NCLAT dismisses PNB’s plea against Sterling Biotech sale to US-based firm

The National Company Law Appellate Tribunal has set aside the plea of a UK-based subsidiary of Punjab National Bank against the NCLT order, approving the sale of Sterling Biotech to US-based food technology startup Perfect Day.

The Mumbai bench of the National Company Law Tribunal (NCLT) on November 11, 2022, approved a Rs 638 crore bid of Perfect Day in an auction conducted by the liquidator of Sterling Biotech under the Insolvency & Bankruptcy Code.

However, this was challenged by Punjab National Bank (International) Ltd, a stakeholder in Sterling Biotech, before the appellate tribunal National Company Law Appellate Tribunal (NCLAT), contending that the value of the Corporate Debtor was much higher than the one mentioned in the e-Auction notice.

It had prayed to stay the auction process, direct the liquidator to maintain the status quo and invite fresh bids.

According to the PNB’s subsidiary, the value of Sterling Biotech was much higher than Rs 548.46 crore mentioned in the e-Auction notice. As per the valuation report, which was obtained by Andhra Bank from Gajjar Techno-Economic Consultant, the value was more than three times.

The liquidator neglected to fetch the maximum price and auctioned the corporate debtor at a throwaway price, it alleged.

However, rejecting it, NCLAT said that from all materials brought on record, Punjab National Bank (International), a stakeholder of only 0.734 per cent in the total value of stakeholders of the corporate debtor, was part of the Committee of Creditors and participated in the liquidation process by filing its claim.

“The Appellant has been distributed the proceeds of the liquidation as per the entitlement under Section 53 of the IBC. At no point of time, prior to the holding of auction… any kind of objection was raised by the Appellant to the reserve price or against valuation obtained in the liquidation process by the Liquidator,” said the NCLAT.

It was only after the auction was over and the successful bidder was declared, for the first time, a letter dated May 26, 2022, was written to the liquidator by the bank, calling for relevant information, which was provided also.

“It is clear that all that appellant wanted was to stay the process of auction and sale of the Corporate Debtor. The auction having already been completed on 04.04.2022, there was no occasion to stay the auction. Further, the process of sale was to be undertaken as per the liquidation regulations,” the NCLAT said.

When the successful resolution applicant Perfect Day has deposited the entire amount, the issuance of the Sale Certificate was as per the liquidation regulations, in which no objection can be raised by the appellant.

It further said that when the sale of Sterling Biotech is being done as a going concern, the Successful Auction Purchaser is entitled to receive certain reliefs and concessions to run it as a going concern.

“We do not find any merit in any of the submissions raised by the appellant in the Appeal. The Appeal is dismissed,” said a two-member NCLAT bench comprising Chairperson Justice Ashok Bhushan and Member Barun Mitra.

A corporate insolvency resolution process (CIRP) was initiated against the Sandesara brothers-promoted Sterling Biotech over a petition filed by Andhra Bank (now Union Bank of India) petition on June 11, 2018.