Pranav B Prem

The National Company Law Appellate Tribunal (NCLAT), New Delhi Bench, has held that a public auction is not compulsory for the sale of encumbered assets of a corporate debtor when secured creditors consent to such a transaction under Regulation 29 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.

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A Bench comprising Justice Ashok Bhushan (Chairperson) and Arun Baroka (Technical Member) set aside the order of the National Company Law Tribunal (NCLT), New Delhi Bench, which had directed the Resolution Professionals (RPs) of Arshiya Group companies to conduct independent bidding for the sale of non-core assets of Arshiya Limited during its Corporate Insolvency Resolution Process (CIRP). The Tribunal held that the commercial wisdom of the Committee of Creditors (CoC) in approving such a sale could not be interfered with by the Adjudicating Authority, and that public auction is not the only viable or mandatory method for price discovery where the CoC has already ensured value maximization through fair valuation mechanisms.

Background

The appeals were filed by Pankaj Mahajan and Bhuvan Madan, Resolution Professionals representing Arshiya Limited, NCR Rail Infrastructure Limited, and Arshiya Northern FTWZ Limited (ANFL)—three interlinked entities undergoing CIRP before different benches of the NCLT, Mumbai.

The dispute arose after the Committee of Creditors (CoC) of Arshiya Limited approved the sale of 42.08 acres of non-core land parcels, which included 39.56 acres within NCR Rail Infrastructure’s railway siding operations and 2.52 acres forming part of a spine road providing essential access to ANFL and NCR Rail assets. The sale was approved under Regulation 29 of the CIRP Regulations, with 85.46% CoC voting in favor, citing operational synergy and enhanced value realization within the Khurja Free Trade Warehousing Zone (FTWZ).

However, while granting in-principle approval, the NCLT New Delhi had directed the RPs to invite independent bids from all prospective resolution applicants to ensure transparency in price discovery. This directive was challenged before the NCLAT, with the RPs and CoC contending that the NCLT had overstepped its jurisdiction by interfering in the CoC’s commercial decision.

Tribunal’s Findings

The Appellate Tribunal found that the NCLT exceeded its jurisdiction by issuing directions that intruded into the CoC’s domain and affected the CIRPs of separate companies pending before different NCLT benches. The NCLAT emphasized that Section 30(2) of the IBC restricts judicial review of CoC’s decisions to ensuring compliance with the Code and the accompanying regulations. The Bench held that the manner of sale and valuation of assets lies exclusively within the commercial wisdom of the CoC, and that judicial authorities cannot second-guess such commercial choices. “The CoC’s preference for an outright transfer, at fair value, to entities that will unlock operational synergies is commercially rational, within the CoC’s exclusive domain, and thus non-justiciable. Judicial review of the CoC’s decision on matters of commercial wisdom is impermissible, save to the limited extent necessary to ensure compliance with the Code,” the Bench observed.

Rejecting the NCLT’s insistence on public auction, the NCLAT clarified that while auctions are one possible method of achieving transparent price discovery, they are not mandatory. “Public auction is not the sole feasible method of price discovery. The CoC’s process ensured value maximization consistent with the Code, through valuations by two independent agencies and a decision not to sell below the average fair market price,” the Tribunal stated.

On Sale Of Encumbered Assets

The NCLAT also addressed the legality of selling encumbered assets during CIRP. Citing its previous ruling in Jet Aircraft Maintenance Engineers Welfare Association v. Ashish Chhawchharia & Ors., the Bench held that sale of encumbered assets is permissible under Regulation 29 if secured creditors expressly consent to the transaction.

In the present case, Edelweiss ARC and SREI Equipment Finance Ltd., both being charge holders and CoC members, had expressly consented to the sale, fulfilling the legal requirement.“Edelweiss ARC and SREI Equipment Finance Ltd., being charge-holders and CoC members, expressly consented to the transaction. This is functionally equivalent to a waiver of prejudice that Regulation 29 guards against,” the Bench held. The Tribunal further observed that each CIRP is a distinct statutory process, and therefore, the NCLT erred in linking the sale of Arshiya Limited’s assets with the bidding processes in the CIRP of NCR Rail and ANFL. “Such directions conflate separate proceedings and render the Corporate Debtor’s CIRP contingent upon outcomes of parallel CIRPs, which is impermissible,” the Bench ruled.

On Regulation 36A(1A)

The NCLAT also noted that Regulation 36A(1A)—which allows the invitation of expressions of interest for the sale of assets—was inserted in the CIRP Regulations only on May 26, 2025, after the CoC had already approved the sale on March 18, 2025. Therefore, the regulation could not be applied retrospectively to invalidate the transaction. “Not only Regulation 36A(1A), but no other provision in the Code allows invitations of bids for sale of assets owned by a separate entity in the CIRP of another Corporate Debtor. Furthermore, Regulation 36A(1A) was introduced much after the CoC’s approval and is prospective in nature,” the Bench clarified.

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Allowing the appeals, the NCLAT set aside the NCLT’s directions for independent bidding and upheld the CoC’s approval of the sale under Regulation 29 of the CIRP Regulations. “The CoC’s commercial decision having been taken with requisite majority and in compliance with the Code, the NCLT’s order directing independent bids is unsustainable in law,” the Tribunal concluded. Accordingly, the Tribunal permitted the sale of the 42.08 acres of non-core land parcels of Arshiya Limited as approved by the CoC.

Appearance

For Appellant: Mr. Abhijeet Sinha, Sr. Advocate with Mr. Ayush Rajani and Ms. Heena Kochar, Advocates

For Respondent: Mr. Arvind Nayyar, Sr. Advocate with Mr. Vivek Jain, Mr. Swapnil Srivastava, Mr. Abhishek Gupta, Mr. Chirag Naik, Mr. Jayesh Srivastava, Mr. Rishabh Periwal, Mr. Shubham and Ms. Diksha Dadu, Advocates. Mr. Arun Kathpalia, Sr. Advocate with Ms. Misha, Ms. Mahima Sareen, Mr. Abhilash Chaudhary and Ms. Sanjukta Fauzdar and Ms. Diksha Gupta Advocates for R1-R8, R-11 and R-12 CoC.

Cause Title: Pankaj Mahajan Versus Edelweiss Asset Reconstruction Asset Company

Case No: Company Appeal (AT) (Insolvency) No. 1450 of 2025

Coram: Justice Ashok Bhushan (Chairperson), Arun Baroka (Technical Member)