not the assets of the Corporate Debtor. This is because these goods were
never claimed after being imported. As per the record, the goods
were imported between the years 2012 and 2015, and the Corporate Debtor started the liquidation process in 2019. In this span
of 4 years, the Corporate Debtor never cleared bills of entry for
part of the goods and abandoned all the material lying in the
Custom Bonded Warehouse. Despite receipt of various demand
notices by the respondent, the Corporate Debtor did not clear the
goods and hence the same are liable to be sold by the respondent
under the Customs Act.
ii. The liquidator can take into his possession only the assets of the
Corporate Debtor as under Section 35(1)(b) of the IBC. However,
in the present case, the warehoused goods cannot be termed as
11
assets of the Corporate Debtor, until and unless the same are
legally cleared from the warehouses upon payment of relevant
dues and duties. The Corporate Debtor herein has not even paid
the bill of entry for part of the goods.
iii. Section 45 of the Customs Act lays down restrictions on custody
and removal of imported goods. It stipulates that all imported
goods unloaded in the customs area shall remain in the custody
of such person approved by the commissioner till the time the
same are cleared for home consumption or are warehoused or
transshipped. Further, it provides that if such goods are not
cleared as per the criteria mentioned above, they can be sold
after   permission   from   the   proper   officer.   Section   71   of   the
Customs Act further states that no goods shall be taken out of
the warehouse except as provided under by the Customs Act.
Hence, the goods cannot be removed without payment of import
duties and charges.
iv. The Corporate Debtor has abandoned the imported goods for
several   years,   refused   to   pay   the   import   duties   and   other
charges, and has not taken any effort to take possession of the
goods for several years. Consequently, the Corporate Debtor has
lost its right to the warehoused goods, and hence under Section
72   of   the   Customs   Act,   the   government   authorities   are   fully
authorized to recover the dues. In such a circumstance, where
the Corporate Debtor’s title to the goods has been deemed to
have   been   relinquished,   the   liquidator   does   not   have   the
authority to take possession of them.
v. Customs duty is an incidence or consequence of import. Even
before the CIRP was initiated, the Corporate Debtor could not
have secured the possession of the warehoused goods without
paying   the   due   charges.   Hence,   the   liquidator,   who   is
12
representing   the   Corporate   Debtor,   cannot   stand   on   a   better
footing than the Corporate Debtor itself.
vi. It is further submitted that merely because the respondent had
filed its claim before the liquidator, it cannot be said that the
respondent   had   relinquished   its   rights   over   the   warehoused
goods. The claim was filed by the respondent only to realize its
dues,   and   hence   cannot   be   viewed   as   a   relinquishment   or
abandonment of its rights. 
20 In light of the arguments advanced and the documents submitted
before this Court, we are called upon to answer two important
questions which arise for our consideration: 
a) Whether the provisions of the IBC would prevail over
the Customs Act, and if so, to what extent?
b) Whether   the   respondent   could   claim   title   over   the
goods and issue notice to sell the goods in terms of the
Customs Act when the liquidation process has been
initiated?
    ANALYSIS
21 It must be noted that this question assumes significance as the
warehoused goods belonging to the Corporate Debtor which is
under   liquidation,   are   sought   to   be   sold   by   the   Customs
Authorities in lieu of custom dues. The respondent has relied on
certain provisions of the Customs Act to assume such power.
This has been vehemently opposed by the appellant herein, who
has argued that once the insolvency process has been initiated
against   the   Corporate   Debtor,   the   IBC   becomes   squarely
13
applicable and overrides any other enactment giving priority to
the charges on the property. 
22 The   NCLAT   has   not   directly   answered   this   question   of   law.
Rather, it has entered into the facts of the case to distinguish the
applicability of the IBC as compared to the Customs Act. The
NCLAT held that the Corporate Debtor had abandoned the goods
much before the insolvency process was initiated, and thereby
the title of the goods had passed to the Customs Authority. The
NCLAT held as under: 
“7.16 Thus, it is clear that NCLT and NCLAT
cannot   usurp   the   legitimate   jurisdiction   of
other   Courts,   Tribunals   and   fora   when   the
dispute does not arise solely from or relating to
the Insolvency of the Corporate Debtor. In the
instant   case,   the   Corporate   Debtor   had
abandoned the imported goods in the Customs
warehouses for several years and failed to pay
the import duty and other charges and had not
taken  any  steps to   take  possession   of  those
goods for several years. Therefore the importer
had   lost   his   right   to   the   imported   goods.
Consequently,   the   Customs   Authorities   are
fully empowered under Section 72 of the Act to
sell   those   goods   to   recover   the   government
dues. The Liquidator has no right to take into
possession   over   those   goods   for   which   the
Corporate Debtor's title is deemed relinquished
by implication of law. Even before initiating the
Corporate   Insolvency   Resolution   Process,   the
Corporate   Debtor   Company  could   not   have
secured the possession of the imported goods
except   by   paying   the   customs   duty.   The
Resolution   Professional/Liquidator,   who
virtually represents the Company, cannot stand
on a better footing than the Corporate Debtor
14
itself. 
7.20 In the instant case, the Appellant has filed
its Claim before the Liquidator in response to
the Notice issued by the Liquidator. Given the
law laid down by the Hon'ble Supreme Court in
the above­mentioned case, it is clear that by
submission of Claim in response to the Notice
issued   by   the   Liquidator,   it   can   not   be
presumed that the Appellant had relinquished
its right over the property and submitted to the
jurisdiction of the Liquidator. The Claim is filed
in an effort to realise its dues. Still, it will not
amount to relinquishment of its right over the
Warehoused goods under its custody for which
Appellant has every right to sell those goods for
the realisation of the Government goods. 
7.23 We are not convinced with the argument
advanced by the Respondent because the goods
imported   by   the   Corporate   Debtor   were
imported   much   before   the   initiation   of   the
Corporate   Insolvency   Resolution   Process,   and
the Corporate Debtor never claimed them after
import.   Undisputedly   the   containers   were
imported between 2012 to 2015. The CIRP was
initiated against the Corporate Debtor in 2017,
and the liquidation order was passed on April
25 2019. 
7.24   Therefore,   the   Corporate   Debtor's   assets
because the Corporate Debtor never made any
effort for clearing the goods by paying Customs
Duty   and   other   applicable   charges   before   the
initiation   of   Liquidation   proceeding   after
importing   them.   Undisputedly   the   containers
were imported between 2012 to 2015. The CIRP
was   initiated   against   the   Corporate   Debtor   in
2017, and the liquidation order was passed in
April 25, 2019. Therefore the assets lying in the
Customs   bonded   warehouses   cannot   be
considered assets of the Corporate Debtor. The
Liquidator   intends   to   possess   the   uncleared
15
goods   from   the   customs   warehouses   without
upfront   payment   of   Customs   duty,   which   is
against the statutory provisions of the Customs
Act, 1962. Therefore, the imported goods subject
to levy of Customs stand on a different footing
than   the   goods   /assets,   not   in  the   Corporate
Debtor's possession. Therefore, the assets lying
in the Customs bonded warehouses cannot be
considered assets of the Corporate Debtor.
23 In the above context, this Court is required to analyze whether
the NCLAT’s treatment of the facts is correct or if a fresh look is
required. Before we enter into a detailed discussion and analysis
of the case at hand, it would be beneficial to analyze certain
provisions of the Customs Act which may be relevant to this case.
24 When goods are imported/exported from India, such goods may
be subjected to custom duty as indicated under Section 12 of the
Customs Act. There are many objectives behind such exaction –
some of  it  is to  maintain trade balance, control imports and
exports, protection of domestic industry, prevention of smuggling,
conservation and augmentation of foreign exchange, and so on. 
25 When goods are imported, it can be either for home consumption
or for transshipment. An importer can either choose to pay the
duty and utilize the goods immediately for domestic usage or
execute a bond so as to warehouse the said goods. Accordingly,
an   importer   has   to   submit   a   bill   of   entry   either   for   home
consumption or for warehousing in terms of Section 46 of the
16
Customs Act, in the prescribed format. 
26 When a person chooses to warehouse the goods, he ought to
execute a bond in terms of Section 59 of the Customs Act. Such
warehoused goods can subsequently be either cleared for home
consumption or can be exported.
27 Section 61 of the Customs Act mandates the time period allowed
for   warehousing.   For   example,   in   the   case   of   capital   goods
intended for a 100% export­oriented undertaking, warehousing is
permitted till such goods are cleared from the warehouse. In case
of goods not intended for such export­oriented purpose, a time
period of one year is prescribed in terms of Section 61(1)(c) of the
Customs Act. The provision also provides for an extension which
could be granted by the appropriate authority, for a period of not
more than one year. Under Section 61(2) of the Customs Act,
provision is made to charge interest on those goods which are
warehoused beyond the period granted.
28 Section   71   of   the   Customs   Act   provides   that   no   warehoused
goods shall be taken out of the warehouse, except on clearance
for   home   consumption   or   export   or   for   removal   to   another
warehouse, or as provided by the Act.
29 Section 72 of the Customs Act deals with the issue of when the
goods can be said to have been improperly removed from the
17
warehouse. As this provision is of some relevance to the present
case, it is extracted below: 
“72.  Goods   improperly   removed   from
warehouse,   etc.—(1)   In   any   of   the   following
cases, that is to say,— 
(a)   where   any   warehoused   goods   are   removed
from a warehouse in contravention of section 71; 
(b) where any warehoused goods have not been
removed from a warehouse at the expiration of
the   period   during   which   such   goods   are
permitted   under   section   61   to   remain   in   a
warehouse;  
*   *   *   *   *  
(d) where any goods in respect of which a bond
has been executed under section 59 and which
have not been cleared for home consumption or
export   or   are   not   duly   accounted   for   to   the
satisfaction   of   the   proper   officer,   the   proper
officer   may   demand,   and   the   owner   of   such
goods   shall   forthwith   pay,   the   full   amount   of
duty   chargeable   on   account   of   such   goods
together with interest, fine and penalties payable
in respect of such goods 
(2)   If   any   owner   fails   to   pay   any   amount
demanded   under   sub­section   (1),   the   proper
officer   may,   without   prejudice   to   any   other
remedy,   cause   to   be   detained   and   sold,   after
notice to the owner (any transfer of the goods
notwithstanding)  such   sufficient   portion   of   his
goods,   if   any,   in   the   warehouse,   as   the   said
officer may deem fit.”
From   the   aforesaid,   it   can   be   noted   that   when   goods   are
warehoused and the importer has not taken sufficient steps to
take   the   goods   out   for   domestic   consumption   or   for
transshipment, within the required time period, then the proper
18
office has to take steps in terms of Section 72(2) of the Customs
Act. The aforesaid provision mandate that  it is only after the
determination of dues by the proper officer that goods may be
sold, in the event that the demanded amount relating to custom
duty, interest, fines, and other penalties have not been paid. In
that case alone, after such determination, a sufficient portion of
goods may be sold. 
30 In order to complete the discussion on the Customs Act, it may
be necessary to take note of Section 142A extracted below:
142A. Liability under Act to be first charge.—
Notwithstanding   anything   to   the   contrary
contained in any Central Act or State Act, any
amount of duty, penalty, interest or any other
sum payable by an assessee or any other person
under this Act, shall, save as otherwise provided
in section 529A of the Companies Act, 1956 (1 of
1956), the Recovery of Debts Due to Banks and
the Financial Institutions Act, 1993 (51 of 1993),
and   the   Securitisation   and   Reconstruction   of
Financial Assets and the Enforcement of Security
Interest   Act,   2002   (54   of   2002)   and   the
Insolvency   and   Bankruptcy   Code,  2016   (31   of
2016) be the first charge on the property of the
assessee or the person, as the case may be..
31 In the present case, the Corporate Debtor as part of its business
used to regularly import and warehoused goods in the custom
bonded warehouses from at least 2011. As has already been
mentioned   above,   the   CIRP   process   commenced   against   the
Corporate Debtor on 01.08.2017 by the order of the NCLT. It
19
appears   from   the   record   that   no   notices   were   issued   by   the
respondent   against   the   Corporate   Debtor   with   respect   to   the
warehoused goods prior to initiation of the CIRP. In fact, all the
duty demand notices issued by the respondent were from March
2019 onwards. It is in this context that it is necessary for us to
ascertain whether the IBC overrides the Customs Act or viceversa. 
32 Insolvency and Bankruptcy Code came into force in India from
28.05.2016 to combine provisions relating to insolvency found
across different statutes into a single comprehensive instrument.
Under the earlier legal regime, different statutes were resulting in
multiple   parallel   proceedings,   which   inevitably   resulted   in
uncertainty   for   the   creditors   over   their   recovery.   One   of   the
objectives   behind   the   enactment   of   the   IBC   was   to   end   the
conflict between different statutes.
33 The   purpose   behind   insolvency   law   has   been   captured   in
Halsbury’s Laws of England (para 8, vol. III, 4th  edition) in the
following manner:
“A   man   has   a   perfect   right,   so   long   as  he  is
solvent, to continue a losing business; but the
moment he becomes insolvent he does so at the
risk of his creditors. As soon as he finds that he
cannot pay loop in the pound, although he may
nevertheless think that if he goes on he may be
able   to   retrieve   his   position,   he   ought   to   call
together his creditors, who will have to bear the
loss in case his calculations are wrong, and leave
them to determine whether the business shall be
20
continued or not. Moreover, it is not enough to
consult only the largest creditors. There is no
insolvency within the meaning of this offence if a
careful, prudent, and unhurried realization of the
assets would produce enough to pay loop in the
pound on the amount of liabilities.”
34 It may be relevant to capture a brief outlook as to various stages
involved in the corporate insolvency process in India:
(i) When   a   financial   default   occurs,   either   the   borrower
(Corporate Debtor under Section 10 read with Section 11
of the IBC) or the lender (creditors – financial creditor
under Section 7 or operational creditor under Section 9
of the IBC) can approach the NCLT for initiating the
resolution process. Operational creditors need to give a
notice   of   10   days   to   the   Corporate   Debtor   before
approaching the NCLT. If the Corporate Debtor fails to
repay dues to the operational creditor, or fails to show
any existing dispute or arbitration, then the operational
creditor can approach the NCLT.
(ii) Upon   admission   of   an   application   by   the   NCLT,   the
claims of the creditor will be frozen for 180 days, during
which time, the NCLT will hear proposals for revival of
the Corporate  Debtor and  decide on future course of
action. During this period, a moratorium is imposed to
ensure   no   coercive   proceedings   are   launched   or
continued   against   the   Corporate   Debtor   in   any   other
21
forum   or   under   any   other   law,   until   approval   of   the
resolution plan or initiation of the liquidation process.
(iii) The   NCLT   first   appoints   an   interim   insolvency
professional. The interim insolvency professional is to
hold office until a resolution professional is appointed.
