Liquidator Must Not Restrict Sale Of Corporate Debtor's Assets Through Private Sale To Single Buyer, Must Strategise To Attract Multiple Buyers: NCLT Mumbai
The National Company Law Tribunal (NCLT) Mumbai bench of Shri Anil Raj Chellan (Judicial Member) and Shri K. R. Saji Kumar (Technical Member) while disallowing the Liquidator's application for the private sale of the Corporate Debtor's assets, it was held that the Liquidator must not restrict the private sale to a single buyer but should strategize to attract the maximum number of buyers...
The National Company Law Tribunal (NCLT) Mumbai bench of Shri Anil Raj Chellan (Judicial Member) and Shri K. R. Saji Kumar (Technical Member) while disallowing the Liquidator's application for the private sale of the Corporate Debtor's assets, it was held that the Liquidator must not restrict the private sale to a single buyer but should strategize to attract the maximum number of buyers to maximize realization from the asset sale.
Brief Facts:
The Corporate Debtor was admitted to the Corporate Insolvency Resolution Process (CIRP) vide order dated 23.11.2017. However, as no Resolution Plan was approved by the Committee of Creditors (CoC), the Adjudicating Authority ordered liquidation pursuant to an Order dated 07.10.2020, wherein the Applicant was appointed as the Liquidator of the Corporate Debtor.
Thereafter, the applicant, in consultation with the Stakeholders' Consultation Committee (SCC), decided to categorise the said Asset as Not Readily Realisable Assets (NRRA) under Regulation 37A of the Liquidation Process Regulations. The said Asset was put to public auction, treating it as NRRA on 20.07.2024 but no bids were received.
As an NRRA, two public announcements were made. In the second public announcement, made on 05.09.2024, an offer of Rs.27,35,000/- was received from Bhubnesh Commercial Private Limited. This offer was subsequently revised by its associate company Amrex Marketing Private Limited to Rs. 35,00,000/-. Amrex Marketing Private Limited has deposited Earnest Deposit Money (EMD) of Rs. 3,00,000/-
The offer was discussed in the SCC meeting held on 10.10.2024 and was put for voting from 17.10.2024 to 27.11.2024. However, 63.70% voted in favour and 30.78% voted against and 5.92% abstained from voting.
In this background, the applicant filed the present application seeking approval of Adjudicating Authority for the private sale in favour of Amrex Marketing Private Limited.
Contentions:
The Applicant submitted that the Applicant has made every endeavor to sell the assets of the Corporate Debtor, but the same has not been sold till date. This demonstrates a lack of market interest in the conventional auction method, necessitating an alternative mechanism such as a private sale to achieve asset realisation.
Lastly, it was submitted that the proposed private sale adheres to Regulation 31A (10), which permits private sales under specific circumstances, such as the failure of public auctions and the asset's classification as an NRRA.
Observations:
The Tribunal noted that the most recent failed auction had a reserve price of ₹71,76,839/-. The present offer is significantly lower. Additionally, the proposal for a private sale at Rs 35,00,000 lacked the required majority and was rejected under Regulation 32A(9) of the Liquidation Process Regulations.
The Tribunal further observed that the Liquidation Regulations provides for certain checks and balances on the private sale as outlined in schedule I which includes strategizing to attract buyers, liaising with potential purchasers or their agents, completion of sale in accordance with the terms of sale etc. The process of conducting the private sale must aim to maximise the realisations from the sale of the assets.
The National Company Law Appellate Tribunal (NCLAT) held in State Bank of India Vs. Bhuvee Stenovate Private Limited and Ors that the liquidator must not limit the private sale to a single buyer but should strategise to attract multiple buyers to maximise asset realisation.
Based on the above, the Tribunal held that there is no evidence on record that the Applicant formulated a strategy to attract buyers for a private sale to maximise asset realisation. Additionally, the liquidation value of the asset has not been determined to justify the ₹35,00,000/- offer. Therefore, the private sale at this price cannot be allowed and the liquidator was directed under section 35 of the code as follows-
The Liquidator shall issue a fresh notice of sale in two widely circulated newspapers inviting bids above the offer of Amrex Marketing Private Ltd. The Swiss Challenge Method shall be used with Amrex's bid as the anchor bid. Interested bidders must submit 10 percent of the bid amount as EMD. If a higher bid is received, Amrex Marketing Private Ltd. will have the option to match the bid.
Accordingly, the present application was dismissed.
Case Title: Avil Menezes Liquidator of Parekh Aluminex Limited
Case Number: IA No.492 of 2025 IN CP (IB)/1262/MB/C-II/2017
Order Date: 18/03/2025
For the Applicant : Adv. Aniruth Purusothaman
