NCLAT sets aside PNB UK subsidiarys plea against NCLT order approving Sterling Biotech sale

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

NCLT Approves Sale of Sterling Biotech to Perfect Day

On November 11, 2022, the Mumbai bench of the NCLT approved a Rs 638 crore bid by Perfect Day in an auction conducted by the liquidator of Sterling Biotech under the Insolvency & Bankruptcy Code (IBC). However, this was challenged by Punjab National Bank International Ltd (PNBIL), a stakeholder in Sterling Biotech, before the NCLAT.

PNBIL Contends Value of Sterling Biotech was Higher

PNBIL contended that the value of Sterling Biotech 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 PNBIL, 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.

NCLAT Rejects PNBIL's Plea

Rejecting PNBIL's plea, the NCLAT said that the bank, as a stakeholder with only a 0.734% share 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 bank had also received the proceeds of the liquidation as per the entitlement under Section 53 of the IBC. The NCLAT noted that PNBIL had not raised any objection to the reserve price or against the valuation obtained in the liquidation process by the liquidator at any point of time prior to the holding of the auction.

The NCLAT further observed that the bank had written to the liquidator for relevant information only after the auction was over and the successful bidder was declared. The tribunal held that it was clear that all that PNBIL wanted was to stay the process of auction and sale of the Corporate Debtor. Since the auction had already been completed, there was no occasion to stay it. The NCLAT also noted that the process of sale was to be undertaken as per the liquidation regulations.

NCLAT Dismisses Appeal

The NCLAT found no merit in any of the submissions raised by PNBIL in the appeal and dismissed it. The tribunal held that when the successful resolution applicant, Perfect Day, had deposited the entire amount, the issuance of the Sale Certificate was as per the liquidation regulations, and no objection could be raised by PNBIL.

The NCLAT further observed 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. Thus, the NCLAT dismissed the appeal filed by PNBIL.

Background of Sterling Biotech Case

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) on June 11, 2018. The NCLT had approved the resolution plan submitted by Perfect Day on November 11, 2022.