He   further   takes   control   of   the   Corporate   Debtor’s
operations   and   collects   its   financial   information   from
information utilities. The NCLT must also ensure public
announcement of the initiation of corporate insolvency
process and call for submission of claims. 
(iv) The   Corporate   insolvency   process   must   normally   be
completed   within   180   days   of   admission   of   the
application by the NCLT. The Committee of Creditors has
to then take decisions regarding insolvency resolution as
provided by law.
35 In this context, we may note that when the insolvency process
commences, the adjudicating authority is mandated to declare a
moratorium on continuation or initiation of any coercive legal
action against the Corporate Debtor. Section 14 of the IBC reads
as under:
14. Moratorium.––(1)   Subject   to   provisions   of
sub­sections   (2)   and   (3),   on   the   insolvency
commencement date, the Adjudicating Authority
shall by order declare moratorium for prohibiting
all of the following, namely:—
22
(a)   the   institution   of   suits   or   continuation   of
pending   suits   or   proceedings against   the
corporate   debtor   including   execution   of   any
judgment, decree or order in any court of law,
tribunal, arbitration panel or other authority;
(b)   transferring,   encumbering,   alienating   or
disposing of by the corporate debtor any of its
assets   or   any   legal   right   or   beneficial   interest
therein;
(c) any action to foreclose, recover or enforce any
security interest created by the corporate debtor
in respect of its property including any action
under the Securitisation  and Reconstruction  of
Financial   Assets   and   Enforcement   of
Security Interest Act, 2002 (54 of 2002);
(d) the recovery of any property by an owner or
lessor where such property is occupied by or in
the possession of the corporate debtor.
Explanation.—For   the   purposes   of   this   subsection,   it   is   hereby   clarified   that
notwithstanding anything contained in any other
law for the time being in force, a license, permit,
registration, quota, concession, clearances or a
similar   grant   or   right   given   by   the   Central
Government, State Government, local authority,
sectoral   regulator   or   any   other   authority
constituted   under   any   other   law   for   the   time
being   in   force,   shall   not   be   suspended   or
terminated on the grounds of insolvency, subject
to   the   condition   that   there   is   no   default   in
payment of current dues arising for the use or
continuation of the license, permit, registration,
quota, concession, clearances or a similar grant
or right during the moratorium period;
(2) The supply of essential goods or services to
the corporate debtor as may be specified shall
not be terminated or suspended or interrupted
during moratorium period.
23
(2A) Where the interim resolution professional or
resolution   professional,   as   the   case   may   be,
considers the supply of goods or services critical
to protect and preserve the value of the corporate
debtor   and   manage   the   operations   of   such
corporate debtor as a going concern, then the
supply of such goods or services shall not be
terminated, suspended or interrupted during the
period   of   moratorium,   except   where   such
corporate debtor has not paid dues arising from
such supply during the moratorium period or in
such circumstances as may be specified.
(3)  The  provisions   of  sub­section   (1)  shall   not
apply to —
(a)   such   transactions,   agreements   or   other
arrangements as may be notified by the Central
Government in consultation with any financial
sector regulator or any other authority;
(b)   a   surety   in   a   contract   of   guarantee   to   a
corporate debtor.
(4)   The   order   of   moratorium   shall   have   effect
from the date of such order till the completion of
the corporate insolvency resolution process:
Provided   that   where   at   any   time   during   the
corporate insolvency resolution process period, if
the   Adjudicating   Authority   approves   the
resolution plan under sub­section (1) of section
31 or passes an order for liquidation of corporate
debtor under section 33, the moratorium shall
cease   to   have   effect   from   the   date   of   such
approval or liquidation order, as the case may be.
36 Section 14 of the IBC prescribes a moratorium on the initiation of
CIRP proceedings and its effects. One of the purposes of the
moratorium is to keep the assets of the Corporate Debtor together
during the insolvency resolution process and to facilitate orderly
24
completion of the processes envisaged under the statute. Such
measures   ensure   the   curtailing   of   parallel   proceedings   and
reduce the possibility of conflicting outcomes in the process. In
this context, it is relevant to quote the February 2020 Report of
the Insolvency Law Committee, which notes as under:
“8.2   The   moratorium   under   Section   14   is
intended to keep “the corporate debtor's assets
together during the insolvency resolution process
and   facilitating   orderly   completion   of   the
processes   envisaged   during   the   insolvency
resolution   process   and   ensuring   that   the
company may continue as a going concern while
the creditors take a view on resolution of default.”
Keeping the corporate debtor running as a going
concern   during   the   CIRP   helps   in   achieving
resolution as a going concern as well, which is
likely to maximize value for all stakeholders. In
other jurisdictions too, a moratorium may be put
in   place   on   the   advent   of   formal   insolvency
proceedings,   including   liquidation   and
reorganization proceedings. The UNCITRAL Guide
notes   that   a   moratorium   is   critical   during
reorganization proceedings since it “facilitates the
continued operation of the business and allows
the   debtor   a   breathing   space   to   organize   its
affairs, time for preparation and approval of a
reorganization plan and for other steps such as
shedding   unprofitable   activities   and   onerous
contracts, where appropriate.” 
From the above, it can be seen that one of the motivations of
imposing a moratorium is for Section 14(1)(a), (b), and (c) of the
IBC to form a shield that protects pecuniary attacks against the
Corporate Debtor. This is done in order to provide the Corporate
25
Debtor with breathing space, to allow it to continue as a going
concern and rehabilitate itself. Any contrary interpretation would
crack this shield and would have adverse consequences on the
objective sought to be achieved. 
37 Even if a company goes into liquidation, a moratorium continues
in terms of Section 33(5) of the IBC which reads as under:
33 (5) ­ Subject to section 52, when a liquidation
order  has   been  passed,  no   suit   or  other   legal
proceeding shall be instituted by or against the
corporate debtor:
Provided that a suit or other legal proceeding may
be instituted by the liquidator, on behalf of the
corporate debtor, with the prior approval of the
Adjudicating Authority.
38 We may note that the IBC, being the more recent statute, clearly
overrides the Customs Act. This is clearly made out by a reading
of Section 142A of the Customs Act. The aforesaid provision notes
that the Custom Authorities would have first charge on the assets
of an assessee under the Customs Act, except with respect to
cases under Section 529A of Companies Act 1956, Recovery of
Debts   Due   to   Banks   and   Financial   Institutions   Act   1993,
Securitisation   and   Reconstruction   of   Financial   Assets   and
Enforcement of Security Interest Act, 2002 and the IBC, 2016.
Accordingly, such an exception created under the Customs Act is
duly   acknowledged   under   Section   238   of   the   IBC   as   well.
26
Additionally, we may note that Section 238 of the IBC clearly
overrides any provision of law which is inconsistent with the IBC.
Section 238 of IBC provides as under: 
238. Provisions   of   this   Code   to   override
other lawsThe provisions of this Code shall have effect,
notwithstanding   anything   inconsistent
therewith  contained  in  any  other  law  for the
time being in force or any instrument having
effect by virtue of any such law.
39 The NCLAT, while playing down the effect of Section 142A of the
Customs  Act  and  Section  238  of  the  IBC, has  held  that  the
Customs Act is a complete code in itself and no person can seek
removal of goods from the warehouse without paying customs
duty. The NCLAT relies on the judgment in Collector of Customs
v. Dytron (India) Ltd., 1999 ELT 342 Cal., by the High Court of
Calcutta, which laid down that customs duty carry first charge
even during the insolvency process under Section 529 and 530 of
Companies Act, 1956. However, reliance on the said precedent is
not appropriate as the NCLAT has failed to notice that such
interpretation has been legislatively overruled by the inclusion of
Section 142A under the Customs Act, through Section 51 of the
Finance Act of 2011.
40 From the above, it is to be noted that the Customs Act and the
IBC act in their own spheres. In case of any conflict, the IBC
overrides the Customs Act. In present context, this Court has to
27
ascertain as to whether there is a conflict in the operation of two
different statutes in the given circumstances. As the first effort,
this Court is mandated to harmoniously read the two legislations,
unless this Court finds a clear conflict in its operation.
41 At the cost of repetition, we may note that the demand notices
issued by the respondent are plainly in the teeth of Section 14 of
the   IBC   as   they   were   issued   after   the   initiation   of   the   CIRP
proceedings.   Moratorium   under   Section   14   of   the   IBC   was
imposed   when   insolvency   proceedings   were   initiated   on
01.08.2017. The first notice sent by the respondent authority was
on 29.03.2019. Further, when insolvency resolution failed and
the   liquidation   process   began,   the   NCLT   passed   an  order  on
25.04.2019 imposing moratorium under Section 33(5) of the IBC.
It is only after this order that the respondent issued a notice
under   Section   72   of   the   Customs   Act   against   the   Corporate
Debtor. The various demand notices have therefore clearly been
issued by the respondent after the initiation of the insolvency
proceedings, with some notices issued even after the liquidation
moratorium was imposed. 
42 We are of the clear opinion that the demand notices to seek
enforcement of custom dues during the moratorium period would
clearly violate the provisions of Sections 14 or 33(5) of the IBC, as
the case may be. This is because the demand notices are an
28
initiation   of   legal   proceedings   against   the   Corporate   Debtor.
However, the above analysis would not be complete unless this
Court   examines   the   extent   of   powers   which   the   respondent
authority can exercise during the moratorium period under the
IBC. 
43 In   the   above   context,   the   judgment   of   this   Court   in  S.V.
Kondaskar v. V.M. Deshpande, AIR 1972 SC 878, is extremely
relevant. In that case, this Court, while expounding the interplay
of Section 446 of the Companies Act 1956 (bankruptcy provision)
with the Income Tax Act,1961, held as follows: 
“7.  …Looking   at   the   legislative   history   and   the
scheme of the Indian Companies Act, particularly the
language of Section 446, read as a whole, it appears
to us that the expression “other legal proceeding” in
sub­section (1) and the expression “legal proceeding”
in sub­section (2) convey the same sense and the
proceedings in both the sub­sections must be such
as can appropriately be dealt with by the winding up
court.   The   Income   Tax   Act   is,   in   our   opinion,   a
complete code and it is particularly so with respect to
the   assessment   and   re­assessment   of   income   tax
with which alone we are concerned in the present
case. The fact that after the amount of tax payable by
an assessee has been determined or quantified its
realisation from a company in liquidation is governed
by the Act because the income tax payable also being
a debt has to rank pari passu with other debts due
from   the   company   does   not   mean   that   the
assessment proceedings for computing the amount of
tax must be held to be such other legal proceedings
as can only be started or continued with the leave of
the liquidation court under Section 446 of the Act.
The liquidation court, in our opinion, cannot perform
the functions of Income Tax Officers while assessing
29
the amount of tax payable by the assessees even if
the assessee be the company which is being wound
up by the Court. The orders made by the Income Tax
Officer in the course of assessment or re­assessment
proceedings   are   subject   to   appeal   to   the   higher
hierarchy under the Income Tax Act. There are also
provisions for reference to the High Court and for
appeals from the decisions of the High Court to the
Supreme   Court   and   then   there   are   provisions   for
revision by the Commissioner of Income Tax. It would
lead to anomalous consequences if the winding up
court   were   to   be   held   empowered   to   transfer   the
assessment   proceedings   to   itself   and   assess   the
company to income tax. The argument on behalf of
the appellant by Shri Desai is that the winding up
court  is empowered  in  its  discretion  to  decline  to
transfer the assessment proceedings in a given case
but the power on the plain language of Section 446 of
the Act must be held to vest in that court to be
exercised only if considered expedient. We are not
impressed by this argument. The language of Section
446   must   be   so   construed   as   to   eliminate   such
startling consequences as investing the winding up
court   with   the   powers   of   an   Income   Tax   Officer
conferred on him by the Income Tax Act, because in
our view the legislature could not have intended such
a result.
8. The argument that the proceedings for assessment
or re­assessment of a company which is being wound
up can only be started or continued with the leave of
the liquidation court is also, on the scheme both of
the Act and of the Income Tax Act, unacceptable. We
have   not   been   shown   any   principle   on   which   the
liquidation court should be vested with the power to
stop   assessment   proceedings   for   determining   the
amount   of   tax   payable   by   the   company   which   is
being wound up. The liquidation court would have
full power to scrutinise the claim of the revenue after
income tax has been determined and its payment
demanded from the liquidator. It would be open to
the liquidation court then to decide how far under
the law the amount of income tax determined by the
Department should be accepted as a lawful liability
30
on the funds of the company in liquidation. At that
stage the winding up court can fully safeguard the
interests of the company and its creditors under the
Act. Incidentally, it may be pointed out that at the
Bar no English decision was brought to our notice
under which the assessment proceedings were held
to be controlled by the winding up court. On the view
that we have taken, the decisions in the case of Seth
Spinning Mills Ltd., (In Liquidation) (1962) 46 ITR 193
(Punj) (Supra) and the Mysore Spun Silk Mills Ltd., (In
Liquidation) (1968) 68 ITR 295 (Mys) (supra) do not
seem to lay down the correct rule of law that the
Income Tax Officers must obtain leave of the winding
up court for commencing or continuing assessment
or re­assessment proceedings.”
44 Therefore, this Court held that the authorities can only take steps
to determine the tax, interest, fines or any penalty which is due.
However, the authority cannot enforce a claim for recovery or levy
of interest on the tax due during the period of moratorium. We
are of the opinion that the above  ratio  squarely applies to the
interplay between the IBC and the Customs Act in this context. 
45 From the above discussion, we hold that the respondent could
only initiate assessment or re­assessment of the duties and other
levies. They cannot transgress such boundary and proceed to
initiate recovery in violation of Sections 14 or 33(5) of the IBC.
The interim resolution professional, resolution professional or the
liquidator, as the case may be, has an obligation to ensure that
assessment is legal and he has been provided with sufficient
power to question any assessment, if he finds the same to be
31
excessive. 
46 There is another aspect of this case that needs to be highlighted
to portray the inconsistency of the Customs Act vis­à­vis the IBC
during the moratorium period. In the present case, the demand
notice dated 11.07.2019 was issued by the respondent under
Section 72 of the Customs Act, in clear breach of the moratorium
imposed under Section 33(5) of the IBC. Issuing a notice under
Section 72 of the Customs Act for non­payment of customs duty
falls   squarely   within   the   ambit   of   initiating   legal   proceedings
against a Corporate Debtor. Even under the liquidation process,
the liquidator is given the responsibility to secure assets and
goods of the Corporate Debtor under Section 35(1)(b) of IBC.
