September 9, 2023 In Uncategorized


In a recent case of Eva Agro Feeds Private Limited Vs Punjab National Bank And Anr. Civil Appeal No.7906 of 2021, a two Judge Bench of the Supreme Court comprising of Justice B. V. Nagarathna and Justice Ujjal Bhuyan passed a Judgment dated 06-09-2023 and held that the Liquidator was not justified in rejecting the Appellant’s highest bid without citing any reasons thereof and thereby, going ahead to conduct another round of auction merely on the expectation that a still higher price may be obtained.


i) In the present case, one, Huvepharma Sea Private Limited filed an Application under Section 9 of the Insolvency and Bankruptcy Code 2016 (IBC) (Application for initiation of corporate insolvency resolution process by operational creditor) against M/s. Amrit Feeds Limited (Corporate Debtor) before the Hon’ble National Company Law Tribunal, Kolkata (NCLT) in CP(IB) No.440/KB/2018, which was admitted vide Order dated 22-10-2019.

ii) Subsequently, the NCLT ordered for liquidation of the Corporate Debtor, vide Order dated 19-02-2021 and appointed Mr. Sunil Mohan Acharya, the Respondent No. 2 herein as the Liquidator.

iii) The Liquidator fixed a date of 23-06-2021 for sale of assets of the Corporate Debtor by way of auction. However, the auction did not materialise and hence, the Liquidator scheduled another auction for 20-07-2021, by Email dated 29-06-2021, wherein, various immovable properties of the Corporate Debtor in Mirzapur, Uttar Pradesh with building, plant and machinery and other fixed assets (Subject Property) were put up for auction.

iv) In the said auction, the Appellant- Eva Agro Feeds Private Limited submitted its Bid dated 16-07-2021 and paid the Earnest Money Deposit (EMD) of Rs. 1 Crore in respect of the Subject Property.

v) Thereafter, the Appellant received an e-Auction Certificate on 20-07-2021 from the Liquidator, thereby certifying that the Appellant had won the auction for the assets of the Corporate Debtor that were put up for auction sale.

vi) However, the next day, the Appellant received an Email dated 21-07-2021 from the Liquidator, thereby, informing him that the e-Auction had been cancelled under Clause 3(k) of the Disclaimer Clause in the E-Auction Process Information Document and that a fresh e-Auction would be conducted for the Subject Property.

vii) Aggrieved, the Appellant filed an Application before the NCLT under Section 60 of IBC (Adjudicating Authority for corporate persons) in A. (IB) No.663/KB/2021 in CP (IB) 440/KB/2018, which was allowed, vide Order dated 12-08-2021 and by the said Order, the Liquidator was directed to send a communication to the Appellant requiring the latter to deposit the balance sale consideration within the time specified in the e-Auction Notice dated 28-06-2021 that was issued for auction sale of the assets of the Corporate Debtor of 20-07-2021.

viii) Thus, the Liquidator issued a Letter to the Appellant to deposit the balance consideration. Accordingly, the Appellant deposited the balance amount on 10-09-2021, following which, the Liquidator issued a Sale Certificate dated 15-09-2021 in respect of the Subject Property in favor of the Appellant.

ix) However, the Respondent No. 1, the Punjab National Bank, i.e. one of the Financial Creditors of the Corporate Debtor filed an Appeal against the NCLT Order dated 12-08-2021 in Company Appeal (AT) (Insolvency) No.757 of 2021 before the Hon’ble National Company Law Appellate Tribunal, Principal Bench, New Delhi (NCLAT) under Section 61 of IBC (Appeals and Appellate Authority). The said Appeal was allowed by NCLAT, vide Order dated 30-11-2021 and as a result, the NCLT Order dated 12-08-2021 was set aside. Accordingly, the Liquidator was allowed to initiate fresh process of auction.

