NCLT approves acquisition of Sterling Biotech Ltd. by US-based food tech ‘Perfect Day’

Financial Creditor

   

National Company Law Tribunal | In an application filed under S. 60(5) of the Insolvency and Bankruptcy Code, 2016, a bench comprising of P. N. Deshmuk, J. and Shyam Babu Gautam (Technical Member), approved the acquisition of Sterling Biotech Limited by Perfect Day, a US food technology company under IBC.

The applicant filed an application seeking permission to execute and conclude the purchase/acquisition of the Corporate Debtor based on the acquisition plan submitted by him. The Applicant also seeks certain reliefs, concessions, directions, dispensations and exemptions which are necessary to acquire Sterling Biotech Limited (Corporate Debtor).

Factual Matrix

In the instant matter, the Adjudicating Authority vide order dated 11-06-2018 ordered the liquidation of Sterling Biotech Limited. Vide order dated 11-05-2019, this Tribunal ordered liquidation of Sterling Biotech Limited as no resolution plan was approved by the Committee of Creditors of the Corporate Debtor during Corporate Insolvency Resolution Process (CIRP) and appointed Ms. Mamta Binani as the Liquidator.

On 21-10-2021, the Respondent (Ms. Mamta Binani) issued public notice calling the stakeholders to submit their claims with proof for acquisition of the Corporate Debtor in accordance with IBC and submitted a binding bid of ₹ 638,00,00,005/- (Six hundred and thirty-eight crores and five only) for acquiring Corporate Debtor. After the completion of paper works the applicant was considered as a “qualified bidder”. On 04-04-2022, after the completion of e-auction process, the applicant was declared as a successful bidder.

Applicant’s Contentions

The applicant submitted a detailed Acquisition Plan for acquiring the Corporate Debtor to the respondent.

The applicant contended that Perrya, an LLC which was incorporated by some of the founders of the appellant who are non-resident Indians/ overseas citizens of India, will acquire the shares of the Corporate Debtor on non-repatriation. The applicant contended that they will directly acquire 73.9% of the share capital of the Corporate Debtor and the balance will be acquired by Perrya as per regulatory requirements for foreign investment by a non-resident in an entity engaged in pharmaceutical sector.

The applicant also contended that as per Process Document, the applicant can acquire the Corporate Debtor either in its name or through ‘special purpose vehicle’ (SPV) and the applicant is only required to acquire majority of the voting rights and management in the SPV, therefore a third-party can indirectly acquire a voting and management rights of upto 49% in the Corporate Debtor.

The applicant further contended that the applicant had submitted a declaration to the Respondent under S. 29-A IBC stating that Perrya is not barred from acquiring the Corporate Debtor.

The applicant submitted that a combine reading of the Resolution Plan, Ss. 31 and 5(26) IBC and Reg. 32(e) of Liquidation Regulations indicates that the scheme of the Code and the Liquidation Regulations intend to confer benefits and reliefs to an applicant acquiring the Corporate Debtor as a going concern during liquidation proceedings of the same nature as contemplated for a resolution plan approved under Section 31 of the Code.

The applicant cited Nitin Jain v. Lucky Holdings (P) Ltd., IA 391(AHM)/2021 in CP(IB) 37 of 2017; Nitin Jain v. Enforcement Directorate, (2022) 287 DLT 625 and Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta, (2020) 8 SCC 531 where similar reliefs were granted.

The applicant also contended that in the absence of such reliefs and concessions, the Acquisition Plan may become unviable and unfeasible leading to further depletion of value of the assets of the Corporate Debtor and may create hardship to numerous employees and labours.

Respondent’s Contention

The respondent contended that the liquidator understands the applicant’s position as a US-based company but there was a slight difference between the relevant stipulations provided in terms of technical/procedural terms as provided under Acquisition Plan and Process Document.

The respondent also contended that at the time of issuance of the Process Document, the liquidator could not have envisaged the terms of the Acquisition Plan, especially related to the issue of the place of incorporation of the Successful Bidder.

The Respondent also prayed that considering the best interest of the Corporate Debtor and all stakeholders and for maximization of the value of the Corporate Debtor, the tribunal may consider the submissions by the respondent.

Tribunal’s Decision

The Tribunal observed that the prayer sought by the applicant to transfer the Corporate Debtor is essential to run the Corporate Debtor on a clean slate basis.

The Tribunal directed the applicant to deposit the balance sale consideration in terms of Reg. 41 of the Liquidation Process Regulations into the Liquidation Account and the liquidator should distribute the sale consideration in accordance with S. 53 IBC.

The Tribunal opined that the “Acquirers” will be granted all the rights, title and interest in the whole and every part of the Corporate Debtor, including but not limited to the assets, properties, contracts and Approvals, free and clear of all security interest after the payment of the Final Consideration and the Acquirers will not have any financial obligation or liability to any Person or Stakeholder after that. The Tribunal allowed the issuance and allotment of shares to the Acquirers after the cancellation and extinguishment of existing share capital of the Corporate Debtor.

[Perfect Day Inc. v. Mamta Binani, 2022 SCC OnLine NCLT 283, decided on 11-11-2022]


Advocates who appeared in this case :

Mr. Ravi Kadam, Dr. Mustafa and Zal T. Adhyarujina (Senior Advocate), Mr Shreeyash Uday Lalit, Mr. Vishesh Srivastav, Mr. Nikhil Waje, Mr. Prem Gada, Mr. Hardeep Sachdeva, Mr. Kamal Shankar, Mr. Ravi Bhasin, Mr. Parag Maini, Mr. Raghav Chadha, Ms. Gursimran Kohli and Ms. Kanika Singhal, Counsel for the Applicant;

Mr. Atmaram N S Nadkarni (Senior Advocate), Sandeep Bajaj, Aakanksha Nehra and Ajay Sharma, Counsel for the Liquidator.


*Ritu Singh, Editorial Assistant has put this report together.

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