47 As laid down earlier, the Customs Act and IBC can be read in a
harmonious manner wherein authorities under the Customs Act
have   a   limited   jurisdiction   to   determine   the   quantum   of
operational debt – in this case, the customs duty – in order to
stake   claim   in   terms   of   Section   53   of   the   IBC   before   the
liquidator. However, the respondent does not have the power to
execute its claim beyond the ambit of Section 53 of the IBC. Such
harmonious   construction   would   be   in   line   with   the   ruling  in
Gujarat Urja Vikas Nigam Ltd. v. Amit Gupta, (2021) 7 SCC
209, wherein a balance was struck by this Court between the
jurisdiction   of   the   NCLT   under   the   IBC   and   the   potential
32
encroachment on the legitimate jurisdiction of other authorities. 
48 However, it appears to us that in the impugned order, the NCLAT
has   misinterpreted   the   aforesaid   judgment   of   this   Court   in
Gujrat Urja Vikas Nigam Case (supra) and held as follows:
“7.16 Thus,  it is  clear that  NCLT and  NCLAT
cannot usurp the legitimate jurisdiction of other
Courts,   Tribunals   and   fora   when   the   dispute
does   not   arise   solely   from   or   relating   to   the
insolvency of the corporate debtor. In the instant
case, the Corporate Debtor had abandoned the
imported goods in the Customs warehouses for
several years and failed to pay the import duty
and other charges and had not taken any steps
to   take   possession   of   those   goods   for   several
years. Therefore, the importer had lost his right
to the imported goods. Consequently, Customs
Authorities are fully empowered under Section
72 of the Act to sell those goods to recover the
Government dues. Liquidator has no right to take
into possession over those goods for which the
Corporate Debtors title is deemed relinquished
by implication of law. Even before initiating the
Corporate   Insolvency   Resolution   Process,   the
Corporate   Debtor   company   could   not   have
secured   the   possession   of   the   imported   goods
except by paying the Customs duty. Resolution
Professional/liquidator, who virtually represents
the company, cannot stand on a better footing
than the Corporate Debtor itself.”
49 Such interpretation clearly ignores the fact that there was no
“abandonment   of   goods”   which   would   authorize   the   Customs
Authorities to initiate the adjudicatory process to transfer title to
themselves.   Before   any   goods   can   be   declared   to   have   been
“abandoned”, the same must be adjudged by some authority after
due notice. The position cannot be assumed or deemed. In the
33
case at hand, no such adjudication or notice has been placed on
record to suggest that  such abandonment of the warehoused
goods had taken place prior to the imposition of the moratorium.
50 The NCLAT, by deciding the question of passing of title from the
Corporate Debtor to the respondent authority, has clearly ignored
the mandate of Section 72(2) of the Customs Act relating to sale.
This interpretation of the NCLAT clearly ignores the effects of the
moratorium under Sections 14 and 33(5) of the IBC. The fact is
that the duty demand notice and notice under Section 72(2) of
the Customs Act, were issued during the  moratorium period,
which has been completely ignored by NCLAT and has resulted in
rendering the moratorium otiose.
51 The interpretation provided by the NCLAT, regarding the deemed
transfer of title of the goods from the assessee to the Customs
Authority under Section 72 of the Customs Act, would fly in the
face of Section 14 of the IBC, read with Sections 25 and 33(5).
Moreover, such deemed transfer cannot be countenanced in law
as   the   same   would   be   in   breach   of   Article   300A   of   the
Constitution, as properties are deemed to be transferred to the
Customs Authority without there being adequate hearing or any
adjudication   of   any   form.   Such   an   interpretation   cannot   be
accepted by this court. 
34
52 Interestingly, in the present case, on 20.05.2019, 27.05.2019,
29.05.2019 & 18.09.2019 the Customs Authorities filed Form C
under Regulation 17 of IBBI Liquidation Process Regulation 2016
before   the   appellant/liquidator   in   order   to   stake   claims   for
distribution of proceeds of sale in consonance with Section 53 of
the IBC.  The respondent authority, does a U­turn on filing such
claims   and   instead,   unilaterally   decides   to   initiate   recovery
proceedings under Section 72(2) of the Customs Act. Further, the
Customs Authority bypasses even the notice and adjudicatory
requirements contemplated under Section 72(2) of the Customs
Act and takes the position that there is a deemed transfer of title
with respect to the assets as customs duty and other levies were
not duly paid. Such a change in stance is clearly an afterthought,
without there being any basis in law to by­pass the specialized
procedure laid down under the IBC.
53 For the sake of clarity following questions, may be answered as
under:
a) Whether the provisions of the IBC would prevail over the
Customs Act, and if so, to what extent?
The IBC would prevail over The Customs Act, to the extent that
once moratorium is imposed in terms of Sections 14 or 33(5) of
the IBC as the case may be, the respondent authority only has
35
a   limited   jurisdiction   to   assess/determine   the   quantum   of
customs duty and other levies. The respondent authority does
not have the power to initiate recovery of dues by means of
sale/confiscation, as provided under the Customs Act.
b) Whether  the  respondent  could  claim  title  over  the  goods
and issue notice to sell the goods in terms of the Customs
Act when the liquidation process has been initiated?
answered in negative.
54 On   the   basis   of   the   above   discussions,   following   are   our
conclusions:
i) Once moratorium is imposed in terms of Sections 14 or
33(5) of the IBC as the case may be, the respondent
authority   only   has   a   limited   jurisdiction   to
assess/determine the quantum of customs duty and
other levies. The respondent authority does not have
the  power  to  initiate  recovery  of  dues  by  means   of
sale/confiscation, as provided under the Customs Act.
ii) After such assessment, the respondent authority has
to   submit   its   claims   (concerning   customs
dues/operational debt) in terms of the procedure laid
down,   in   strict   compliance   of   the   time   periods
prescribed   under   the   IBC,   before   the   adjudicating
36
authority.
iii) In any case, the IRP/RP/liquidator can immediately
secure goods from the respondent authority to be dealt
with appropriately, in terms of the IBC.
55 Resultantly, we allow the appeal and set aside the impugned
order and judgment of the NCLAT. There shall be no orders as to
costs.
...........................CJI.
(N.V. RAMANA)
      
                …...........................J.
(J.K. MAHESHWARI)
…...........................J.
(HIMA KOHLI)
NEW DELHI;
AUGUST 26, 2022.
37
Civil Appeal No.7722 of 2021 and Civil Appeal No.7731 of 2021
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 7722 OF 2021
 M/S. R.K. INDUSTRIES (UNIT-II) LLP .… APPELLANT
Versus
M/S. H.R. COMMERCIALS PRIVATE LIMITED AND OTHER …..RESPONDENTS
AND
CIVIL APPEAL NO. 7731 OF 2021
WELSPUN STEEL RESOURCES PRIVATE LIMITED .… APPELLANT
Versus
M/S R.K. INDUSTRIES (UNIT II) LLP AND OTHERS …..RESPONDENTS
J U D G M E N T
HIMA KOHLI, J.
1. By this common judgment, we propose to decide both the appeals one filed
by M/s. R.K. Industries (Unit-II) LLP (appellant in Civil Appeal No.7722 of 2021 and
respondent No.1 in Civil Appeal No.7731 of 2021) and Welspun Steel Resources
Private Limited1
 (appellant in Civil Appeal No.7731 of 2021 and respondent No.7 in
Appeal No.7722/2021) against the judgment dated 10th December, 2021 passed by
1 For short ‘Welspun’
Page 1 of 59
Civil Appeal No.7722 of 2021 and Civil Appeal No.7731 of 2021
the Appellate Authority, National Company Law Appellate Tribunal, Principal Bench,
New Delhi2
 in Company Appeal (AT) (Ins.)No.690 of 2021 filed by R.K. Industries
under Section 61 of the Insolvency and Bankruptcy Code, 20163
, assailing the order
dated 16th August, 2021 passed by the Adjudicating Authority, (National Company
Law Tribunal, Ahmedabad)4
 in Interlocutory Application No.273 of 2021 (filed by the
respondent No.1 - H.R. Commercial Private Limited, in IA No.698 of 2020 (filed by
Liquidator) in Company Petition (IB) No.53 of 2017. For the sake of convenience, we
propose to refer to the facts narrated in Civil Appeal No.7722 of 2021.
FACTS OF THE CASE
2. The facts of the case necessary to decide the present appeals are as follows.
2.1 Vide Agreement dated 26th February, 2008, Gujarat Maritime Board5
 leased
out a parcel of land to ABG Shipyard Limited6
 for a period of thirty years. On 1st
August, 2017, ICICI Bank Limited moved an application for initiation of Corporate
Insolvency Resolution Process7
 against the Corporate Debtor under Section 7 of the
IBC read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating
Authority) Rules8
, 2016 before the Adjudicating Authority, NCLT, Ahmedabad [CP(IB)
2 For short ‘NCLAT’
3 For short ‘IBC’
4 For short ‘NCLT’
5 For short ‘GMB’
6 For short ‘Corporate Debtor’
7 For short ‘CIRP’
8 For short ‘IBC Rules’
Page 2 of 59
Civil Appeal No.7722 of 2021 and Civil Appeal No.7731 of 2021
No.53/NCLT/AHM/2017] wherein, Mr. Sundaresh Bhat was appointed as an Interim
Resolution Professional9
. As no Resolution Plan was approved during the CIRP, an
application was moved by the IRP for initiating liquidation proceedings. Vide order
dated 25th April, 2019, the Adjudicating Authority ordered liquidation of the Corporate
Debtor and appointed Mr. Sundaresh Bhat as the Liquidator. The respondent No.2 -
Liquidator made efforts to sell the assets of the Corporate Debtor through an eauction process, as contemplated in Sections 33 and 35 of the IBC read with
Schedule-I of the Insolvency and Bankruptcy Board of India (Liquidation Process)
Regulations, 201610. Five e-auctions were conducted by the respondent No.2 -
Liquidator to sell the consolidated assets of the Corporate Debtor on 17th September,
2019; 27th September, 2019; 22nd October, 2019; 11th November, 2019 and 5th
August, 2020. When the first four e-auctions were unsuccessful, in the fifth eauction, the respondent No.2 - Liquidator offered sale of the assets on a stand-alone
basis or singly or in smaller lots, besides compositely. Except for the sale of two
residential assets, no purchasers stepped forward to purchase the other assets.
2.2. Faced with the above situation, the respondent No.2 - Liquidator moved an
application (IA No.698 of 2020) before the NCLT for permission to sell the assets of
the Corporate Debtor through Private Sale, in terms of Regulation 33(2)(d) of the
Liquidation Regulations, which was duly allowed. On receiving offers from potential
9 For short ‘IRP’
10 For short ‘Liquidation Regulations’
Page 3 of 59
Civil Appeal No.7722 of 2021 and Civil Appeal No.7731 of 2021
buyers, the respondent No.2 - Liquidator approached the Stakeholders, who in the
Meeting conducted on 28th January, 2021, took a decision to go in for the sale of the
Dahej Material and Scrap11 at amounts higher than the reserve price of the Dahej
Material fixed at ₹516 crores in the fifth round of the e-auction. The Stakeholders’
Consultative Committee12 resolved that the prospective bidders, who proposed to
participate in the Private Sale, ought to be encouraged to participate in the Swiss
Challenge Process. As a result, the Swiss Challenge Process was adopted for sale
of the assets of the Corporate Debtor through Private Sale.
2.3. The first Swiss Challenge Process that commenced on 12th March, 2021, was
unsuccessful as the highest offeror failed to deposit the earnest money amount of
10% of the reserve price. The SCC decided to conduct a second Swiss Challenge
Process at a base price of ₹460 crores (being lower than the earlier calculated
reserve price of ₹516 crores) as some assets from the Dahej Material were kept
reserved for a potential buyer. The second Swiss Challenge Process was initiated
on 22nd March, 2021 and at the Anchor Bid stage, the respondent No.2 - Liquidator
received bids from R.K. Industries, appellant in Civil Appeal No.7731/2021,
respondent No.4 - V.K. Industrial Corporation Limited and respondent No.5 – M/s
Ankit International.
11 For short ‘Dahej Material’
12 For short ‘SCC’
Page 4 of 59
Civil Appeal No.7722 of 2021 and Civil Appeal No.7731 of 2021
2.4. On 23rd March, 2021, the appellant submitted its bid of ₹431 crores along
with Expression of Interest and deposited a sum of ₹1.00 crore in terms of the bid
requirement. Though the last date for submitting the Earnest Money Deposit 13 in
terms of the Process Document was as 24th March, 2021, the appellant deposited
the EMD of ₹43.10 crores with the respondent No.2 – Liquidator for selection as an
Anchor Bidder on 26th March, 2021 along with an affidavit stating inter alia that it
agreed to be bound by the terms of the Swiss Challenge Process.
2.5. The second stage of the Swiss Challenge Process commenced on 27th
March, 2021 when the respondent No.2 - Liquidator published an advertisement
inviting bidders to participate in the Swiss Challenge Process and submit their bids
against the Anchor Bid. In response thereto, the appellant, respondents No.1, 3, 4,
5 and 6 submitted their bids. On 2nd April, 2021, the respondent No.1 – HR
Commercials Private Limited proposed to bid in a consortium comprising of itself and
the respondents No.3 to 6. The said consortium also submitted an EMD in the
second stage of the Swiss Challenge Process.
COMMENCEMENT OF LITIGATION
ORDER OF THE ADJUDICATING AUTHORITY (NCLT)
3. On 6th April, 2021, respondent No.1 – HR Commercials Private Limited filed
an application before the Adjudicating Authority (NCLT), being IA No.273 of 2021,
13 For short ‘EMD’
Page 5 of 59
Civil Appeal No.7722 of 2021 and Civil Appeal No.7731 of 2021
challenging the bid process in the second Swiss Challenge Process wherein, the
appellant was selected as the Anchor Bidder. The NCLT passed an interim order on
the aforesaid application on 7th April, 2021 directing the respondent No.2 - Liquidator
to complete the second Swiss Challenge Process only upto the stage of
announcement of the highest bidder and for deferring the rest of the process to a
date after 12th April, 2021. The said interim order dated 7th April, 2021 was
subsequently extended by the NCLT on 27th April, 2021 and 3rd May, 2021.
4. Aggrieved by the aforesaid orders, the appellant – R.K. Industries filed an
appeal before the Appellate Authority/NCLAT, which was disposed of, vide order
dated 18th June, 2021 with a direction issued to the NCLT to expeditiously decide IA
No.273 of 2021, moved by the respondent No.1 – HR Commercials Private Limited.
[In the meantime, respondent No.7 – Welspun sent an e-mail dated 19th May, 2021 to
the respondent No.2 – Liquidator expressing its interest in the Dahej Material as well
as the land that was leased out by GMB to the Corporate Debtor]. A series of emails were exchanged between the respondent No.2–Liquidator and the respondent
No.7–Welspun on its offer to acquire the consolidated assets of the Corporate Debtor
at a price of ₹627.50 crores. When the request of the respondent No.7–Welspun for
permission to inspect the Dahej Material at the site was turned down by the
respondent No.2 - Liquidator on the ground that the matter was sub judice and the
material was not available for bidding, it filed an application before the NCLT (IA
Page 6 of 59
Civil Appeal No.7722 of 2021 and Civil Appeal No.7731 of 2021
No.445 of 2021) for issuing directions to the respondent No.2 – Liquidator to
consider and accept its offer for buying the consolidated assets of the Corporate
Debtor. Around the same time, the respondent No.8 – Kanter Steel India Private
Limited also moved an application (IA No.379 of 2021) before the NCLT for quashing
of the second Swiss Challenge Process.
