2026 Supreme(Online)(NCLAT) 22

NATIONAL COMPANY LAW APPELLATE TRIBUNAL
Indevar Pandey, Member (T)
Akshat Gupta – Appellant
Versus
Union Bank of India – Respondent
1577/ND/2024 COMPANY APPEAL(AT)(INS)

Procedural lapses like short auction notice, post-facto CoC communication, single undervaluation, and lack of due diligence on encumbrances justify setting aside completed auction in personal bankruptcy to ensure value maximisation and fairness.

Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Sections 121, 122, 138, 152, 153 - IBBI (Bankruptcy Process for Personal Guarantors to Corporate Debtors) Regulations, 2019 - Regulations 8, 21, 30 - Auction sale in personal bankruptcy - Completed e-auction of 50% undivided share in residential property set aside by Adjudicating Authority due to 25-day notice period between publication and auction (instead of 30 days), post-facto sharing of information with CoC, undervaluation, lack of due diligence on encumbrance, and inadequate stakeholder consultation - Appellate Tribunal upheld setting aside, noting procedural lapses vitiated fairness and value maximisation despite two bidders and payment by purchaser; no mandatory 30-day period in regulations but justified for complex assets requiring due diligence; post-facto CoC communication treats it as post-box, contrary to IBC objectives; single valuation inadequate under Regulation 30(3) for fractional undivided share; purchaser's rights not protected as process flawed ab initio, refund accepted. (Paras 51-75)

(B) Auction sanctity - Interference permissible for significant procedural irregularities affecting market exposure and competitiveness, even absent fraud; 25-day notice inadequate for complex fractional assets; NCLT, vested with DRT powers, to apply 30-day norm from SARFAESI; prior CoC consultation mandatory for transparency. (Paras 57-59, 71)

(C) Res judicata - Prior appellate upholding of re-auction order bars fresh challenge; acceptance of refund precludes approbation-reprobation. (Paras 20, 73)

Facts of the case:
Bankruptcy process commenced; trustee valued 50% undivided share in residential property, published auction notice on 02.06.2023, conducted e-auction on 27.06.2023 with two bidders, issued sale certificate on 05.07.2023 post full payment above reserve. Secured creditor filed application alleging undervaluation and irregularities; Adjudicating Authority set aside sale for short 25-day notice, directed fresh valuations and auction with refund. Appeal by purchaser against cancellation.

Findings of Court:
Auction process flawed by post-facto CoC information, inadequate notice for complex asset, undervaluation without consultation, lack of due diligence on encumbrance; upheld re-auction direction; distinguished precedents protecting bona fide purchasers where no procedural defects.

Issues: Whether Adjudicating Authority justified in setting aside e-auction for 25-day notice, procedural irregularities, undervaluation, and lack of CoC consultation; applicability of res judicata from prior orders; protection for completed auction purchaser.

Ratio Decidendi: In personal guarantor bankruptcy, trustee must ensure prior CoC consultation, adequate notice (around 30 days) for complex assets, multiple valuations if needed, and due diligence on encumbrances for fair value maximisation; irregularities justify setting aside even post-completion and payment, prioritising process integrity over purchaser rights.

Result: Appeal dismissed; impugned order upheld.