Committee of Creditors' commercial wisdom validated; highest bidder's claim rejected due to non-payment and interim court stay; private sale sanctioned under amended IBBI Liquidation Regulations
In a significant ruling dated October 16, 2026, the National Company Law Tribunal (NCLT), Kochi Bench, delivered a comprehensive judgment in the matter concerning the liquidation and sale of the Asten Aurum Woods property, part of the liquidation estate of Asten Realtors Private Limited. The Bench, comprising Mr. Vinay Goel, Judicial Member, and Mr. Ravichandran Ramasamy, Technical Member, allowed the liquidator's application to reject the highest bid in an e-auction and approved a private sale of the property to a consortium of homebuyers.
The case arose after an e-auction conducted on June 18, 2025, where Mr. Muhammed Aslam emerged as the highest bidder with a bid of INR 4.96 crore, matching the reserve price. Although the earnest money deposit (EMD) of INR 49 lakh was paid, the balance sale consideration was not received within the stipulated time due to an interim order issued by the Kerala High Court staying further auction proceedings. Consequently, the sale was not completed, and no vested right accrued to the highest bidder.
The auction notice explicitly reserved the liquidator's right to cancel, modify, or extend the auction terms at any time. The NCLT relied heavily on the Supreme Court's precedent in Eva Agro Feeds Private Limited v. Punjab National Bank (2023), which held that a successful bidder in an auction does not acquire any enforceable right until the sale is completed by full payment. Accordingly, the Tribunal refused to allow the highest bidder's attempt to be impleaded in the proceedings, affirming that no vested rights had crystallized.
Under the amended IBBI (Liquidation Process) Regulations, 2016-effective June 2, 2026-the Committee of Creditors (CoC) now holds the power to reject the highest bid by a vote of not less than 66% and approve a private sale subject to compliance with prescribed procedures. The CoC exercised its commercial wisdom by approving the rejection of the highest bid and authorizing the liquidator to pursue a private sale to a consortium of homebuyers of the Asten Aurum Woods project at the same consideration amount.
The CoC's decision was grounded on several factors: the non-completion of the sale due to the High Court's interim stay, the absence of any fraud or irregularity in the auction process, and the homebuyers' legitimate interest in completing the project and securing possession of their homes. The Tribunal emphasized the Supreme Court's recognition in Mansi Brar Fernandes v. Shubha Sharma (2025) that the right to timely possession of a home is a fundamental right under Article 21 of the Indian Constitution, underscoring the homebuyers' position as financial creditors with admitted claims.
Further, the CoC decided to refund the EMD along with accrued interest to the highest bidder, despite interest not being payable under auction terms, demonstrating fairness in the liquidation process. The liquidator was directed to dispatch the refund promptly.
The NCLT's ruling also highlighted that the private sale to the homebuyers' consortium complies with the spirit and objectives of the Insolvency and Bankruptcy Code (IBC), reflecting evolving regulatory provisions and the need to balance commercial interests with social justice in liquidation sales.
This judgment sets a precedent affirming the liquidator's discretion to cancel auctions where terms permit, the paramount role of the CoC under the amended liquidation regulations, and the protective stance towards genuine homebuyers in insolvency proceedings involving real estate projects.
Bottom Line:
Insolvency and Bankruptcy Code - Liquidation - Liquidator can cancel auction where auction notice reserves such right - Highest bidder acquires no vested right before completion of sale - Committee of Creditors, in its commercial wisdom, can approve rejection of highest bid and permit private sale to homebuyers at matching value, subject to compliance with IBBI (Liquidation Process) Regulations, 2016.
Statutory provision(s):
Insolvency and Bankruptcy Code, 2016; IBBI (Liquidation Process) Regulations, 2016 (Schedule I Clause 1(11A), Regulation 33(2), Regulation 8(5)(a)); Section 60(5) of the Code; Article 21 of the Constitution of India
Sreenivasan PR (Liquidator), (NCLT)(Kochi Bench) : Law Finder Doc Id # 3001085