5. On 5th July, 2021, the NCLT directed the respondent No.2 – Liquidator to
permit the respondent No.7 – Welspun to inspect the assets of the Corporate Debtor.
After the said inspection, vide letter dated 2nd August, 2021, the respondent No.7 –
Welspun hiked its offer for the consolidated assets from ₹627.50 crores to ₹650
crores on an ‘as is where is basis’; ‘as is what is basis’ and ‘wherever there is basis’.
6. On 6th August, 2021, a Meeting of the SCC was convened wherein, the
respondent No.2– Liquidator appraised the stakeholders of the further developments
that had taken place and the offer letter dated 2nd August, 2021 issued by the
respondent No.7–Welspun bidding for the consolidated assets of the Corporate
Debtor. The SCC advised the respondent No.2–0Liquidator to place the relevant
facts and the bid received from the respondent No.7–Welspun before the NCLT. It is
the stand of the respondent No.2–Liquidator that in the hearing conducted on 9th
August, 2021, the NCLT had orally directed him to place the offer made by the
respondent No.7-Welspun before the stakeholders.
Page 7 of 59
Civil Appeal No.7722 of 2021 and Civil Appeal No.7731 of 2021
7. Pursuant to the aforesaid direction, a Meeting of the SCC was conducted on
13th August, 2021 and it was decided that it would be beneficial if the Dahej Material
and the Shipyard are sold as composite assets to maximize realization to the
stakeholders in the shortest possible time and for quick disposal of the assets. In
other words, the stakeholders were of the view that a composite sale of the Dahej
Material and the Shipyard would be more beneficial vis-à-vis the sale of the Dahej
Material alone, subject matter of the second Swiss Challenge Process.
8. On 16th August, 2021, the respondent No.7–Welspun sent an e-mail to the
respondent No.2–Liquidator once again increasing its offer for the consolidated
assets of the Corporate Debtor from ₹650 crores to ₹675 crores. It also offered to
pay a sum of ₹67.50 crores as EMD with an assurance that full payment would be
made on or before 30th September, 2021. On the very same day, when the matter
was listed before the NCLT, the respondent No.2–Liquidator apprised the NCLT of
the recommendations made by the SCC for entertaining the consolidated offer
received from the respondent No.7–Welspun. Noting the aforesaid submission that
removal of the Dahej Material will take upto 15 to 20 months and only thereafter,
could the process for conducting sale of the land be undertaken, which would further
delay the entire liquidation process and having regard to the view of the stakeholders
that consolidated sale of all the assets of the Corporate Debtor at one go will save
time and maximize the value to the stakeholders, the NCLT passed an order on 16th
Page 8 of 59
Civil Appeal No.7722 of 2021 and Civil Appeal No.7731 of 2021
August, 2021, permitting the respondent No.2–Liquidator to go in for Private Sale of
all the assets of the Corporate Debtor and complete the entire sale process in
consultation with the SCC within a period of three weeks. The respondent No.2–
Liquidator was also directed to permit all the parties before the NCLT to participate in
the bidding process.
ORDER OF THE APPELLATE AUTHORITY (NCLAT)
9. It was the aforesaid order that was challenged by the appellant–R.K.
Industries before the NCLAT, which has been dismissed, by the impugned judgment
dated 10th December, 2021. However, the NCLAT has gone on to modify the order
dated 16th August, 2021 passed by the NCLT directing the respondent No.2–
Liquidator to complete the entire private sale within three weeks in the following
manner :
“39. It is clear from the ratio of the above mentioned judgments
that the specific context in which an auction is carried out can
only elucidate the aspect of arbitrariness and favouritism or
otherwise. Thus, in the present appeal where the Impugned
Order challenging the stoppage of second Swiss Challenge
Process and taking up a fresh private sale process has been
challenged, it is seen that the decision of the stakeholders and
the liquidator, upon which the Adjudicating Authority has based
its order does not grant any particular party any favour. It is
driven by the stakeholders' wish to get the liquidation process
concluded early without losing sight of maximization of value of
assets. Also, even though this is a private sale as opposed
to sale by a government authority, we are of the opinion
that the standards and norms of transparency, fairness and
responsibility should be adopted without any qualification
or reservation and all prospective bidders should get
Page 9 of 59
Civil Appeal No.7722 of 2021 and Civil Appeal No.7731 of 2021
sufficient notice and time to enable them to participate in
the bidding in an effective manner. The process should be
taken up after proper notice to prospective buyers and not
limited to chosen few.
40. The impugned order directs the Liquidator to complete the
entire private sale (relating to the assets contained in the
WSRPL offer) within three weeks from the date of Adjudicating
Authority's order. It additionally directs the Liquidator to allow
the parties who are involved in the hearing of CP(IB) No. 53 of.
2017 and related IAs to participate in the sale process. We are
of the opinion that rushing into the sale of composite
assets with only such parties participating who had earlier
not evinced keen interest in the five failed rounds of eauction may not achieve the value maximization objective.
The process should be restarted with adequate preparation
and after giving open notice to prospective buyers. We also
hope liquidator will take steps to initiate and complete the sale
process in accordance with the provisions of IBC and
Liquidation Regulations without any favouritism and bias and
with transparency and fairness.
41. In view of the above discussion, we direct, in partial
modification of the impugned order, that while the second
Swiss Challenge Process stands cancelled, the private sale
process should be undertaken in accordance with the
directions contained in the preceding paragraph of this
judgment as per relevant legal provisions.”
 (emphasis added)
THE APPEAL
10. It is the aforesaid order that has brought the appellant - R.K. Industries to this
Court with a grievance that there was no good reason for the NCLAT to have
permitted the procedure of Private Sale of the composite assets of the Corporate
Debtor instead of taking the Second Swiss Challenge Process to its logical
conclusion. As regards Welspun, respondent No.7 in Civil Appeal No. 7722 of 2021
and the appellant in Civil Appeal No. 7731 of 2021, the limited grievance raised is
Page 10 of 59
Civil Appeal No.7722 of 2021 and Civil Appeal No.7731 of 2021
with regard to the directions issued in the penultimate paragraphs of impugned
judgment of restarting the process of Private Sale after issuing an open notice to all
prospective buyers instead of confining the same to the parties who had earlier
participated in the process.
SUBMISSIONS OF THE APPELLANT – R.K. INDUSTRIES
11. Arguing on behalf of the appellant–R.K. Industries, Mr. Gaurav Mitra, learned
Senior counsel submitted that the NCLAT has erred in upholding the order of NCLT
of going in for Private Sale of the composite assets of the Corporate Debtor
inasmuch as there were no takers for the same at the announced reserve price in
five rounds of e-auction conducted earlier by the respondent No.2–Liquidator.
Contending that when there are no allegations or observations made in the
impugned order that the Swiss Process challenge was irregular or improper, there
was no justification for interfering with the said process that had already been set into
motion for a second time in March, 2021 wherein the appellant was declared as the
Anchor Bidder thereby giving it a Right of First Refusal 14 in respect of the Dahej
Material. Finding fault with the observations made in the impugned order that the
views of the stakeholders regarding the sale of assets are significant as they are the
ultimate beneficiaries of the liquidation process and a substantial period of time had
already been spent in the liquidation process without any fruitful results, it was
14 For short ‘ROFR’
Page 11 of 59
Civil Appeal No.7722 of 2021 and Civil Appeal No.7731 of 2021
submitted on behalf of the appellant that the aforesaid observations run contrary to
Regulation 31-A of the Liquidation Regulations and Section 35(2) of the IBC that
state in clear terms that the views of the SCC are not binding on the Liquidator. It
was urged that the NCLT and the NCLAT ought not to have permitted the respondent
No.2-Liquidator to terminate the Swiss Challenge Process when it was at the final
stage as the said termination will lead to a further delay and huge financial losses for
all the concerned parties. In support of the submission that sale through the Swiss
Challenge Process has been recognized by courts as a fruitful method of
maximisation of value, reliance has been placed on Ravi Development v. Krishna
 Parishthan & Others15
 .
12. It was next submitted by learned counsel for the appellant that the respondent
No.20-Liquidator having failed to succeed in the e-auction process that was
undertaken by him on five occasions, he had himself supported the Swiss Challenge
Process for liquidating the assets of the Corporate Debtor and therefore, he could
not have been permitted to drop the said process halfway through and approach the
NCLT for seeking permission to conduct a Private Sale of the composite assets of
the Corporate Debtor. It was contended that the NCLAT has failed to appreciate that
the respondent No.7-Welspun too had all the opportunity to participate in the
previous e-auctions conducted by the respondent No.2-Liquidator as also in the
15 (2009) 7 SCC 462
Page 12 of 59
Civil Appeal No.7722 of 2021 and Civil Appeal No.7731 of 2021
Second Swiss Challenge Process in respect of the Dahej Material and having
elected not to do so, its first offer made as late as on 19th May, 2021, culminating in
the final offer made on 16th August, 2021, ought not have been entertained.
SUBMISSIONS OF THE RESPONDENT NO.2 – LIQUIDATOR
13. The conduct of the respondent No.2 - Liquidator has also been questioned by
the appellant on the ground that initially he had repeatedly refused to entertain the
offers made by the respondent No.7-Welspun, but later on, did a complete ‘U’ turn in
the attempt to transfer the composite assets of the Corporate Debtor to the said
respondent and towards this aim, has tailor-made the Bid Documents to favour the
respondent No.7. It was argued that simply because Clause 11.6 of the terms of the
Second Swiss Challenge Process entitles the respondent No.2-Liquidator to
abandon/cancel/terminate/waive the said process at any stage, it cannot be a ground
to take such a step in an arbitrary manner, as has been done in the instant case,
more so when the entire sale process had almost reached a closure when
respondent No.7 - Welspun suddenly intervened seeking a composite sale of the
assets of the Corporate Debtor. Lastly, learned Senior Counsel for the appellant
submitted that the NCLAT has erred in directing that a fresh bid ought to be
conducted. Instead, the appellant being the Anchor Bidder, ought to be given the
Page 13 of 59
Civil Appeal No.7722 of 2021 and Civil Appeal No.7731 of 2021
benefit of matching the highest bid submitted without scrapping the Second Swiss
Challenge process.
14. Mr. Arvind Datar and Mr. Savla, learned Senior counsel appearing for the
respondent No.2 - Liquidator sought to repel the arguments advanced on behalf of
the appellant and asserted that the respondent No.2 - Liquidator had conducted the
liquidation process of the Corporate Debtor in consultation with the stakeholders at
every step and in the best interest of the Corporate Debtor, while strictly adhering to
the provisions of the IBC and the Liquidation Regulations. Laying emphasis on the
mandate of the Liquidator under the IBC to ensure maximisation of the value of the
assets of the Corporate Debtor, it was stated that the intention of the respondent
No.2 - Liquidator all through was to sell the consolidated assets of the Corporate
Debtor and towards this direction, five e-auctions were conducted by him. In the first
two e-auctions, attempts were made to sell the assets of the Corporate Debtor
compositely but that was to no avail. Left with no other option, respondent No.2 -
Liquidator decided to offer the assets of the Corporate Debtor for sale singly or in
smaller lots, besides compositely. Despite adopting the aforesaid route in the third,
fourth and fifth e-auction processes, the auction sales failed to take off and none of
the assets of the Corporate Debtor could be liquidated except for two residential
apartments situated in Mumbai and Ahmedabad. It was only after five failed auctions
that the respondent No.2 - Liquidator moved an application before the NCLT for
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permission to sell the assets of the Corporate Debtor by way of Private Sale, in terms
of Regulation 33(2)(d) of the Liquidation Regulations, which was duly allowed.
15. Arguing that the appellant has no right to insist that the respondent No.2 -
Liquidator ought to have concluded the Second Swiss Challenge Process when a
higher offer was available and was duly recommended by the stakeholders, learned
counsel cited the Minutes of the Meeting of the stakeholders held on 13th August,
2021 recording the view of the stakeholders that a composite sale of the Dahej
assets as opposed to the sale set out under the Swiss Challenge process, would be
far more beneficial and lead to maximising recovery in a guaranteed time line and
that the said strategy ought to be adopted to ensure certainty of realization of the
sale proceeds in the shortest possible time. It was stated that the respondent No.2 -
Liquidator was only acting in terms of the views expressed by the stakeholders which
stood to reason and logic and the said view has found favour with both, the NCLT as
also the NCLAT.
16. As for the plea taken by the appellant that the Second Swiss Challenge
Process ought to have been taken to its logical conclusion and could not have been
abandoned midstream, learned counsel for the respondent No.2 - Liquidator
submitted that simply because the appellant had participated in and was selected as
an Anchor Bidder in the Second Swiss Challenge Process, does not mean that it has
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any vested right to have the same concluded in its favour. Moreover, the said
process comprises of two-stage bidding and the second stage which involved
opening the process to the public to match the bid given by the appellant as the
Anchor Bidder, was not concluded. Relying on the decisions in Laxmikant and
 Others v. Satyawan and Others16 and State of Jharkhand and Others v.
 CWE-Soma Consortium17
, it was canvassed that since the Second Swiss
Challenge Process was not concluded, no vested right had accrued in favour of the
appellant for seeking enforcement in the Court of Law.
17. It was next argued that having accepted the terms of Anchor Bid Document,
the appellant cannot be permitted to challenge the decision of the respondent No. 2-
Liquidator who had to cancel the Second Swiss Challenge Process. In this context,
reference was made to the affidavit dated 23rd March, 2020 submitted by the
appellant wherein it had undertaken to remain unconditionally and irrevocably bound
by the Swiss Challenge Process document as also by the decision of the respondent
No.2 - Liquidator to cancel/ abandon/modify at any time solely at his discretion, the
sale process or any part thereof. To bring home the said point, reliance has been
placed on Clause 11.6 of the Swiss Challenge Process and Clause 12.3 of the
Anchor Bid Document. To buttress the argument that the entity issuing the tender is
well empowered to cancel the process if the tender documents so permit, learned
16 (1996) 4 SCC 208
17 (2016) 14 SCC 172
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counsel has cited CWE-Soma Consortium (supra); Tata Cellular v. Union of
 India18 and Air India v. Cochin International Airport Limited and Others 19. The
decisions in Montecarlo Limited v. National Thermal Power Corporation
 Limited20 and Agmatel India Private Limited v. Resources Telecom and Others21
have been relied on in support of the submission that courts should show restraint in
matters relating to the interpretation of the tender document and the Agency floating
the tender is best placed to decide its requirements.
