NCLAT Rules, Mere Allegations Of Fraud Can't Invalidate Auction When Unsuccessful Bidder Failed To Put In Bid Despite Opportunity
Pranav B Prem
The National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, comprising Justice Yogesh Khanna (Judicial Member) and Mr. Indevar Pandey (Technical Member), has held that unsubstantiated allegations of fraud or manipulation cannot be grounds to invalidate a fair auction, particularly when the unsuccessful bidder had full opportunity to participate but failed to place a valid higher bid within the stipulated time.
The Appellant, Jai Agarwal, had challenged the order of the National Company Law Tribunal (NCLT), Jaipur Bench, which dismissed his application seeking to set aside the e-auction conducted by the Liquidator of M/s Atlas Alloy (India) Pvt. Ltd., during the liquidation process. The appellant alleged that the auction was conducted in a non-transparent manner and that another bidder had been introduced at the last moment in collusion with the Liquidator.
The Liquidator, Mr. Satyendra Prasad Khorania, denied the allegations and produced evidence showing that the second bidder, Novelty Textiles, had duly deposited the Earnest Money Deposit (EMD) two days prior to the auction, thereby qualifying as an eligible bidder. The e-auction was conducted through the official portal ncltauction.auctiontiger.net on September 6, 2023, in which Novelty Textiles emerged as the highest bidder with a bid of ₹1,56,55,000, marginally above the appellant’s ₹1,56,30,000.
The appellant alleged that his father, who was present in the Liquidator’s office, had witnessed irregularities and that the Liquidator had interfered with his bidding process. He also claimed that the Liquidator had demanded illegal gratification and introduced a new bidder at the last minute. However, the Tribunal found no material evidence to support these serious allegations.
The NCLAT observed that the technical records clearly showed that the appellant had logged into the system multiple times during the auction from his own computer, not from the Liquidator’s office. The Tribunal noted that the appellant had every opportunity to place a higher bid but instead entered an invalid bid amount and continued taking screenshots instead of increasing his offer. The system automatically rejected his bid for being invalid, and the auction concluded thereafter.
The Bench further observed that the auction portal had built-in safeguards such as automatic time extension, which allowed bidders to place valid bids even in the last moments. The appellant, being logged in continuously, could have availed this feature but failed to do so. His inability to secure the asset, therefore, stemmed from his own inaction rather than any procedural irregularity.
On the issue of alleged bribery and manipulation, the Tribunal held that fraud must be specifically pleaded and proved, and mere suspicion or unsubstantiated accusations cannot invalidate a validly conducted auction. It emphasized that setting aside a completed auction on the basis of bald allegations would undermine the finality and certainty of liquidation proceedings and open the door to endless litigation by disgruntled participants. The Bench concluded: “The material on record clearly demonstrates that the auction was conducted fairly and transparently; that the rival bidder was validly registered; that the appellant was continuously logged in during the entire period and was fully aware of the bidding position; that he failed to place a valid higher bid despite opportunity. The allegations of manipulation or bribery are wholly unsupported by the material on record.”
Accordingly, the NCLAT dismissed the appeal, affirming that the auction process was lawful, transparent, and in compliance with the IBC and that no fraud, collusion, or material irregularity had been established.
Appearance
For Appellant: Mr. Avin Chhangani, Advocate.
For Respondents: Mr. Naresh Kumar Sejvani, Advocate for R-3. Mr. Amol Vyas, Liquidator. Mr. Ankit Raj, Mr. Mohammed Khan, Advocates for R-2.
Cause Title: Jai Agarwal Versus Satyendra Prasad Khorania
Case No: Company Appeal (AT) (Ins.) No. 30 of 2024
Coram: Justice Yogesh Khanna, Mr. Indevar Pandey (Technical Member)
