Pranav B Prem

The National Company Law Tribunal (NCLT), Bengaluru Bench, comprising Shri Sunil Kumar Aggarwal (Judicial Member) and Shri Radhakrishna Sreepada (Technical Member), has held that the sale of a corporate debtor’s assets cannot be permitted at a reserve price reduced beyond the statutory 25% limit, as such a move would violate the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016. The Bench also clarified that this restriction cannot be bypassed even by invoking the Adjudicating Authority’s powers under Section 60(5) of the Insolvency and Bankruptcy Code (IBC), as doing so would amount to creating a procedural or substantive remedy not contemplated in the statute.

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The application was filed by Smt. Ramanathan Bhuvaneshwari, Liquidator of Supreme Overseas Exports India Pvt. Ltd., under Section 60(5) of the IBC read with Schedule I(8) of the Liquidation Regulations and Rule 11 of the NCLT Rules, seeking permission to sell the remaining movable assets of the corporate debtor through a physical auction at a reserve price reduced beyond the 25% threshold set under Regulation 33, as recommended by the Stakeholders’ Consultation Committee (SCC). The liquidator also sought permission to conduct the auction physically in terms of Schedule I.

The corporate debtor had been ordered into liquidation on 24 April 2024, and the liquidator issued e-auction sale notices dated 12 July 2024, 2 October 2024, and 1 February 2025 for various assets on “as is where is” and “as is what is” basis. While some assets were sold in the 30 October 2024 auction, others — including plant and machinery used in the leather industry, leather inventory, and finished leather jackets — remained unsold. Subsequent auctions reduced prices by 25% as per the Regulations, but still failed to attract buyers. The liquidator stated that further deterioration of raw material and equipment made an immediate sale necessary and proposed a one-time reduction of reserve prices beyond 25% to maximize value.

The SCC, in its meeting on 26 March 2025, approved the proposal with 93.58% voting share in favour. The revised reserve prices were significantly lower than the previous auction values — for instance, the price of steel rotary mat drum assemblies was reduced from ₹33,41,250 to ₹15,00,000, and an RO plant from ₹15,22,500 to ₹4,00,000.

The Tribunal, however, observed that Schedule I to Regulation 33 clearly limits the liquidator’s discretion — the reserve price can be reduced by up to 25% after the first failed auction, and by no more than 10% in each subsequent auction. Permitting a reduction beyond this would directly contravene the Regulations.

The Bench relied on the Supreme Court’s observations in Ebix Singapore Pvt. Ltd. v. Committee of Creditors of Educomp Solutions Ltd. that residuary powers under Section 60(5) of the IBC and Rule 11 of the NCLT Rules must be exercised in harmony with the statutory framework and cannot be used to create remedies not envisaged by law, as that would risk altering the delicate legislative balance of the insolvency regime.

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Applying this principle, the NCLT rejected the liquidator’s prayer to lower the reserve price beyond 25% of the previous auction value, holding that such a step would violate both the letter and spirit of the Liquidation Regulations. However, the Bench allowed the prayer to conduct the sale through physical auction in the manner specified under Schedule I and other applicable provisions of the IBC, and granted liberty to complete the auction process expeditiously within the statutory timelines. Accordingly, the application was partly allowed — the request for reserve price reduction beyond 25% was denied, but physical auction of assets was permitted under the existing legal framework.

Appearance

For I.A No.741/2024: Shri Saravana

For Respondent in I.A No. 592 & 17/2023: Mr. Fazil

For Liquidator: Shri Vineeth Reddy

For R4 in I.A 17/2023: Shri Amit Anand

Cause Title: Supreme Overseas Exports India Private Limited Represented by its Liquidator

Case No: I.A. No. 318 of 2025 in C.P. (IB) No. 89/BB/2021

Coram: Shri Sunil Kumar Aggarwal [Judicial Member], Shri Radhakrishna Sreepada [Technical Member]