18. Refuting the submission made on behalf of the appellant that the respondent
No.2 - Liquidator has adopted an unfair process for conducting Private Sale of the
assets of the Corporate Debtor, learned counsel asserted that there are no malafides
on the part of the Liquidator in inviting fresh bids after taking the decision to cancel
the Second Swiss Challenge Process when the stakeholders were duly consulted
and they had unanimously expressed an opinion to go in for Private Sale of the
composite assets of the Corporate Debtor. It was pointed out that even after
receiving an offer from the respondent No. 7-Welspun in May, 2021, respondent No.2
- Liquidator did not unilaterally decide to scrap the Second Swiss Challenge Process.
Rather, he approached the stakeholders on 6th August, 2021 and only after receiving
a green signal from them, he took the matter to the NCLT. Alluding to the terms of
18 (1994) 6 SCC 651
19 (2000) 2 SCC 617
20 (2016) 15 SCC 272
21 (2022) 5 SCC 362
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Schedule I, Clause 2(3) of the Liquidation Regulations, it was argued that Private
Sale through direct liaison with potential buyers or through the agents is permissible.
The attention of the Court was also drawn to Regulation 4 of the Liquidation
Regulations which requires the liquidation process to be completed within two years
and it was submitted that the order for liquidation of the Corporate Debtor was
passed on 24th May, 2019 and three years have already lapsed since then and if the
Dahej land and scrap are directed to be sold separately, it will require a minimum
period of 15 to 18 months to remove the material from the Dahej shipyard thereby
delaying sale of the Dahej land and buildings and adversely impacting the value of
the Corporate Debtor and its assets.
19. The only grievance raised on behalf of the respondent No.2 - Liquidator is in
respect of the directions issued in the impugned order calling upon him to restart the
process of Private Sale dated 24th August, 2021 after giving an open notice to all the
prospective buyers. Supporting a similar stand taken by the respondent No.7 -
Welspun (appellant in Civil Appeal No. 7731 of 2021) that any such step will delay
the liquidation process and result in putting the clock back to the stage of open
auction, learned counsel submitted that the process that is under challenge is the
Private Sale process which is duly contemplated in Regulation 33(2) of the
Liquidation Regulations and cannot be questioned. Additionally, reference was made
to a subsequent development where the Core Committee of Financial Creditors
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conducted a meeting on 15th December, 2021, after the impugned order was passed
and had expressed a unanimous view that the Private Sale process should be
continued and not restarted having regard to the fact that it has taken almost three
years to find a buyer and the same is at the stage of being brought to a closure. A
copy of the minutes of the Core Committee held on 15th December, 2021, has been
enclosed with IA No.34322/2022 (application for permission to file additional
documents) filed by the respondent No.2 – Liquidator.
SUBMISSIONS OF THE RESPONDENT NO. 7 - WELSPUN
20. Arguments advanced by Mr. Aman Raj Gandhi, learned counsel for Welspun,
respondent No.7 in Civil Appeal No. 7722 of 2021 and appellant in Civil Appeal No.
7731 of 2021 are broadly on the same lines as those advanced on behalf of the
respondent No.2 – Liquidator. It was submitted that the appellant was involved in the
bidding process since March, 2021 and had all the opportunity to conduct site visits
and undertake due diligence to come up with a bid for the consolidated assets
offered for sale by the respondent No.2 – Liquidator, but it failed to do so that even
as on date, the appellant has not evinced any interest in bidding for the consolidated
assets of the Corporate Debtor; that the entire effort of the appellant is to resort to
dilatory tactics and stall the liquidation process; that earlier too, Welspun was
constrained to approach this Court by way of Civil Appeal No. 5855 of 2021 in view
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of the aforesaid conduct of the appellant and it was only after an order was passed
by this Court on 21st September, 2021, requesting the NCLAT to dispose of the
appeal preferred by the appellant within two months that the impugned order has
been passed which deserves to be upheld except to the extent that the NCLAT has
directed the Private Sale process to be restarted after giving an open notice to the
prospective buyers. Stressing the fact that such a direction is not in consonance with
the object of the IBC and does not subserve the interest of the stakeholders who
have already given their unanimous consent to the Private Sale of the composite
assets of the Corporate Debtor by invitation, learned counsel for Welspun has
argued that the aforesaid direction deserves to be set aside, being bereft of any
rationale. Besides, the said direction has been passed by the NCLAT when none of
the parties appearing before it had sought any such relief. Citing the decision in
 Swiss Ribbons Private Limited and Another v. Union of India and Others
22 and
EBIX Singapore Private Limited v. Committee of Creditors of Educomp
 Solutions Limited and Another
23 wherein it has been observed that a delay in the
liquidation process results in depletion in the value of the Corporate Debtor and a low
realization, learned counsel for Welspun argued that it is imperative to preserve the
economic value of the assets of the Corporate Debtor and expedite the realization
process by carrying it forward instead of putting the clock back and directing the
22 (2019) 4 SCC 17
23 (2022) 2 SC 401
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respondent No.2 - Liquidator to start afresh. In fact, the aforesaid direction was
sought to be described as a fusion of two distinct concepts of ‘Private Sale’ and
‘public auction’ and it was submitted that issuance of an ‘open notice’ runs contrary
to the very object of going in for a private sale. Learned counsel for Welspun
concluded by citing a recent decision in Jaypee Kensington Boulevard
Apartments Welfare Association and Others v. NBCC (India) Limited and
 Others24 where emphasis has been laid on the object of the IBC being to ensure
resolution/liquidation in a time bound manner for maximization of value assets in
order to balance the interest of all the stakeholders. It was urged that as the
respondent No.2 - Liquidator has taken a decision to sell the assets of the Corporate
Debtor on a composite basis by Private Sale in consultation with the Stakeholders
Consolidation Committee, the NCLAT ought not to have replaced the commercial
wisdom of the SCC with its own view, without offering any justification for doing so.
SUBMISSIONS OF RESPONDENT NO.8 – M/s KANTER STEEL INDIA PRIVATE
LIMITED
21. Mr. Gaurav Mathur, learned counsel for the respondent No.8 – M/s. Kanter
Steel India Private Limited has also supported the submissions made on behalf of
the respondent No.7 - Welspun and contended that the private sale process initiated
24 (2022) 1 SCC 401
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by the respondent No.2 - Liquidator has the potential of fetching greater value for the
larger good of the stakeholders of the Corporate Debtor and deserves to be
continued. Referring to the offer of ₹431 crores made by the appellant under the
Second Swiss Challenge Process, it was stated that the same was evidently below
the base price of ₹460 crores declared by the respondent No.2 - Liquidator and the
appellant was also in clear breach of the timelines fixed in the Sale Process
Documents. The timeline fixed for submitting the earnest money deposit in the Sale
Process Document for the Anchor Bidder was 24th March, 2021, by 2:00 P.M.
whereas, the appellant had admittedly deposited the earnest money two days
thereafter, on 26th March, 2021, which itself was sufficient ground for the respondent
No.2 - Liquidator to have rejected its offer at the threshold. It was submitted that all
the aforesaid submissions form a part of the objections taken by the respondent No.8
and other parties before the NCLT which were still pending when the matter came to
be finally decided by the NCLAT. It has thus been argued that the appellant having
participated in the bid process with eyes wide open and without any demur, it cannot
be heard to state now that a vested right has been created in its favour merely on
account of its participation in the bid process.
SUBMISSION OF THE APPLICANT/INTERVENOR, KIRI INFRASTRUCTURE
PRIVATE LIMITED (IA NO.166862/2021)
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22. Mr. Mukul Rohtagi, learned Senior counsel for the applicant - Kiri
Infrastructure submitted that the applicant had filed an application before the
Adjudicating Authority (NCLT) on 23rd November, 2021 seeking impleadment and had
made an offer of ₹680 crores to purchase the Dahej Material, the Shipyard land and
buildings. Simultaneously, a similar application was moved by the applicant before
the NCLAT. However, the said application was not on record when the Company
Appeal was listed before the NCLAT on 24th November, 2021, on which date, orders
were reserved in the Appeal followed by the impugned judgment that was passed on
10th December, 2021. The applicant seeks impleadment in the present Appeal and
supports the impugned judgment to the extent that the NCLAT had directed the
respondent No.2 – Liquidator to restart the sale process after issuing an open notice
to the prospective buyers, thereby affording an opportunity to the applicant to submit
a bid for the consolidated assets of the Corporate Debtor on a plea that so far, its
offer is the highest.
ANALYSIS
23. We have perused the impugned judgment as well as the documents placed
on record and carefully considered the rival submissions advanced by learned
counsel for the parties. Only two points arise for consideration in these appeals.
Firstly, whether the respondent No.2 – Liquidator was justified in discontinuing the
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Second Swiss Challenge Process for the sale of a part of the assets of the Corporate
Debtor wherein the appellant – R.K. Industries was declared as an Anchor Bidder
and opting for a Private Sale Process through direct negotiations in respect of the
composite assets of the Corporate Debtor? If so, was the NCLAT justified in
directing the respondent No.2 – Liquidator to restart the entire process of Private
Sale after issuing an open notice to prospective buyers instead of confining the
process to those parties who had participated in the process earlier?
24. To begin with, it is considered necessary to have an overview of the IBC and
its relevant provisions along with the Liquidation Regulations for a better
understanding of the manner in which a Liquidator is expected to proceed for
conducting the sale of the assets of the Corporate Debtor in liquidation.
25. Conscious of the inadequate and ineffective framework of the insolvency and
bankruptcy resolution, the Government decided to overhaul the insolvency regime.
Towards this end, there were several rounds of deliberations and consultations,
followed by presentation of Committee Reports, prominent among them being the
Report of the Bankruptcy Law Reforms Committee25 Volume I : Rationale and Design
of November, 201526. As observed in Innovative Industries Limited v. ICICI Bank
25 For short ‘BLRC’
26 The Report of the Bankruptcy and Law Reforms Committee Vol. I : Rationale and
Design, accessible at
<https://www.ibbi.gov.in/uploads/resources/BLRCReportVol1_04112015.pdf >,
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 and Another27, the aim of the Parliament was to codify a legislation that would bring
the entire insolvency and bankruptcy regime under one umbrella and speed up the
process.
26. The Statement of the Objects and Reasons that prevailed upon the legislature
to enact the IBC is as follows :
“12. …. The Statement of Objects and Reasons of the Code
reads as under:
“Statement of Objects and Reasons — There is no single law in
India that deals with insolvency and bankruptcy. Provisions
relating to insolvency and bankruptcy for companies can be
found in the Sick Industrial Companies (Special Provisions) Act,
1985, the Recovery of Debts Due to Banks and Financial
Institutions Act, 1993, the Securitisation and Reconstruction of
Financial Assets and Enforcement of Security Interest Act, 2002
and the Companies Act, 2013. These statutes provide for
creation of multiple fora such as Board of Industrial and
Financial Reconstruction (BIFR), Debts Recovery Tribunal
(DRT) and National Company Law Tribunal (NCLT) and their
respective Appellate Tribunals. Liquidation of companies is
handled by the High Courts. Individual bankruptcy and
insolvency is dealt with under the Presidency Towns Insolvency
Act, 1909, and the Provincial Insolvency Act, 1920 and is dealt
with by the Courts. The existing framework for insolvency and
bankruptcy is inadequate, ineffective and results in undue
delays in resolution, therefore, the proposed legislation.
2. The objective of the Insolvency and Bankruptcy Code,
2015 is to consolidate and amend the laws relating to
reorganisation and insolvency resolution of corporate persons,
partnership firms and individuals in a time-bound manner for
maximisation of value of assets of such persons, to promote
entrepreneurship, availability of credit and balance the interests
of all the stakeholders including alteration in the priority of
payment of government dues and to establish an Insolvency
and Bankruptcy Fund, and matters connected therewith or
incidental thereto. An effective legal framework for timely
27 (2018) 1 SCC 407
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resolution of insolvency and bankruptcy would support
development of credit markets and encourage
entrepreneurship. It would also improve Ease of Doing
Business, and facilitate more investments leading to higher
economic growth and development.
3. The Code seeks to provide for designating NCLT and DRT
as the adjudicating authorities for corporate persons and firms
and individuals, respectively, for resolution of insolvency,
liquidation and bankruptcy. The Code separates commercial
aspects of insolvency and bankruptcy proceedings from judicial
aspects. The Code also seeks to provide for establishment of
the Insolvency and Bankruptcy Board of India (Board) for
regulation of insolvency professionals, insolvency professional
agencies and information utilities. Till the Board is established,
the Central Government shall exercise all powers of the Board
or designate any financial sector regulator to exercise the
powers and functions of the Board. Insolvency professionals will
assist in completion of insolvency resolution, liquidation and
bankruptcy proceedings envisaged in the Code. Information
Utilities would collect, collate, authenticate and disseminate
financial information to facilitate such proceedings. The Code
also proposes to establish a fund to be called the Insolvency
and Bankruptcy Fund of India for the purposes specified in the
Code.
4. The Code seeks to provide for amendments in the Indian
Partnership Act, 1932, the Central Excise Act, 1944, Customs
Act, 1962, the Income Tax Act, 1961, the Recovery of Debts
Due to Banks and Financial Institutions Act, 1993, the Finance
Act, 1994, the Securitisation and Reconstruction of Financial
Assets and Enforcement of Security Interest Act, 2002, the Sick
Industrial Companies (Special Provisions) Repeal Act, 2003, the
Payment and Settlement Systems Act, 2007, the Limited
Liability Partnership Act, 2008, and the Companies Act, 2013.
5. The Code seeks to achieve the above objectives.”
27. The Preamble of the IBC describes the Act as:
“An Act to consolidate and amend the laws relating to
reorganisation and insolvency resolution of corporate persons,
partnership firms and individuals in a time-bound manner for
maximisation of value of assets of such persons, to promote
entrepreneurship, availability of credit and balance the interests
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of all the stakeholders including alteration in the order of priority
of payment of government dues and to establish an Insolvency
and Bankruptcy Board of India, and for matters connected
therewith or incidental thereto.”
