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IBC – Auction – Liquidator cannot cancel an auction on expectation of higher price in fresh auction

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 Judgment dated 6.9.2023 of the Supreme Court of India

Sections 5(24) and 29A of IBC – related party and eligibility of resolution applicant.   The IBBI (Liquidation Process) Regulations 2016

On 22.10.2019, the Tribunal admitted the application of Huvepharma Sea (Pune) Pvt Limited under section 9 of IBC against corporate debtor M/s. Amrit Feeds Limited and started CIRP.

On 19.2.2021, the order for liquidation of CD was passed and the Respondent no.2 Liquidator was appointed.

The process for sale of assets of CD was started by the Liquidator.

On 20.7.2021 the appellant bidder was the only bidder, had paid earnest amount of Rs.1 crore, submitted its bid for Rs.10 crores as reserve price.

On 20.7.2021, respondent no.2 had given E-auction certificate to the appellant.

However, on 21.7.2021, the respondent no.2 informed the appellant about cancellation of E-auction held on 20.7.2021 as per clause 3(k) but without assigning the reasons.

By the order dated 12.8.2021, the Tribunal directed the Liquidator to send a communication to the appellant for deposit of sale consideration.

The Liquidator did not challenge this order.

On 10.9.2021 the appellant deposited the entire amount and on 15.9.2021, the Liquidator issued the sale certificate.

However, on 30.11.2021, the Appellate Tribunal allowed appeal of respondent no.1 financial creditor and quashed the order dated 12.8.2021 of the Tribunal.  The appellant – auction purchaser has filed the civil appeal in the Supreme Court.

HELD in para 42 of the judgment that mere expectation of the Liquidator that a still higher price may be obtained can be no good ground to cancel an valid auction and to go for another round of auction.   This would lead to avoidable expenses but also erode credibility of auction process itself.  The Liquidator had no absolute or unfettered discretion to cancel an auction.  Moreover, it was seen that the appellant is a related party of the corporate debtor and ineligible as resolution applicant.

Civil Appeal No.7906 of 2021 – EVA AGRO FEEDS PRIVATE LIMITED VS. PUNJAB NATIONAL BANK AND ANOTHER

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