Notice Period Of 30 Days Should Be Given For E-Auction, Even Though There Are No Timelines Under Liquidation Regulations: NCLAT Delhi
The National Company Law Appellate Tribunal (“NCLAT”), Principal Bench, comprising of Justice Ashok Bhushan (Chairperson) a nd Shri Naresh Salecha (Technical Member), while adjudicating an appeal filed in Naren Seth v Sunrise Industries & Ors, has held that a notice period of thirty days should be given in e-auction to obtain best value, even though Insolvency &...
The National Company Law Appellate Tribunal (“NCLAT”), Principal Bench, comprising of Justice Ashok Bhushan (Chairperson) a nd Shri Naresh Salecha (Technical Member), while adjudicating an appeal filed in Naren Seth v Sunrise Industries & Ors, has held that a notice period of thirty days should be given in e-auction to obtain best value, even though Insolvency & Bankruptcy Board of India (Liquidation Process) Regulations, 2016 do not provide any timelines. The Bench has set aside an e-auction which was concluded by the Liquidator within five days of issuing Sale Notice.
Background Facts
Ciemme Jewels Ltd. (“Corporate Debtor”) was admitted into Corporate Insolvency Resolution Process (“CIRP”) by the NCLT. When no resolution plans were received, the NCLT ordered liquidation of the Corporate Debtor and Mr. Naren Seth (“Appellant/Liquidator”) was appointed as the Liquidator.
On 02.04.2022, the Liquidator issued a notice for sale of assets and date of E-auction was fixed on 08.04.2022. The Sale Notice was later revised due to certain dates being incorrect. The last date for submission of Expression of Interest by bidders was 04.04.2022. Further, KYC and EMD were to be submitted by 07.04.2022.
The E-auction was concluded by the Liquidator within a span of 5 days including weekends. Apart from the Successful Bidder, other bidders contended that the auction was conducted in haste without giving them adequate opportunity to participate. The E-auction dated 08.04.2022 was challenged before the NCLT.
The NCLT opined that there was no sufficient gap given after issuance of Sale Notice to complete the E-auction exercise and the Liquidator had acted hastily. Accordingly, the E-auction dated 08.04.2022 was set aside and the Liquidator was directed to personally bear the cost of auction/re-auction.
The Liquidator filed an appeal before the NCLAT.
NCLAT Verdict
The Bench observed that merely one day was granted to the bidders to submit KYC, further three days to deposit EMD of Rs. 1.15 Crores and finally one more day till 08.04.2022 to give bids. Thus, the entire liquidation process was supposed to be completed in one week. It was opined that though the Insolvency & Bankruptcy Board of India (Liquidation Process) Regulations, 2016 (“Liquidation Regulations”) do not provide any timelines, but normally a notice period of 30 days is given to obtain best value in auction.
“Although, no specific timelines have been given in the Insolvency & Bankruptcy Board of India (Liquidation Process) Regulations, 2016, normally notice period of 30 days is given to get best value.”
Reliance was placed on Rule 8(6) of the SARFAESI Security Interest (Enforcement) Rules, 2002 which states as under:
“Rule 8 Sake of immovable secured assets
(6) the authorised officer shall serve to the borrower a notice of thirty days for sale of the immovable secured assets, under sub-rule (5) ***”
The Bench held that sufficient time of 30 days ought to have been given by the Liquidator after issuance of Sale Notice and the Liquidator acted in haste to conclude the E-auction.
The NCLT order has been upheld and the appeal has been dismissed.
Case Title: Naren Seth v Sunrise Industries & Ors.
Case No.: Company Appeal (AT) (Insolvency) No. 401 of 2023
Counsel for Appellant: Mr. Asav Rajan, Advocate.
Counsel For the Respondent: Mr. Malak Bhatt & Ms. Tanishka Khatana, Advocates.