Tribunal holds that an unaccepted OTS cannot be enforced after liquidation begins and upholds the completed e-auction sale in favour of N.K. Marketing.
The National Company Law Tribunal (NCLT), Guwahati Bench, has dismissed an application filed by the legal heirs of Sandeep Kumar Bhagat seeking to halt the liquidation sale of the assets of M/s Shree Sai Rolling Mills India Pvt. Ltd. and related group companies, and to compel Punjab National Bank to accept a one-time settlement (OTS) proposal.
The petitioners had challenged the e-auction notice dated 10 May 2024, the auction held on 6 June 2024, and the sale certificate issued on 21 June 2024 in favour of successful bidder N.K. Marketing. They also sought directions to accept their OTS proposal of Rs. 22.5 crore, which they claimed was higher than the reserve price and would have fetched better value for the creditors.
The Tribunal, however, held that acceptance of an OTS is a matter of commercial discretion for the financial creditor and cannot be compelled by the court or tribunal. It noted that the proposal dated 29 December 2023 was made before the liquidation order dated 25 January 2024, but had never matured into a binding settlement. Since liquidation had already commenced, the petitioners could not insist on enforcement of the proposal as a matter of right.
On the challenge to the auction process, the NCLT found no material irregularity, fraud, collusion, or statutory violation. The Tribunal observed that the auction notice was published on 10 May 2024 and the auction took place on 6 June 2024, and the petitioners had become aware of the process before its conclusion. Despite that knowledge, neither the petitioners nor their alleged prospective purchaser participated in the auction.
The Bench also rejected the argument that the reserve price had been arbitrarily fixed. It accepted the liquidator’s explanation that the reserve price was set at 120% of the liquidation value on the basis of a valuation report and approval of the Stakeholders’ Consultation Committee. The Tribunal held that a higher private offer, by itself, does not invalidate a concluded auction.
Importantly, the NCLT emphasized that the sale had already been completed, full consideration had been paid, and the sale certificate had been issued. In such circumstances, the tribunal said, there was no legal basis to interfere with the concluded sale in the absence of fraud or statutory breach.
Accordingly, the application filed under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 read with Rule 11 of the NCLT Rules, 2016 was dismissed and disposed of.
Bottom Line :
Insolvency and Bankruptcy Code, 2016 - Liquidation process - Request for acceptance of One-Time Settlement (OTS) proposal made prior to liquidation - Tribunal cannot compel financial creditor to accept unaccepted settlement proposal - Concluded e-auction sale cannot be set aside in the absence of material irregularity, fraud, or statutory violation.
Statutory provision(s): Section 60(5), Insolvency and Bankruptcy Code, 2016, Rule 11, National Company Law Tribunal Rules, 2016, Regulation 32(e), Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016, Schedule I, Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016