28. In EBIX Singapore Private Limited (supra), discussing the raison d'étre of
the IBC for giving a purposive interpretation of the statute, this Court has observed
that :
“96. …. IBC was introduced as a watershed moment for
Insolvency law in India that consolidated processes under
several disparate statutes such as the 2013 Act,
SICA, SARFAESI, the Recovery of Debts Act, the Presidency
Towns Insolvency Act, 1909 and the Provincial Insolvency Act,
1920, into a single code. A comprehensive and time-bound
framework was introduced with smooth transitions between
reorganisation and liquidation, with an aim to inter alia maximise
the value of assets of all persons and balance the interest of all
stakeholders”
29. The underlying object of the IBC of maximization of the value of the assets of
the Corporate Debtor has been highlighted in Swiss Ribbons Private Limited
(supra) in the following words :
“27. As is discernible, the Preamble gives an insight into what
is sought to be achieved by the Code. The Code is first and
foremost, a Code for reorganisation and insolvency resolution of
corporate debtors. Unless such reorganisation is effected in a
time-bound manner, the value of the assets of such persons will
deplete. Therefore, maximisation of value of the assets of such
persons so that they are efficiently run as going concerns is
another very important objective of the Code. This, in turn, will
promote entrepreneurship as the persons in management of the
corporate debtor are removed and replaced by entrepreneurs.
When, therefore, a resolution plan takes off and the corporate
debtor is brought back into the economic mainstream, it is able
to repay its debts, which, in turn, enhances the viability of credit
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in the hands of banks and financial institutions. Above all,
ultimately, the interests of all stakeholders are looked after as
the corporate debtor itself becomes a beneficiary of the
resolution scheme—workers are paid, the creditors in the long
run will be repaid in full, and shareholders/investors are able to
maximise their investment. Timely resolution of a corporate
debtor who is in the red, by an effective legal framework, would
go a long way to support the development of credit markets.
Since more investment can be made with funds that have come
back into the economy, business then eases up, which leads,
overall, to higher economic growth and development of the
Indian economy. What is interesting to note is that the Preamble
does not, in any manner, refer to liquidation, which is only
availed of as a last resort if there is either no resolution plan or
the resolution plans submitted are not up to the mark. Even in
liquidation, the liquidator can sell the business of the corporate
debtor as a going concern.”
30. In the BLRC, the liquidation process has been discussed in Chapter 5 and
much stress has been laid on the observations of time value in the following terms28 :
“5.5 A time-bound, efficient Liquidation
Liquidation is the state the entity enters at the end of an IRP, where
neither creditors nor debtors can find a commonly agreeable
solution by which to keep the entity as a going concern. In India, it is
widely accepted that liquidation is a weak link in the bankruptcy
process and must be strengthened as part of ensuring a robust
legal framework. The process flow in liquidation shares some
objectives in common with that of resolving insolvency. Preservation
of time value is the most important, and efficient outcomes under
collective action is the next, both of which are important principles
driving the design. However, this is not straightforward in
implementation, particularly in an environment where different
creditors have different rights over the assets of the entity,
information is asymmetric, and governance and enforcement has
been traditionally weak.”
28 5.5, The Report of the Bankruptcy Law Reforms Committee, Vol. 1: Rational & Design
(November 2015), available at
<https://www.ibbi.gov.in/uploads/resources/BLRCReportVol1_04112015.pdf >, last
accessed 06-07-2022.
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31. In the Fifth Report of the Insolvency Law Committee, May, 2022 published by
the Ministry of Corporate Affairs, Government of India29, while examining whether the
role of the SCC ought to be reviewed and suitable provisions be enacted in the IBC to
give its statutory recognition, the Committee observed that the BLRC has designed
the CIRP to be driven by creditors of the Corporate Debtor, the liquidation process is
met to be driven by the Liquidator. Therefore, the act does not contemplate a
Creditors’ Committee in the liquidation process. The creditors have a limited role of
participation in the decision making during the said process. In fact, UNCITRAL
Legislative Guide on Insolvency Law also acknowledges that it is generally not
important for creditors to intervene in proceedings or participate in decision making
during the liquidation process as the said process is driven by the Liquidator. The
suggestion made by the UNCITRAL Legislative Guide is that in instances such as sell
of assets in the context of liquidation proceedings, the creditors may be given a more
significant role to play to boost the value of returns from such sale.
32. That time is the essence of the insolvency and the liquidation process and one
of the paramount factors that weighed with the legislature for introducing the new
insolvency regime through the IBC, has been referred to by the BLRC that has
observed that “the swiftness with which the liquidation face can be completed with the
29 The Fifth Report of the Insolvency Law Committee, May, 2022 published by the
Ministry of Corporate Affairs, Government of India at
<https://www.ibbi.gov.in/uploads/resources/f841a45902d901ef311fe6d76127d094.pd
f>, last accessed 06-07-2022
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most efficient way as always rested on the Liquidator”. One of the central problems
identified in the poor implementation of bankruptcy systems in India has been the
Liquidator. It has been highlighted how important it was to speed up the working of
the Bankruptcy Code and what are the benefits of such a fast paced process.
Significantly, the Executive Summary of the BLRC Report30 has made the following
observations on the “Speed is of Essence” :
“Speed is of essence for the working of the Bankruptcy Code,
for two reasons. First, while the “calm period” can help keep an
organisation afloat, without the full clarity of ownership and
control, significant decisions cannot be made. Without effective
leadership, the firm will tend to atrophy and fail. The longer the
delay, the more likely it is that liquidation will be the only answer.
Second, the liquidation value tends to go down with time as
many assets suffer from a high economic rate of depreciation.
From the viewpoint of creditors, a good realisation can generally
be obtained if the firm is sold as a going concern. Hence, when
delays induce liquidation, there is value destruction. Further,
even in liquidation, the realisation is lower when there are
delays. Hence, delays cause value destruction. Thus, achieving
a high recovery rate is primarily about identifying and combating
the sources of delay.”
33. It has been noticed from past experience that judicial delays is one of the
major reasons for the failure of the insolvency process. Thus, much emphasis was
laid in the BLRC Report on expediting the liquidation process by curtailing the delay
to ensure that the assets of the Corporate Debtor do not get frittered away or
depreciated due to the time lag. Once the stage of CIRP is over and the process of
liquidation is set into motion, it is critical that least time is lost in liquidating the assets
30 https://ibbi.gov.in/BLRCReportVol1_04112015.pdf
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of the Corporate Debtor. The reasons are not far to see. A quick, smooth and
seamless process of liquidation goes a long way in stemming deterioration of the
value of the assets of the Corporate Debtor in liquidation and increases the chances
of maximizing the returns to the stakeholders.
34. Keeping in mind the underlying object of this special enactment, we may
directly proceed to examine Chapter III of the IBC that encapsulates the liquidation
process right from the stage of initiation of liquidation, till the stage of dissolution of
the Corporate Debtor. Section 33 of the IBC states as follows :
“33. Initiation of Liquidation - (1) Where the Adjudicating
Authority—
(a) before the expiry of the insolvency resolution process period
or the maximum period permitted for completion of the
corporate insolvency resolution process under section 12 or the
fast track corporate insolvency resolution process under section
56, as the case may be, does not receive a resolution plan
under sub-section (6) of section 30; or
(b) rejects the resolution plan under section 31 for the noncompliance of the requirements specified therein, it shall—
(i) pass an order requiring the corporate debtor to be liquidated
in the manner as laid down in this Chapter;
(ii) issue a public announcement stating that the corporate
debtor is in liquidation; and
(iii) require such order to be sent to the authority with which the
corporate debtor is registered.”
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34. The circumstances in which liquidation can be triggered by the Adjudicating
Authority (NCLT) under Section 33, have been spelt out in Arcelormittal India
 Private Limited v. Satish Kumar Gupta and Others31 as below:
“76.10. As has been stated hereinbefore, the liquidation
process gets initiated under Section 33 if, (1) either no
resolution plan is submitted within the time specified under
Section 12, or a resolution plan has been rejected by the
adjudicating authority; (2) where the Resolution Professional,
before confirmation of the resolution plan, intimates the
adjudicating authority of the decision of the Committee of
Creditors to liquidate the corporate debtor; or (3) where the
resolution plan approved by the adjudicating authority is
contravened by the corporate debtor concerned. Any person
other than the corporate debtor whose interests are prejudicially
affected by such contravention may apply to the adjudicating
authority, who may then pass a liquidation order on such
application.”
36. Section 34 of the IBC contemplates that on passing an order for liquidation of
the Corporate Debtor under Section 33, the Resolution Professional appointed for
the CIRP shall act as a Liquidator for purposes of liquidation. Once appointed as a
Liquidator, all powers of the Board of Directors, key managerial personnel and the
partners of the Corporate Debtor stand vested in the Liquidator. The powers and
duties of the Liquidator have been elaborated in Section 35. To contextualize the
ensuing discussion, extracted below is Section 35 of the IBC:
“35. Powers and duties of liquidator - (1) Subject to the
directions of the Adjudicating Authority, the liquidator shall have
the following powers and duties, namely:—
31 (2019) 2 SCC 1
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xxxx xxxx xxxx
(b) to take into his custody or control all the assets, property,
effects and actionable claims of the corporate debtor;
xxxx xxxx xxxx
(f) subject to section 52, to sell the immovable
and movable property and actionable claims of
the corporate debtor in liquidation by public
auction or private contract, with power to
transfer such property to any person or body
corporate, or to sell the same in parcels in such
manner as may be specified;
xxxx xxxx xxxx
(n) to apply to the Adjudicating Authority for such orders or
directions as may be necessary for the liquidation of the
corporate debtor and to report the progress of the liquidation
process in a manner as may be specified by the Board.
xxxx xxxx xxxx
(2) The liquidator shall have the power to consult any of the
stakeholders entitled to a distribution of proceeds under
section 53: Provided that any such consultation shall not be
binding on the liquidator: Provided further that the records of
any such consultation shall be made available to all other
stakeholders not so consulted, in a manner specified by the
Board.”
40. Coming next to the Liquidation Regulations, Regulations 8, 31A, 32 and 33
need to be highlighted and state as follows:
“8. Consultation with stakeholders.
(1) The stakeholders consulted under section 35(2) shall extend
all assistance and cooperation to the liquidator to complete the
liquidation of the corporate debtor.
(2) The liquidator shall maintain the particulars of any
consultation with the stakeholders made under this Regulation,
as specified in Form A of Schedule II.
xxx xxxx xxxx
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31A. Stakeholders’ Consultation Committee.
(1) The liquidator shall constitute a consultation committee
within sixty days from the liquidation commencement date,
based on the list of stakeholders prepared under regulation 31,
to advise him on the matters relating to sale under regulation
32.
xxxx xxxx xxxx
(5) Subject to the provisions of the Code and these regulations,
representatives in the consultation committee shall have access to all
relevant records and information as may be required to provide advice
to the liquidator under sub-regulation (1).
xxxx xxxx xxxx
(7) The liquidator shall chair the meetings of consultation committee
and record deliberations of the meeting.
(8) The liquidator shall place the recommendation of committee of
creditors made under sub-regulation (1) of regulation 39C of the
Insolvency and Bankruptcy Board of India (Insolvency Resolution
Process for Corporate Persons) Regulations, 2016, before the
consultation committee for its information.
(9) The consultation committee shall advise the liquidator, by a vote of
not less than sixty-six percent of the representatives of the
consultation committee, present and voting.
(10) The advice of the consultation committee shall not be binding on
the liquidator: Provided that where the liquidator takes a decision
different from the advice given by the consultation committee, he shall
record the reasons for the same in writing.
32. [Sale of Assets, etc.
The liquidator may sell-
(a) an asset on a standalone basis;
(b) the assets in a slump sale;
(c) a set of assets collectively;
(d) the assets in parcels;
(e) the corporate debtor as a going concern; or
(f) the business(s) of the corporate debtor as a going concern:
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 Provided that where an asset is subject to security
interest, it shall not be sold under any of the clauses (a) to (f)
unless the security interest therein has been relinquished to the
liquidation estate.]
33. Mode of sale.
(1) The liquidator shall ordinarily sell the assets of the corporate
debtor through an auction in the manner specified in Schedule I.
(2) The liquidator may sell the assets of the corporate debtor by
means of private sale in the manner specified in Schedule I
when-
(a) the asset is perishable;
(b) the asset is likely to deteriorate in value significantly if not
sold immediately;
(c) the asset is sold at a price higher than the reserve price of a
failed auction; or
(d) the prior permission of the Adjudicating Authority has been
obtained for such sale:
 Provided that the liquidator shall not sell the assets,
without prior permission of the Adjudicating Authority, by way of
private sale to-
(a) a related party of the corporate debtor;
(b) his related party; or
(c) any professional appointed by him.
(3) The liquidator shall not proceed with the sale of an asset if
he has reason to believe that there is any collusion between the
buyers, or the corporate debtor’s related parties and buyers, or
the creditors and the buyer, and shall submit a report to the
Adjudicating Authority in this regard, seeking appropriate orders
against the colluding parties.”
38. Schedule-I under Regulation 33 lays down the procedure to be followed by
the Liquidator for selling the assets of the Corporate Debtor. The relevant clauses of
Schedule-I are extracted as below:
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“SCHEDULE I
MODE OF SALE
(Under Regulation 33 of the Insolvency and Bankruptcy Board
of India (Liquidation Process) Regulations, 2016)
1. AUCTION
(1) Where an asset is to be sold through auction, a liquidator
shall do so the in the manner specified herein.
(2) The liquidator shall prepare a marketing strategy, with the
help of marketing professionals, if required, for sale of the asset.
The strategy may include-
(a) releasing advertisements;
(b) preparing information sheets for the asset;
(c) preparing a notice of sale; and
(d) liaising with agents.
(3) The liquidator shall prepare terms and conditions of sale,
including reserve price, earnest money deposit as well as prebid qualifications, if any.
xxxx xxxx xxxx
2. PRIVATE SALE
(1) Where an asset is to be sold through private sale, a
liquidator shall conduct the sale in the manner specified herein.
(2) The liquidator shall prepare a strategy to approach
interested buyers for assets to be sold by private sale.
(3) Private sale may be conducted through directly liaising with
potential buyers or their agents, through retail shops, or through
any other means that is likely to maximize the realizations from
the sale of assets.
xxxx xxxx xxxx”
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39. On a conjoint reading of the aforesaid provisions of the IBC and the
Liquidation Regulations, it is evident that the Liquidator is authorized to sell
the immovable and movable property of the Corporate Debtor in liquidation
through a public auction or a private contract, either collectively, or in a piecemeal manner. The underlying object of the Statute is to protect and preserve
the assets of the Corporate Debtor in liquidation and proceed to sell them at
the best possible price. Towards this object, the provisions of the IBC have
empowered the Liquidator to go in for a public auction or a private contract as
a mode of sale. Besides reporting the progress made, the Liquidator can
also apply to the Adjudicating Authority (NCLT) for appropriate orders and directions considered necessary for liquidation of the Corporate Debtor. The
Liquidator is permitted to consult the stakeholders who are entitled to distribution of the sale proceeds. However, the proviso to Section 35 (2) of the
IBC makes it clear that the opinion of the stakeholders would not be binding
on the Liquidator. Regulation 8 of the Liquidation Regulations refers to the
consultative process with the stakeholders, as specified in Section 35 (2) of
the IBC and states that they shall extend all necessary assistance and cooperation to the Liquidator for completing the liquidation process. Regulation
31A has introduced a Stakeholders’ Consultation Committee that may advise
the Liquidator regarding sale of the assets of the Corporate Debtor and must
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be furnished all relevant information to provide such advice. Though the advice offered is not binding on the Liquidator, he must give reason in writing for
acting against such advice.
