Back
NCLT Guwahati Refuses to Direct PNB to Accept OTS Proposal for Liquidated Companies
The , has declined to compel to accept a ₹22.50 crore proposal made by Sandeep Kumar Bhagat in respect of three companies undergoing . The Bench, comprising Judicial Member Rammurti Kushawaha and Technical Member Yogendra Kumar Singh, held that acceptance of an OTS is a matter of and that the tribunal lacks the power to force a financial creditor to accept a settlement that was never .
The decision, delivered on , reinforces the principle that once proceedings have commenced, settlement proposals cannot be enforced as a matter of right. The tribunal also upheld the validity of an conducted for the sale of the corporate debtors’ assets, rejecting allegations of procedural irregularities.
Background: From Credit Facilities to Liquidation
The three corporate debtors— , , and —had been sanctioned credit facilities by PNB. After the accounts were classified as , the bank initiated the under the (IBC). The NCLT admitted the CIRP, and after a series of appeals before the and the , the tribunal ordered of the companies on . Sandeep Khaitan was appointed as the Liquidator.
Meanwhile, Bhagat, through his legal heirs, proposed an OTS of ₹22.50 crore to PNB. He alleged that the bank failed to consider the proposal despite being notified. Subsequently, the Liquidator issued an notice on for the sale of the companies’ assets at an aggregate of ₹16.23 crore. Bhagat challenged the auction, contending that the notice period was less than 30 days and that the was substantially lower than his OTS offer. The auction was conducted, and emerged as the successful bidder.
Tribunal’s Findings on OTS and
The NCLT observed that the OTS proposal had been made before commenced but had never been accepted or crystallised into a binding settlement. The Bench stated:
“Acceptance of an OTS is a matter of , having regard to the financial position, security, recoverability and applicable banking norms. This Tribunal cannot compel the Financial Creditor to accept an unaccepted settlement proposal.”
The tribunal emphasised that the mere fact that the proposed OTS amount was higher than the eventual sale consideration did not render the auction illegal. It noted that any person intending to acquire the assets was required to participate in the auction and submit a bid in accordance with its terms.
Auction Challenges Rejected
Bhagat argued that the notice provided less than 30 days’ notice, potentially discouraging eligible bidders. However, the NCLT found no evidence that the shorter notice period actually denied any eligible bidder a reasonable opportunity to participate or affected the fairness or competitiveness of the process.
The challenge to the was also dismissed. The tribunal held that a difference between an earlier valuation, private proposals, and the eventual auction consideration did not, by itself, establish illegality or arbitrariness. The Bench noted the absence of any material establishing , improper valuation, .
Since the sale had been completed and the issued, the NCLT concluded:
“In the absence of any established , , fraud, collusion or other compelling circumstance affecting the legality of the concluded sale, no interference with the sale is warranted merely on the basis of a subsequent higher offer or settlement proposal.”
Legal Implications and Impact on IBC Practice
The judgment reaffirms the limited role of adjudicating authorities in commercial decisions made by financial creditors. Under the IBC, the legislature has consciously left the acceptance or rejection of settlement proposals to the of creditors, subject to the overriding objective of . The NCLT’s refusal to interfere underscores that once a order is passed, the timeline for reviving the corporate debtor through a private OTS is effectively closed unless the liquidator or the committee of creditors chooses to consider it.
For legal practitioners, the ruling serves as a reminder that challenges to auction processes must be grounded in concrete evidence of statutory violations or fraud. Mere assertions of a higher offer or procedural preferences—such as a longer notice period—are insufficient to unsettle a concluded sale. The decision also clarifies that the set by the liquidator, while open to scrutiny, is not invalid simply because it is lower than a prior settlement offer.
The case further highlights the importance of timely action: parties seeking to enforce settlement proposals must ensure they are accepted and crystallised before the commencement of . Once the process is underway, the regime shifts decisively towards a transparent, competitive auction mechanism designed to maximise realisations for all stakeholders.
Conclusion
By dismissing the application, the NCLT Guwahati has reinforced the boundaries of judicial intervention in insolvency matters. The decision balances the need for in proceedings against the rights of stakeholders, while respecting the commercial autonomy of financial creditors. For the legal community, it provides clear guidance on the limited grounds available to challenge auction sales and the non-enforceability of unaccepted OTS proposals after has begun.
