Guwahati tribunal holds that an unaccepted settlement offer cannot override a concluded e-auction sale after full payment and issuance of sale certificate
The National Company Law Tribunal (NCLT), Guwahati Bench, has dismissed an application filed by the legal heirs of late Sandeep Kumar Bhagat seeking to quash an e-auction sale of corporate debtor assets and compel Punjab National Bank to accept a one-time settlement (OTS) proposal.
The application arose out of liquidation proceedings involving the assets of three group companies, including M/s Shree Sai Rolling Mills (India) Ltd. The petitioners had challenged the e-auction notice dated 10 May 2024, the auction held on 6 June 2024, and the sale certificate issued in favour of successful bidder M/s N.K. Marketing on 21 June 2024. They also sought a direction to the bank and liquidator to accept an OTS proposal dated 29 December 2023, under which a third party allegedly offered Rs. 22.50 crore for the assets.
The tribunal, however, found no legal basis to interfere. It held that acceptance of an OTS is a matter of commercial discretion of the financial creditor and cannot be compelled by the NCLT, especially when no concluded and binding settlement existed before the liquidation order dated 25 January 2024. The bench noted that the proposal had been made before liquidation, had not been accepted, and therefore could not be enforced as a matter of right after commencement of liquidation.
On the auction challenge, the tribunal rejected the argument that the sale was invalid because the notice period was allegedly short and because a higher private offer had been made. It observed that the applicant admittedly knew of the auction before it concluded but neither he nor the proposed purchaser participated in the bidding process. The successful bidder matched the reserve price, paid the entire sale consideration, and obtained the sale certificate. In these circumstances, the tribunal said, a mere higher private offer could not be used to unsettle a completed auction.
The NCLT also declined to accept the contention that the reserve price had been arbitrarily reduced. It recorded the liquidator’s submission that the reserve price was fixed at 120% of the liquidation value based on an approved valuation report and the decision of the Stakeholders’ Consultation Committee. The tribunal held that differences between earlier valuations, private offers and the final auction price do not by themselves prove illegality, fraud, collusion or material irregularity.
Importantly, the bench emphasized that once the auction had been concluded, the full sale consideration paid, and the sale certificate issued, the rights of the successful purchaser and other stakeholders stood crystallised. In the absence of any established statutory violation, fraud, collusion or material misconduct, the concluded sale could not be disturbed merely because a higher offer surfaced later.
The petitioners had also relied on proceedings before the Gauhati High Court, which had briefly directed maintenance of status quo. The tribunal noted that the high court order did not decide the merits and that the sale certificate had already been issued before that interim direction.
Ultimately, the NCLT dismissed IA(IBC)/126/GB/2024 in CP(IB)/24/GB/2019, holding that the applicant had failed to show any legal ground to set aside the auction, cancel the sale certificate, or direct acceptance of the OTS proposal.
Bottom Line :
Insolvency and Bankruptcy Code, 2016 - In liquidation proceedings, NCLT cannot direct acceptance of an unaccepted One Time Settlement proposal - Mere existence of a higher private offer, without participation in auction, is insufficient to set aside a concluded e-auction sale - After full payment of sale consideration and issuance of sale certificate, concluded sale will not be interfered with absent proof of statutory violation, fraud, collusion or material irregularity.
Statutory provision(s): Section 60(5), Insolvency and Bankruptcy Code, 2016, Rule 11, National Company Law Tribunal Rules, 2016, Regulation 32, Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016, Regulation 32A, Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016, Schedule I, Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016