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40. When it comes to the mode of sale of the assets of the Corporate
Debtor, whether immovable or movable and other actionable claims, Regulation 33 of the Liquidation Regulations comes into play and states that ordinarily, the Liquidator will sell the said assets through auction, as specified in
Schedule-I(1). Sub-section (2) of Section 33, IBC gives an option to the Liquidator to sell the assets of the Corporate Debtor through a Private Sale, in
the manner set out in Schedule-I (2). Regulation 33 of the Liquidation Regulations is couched in a language which shows that ample latitude has been
given to the Liquidator, who may “ordinarily” sell the assets through auction
thereby meaning that in peculiar facts and circumstances, the Liquidator may
directly go in for a Private Sale. To avoid the pitfalls of disposing of the assets
by conducting a Private Sale for the Pittance, Regulation 33 has prescribed
some stringent conditions that the Liquidator is under an obligation to comply.
The said pre-conditions are that (i) the asset is perishable; (ii) the asset is
likely to deteriorate in value significancy if not sold immediately; (iii) the asset
is sold at a higher price than the reserved price of the failed auction; and (iv)
the Adjudicating Authority (NCLT) must grant prior permission for such a sale.
The proviso appended to Regulation 33(2) of the Liquidation Regulations
places yet another embargo to the effect that when the Liquidator intends to
sell the assets of the Corporate Debtor by way of a Private Sale to a related
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party of the Corporate Debtor, his relative party or any professional appointed
by him, it is mandatory to obtain prior permission of the Adjudicating Authority
(NCLT). Even the mode of sale has been regulated under the Liquidation
Regulations for both, a public auction and a Private Sale. All the above dos
and don’ts have been inserted to protect the assets of the Corporate Debtor
and safeguard the interest of the stakeholders.
41. It is a matter of record that in the instant case, following the mandate of
Regulation 33 (1) of the Liquidation Regulations, the respondent No.2 – Liquidator
took steps to sell the assets of the Corporate Debtor through the e-auction process
not once or twice, but on five separate occasions. On each of the said occasion,
efforts were made by the respondent No.2 – Liquidator to conduct a consolidated
sale of the assets of the Corporate Debtor, but with no fruitful results. Faced with the
said situation, the respondent No.2 – Liquidator approached the Adjudicating
Authority (NCLT) in terms of Section 35 (1)(n), IBC read with Regulation 33(2) of the
Liquidation Regulations for seeking permission to sell the assets of the Corporate
Debtor through Private Sale. Only after due permission was granted, did the
respondent No.2 – Liquidator approach the stakeholders for consultation. In the
meeting held on 28th January, 2021, the stakeholders resolved that the prospective
bidders, who wished to participate in the Private Sale of the Dahej Material, be
encouraged to do so by adopting the Swiss Challenge Process. Pertinently, the first
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stage of the said process requires selection of an Anchor Bidder; the second stage
entails inviting prospective bidders to submit their bids against the reserve price
offered by the Anchor Bidder. At the third stage, the Anchor Bidder gets one chance
to exercise the ROFR against the H1 bidder by placing a bid higher than the H1 bid.
In the event the Anchor Bidder fails to exercise the ROFR, the said right stands
extinguished and H1 bidder would then be declared as successful.
42. In the instant case, the first Swiss Challenge Process did not succeed as the
highest offerer failed to deposit the EMD. In the second round of the Swiss
Challenge Process, as against the base price of ₹460 crores fixed for the Dahej
Material and scrap, the appellant made a bid of ₹431 crores that was accepted.
Thereafter, the respondent No.2 – Liquidator did publish an advertisement inviting
bidders to submit their bids against the Anchor Bid in response whereto, the
appellant, respondents No.3, 4, 5, and 6 submitted their bids, but before the process
could be taken further, on an application moved by the respondent No.1, the
Adjudicating Authority (NCLT) passed an order directing the respondent No.2 –
Liquidator to carry forward the stage upto announcement of the highest bidder, while
deferring the rest of the process.
43. When the matter was still pending before the NCLT, the respondent No.2 –
Liquidator was approached by the respondent No.7 – Welspun, who evinced interest
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in purchasing the immovable and movable assets of the Corporate Debtor, i.e., the
Ship building yard along with the metal and scrap, etc., lying in the complex. As this
offer was considered more attractive not only by the respondent No.2 – Liquidator,
but also by the SCC, the Adjudicating Authority (NCLT) was approached for
permission to undertake a composite sale of the Dahej Material and the Shipyard,
which was duly granted vide order dated 16th August, 2021.
44. For testing the arguments advanced on behalf of the appellant that the
respondent No.2 – Liquidator should not have been granted permission to cancel the
Second Swiss Challenge Process, which was at an advance stage, it is imperative to
peruse Clause 12.3 of the terms and conditions of the Anchor Bid Documents and
the relevant clauses of Schedule II, which are quoted below:
“12. Terms and Conditions
xxxx xxxx xxxx
12.3. Notwithstanding anything to the contrary contained herein,
the Liquidator expressly reserves the right to
abandon/cancel/terminate/ waive the current process or a part
thereof contemplated hereunder (at any stage without any
liability). Further, the Liquidator reserves the right to reprice and
resize or change the lots / combination of lots in the current
Sale Process or in any other sale process that may be
contemplated, in accordance with applicable laws and without
incurring any liability in this regard, in the best interest of the
stakeholders.
Schedule – II : General Terms & Conditions
xxxx xxxx xxxx
"k. This not an offer document and is issued with no
commitment or assurances. This intimation document does not
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constitute and will not be deemed to constitute any offer,
commitment or any representation of the Liquidator / ABGSL.
The Process has to be completed as set out under this
document to conclude the transaction/sale successfully.”
xxxx xxxx xxxx
''m. It is clarified that issuance of this Process Document does
not create any kind of binding obligation on the part of the
Liquidator or ABG to effectuate the sale of the assets of ABG."
xxxx xxxx xxxx
"s. The Liquidator reserves the right to cancel, abandon or reject
a Bidder / Successful Bidder at any time during the process,
and the Liquidator also reserves the right to disqualify a
Successful Bidder, in case of any irregularities found such as
ineligibility under the I & B Code."
“t. Liquidator of ABGSL reserves the right to suspend/
abandon/cancel/extend or modify the process terms and/or
documents and/or reject or disqualify any Bidder at any stage of
process without assigning any reason and without any notice
liability of whatsoever nature."
45. Clause 11.6 and Schedule IV of the Second Swiss Challenge Process
Document are also relevant and are worded on the same lines:
"11.6 Notwithstanding anything to the contrary contained
herein, the Liquidator expressly reserves the right to abandon/
cancel/ terminate/ waive the current process or a part thereof
contemplated hereunder (at any stage without liability). Further,
the Liquidator reserves the right to reprise and resize or change
the lots/ combination of notes in the current sale process or in
any other sale process that may be contemplated, in
accordance with applicable laws, and without incurring any
liability in this regard, in the best interest of stakeholders."
Schedule – IV : Terms & Conditions
“e. It is clarified that issuance of the Process Document does
not create any kind of binding obligation on the part of the
Liquidator or ABG to effectuate the sale of the assets of ABG."
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xxxx xxxx xxxx
"x. The Liquidator reserves the right to cancel, abandon or reject
a Bidder / Successful Bidder at any time during the process,
and the Liquidator also reserves the right to disqualify a
Successful Bidder, in case of any irregularities found such as
ineligibility under the I & B Code."
xxxx xxxx xxxx
''y· Liquidator of ABGSL, reserves the right to
suspend/abandon/cancel/ extend or modify the process terms
and/or documents and/or reject or disqualify any Bidder at any
stage of process without assigning any reason and without any
notice liability of whatsoever nature."·
46. The following terms of Schedule IV of the Second Swiss Challenge Process
bestows an additional right on the Liquidator:
“Schedule – IV : Terms & Conditions
‘‘u. Notwithstanding anything contained herein and contrary
thereto, the Liquidator may at any stage include a Bidder to
participate in the Sale Process. The Liquidator reserves the right
to decide the procedure for including such potential Bidders into
the Sale Process. All bidders agree and accept that the
Liquidator has the right to accept or reject any Bids even after
the deadline as prescribed herein or at any stage of the Sale
Process in order to maximize the realization from the sale of
assets in the best interest of the stakeholders."
xxxx xxxx xxxx
"mm. Notwithstanding anything to the contrary contained herein
: the Liquidator proposes to sell the assets of the Company as a
whole to maximize overall recovery and decision for sale shall
also be made after taking cognizance of operational
management matters to effectuate and practically enable the
Sale Process for the collective sale of assets of the Company
and will take all steps and actions required to effectuate this."
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47. A bare perusal of the aforesaid clauses of the Anchor Bid Document and the
Second Swiss Challenge Process Document, leave no manner of doubt that the
prospective bidders were informed that the Liquidator had reserved the right to
abandon/cancel/terminate/waive the said process and/or part thereof at any stage;
that issuance of the Anchor Bid Document did not create any binding obligations on
the Liquidator to proceed with the sale of the assets of the Corporate Debtor; that the
Anchor Bid Document did not constitute an offer/commitment or an assurance of the
Liquidator. Identical rights were reserved with the Liquidator even in the Second
Swiss Challenge Process Document. In fact, as noted above, Schedule IV goes a
step further and entitles the Liquidator to include a bidder to participate in the sale
process at any stage. He could even decide to sell the composite assets of the
Corporate Debtor during the said process.
48. Merely because the appellant herein had submitted a bid under the Anchor
Bid Document and was declared as the Anchor Bidder in the Second Swiss
Challenge Process, could not vest a right on it for it to insist that the said process
must be taken to its logical conclusion. The appellant has been harping about the
vested right that had allegedly accrued in its favour on being declared as the Anchor
Bidder. But it has conveniently glossed over an affidavit dated 23rd March, 2021 filed
by it, undertaking inter alia that it would remain unconditionally and irrevocably bound
by the Swiss Challenge Process Document and the decision of the respondent No.2
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- Liquidator. Given the aforesaid terms and condition of the Anchor Bid Document
and the Second Swiss Challenge Process Document, read collectively with the
unqualified undertaking given by the appellant acknowledging that the respondent
No.2 – Liquidator was well empowered to cancel/modify or even abandon the said
process, it does not lie in the mouth of the appellant to urge that once it was set into
motion, there was no justification to discontinue the Second Swiss Challenge
Process. No special rights came to be bestowed on the appellant as the Anchor
Bidder for it to insist that the said process ought to be taken forward and concluded,
irrespective of the subsequent decision taken by the respondent No.2 – Liquidator,
backed to the hilt by the stakeholders of discontinuing the Swiss Challenge Process
and opting for Private Sale of the consolidated assets of the Corporate Debtor to be
conducted through direct negotiations
49. To put it otherwise, an Anchor Bidder has no vested right beyond the ROFR,
being the origination of the proposal. It must be borne in mind that the Swiss
Challenge Process is just another method of private participation that has been
recognized by this Court for its transparency [Refer : Ravi Development (supra)].
Ultimately, the IBC has left it to the discretion of the Liquidator to explore the best
possible method for selling the assets of the Corporate Debtor in liquidation, which
includes Private Sale through direct negotiations with the object of maximizing the
value of the assets offered for sale.
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50. In the instant case, there was good reason for the respondent No.2 –
Liquidator to have halted the Second Swiss Challenge Process midstream and
approached the Adjudicating Authority (NCLT) armed with an offer of ₹675 crores
received from the respondent No.7 – Welspun who had shown interest in the
composite sale of the Dahej assets. In fact, this was all along the preferred choice of
the respondent No.2–Liquidator as can be seen from the fact that when public
auctions were conducted by him on five earlier occasions, bids were invited for the
composite assets of the Corporate Debtor. It is a different matter that the earlier eauctions turned out to be unsuccessful, thus compelling the respondent No.2 –
Liquidator to explore other options, including the option to sell the assets in smaller
lots.
51. In his wisdom, the respondent No.2 – Liquidator found the offer made by the
respondent No.7 – Welspun to be of better value for more than one reason. Firstly,
unlike the sale proposed under the Second Swiss Challenge Process that was
confined to the Dahej Material, respondent No.7 – Welspun expressed its willingness
to purchase the Dahej land and the scrap as a composite asset thereby curtailing two
rounds of sales, first for the Dahej Material followed by the Shipyard and the other
assets. Secondly, the respondent No.2 – Liquidator had valid reasons to believe that
a consolidated sale of the assets of the Corporate Debtor will lead to a higher return
and a quicker recovery for the stakeholders. Thirdly, composite sale of the assets
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would lead to maximization of recovery within a guaranteed timeline. In the
assessment of the respondent No.2 – Liquidator, a two tier process of selling the
Dahej Material in the first round through the Swiss Challenge method, followed by the
sale of the Dahej land in the second round, would have caused prejudice to the
stakeholders for the reason that continuing the Second Swiss Challenge Process
would have meant that the appellant or the H1 bidder, as the case may be, would
have to be granted at least 15 to 18 months to lift the material from the Dahej
Shipyard, thus stalling the entire process of the sale of the Dahej land to a period well
beyond 18 months. This delay in concluding the process could directly impact the
value of the assets of the Corporate Debtor and hurt the interest of the stakeholders.
52. We are of the firm view that it is not for the court to question the judiciousness
of the decision taken by the respondent No.2 – Liquidator with the idea of enhancing
the value of the assets of the Corporate Debtor being put up for sale. The right to
refuse the highest bid or completely abandon or cancel the bidding process was
available to the respondent No.2 – Liquidator. The appellant has not been able to
demonstrate that the decision of the respondent No.2 – Liquidator to discontinue the
Second Swiss Challenge Process and go in for a Private Sale through direction
negotiations with prospective bidders was a malafide exercise. It is a well-settled
principle that in matters relating to commercial transactions, tenders, etc., the scope
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of judicial review is fairly limited and the court ought to refrain from substituting its
decisions for that of the tendering agency [Ref.: State of Madhya Pradesh and
 Others v. Nandlal Jaiswal and Others32
, Tata Cellular (supra) and Air India
(supra)]. In Nandlal Jaiswal and Others (supra), this Court held that while granting
a licence for setting up a new industry, the State Government is not under any
obligation to advertise and invite offers for the said purpose and that the State
Government is well entitled to negotiate with those who have come up with an offer to
set up such an industry. In 5 M & T Consultants, Secunderabad v. S.Y. Nawab
 and Another33, the court concluded as under :
“17. …… It is by now well settled that non-floating of tenders or
absence of public auction or invitation alone is no sufficient
reason to castigate the move or an action of a public authority
as either arbitrary or unreasonable or amounting to mala fide or
improper exercise or improper abuse of power by the authority
concerned. Courts have always leaned in favour of sufficient
latitude being left with the authorities to adopt their own
techniques of management of projects with concomitant
economic expediencies depending upon the exigencies of a
situation guided by appropriate financial policy in the best
interests of the authority motivated by public interest as well in
undertaking such ventures……..”
