Tribunal Grants Partial Reliefs and Concessions to Successful Bidders Amidst Liquidation Process
In a significant development, the National Company Law Tribunal (NCLT) Mumbai Bench has permitted the sale of Seam Industries Limited as a going concern, marking a crucial turn in the company's liquidation process. The decision comes after the successful bidders, led by Mr. Amitkumar Rishi Kumar Bhabhda, sought multiple reliefs and concessions from the tribunal to ensure the seamless operation of the company post-sale.
The tribunal's decision, delivered by Members Shri Ashish Kalia and Shri Sanjiv Dutt, acknowledged the applicants' payment of Rs. 24.3 crore as the sale consideration for the corporate debtor during an e-auction held on March 15, 2023. The tribunal emphasized that the sale as a going concern aims to preserve the business's operational capacity, thereby safeguarding jobs and maximizing stakeholder returns.
While the tribunal partially granted reliefs, it maintained that certain requests, especially those seeking broad immunities and waivers from statutory compliance, exceeded the jurisdiction of the NCLT. Notably, the tribunal upheld the clean slate theory, ensuring that past liabilities are extinguished as per Section 53 of the Insolvency and Bankruptcy Code, 2016, while also allowing for the issuance of fresh equity and the reconstitution of the board of directors under specified conditions.
The tribunal's order also underscored the limitations of its powers, advising the applicants to approach relevant authorities for specific waivers and concessions, such as tax liabilities and procedural compliance under various statutory frameworks. Furthermore, the tribunal allowed the applicants protection under Section 32A of the Code, subject to fulfilling necessary conditions regarding the change in management and ensuring no involvement in prior mismanagement.
Overall, the tribunal's order facilitates the transition of Seam Industries Limited into a new phase under its successful bidders, with the expectation that this move will revive the company's operational viability while adhering to the statutory provisions.
Bottom Line:
Sale of Corporate Debtor as going concern under liquidation process - Tribunal empowered to grant reliefs and concessions to facilitate operation of Corporate Debtor as going concern, subject to statutory compliance and terms of auction process.
Statutory provision(s): Insolvency and Bankruptcy Code, 2016 Sections 60(5), 32A, 53; Companies Act, 2013 Sections 56, 42, 62(1)(c); Income Tax Act, 1961 Section 56(2)(vii)(b).
