NCLT Dismisses Bid to Cancel Bankruptcy E-Auction Over Alleged Technical Glitches, Upholding Sale to Highest Bidder

In a recent ruling, the National Company Law Tribunal (NCLT), New Delhi Bench, dismissed an application seeking to set aside an e-auction of bankrupt assets due to claimed technical issues, emphasizing that such sales cannot be lightly overturned without evidence of fraud or serious procedural flaws. The decision, delivered in the case of State Bank of India vs. Waseem Ahmad Khan (CP(IB)-951(PB)/2020), reinforces the sanctity of transparent auction processes under the Insolvency and Bankruptcy Code, 2016 (IBC), to ensure timely resolution for creditors.

Case Background and Parties Involved

The proceedings stem from a bankruptcy declaration against Waseem Ahmad Khan, an individual, following an application under Section 95 of the IBC filed by State Bank of India. The NCLT admitted the application on April 6, 2022, and declared Khan bankrupt on December 2, 2024, under Section 126. Assets belonging to Khan, including agricultural lands in Uttar Pradesh divided into two lots, were put up for e-auction to realize value for creditors.

• Lot 1 : Lands measuring 3.424 hectares and 5.059 hectares in Dabhora Ahtmali, with a reserve price of Rs. 2,83,74,051 and earnest money deposit (EMD) of Rs. 28,37,405.
  
  
• Lot 2 : Land measuring 4.046 hectares in Sand Khera, with a reserve price of Rs. 1,83,60,000 and EMD of Rs. 18,36,000.

The auction, advertised on April 15, 2025, was conducted on May 1, 2025, from 2:00 PM to 4:00 PM via an online platform managed by Respondent No. 1, Linkstar Infosys Private Limited, under the oversight of Respondent No. 2, the Bankruptcy Trustee (Anil Kohli).

The applicant, M/s Marinaindia Traexim Private Limited, a potential bidder, filed IA-2204/2025 under Section 60(5) of the IBC, seeking to annul the auction and order a re-auction. They also filed interconnected applications IA-2351/2025 (for interim stay) and IA-2534/2025 (for expert technical examination).

Key Arguments from the Applicant

Marinaindia Traexim claimed it complied with all pre-auction requirements, submitting EMD via RTGS on April 23, 2025, and required documents by April 24-25, 2025. Approved to participate, the company placed initial bids at reserve prices shortly after the auction began and remained the top bidder until around 3:52 PM.

The core grievance: At 3:52 PM, the e-auction platform allegedly suffered technical failures, preventing further bids despite attempts to contact support (call logs from 3:55 PM to 4:10 PM). This purportedly allowed other bidders to surge ahead, concluding the auction unfairly. For Lot 1, the auction ended at 4:25:38 PM after extensions; for Lot 2, at 5:18:54 PM. The applicant argued this violated principles of fairness and transparency under the IBC, leading to undervaluation of assets contrary to the Code's maximization objective. They sought a technical report, re-auction via a different provider, and a stay on sale confirmation.

Respondents' Counterarguments and Evidence

The Bankruptcy Trustee and e-auction provider vehemently denied glitches, supported by system-generated logs, bid histories, and audit trails. Key points:

• The applicant actively bid after 3:52 PM: Five bids for Lot 1 (up to 4:16 PM) and 19 for Lot 2 (up to 5:12 PM), progressively increasing offers from the same IP address and device.
• No contemporaneous complaints: Despite alleged calls, no formal grievance was logged on the redressal portal, and the applicant remained silent post-auction until filing weeks later.
• Successful outcome: M/s Bahl Paper Mills Limited emerged as the highest bidder—Rs. 3,93,74,051 for Lot 1 (12 bids total) and Rs. 6,63,60,000 for Lot 2 (58 bids total)—exceeding reserves and indicating competitive participation by others without issues.
• Broader concerns: The respondents labeled the claims an "afterthought" to enable a higher post-auction offer, warning that unsubstantiated pleas could perpetuate endless litigation.

The provider's additional affidavit confirmed no platform-wide failures, with rectification for a minor filing error.

Court's Reasoning and Reliance on Precedents

The NCLT Bench meticulously reviewed records, finding the applicant's glitch narrative contradicted by undeniable evidence of continued participation. Pivotal excerpts from the order highlight the reasoning:

> "The facts as pleaded by parties and record reveals that the applicant placed the bid after 3:52 pm and thereafter continued to participate in the bidding process, progressively increasing the bid until 4:16 pm for Lot No.1 and further till 5:12 pm for Lot No.2. Hence the contention now raised by the applicant is contrary to the factual position, as the bid history clearly shows the continuous participation."

The Tribunal stressed the e-auction's faceless, time-bound nature: Bidders must act within five-minute extension windows per new bid, and failure to do so concludes the process legally. No immediate objection post-4:16 PM (Lot 1) or 5:12 PM (Lot 2) suggested the claims were belated.

Drawing on precedents, the NCLT applied settled principles against lightly interfering with concluded auctions:

• Celir LLP vs. Sumati Prasad Bafna (2024 SCC OnLine SC 3727) : Auctions should not be set aside except for core flaws like collusion, fraud, or underbidding; mere irregularities without substantial injury warrant dismissal.
• Sanjay Sharma vs. Kotak Mahindra Bank Ltd (2024 SCC OnLine SC 4589) : Echoing V.S. Palanivel v. P. Sriram (2024 INSC 659) , courts must avoid overturning sales absent grave irregularities, considering the "domino effect" on stakeholders.
• Startree Retailors Private Limited vs. Anil Kumar Birla (NCLAT 2021) : Unsuccessful bidders cannot challenge valid auctions post-conclusion under pretexts like value maximization, especially after payments and disbursals under Section 53 IBC's waterfall mechanism.

The Bench distinguished this from cases warranting intervention, noting no proof of systemic failure—other bidders faced none—and rejected hyper-technical objections like reply authorizations as irrelevant.

Final Decision and Implications

All three applications (IA-2204/2025, IA-2351/2025, and IA-2534/2025) were dismissed, with the e-auction upheld as fair and transparent. The Tribunal urged the Insolvency and Bankruptcy Board of India (IBBI) to address e-auction technicalities via regulations to avoid protracted hearings that delay core IBC processes.

This ruling underscores the robustness of digital auctions in insolvency, prioritizing finality to protect creditor recoveries and deter post-hoc challenges. For legal professionals, it signals judicial reluctance to entertain unproven glitch claims, potentially influencing future bankruptcy sales. A copy of the order was forwarded to IBBI for regulatory review, hinting at evolving standards for e-platform reliability.

The decision was pronounced in mid-2025, maintaining the time-bound IBC framework amid growing reliance on virtual proceedings.