2021 (8) TMI 988 - Tri - Insolvency and Bankruptcy

Scope of Company - company within the meaning of the Companies Act 2013 - whether the Liquidator was justified in cancelling the e-auction after the auction was successfully concluded and the highest bidder stood identified? - HELD THAT - There was no reason for the Liquidator to cancel the e-auction under consideration in the present matter especially when we see that the two earlier rounds of the auction process did not fructify and the reserve price had to be decreased on each auction. There is no material on record to sustain the perception of the Liquidator that cancelling the present auction would have resulted in a better price for the assets in question. There cannot be an endless wait to get the best price for the asset especially when there is no material to support a conjecture that there may be a better price for the asset. Application disposed off.

Summary

Issues:
1. Justification of the Liquidator in cancelling the e-auction after the highest bidder was identified.

Analysis:
The case involved a dispute where the Liquidator cancelled an e-auction after the highest bidder was declared. The applicant, a group company of "Eva Group," participated in the auction, submitted a bid of ?10 crore, and was declared the successful bidder. However, the Liquidator abruptly cancelled the e-auction, citing clause 3(k) of the e-auction process document. The applicant challenged this cancellation, alleging unfair conduct by the Liquidator.

The Adjudicating Authority examined the relevant regulations under the Insolvency and Bankruptcy Code, 2016, and the Liquidation Process Regulations. It was noted that the highest bidder is required to provide the balance sale consideration within a specified period, and once identified, the Liquidator does not have the discretion to cancel the auction or revisit the bid. The regulations prohibit the Liquidator from proceeding with a sale if collusion is suspected, but in this case, there was no evidence of collusion.

The Liquidator argued that clause 3(k) of the e-auction process document granted the right to cancel the auction without providing a reason. However, the Authority rejected this argument, emphasizing that such unbridled discretion contradicts the regulatory framework. Under the Insolvency and Bankruptcy Code, the process must adhere to the regulations without arbitrary cancellations.

Ultimately, the Adjudicating Authority found in favor of the applicant, directing the Liquidator to communicate with the successful bidder for the balance sale consideration within the specified time. The cancellation of the e-auction was deemed unjustified, and the Liquidator was instructed to comply with the regulations, ensuring fair treatment of bidders and adherence to the auction process.

In conclusion, the judgment highlighted the importance of upholding the integrity of the auction process in insolvency proceedings, emphasizing transparency, fairness, and adherence to regulatory guidelines to protect the interests of all parties involved.