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2025 Supreme(Online)(NCLAT) 1467
NATIONAL COMPANY LAW APPELLATE TRIBUNAL
Barun Mitra, Member (Technical)
Orissa Alloy Steel Private Limited – Appellant
Versus
S M Steels and Power Limited – Respondent
Company Appeal (AT) (Insolvency) No. 255-257 of 2025 | Company Appeal (AT) (Insolvency) No. 214-216 of 2025
For the Respondent:Mr. Dhruv Mehta, Mr. Krishnendu Datta, Sr. Advocates, Mr. Anand Varma, Mr. Kaustubh Prakash, Ms. Prachi Bhatia, Ms. Alina Merin Mathew, Advocates
Mr. Niranjan Reddy, Sr. Advocate, Mr. Ashim Sood, Mr. Abhishek Swaroop, Mr. Anupam Prakash, Ms. Bhawana Sharma, Ms. Kirti Talreja for Respondent No.1 (RP)
Mr. Shyam Mehta, Sr. Advocate with Mr. Udit Mendiratta, Mr. Shivkrit Rai, Ms. Apeksha Singh, Advocates for Respondent No.1 (SMSPL)
Prior permission from the Adjudicating Authority is essential for conducting private sales under Regulation 33(2)(d) of the Insolvency and Bankruptcy Code, ensuring transparent auctions and optimal bidder participation.
Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Section 61 and Regulation 33 - Appeal against disallowance of private sale of assets under Swiss challenge process - Liquidator directed to issue fresh notice for the private sale process after determining adequate EMD and reserve price - Insufficient time for bidders to exercise their rights, lack of transparency in auction process, and the need for prior permission from the Adjudicating Authority emphasized. (Paras 1, 20, 26, 53, 63)
(B) Regulatory Compliance - Requirement of prior permission from the Adjudicating Authority emphasized for private sales under Regulation 33(2)(d). (Paras 27, 53, 60)
(C) Collusion - Allegations of collusion dismissed due to lack of evidence establishing improper advantage or coordination between involved parties. (Paras 65, 80, 81)
Facts of the case:
Two appeals filed concerning approval of a private sale of a corporate debtor under Swiss challenge after a series of unsuccessful auctions. Appellant and Respondent parties had a majority stake in the Stakeholders’ Consultation Committee, leading to disputes over the auction process and claims of collusion. The Adjudicating Authority found the procedure flawed, especially regarding timing and bidding conditions.
Findings of Court:
The Adjudicating Authority endorsed the necessity for a transparent bidding process with adequate opportunity for all potential bidders, citing violations in the established timeline and conditions for bidding.
Issues: 1) Whether SMSPL has locus to file an application before the Adjudicating Authority. 2) If the timelines set for the private sale facilitated optimal bidder participation. 3) Whether collusion existed amongst the bidders. 4) Need for prior approval from the Adjudicating Authority.
Ratio Decidendi: The court ruled that prior authorization from the Adjudicating Authority is paramount and emphasized the need for fairness and transparency in the sale process, which was compromised in this case.
Result: Impugned order upheld to issue a fresh notice and to set reasonable EMD for future bids.
| Table of Content |
|---|
| 1. overview of company appeals and parties involved. (Para 1 , 2) |
| 2. summary of events leading to the appeals. (Para 3 , 4 , 5 , 6 , 7 , 8 , 9 , 10) |
| 3. outlining the liquidator's actions and timeline of events. (Para 11 , 12 , 13) |
| 4. details on the stakeholder consultation and allegations of collusion. (Para 14 , 15 , 16 , 17 , 18 , 19 , 20 , 21 , 22 , 23 , 24 , 25) |
| 5. analysis of the admissibility of smspl's interventions. (Para 26 , 27 , 28 , 29 , 30) |
| 6. arguments of both parties regarding auction processes and timelines. (Para 31 , 32 , 33 , 34 , 35) |
| 7. evaluation of process document disclosures and conditions. (Para 36 , 37 , 38 , 39 , 40 , 41 , 42 , 43) |
| 8. court's general observations on auction failure and accountability. (Para 44 , 45 , 46 , 47 , 48 , 49) |
| 9. examination of the liquidator's compliance with required regulations. (Para 50 , 51 , 52 , 53) |
| 10. discussion of collusion allegations and burden of proof. (Para 54 , 55 , 56 , 57 , 58) |
| 11. final considerations on collusion impact actions. (Para 59 , 60 , 61 , 62 , 63 , 64) |
| 12. conclusions about the appeal findings and rulings. (Para 65 , 66 , 67) |
| 13. emphasis on the regulatory framework and its application by the court. (Para 68 , 69 , 70 , 71) |
| 14. conclusion reached by the court based on examined evidence. (Para 72 , 73 , 74) |
| 15. final judgments regarding the appeals and orders for future compliance. (Para 75 , 76 , 77 , 78 , 79 , 80 , 81 , 82 , 83) |
JUDGMENT
(Hybrid Mode)
Per: Barun Mitra, Member (Technical)
The present is a set of two appeals filed under Section 61 of Insolvency and Bankruptcy Code 2016 (‘IBC’ in short) which arises out of the Order dated 20.12.2024 (hereinafter referred to as ‘Impugned Order’) passed by the Adjudicating Authority (National Company Law Tribunal, Kolkata Bench, Court- I) in I.A. (IB) No. 447/KB/2024, I.A. (IB) No. 586/KB/2024 and I.A. (IB) No. 995/KB/2024 in C.P. (IB) No. 23/KB/2019. By the impugned order, the Adjudicating Authority has disallowed IA No. 447 filed by the Liquidator by directing the Liquidator to issue fresh Swiss Challenge Notice in the private sale of the assets of the Corporate Debtor with the bid of OASPL as the anchor bid and EMD fixed on standard norms. IA Nos. 586 and 995 of 2024 filed by SMSPL has been disposed of on the above terms. Aggrieved by the impugned order, two separate appeals have been preferred by Orissa Alloy Steel Pvt. Ltd. (“OASPL” in short) and SM Steels and Power Limited (“SMSPL” in short)
2. Since the facts in both the appeals are common, we would like notice the relevant facts which are necessary to decide both the appeals conjointly which are as under:
On 19.03.2020, Corporate Debtor was admitted into Corporate Insolvency Resolution Process (‘CIRP’ in short).
On 08.10.2021, the Adjudicating Authority directed liquidation of Corporate Debtor and appointed the liquidator.
The Stakeholders’ Consultation Committee (‘SCC’ in short) was constituted with the following composition: i) ARCIL holding 60.65%, ii) REC Limited holding 19.55%, iii) Indian Bank holding 5.37%, iv) PNB holding 4.52%, v) Union Bank of India holding 7.92%, and vi) LIC holding 1.99%.
On 31.12.2021, the Liquidator issued a public notice announcing the auction for the sale of Corporate Debtor as a going concern with a reserve price of Rs. 770 crores and an Earnest Money Deposit (‘EMD’ in short) set at 10% of the reserve price. Nine rounds of auction was conducted unsuccessfully between 31.12.2021 and 15.01.2024 in all of which the EMD was maintained at 10% of the reserve price. None of the auction sales fructified.
On 01.12.2023, J Kumar Developers Limited (‘JKDL’ in short) has also submitted a private sale offer of Rs.290 crores to the Liquidator for the acquisition of Corporate Debtor. The said offer was not accepted, as it was substantially lower than the reserve price of Rs. 361.62 crores fixed in the last failed auction.
On 21.12.2023, Liquidator caused publication of eighth notice for the auction at a reserve price