Supreme Court Observations

Aggrieved, the Appellant i.e. the Successful Bidder, filed Civil Appeal No.7906 of 2021 before the Hon’ble Supreme Court against the NCLAT Order dated 30-11-2021. The Apex Court, vide Order dated 06-09-2023, made the following observations:

(1) That Clause 3 (k) of the Auction Sale Notice dated 28-06-2021 that was issued for auction sale of the Subject Property of 20-07-2021, provides that the Liquidator has the absolute right to accept / reject any or all the bids or adjourn / postpone / cancel the e-Auction or withdraw any asset / property / portion thereof from the e-Auction at any stage without assigning any reason.

(2) Further, as per Clause 5 (m) of the Auction Sale Notice dated 28-06-2021, the bidder with the highest offer / bid does not get any right to demand acceptance of its bid.

(3) However, in the present case, the Liquidator initially confirmed to the Appellant that the latter had won the Auction in respect of the Subject Property by Email dated 21-07-2021. Only after the Appellant sought for issue of allotment letter, the Liquidator sent an Email on the same day, informing the Appellant about cancellation of the e-Auction without citing any reasons thereof.

(4) On the aforesaid ground, the NCLT had, vide Order dated 12-08-2021, held that the Liquidator had cancelled the e-Auction as he had anticipated higher price in future auction process, which cannot be allowed, as there cannot be an endless wait to obtain a better price, and hence, the NCLT directed the Liquidator to communicate to the Appellant to deposit balance sale consideration.

(5) Furthermore, as per other provisions of the Schedule-I of the Regulations, ordinarily the highest bid may be accepted by the Liquidator unless there are statutory infirmities in the bidding / the bidding is collusive in nature / there is an element of fraud in the bidding process. Hence, entertaining of objections after the sale is confirmed ought not to be allowed, except on such limited grounds.

(6) Further, the Liquidator had not challenged the aforementioned NCLT Order dated 12-08-2021 before the NCLAT and rather, went ahead to comply with the directions of the said Order.

(7) As per Clause 11 A of the Schedule I of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 (Regulations) (Mode of sale), “Where the liquidator rejects the highest bid in an auction process, he shall intimate the reasons for such rejection to the highest bidder and mention it in the next progress report”. Although the said Clause was inserted w.e.f. 30-09-2021, i.e. much prior to the e-Auction held on 20-07-2021, however, the principle behind introducing such clause remained the same, i.e. the principle of natural justice which requires furnishing of reasons to reject a bid of the highest bidder. The said principle is elaborated as follows:

(i) “It does not imply that an auction sale or the highest bid prior to the aforesaid date could be cancelled by the Liquidator exercising unfettered discretion and without furnishing any reason.”

(ii) “It is trite law that furnishing of reasons is an important aspect rather a check on the arbitrary exercise of power.”

(iii) “Furnishing of reasons presupposes application of mind to the relevant factors and consideration by the concerned authority before passing an order. Absence of reasons may be a good reason to draw inference that the decision making process was arbitrary.”

(iv) “Furnishing of reasons, which is an integral facet of the principles of natural justice, is embedded in a provision or action, whereby the highest bid is rejected by the Liquidator”

(8) Thus, intimation of reasons for rejection of highest bid ought to have been given by the Liquidator to the Appellant.

(9) Furthermore, even in the subsequent e-Auction, the Liquidator had announced the same reserve price of Rs. 10 Lakhs as the earlier one, in which the Appellant had emerged as the highest bidder. The Liquidator proceeded with the subsequent auction merely on the expectation that a still higher price may be obtained, however, the Bench held that the same cannot be a reasonable ground to cancel an otherwise valid auction and go for another round of auction and more so, when there is no proof of fraud or collusion that vitiated the earlier auction and necessitated the conducting of another auction.


Hence, based on the aforesaid observations, the Bench held that there was no justification in rejecting the Appellant’s bid and going for another round of auction. As a result, the Appeal filed by the Appellant-Successful Bidder was allowed and the NCLT Order dated 12-08-2021 that directed the Liquidator to send a communication to the Appellant requiring the latter to deposit the balance sale consideration, was upheld and the NCLAT Order dated 30-11-2021 that allowed the Liquidator to conduct fresh auction, was set aside.

Harini Daliparthy

Senior Associate

The Indian Lawyer

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