[
53. On the aspect of rejecting even the highest bid received by an Authority, this
Court has held in Laxmikant and Others (supra) as under :
“4. Apart from that the High Court overlooked the conditions of
auction which had been notified and on basis of which the
aforesaid public auction was held. Condition No. 3 clearly said
32 (1986) 4 SCC 566
33 (2003) 8 SCC 100
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that after the auction of the plot was over, the highest bidder
had to remit 1/10 of the amount of the highest bid and the
balance of the premium amount was to be remitted to the trust
office within thirty days “from the date of the letter informing
confirmation of the auction bid in the name of the person
concerned”. Admittedly, no such confirmation letter was issued
to the respondent. Conditions Nos. 5, 6 and 7 are relevant:
“5. The acceptance of the highest bid shall depend on the
Board of Trustees.
6. The Trust shall reserve to itself the right to reject the
highest or any bid.
7. The person making the highest bid shall have no right
to take back his bid. The decision of the Chairman of the
Board of Trustees regarding acceptance or rejection of the
bid shall be binding on the said person. Before taking the
decision as above and informing the same to the individual
concerned, if the said individual takes back his bid, the entire
amount remitted as deposit towards the amount of bid shall
be forfeited by the Trust.”
From a bare reference to the aforesaid conditions, it is
apparent and explicit that even if the public auction had
been completed and the respondent was the highest
bidder, no right had accrued to him till the confirmation
letter had been issued to him. The conditions of the auction
clearly conceived and contemplated that the acceptance of the
highest bid by the Board of Trustees was a must and the Trust
reserved the right to itself to reject the highest or any bid. This
Court has examined the right of the highest bidder at public
auctions in the cases of Trilochan Mishra v. State of
Orissa34
 , State of Orissa v. Harinarayan Jaiswal35
 , Union of
India v. Bhim Sen Walaiti Ram36 and State of Uttar
Pradesh. v. Vijay Bahadur Singh37
 . It has been repeatedly
pointed out that State or the authority which can be held to
be State within the meaning of Article 12 of the Constitution
is not bound to accept the highest tender or bid. The
acceptance of the highest bid is subject to the conditions
of holding the public auction and the right of the highest
bidder has to be examined in context with the different
conditions under which such auction has been held. In the
present case no right had accrued to the respondent either on
34 (1971) 3 SCC 153
35 (1972) 2 SCC 36
36 (1969) 3 SCC 146
37 (1982) 2 SCC 365
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the basis of the statutory provision under Rule 4(3) or under the
conditions of the sale which had been notified before the public
auction was held.” (emphasis added)
54. Further, in CWE - Soma Consortium (supra), this Court had held as under :
“23. The right to refuse the lowest or any other tender is
always available to the Government. In the case in hand, the
respondent has neither pleaded nor established mala fide
exercise of power by the appellant. While so, the decision of the
Tender Committee ought not to have been interfered with by the
High Court. In our considered view, the High Court erred in
sitting in appeal over the decision of the appellant to cancel
the tender and float a fresh tender. Equally, the High Court
was not right in going into the financial implication of a
fresh tender.”
 (emphasis added)
55. On the scope of judicial review in examining the decision of the tenderer to
cancel the process if the tender document so permits, we may usefully refer to
Montecarlo Limited (supra), wherein it is has been held as under :
“26. ……. Exercise of power of judicial review would be called
for if the approach is arbitrary or mala fide or procedure adopted
is meant to favour one. The decision-making process should
clearly show that the said maladies are kept at bay. But where
a decision is taken that is manifestly in consonance with
the language of the tender document or subserves the
purpose for which the tender is floated, the court should
follow the principle of restraint. Technical evaluation or
comparison by the court would be impermissible. The
principle that is applied to scan and understand an ordinary
instrument relatable to contract in other spheres has to be
treated differently than interpreting and appreciating tender
documents relating to technical works and projects requiring
special skills. The owner should be allowed to carry out the
purpose and there has to be allowance of free play in the joints.”
(emphasis added)
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[Also refer : Sterling Computers Limited v. M/s M & N Publications
 Limited and Others38
 , Tata Cellular (Supra), Mauleshwar Mani and Others v.
 Jagdish Prasad and Others39
 , B.S.N. Joshi & Sons Limited v. Nair Coal
 Services Limited and Others40
 , Jagdish Mandal v. State of Orissa and Others41
 ,
and Afcons Infrastructure Limited v. Nagpur Metro Rail Corporation Limited
 and Another42
 ]
56. The Statute enjoins the Liquidator to sell the immovable and movable assets
of the Corporate Debtor in a manner that would result in maximization of value, lead
to a higher and quicker recovery for the stakeholders, cut short the delay and afford
a guaranteed timeline for completion of the process. On examining the records, we
find that these were the considerations that have weighed not only with the
respondent No.2 – Liquidator, but also with the stakeholders, who were unanimous in
their decision that the Second Swiss Challenge Process Document ought to be
abandoned in favour of the Private Sale process where not only the appellant, but all
the other prospective bidders who had participated in the process were permitted by
the Adjudicating Authority (NCLT) to make a bid in respect of the consolidated assets
of the Corporate Debtor. In its anxiety to claim a vested right as an Anchor Bidder,
the appellant tends to forget that the Swiss Challenge Process adopted by the
38 (1993) 1 SCC 445
39 (2002) 2 SCC 468
40 (2006) 11 SCC 548
41 (2007) 14 SCC 517
42 (2016) 16 SCC 818
Page 52 of 59
Civil Appeal No.7722 of 2021 and Civil Appeal No.7731 of 2021
respondent No.2 – Liquidator also falls in the category of a Private Sale, referred to
in Schedule-I(2) under Regulation 33 of the Liquidation Regulations. For conducting
a Private Sale, all that the Liquidator is required to do is to prepare a strategy to
approach the interested parties. He is authorized to directly liaise with the potential
buyers to ensure that realization from the sale of the assets can be maximized. We
do not find any infirmity in the said approach adopted by the respondent No.2 –
Liquidator.
57. When compared to the above protracted process described in para 53 above,
a single buyer for the Dahej land along with the metal scrap, etc., lying at the complex
was bound to speed up the entire process inasmuch as the successful bidder could
be handed over the possession straightaway and the respondent No.2 - Liquidator
would be in a position to receive the payment for the composite assets in a timebound
manner with a higher rate of recovery. All these factors that fall in the realm of
commercial considerations were examined holistically by the respondent No.2 –
Liquidator who then placed the cards before the stakeholders in the meeting
conducted on 6th August, 2021. Even though the provisions of the IBC empower the
Liquidator to take an independent decision for the sale of the assets of the Corporate
Debtor in liquidation, it can be seen that he has taken the stakeholders into
confidence at every step. Only after finding them to be in agreement with the option
sought to be explored by him of halting the Second Swiss Challenge Process and
Page 53 of 59
Civil Appeal No.7722 of 2021 and Civil Appeal No.7731 of 2021
proceeding with the Private Sale of the consolidated assets of the Corporate Debtor
by directly liaising with the potential buyers, did the respondent No.2 – Liquidator take
such a decision solely with the object of augmenting realization from the sale of the
assets. Thereafter, the matter was taken to the Adjudicating Authority (NCLT) for
necessary permissions under Section 35(1) of the IBC that was duly granted. The
decision taken by the respondent No.2 – Liquidator cannot be treated as arbitrary,
capricious or unreasonable for interference by this Court. The said decision is
tempered with sound reason and logic. It is a purely commercial decision centered on
the best interest of the stakeholders. The stakeholders having unanimously endorsed
the view of the respondent No.2 – Liquidator, it is not for this Court to undertake a
further scrutiny of the desirability or the reasonableness of the said decision or
substitute the same with its own views.
58. Therefore, we concur with the view expressed by the NCLAT that the decision
of the respondent No.2 – Liquidator was driven by the desire of the stakeholders to
complete the liquidation process in the shortest possible time. Let us not forget that
the aforesaid exercise of selling the assets of the Corporate Debtor has been ongoing
for about three years, with several litigations spewed throughout to cause further
delay. The sooner the curtains are drawn on the process, the better it would be for all
concerned.
Page 54 of 59
Civil Appeal No.7722 of 2021 and Civil Appeal No.7731 of 2021
59. It is for the very same reason that we are inclined to set aside the subsequent
directions issued by the NCLAT of restarting the entire process of Private Sale by
issuing fresh notices to all the prospective buyers without limiting them to those who
had participated in the process. No doubt, a public auction entails the procedure of
issuing public notices. But that is not the case with a Private Sale where the
procedure prescribed permits the Liquidator to directly liaise with the potential buyer
and conduct the negotiations. It may be emphasized that these are commercial
transactions and purely business driven decisions, which are not amenable to judicial
review. The insolvency regime introduced under the IBC has placed fetters on the
power of interference by the Adjudicating Authority (NCLT) and the Appellant Authority
(NCLAT). The decision of the NCLT to have the sale of the composite assets
negotiated with the parties who had participated in the earlier rounds of sale, cannot
be described as a rushed decision for the NCLAT to have modified the said order and
direct that the clock be set back to the initial stage of issuing notices to the
prospective buyers. No such relief was sought by any of the parties to the lis, nor has
the NCLAT given any plausible reason for issuing such a direction.
60. The powers vested in and the duties cast upon the Liquidator have been made
subject to the directions of the Adjudication Authority (NCLT) under Section 35 of the
IBC. Once the Liquidator applies to the Adjudicating Authority (NCLT) for appropriate
orders/directions, including the decision to sell the movable and immovable assets of
Page 55 of 59
Civil Appeal No.7722 of 2021 and Civil Appeal No.7731 of 2021
the Corporate Debtor in liquidation by adopting a particular mode of sale and the
Adjudicating Authority (NCLT) grants approval to such a decision, there is no
provision in the IBC that empowers the Appellate Authority (NCLAT) to suo motu
conduct a judicial review of the said decision. The jurisdiction bestowed upon the
Adjudicating Authority [NCLT] and the Appellate Authority [NCLAT] are circumscribed
by the provisions of the IBC and borrowing a leaf from Committee of Creditors of
 Essar Steel India Limited v. Satish Kumar Gupta and Others43, they cannot act as
a Court of equity or exercise plenary powers to unilaterally reverse the decision of the
Liquidator based on commercial wisdom and supported by the stakeholders. The
Court has also observed in the captioned case that “from the legislative history, there
is contra-indication that the commercial or business decisions of the financial
creditors are not open to any judicial review by the adjudicating authority or the
appellate authority.’’ A similar reasoning has prevailed with Respondent in
 K. Sashidhar v. Indian Overseas Bank and Others44
 , Committee of Creditors of
 Amtek Auto Limited v. Dinkar T. Venkatasubramanian and Others45
 , Kalpraj
 Dharamshi and Another v. Kotak Investment Advisors Limited and Another.46
 ,
 Ghanashyam Mishra And Sons Private Limited through the Authorized
 Signatory v. Edelweiss Asset Reconstruction Company Limited through the
43 (2020) 8 SCC 531
44 (2019) 12 SCC 150
45 (2021) 4 SCC 457
46 (2021) 10 SCC 401
Page 56 of 59
Civil Appeal No.7722 of 2021 and Civil Appeal No.7731 of 2021
 Director and Others.47 and Jaypee Kensington Boulevard Apartments Welfare
Association and Others (Supra). The aforesaid view will apply with equal force to
any commercial or business decision taken by the Liquidator for conducting the sale
of the movable/immovable assets of the Corporate Debtor in liquidation. The
Appellate Authority cannot don the mantle of a supervisory authority for overseeing
the validity of the approach of the respondent No.2 – Liquidator in opting for a
particular mode of sale of the assets of the Corporate Debtor.
61. In fact, it has been brought to our notice by the respondent No.2 – Liquidator
that close on the heels of the impugned judgment passed by the NCLAT delivered on
10th December, 2021, the Core Committee of Financial Creditors of the Corporate
Debtor had conducted a meeting on 15th December, 2021 and had unanimously
ratified the view of the respondent No.2 – Liquidator that the bid process commenced
on 24th August, 2021, ought to be continued and not restarted having regard to the
fact that it had taken almost three years to find such buyers and the sale was at the
cusp of being closed. It was also recorded in the minutes of the meeting that several
attempts had already been made to solicit interest from parties but none had come
forward to make an offer for the composite purchase of the assets. We may note that
the Core Committee constitutes 70.3% of the financial creditors and when they have
weighed in to support the stand taken by the respondent No.2 – Liquidator to continue
47 (2021) 9 SCC 657
Page 57 of 59
Civil Appeal No.7722 of 2021 and Civil Appeal No.7731 of 2021
the bid process commenced on 24th August, 2021, we do not see any reason to foist
the view of the NCLAT on the respondent No.2 – Liquidator that he ought to restart
the process for sale of the composite assets of the Corporate Debtor from the scratch
after issuing an open notice to the prospective buyers.
CONCLUSION :
66. Therefore, the impugned judgment dated 10th December, 2021, passed by
NCLAT to the extent that it has modified the order dated 16th August, 2021 passed by
the NCLT and directed restraining of the Private Sale Process, is quashed and set
aside. In our opinion, the Private Sale process of the composite assets of the
Corporate Debtor should be taken further by the respondent No.2 – Liquidator without
losing any further time and be concluded at the earliest. All the eligible bidders who
have made Earnest Money Deposits would be entitled to participate in the
negotiations to be conducted by the respondent No.2–Liquidator for privately selling
the consolidated assets of the Corporate Debtor. Accordingly, we direct that the
process of private negotiations that had commenced on 24th August, 2021, shall be
taken to its logical end and brought to a closure by the respondent No.2 – Liquidator
within four weeks from the date of passing of this order.
63. As a result, Civil Appeal No.7722 of 2021 filed by R.K. Industries fails and the
same is dismissed along with I.A No. 166862/2021. Civil Appeal No.7731 of 2021
Page 58 of 59
Civil Appeal No.7722 of 2021 and Civil Appeal No.7731 of 2021
filed by Welspun is allowed on the afore-stated terms. Parties are left to bear their
own costs. Pending applications, if any other than IA No. 166862/2021 shall stand
disposed of.
………………………CJI.
 [N.V. RAMANA]
.................................J.
 [J.K. MAHESHWARI]
 ...................................J.
 [HIMA KOHLI]
NEW DELHI,
AUGUST 26, 2022
Page 59 of 59

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