Pranav B Prem

The National Company Law Appellate Tribunal (NCLAT), New Delhi Bench, has held that a liquidator cannot conduct a private sale without obtaining prior permission from the Adjudicating Authority (NCLT) as mandated under Regulation 33(2)(d) of the IBBI (Liquidation Process) Regulations, 2016 (LPR). A Bench comprising Justice Ashok Bhushan (Chairperson) and Mr. Barun Mitra (Technical Member) dismissed appeals filed by Orissa Alloy Steel Pvt. Ltd. (OASPL) and S.M. Steels and Power Ltd. (SMSPL), affirming the order of the NCLT Kolkata Bench, which had set aside a Swiss Challenge–based private sale conducted by the liquidator and directed that a fresh process be undertaken following standardised conditions.

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Background

The case arose out of the liquidation proceedings of the corporate debtor, where the liquidator’s repeated attempts to sell the corporate debtor as a going concern had failed. After nine unsuccessful auctions, Orissa Alloy Steels Pvt. Ltd. (OASPL) offered to acquire the corporate debtor through a private sale under the Swiss Challenge method for ₹265 crore, accompanied by an Earnest Money Deposit (EMD) of ₹150 crore. After obtaining the approval of the Stakeholders Consultation Committee (SCC), the liquidator issued an auction notice for the Swiss Challenge process, treating the OASPL’s offer as the anchor bid.

However, S.M. Steels and Power Ltd. (SMSPL), another interested bidder, objected to the process, alleging collusion between OASPL, the liquidator, and the major stakeholder, Assets Care and Reconstruction Enterprise (ACRE). It claimed that the process was non-transparent, violated statutory timelines, and was conducted without prior NCLT approval. The NCLT Kolkata Bench upheld SMSPL’s objection, set aside the private sale, and directed a fresh Swiss Challenge process to be initiated, keeping OASPL’s bid as the anchor offer but requiring the EMD to be fixed as per standard norms. Aggrieved by this decision, both OASPL and SMSPL approached the NCLAT.

Appellant’s Submissions

Orissa Alloy Steels Pvt. Ltd. argued that the Swiss Challenge process was lawfully conducted with 99.92% approval from the SCC and was the result of the Committee’s commercial wisdom, which should not have been interfered with. It submitted that OASPL was a bona fide bidder, having deposited ₹150 crore in EMD, and that the process was carried out transparently in line with Regulation 33. It further contended that SMSPL lacked locus standi, as it had not participated in the earlier nine auctions or in the Swiss Challenge process and had raised objections only after the conclusion of the bidding. The liquidator supported these submissions, stating that the process was conducted in consultation with the SCC, and that an application seeking the NCLT’s approval had already been filed before completion of the sale process.

Respondent’s Submissions

SMSPL, on the other hand, argued that the sale process was riddled with procedural irregularities and violated the mandatory requirements of Schedule I of the Liquidation Regulations. It pointed out that the auction notice allowed only 6 days for submission of eligibility documents, 5 days for inspection, and 8 days for EMD deposit, contrary to the prescribed minimum 14 days and 10 days under the regulations. SMSPL further contended that the EMD of ₹150 crore, far exceeding the 10% ceiling under Schedule I, and the last-minute issue of process documents rendered the bidding exclusionary and opaque. It also alleged collusion between OASPL and ACRE, which the liquidator failed to report to the NCLT as required under Regulation 33(3).

Tribunal’s Observations

The Appellate Tribunal upheld the NCLT’s order, finding that the liquidator erred in conducting the private sale without prior approval of the Adjudicating Authority. Referring to Regulation 33(2)(d) of the Liquidation Regulations, it held: “The liquidator was required to obtain prior permission from the Adjudicating Authority before proceeding with the private sale transaction, which not having been done, to our minds, tantamount to an infraction of the LPR.”   The bench noted that the liquidator’s act of conducting the sale first and seeking ex post facto approval was contrary to the express mandate of the regulation. The NCLAT also criticised the compressed sale timelines, holding that they curtailed bidder participation and defeated the objective of value maximisation under the IBC. It observed: “The manner in which the private sale process was conducted stamped out meaningful participation of bidders, which in turn impeded procuring the highest possible price. The Process Document, instead of providing a level playing field to all potential bidders, precluded genuine bidders from competing to procure the highest value.”

On Alleged Collusion

Addressing the allegations of collusion between ACRE and OASPL, the Tribunal found no concrete material to support such a finding. It clarified: “The Liquidator should have ‘reason to believe’ that there is collusion and not merely harbour reasons to suspect. The belief must be held in good faith and cannot be predicated on unsubstantiated doubts.”

On Locus of SMSPL

Rejecting the contention that SMSPL lacked locus standi, the NCLAT held that SMSPL had intervened before the NCLT’s final approval, and hence its objections were maintainable. It stated: “In the present case, we find that the Liquidator had completed the private sale process but the permission of the Adjudicating Authority still remained to be obtained for conclusion of the sale. SMSPL had clearly intervened before the sale was confirmed by the Adjudicating Authority.”  The bench further observed that while the commercial wisdom of the SCC is respected, it cannot override statutory safeguards prescribed under the IBC and the Liquidation Regulations.

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The NCLAT held that prior approval from the NCLT is a mandatory prerequisite for any private sale under Regulation 33(2)(d). The liquidator’s failure to secure such approval rendered the sale process unsustainable.Accordingly, the Tribunal dismissed the appeals and upheld the NCLT Kolkata’s direction to conduct a fresh Swiss Challenge process, keeping OASPL as the anchor bidder and fixing the EMD as per standard norms. No order as to costs was passed.

Appearance

For Appellant: Mr. Abhijeet Sinha, Sr. Advocate with Mr. Vaibhav Gaggar, Mr. Diwakar Maheshwari, Mr. Shounak Mitra, Mr. Saikat Sarkar, Mr. Shreyas Edupuganti, Mr. Zulfiqar Ali and Mr. Saptarshi Mandal, Advocates.

For Respondent: Mr. Dhruv Mehta and Mr. Krishnendu Datta Sr. Advocates with Mr. Anand Varma, Mr. Kaustubh Prakash, Ms. Prachi Bhatia and Ms. Alina Merin Mathew, Advocates. Shri 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).

Cause Title: Orissa Alloy Steels Pvt. Ltd. v. S.M. Steels & Power Ltd. & Ors.

Case No: Company Appeal (AT) (Insolvency) No. 255-257 of 2025

Coram: Justice Ashok Bhushan (Chairperson), Mr. Barun Mitra (Technical Member)