NCLAT: NCLT Has No Jurisdiction To Modify Capital Structure Proposed By Successful Auction Purchaser If Legally Compliant
Pranav B Prem
The National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi has held that the adjudicating authority has no jurisdiction to modify the capital structure proposed by a successful auction purchaser once the sale of the corporate debtor as a going concern has been confirmed, unless such proposal is in violation of law. The bench comprising Justice Mohd. Faiz Alam Khan (Judicial Member) and Arun Baroka (Technical Member) issued the ruling in an appeal filed under Section 61 of the Insolvency and Bankruptcy Code, 2016.
The appeal arose from the liquidation of Accent Packaging Pvt. Ltd., where the Corporate Insolvency Resolution Process had concluded without the approval of a resolution plan. The company was sold as a going concern via e-auction for ₹6.67 crore, and Abhay Kumar Jitendra Shah emerged as the successful bidder. A sale certificate was issued in his favour on 20.07.2024. Following the purchase, he sought certain operational concessions before the NCLT and also proposed that ₹2 lakh be treated as equity and the remaining amount as debt infusion.
Although several concessions requested by Shah were granted, the NCLT, Ahmedabad Bench modified the proposed capital structure and directed that ₹3.30 crore be treated as equity and ₹3.37 crore as debt, stating that excessive debt should not be imposed on the company. The appellant contended that the determination of capital structure was a commercial decision of the auction purchaser and that the adjudicating authority could not unilaterally alter it. He pointed out that neither the liquidator nor the Stakeholders Consultation Committee (SCC) had raised objections, and that no opportunity of being heard was given before modifying his proposed split.
Before the appellate tribunal, the liquidator informed that the matter had been deliberated in the 21st meeting of the SCC and that no objection had been raised to the structuring of share capital proposed by the auction purchaser. On that basis, the NCLAT noted that the SCC, which is akin to the CoC in the liquidation context, had not objected to the capital structure.
In examining the scope of powers under Section 35 of the IBC, the tribunal reaffirmed that the adjudicating authority exercises supervisory powers in the liquidation process. It observed that “once the e-auction concludes, consideration is deposited, and the sale is confirmed with a sale certificate issued in favour of the auction purchaser, the transaction attains irrevocable finality, vesting unencumbered title in the purchaser.” It further stated that after issuance of the sale certificate, the NCLT cannot introduce ex post facto conditions affecting the purchaser’s autonomy if the commercial arrangement does not violate any legal provision.
Holding that the NCLT’s interference exceeded its jurisdiction, the appellate tribunal concluded that “the adjudicating authority has committed manifest illegality in modifying the proposal made by the appellant with regard to the share capital/shareholding of the company as going concern,” particularly when the SCC did not oppose the restructuring. It emphasized that on the principle of clean slate, the commercial wisdom of the auction purchaser should be respected unless it offends law.
In conclusion, the NCLAT allowed the appeal, set aside the NCLT’s direction requiring reallocation of equity and debt, and remanded the matter to the adjudicating authority for reconsideration afresh after providing adequate opportunity of hearing to the parties. It also directed that the adjudication be conducted strictly in accordance with law.
Appearance
For Appellant: Advocates Palash S. Singhai, Harshal Sareen
For Respondent: Advocates Rishabh Shah, Sogmya Jain, Arjun Seth
Cause Title: Abhay Kumar Jitendra Shah v. Sanjay B. Shah, Liquidator of Accent Packaging Private Limited
Case No: Company Appeal (AT) (Ins) No. 1157 of 2025
Coram: Justice Mohd. Faiz Alam Khan (Judicial Member), Arun Baroka (Technical Member)
