NCLAT upheld the validity of the liquidation process as the delay in challenging the auction and the issuance of the sale certificate rendered the appeal futile.
On 10-03-2025, the National Company Law Appellate Tribunal (NCLAT), Chennai Bench, comprising Justice Sharad Kumar Sharma (Judicial Member) and Mr. Jatindranath Swain (Technical Member), reviewed an appeal along with interlocutory applications (IAs) and held that once an auction is concluded, the sale certificate is issued, and distributions are made, reopening the process would be futile—especially when the appellant failed to act diligently and delayed challenging the auction. The Tribunal found no substantial question of law in the objections raised and upheld the validity of the auction process conducted in accordance with the applicable liquidation regulations.
The Appellant in the present Company Appeal challenged the propriety of the Impugned Order dated 11.03.2024, passed by the Learned NCLT, Division Bench II, Chennai, in IA(IBC)/1123(CHE)2023, in CP(IB)/377(CHE)2020. The application was preferred under Section 60(5) of the Insolvency and Bankruptcy Code (IBC), read with Regulation 2B of the IBBI (Liquidation Process) Regulations, 2016. The Appeal was accompanied by two interlocutory applications: IA No. 128/2025, seeking a stay on the operation of the impugned order, and IA No. 127/2025, seeking condonation of a delay of 224 days in re-filing the appeal.
The Appellant, the Ex-Managing Director of the Corporate Debtor, sought to declare the auction notice dated 20.05.2023 and the consequential sale as null and void. He also prayed for condonation of the delay in submitting a scheme under Section 230 of the Companies Act, 2013, which was mandated under Regulation 2B of the Liquidation Regulations. The Corporate Debtor had been admitted into liquidation by an order dated 09.09.2022. The Liquidator attempted three auctions to sell the Corporate Debtor as a going concern, all of which failed. Subsequently, on 20.05.2023, the Corporate Debtor was auctioned on a piecemeal basis, and the sale was concluded on 11.06.2023, with the sale certificate issued on 17.07.2023. Aggrieved by this, the Appellant filed IA No. 1123/2023, which was dismissed by the Learned Adjudicating Authority.
The Respondent No. 1 objected to the Appellant’s application, arguing that the auction had been completed and the sale certificate had been issued, crystallizing the rights of the auction purchaser, M/s Chinar Steel Segment Centre Pvt. Ltd. The Respondent further contended that the sale had been confirmed, distributions had been made, and a progress report had been submitted to the Adjudicating Authority. The Tribunal held that, considering the developments following the auction, there was no substantive ground to grant relief in IA(IBC)/1123(CHE)2023.
The Appellant contended that the issue could still be examined due to procedural flaws in the auction process. However, the Tribunal observed that the Appellant himself was responsible for the delay in challenging the auction notice and had failed to act diligently. The Appellant had also sought to implead the auction purchaser during the pendency of IA(IBC)/1123(CHE)2023, which was allowed by the Adjudicating Authority on 21.12.2023. The appeal against the impugned order was filed before the Appellate Tribunal on 13.04.2024, but defects in filing were not rectified in time, resulting in a re-filing only on 23.12.2024, after a delay of 224 days.
The Tribunal noted that the Appellant’s reasons for seeking condonation of delay in re-filing the appeal were vague and lacked documentary evidence. However, in the interest of justice, the delay was condoned, and the appeal was considered on merit. The Tribunal further observed that the Appellant had failed to act diligently, allowing the auction to be finalized and the sale certificate to be issued on 17.07.2023. The Appellant argued that the auction process did not comply with Schedule I (1)(1E) and Schedule I (1)(5) of Regulation 31A(2) of the Liquidation Regulations and that the constitution of the Stakeholders' Committee was unfair. However, the Tribunal found that these objections were not substantial questions of law and that the auction process had been conducted in accordance with the applicable regulations.
The Tribunal held that the impugned order was not a non-speaking order, as the Adjudicating Authority had considered the facts, including the confirmation of sale and distribution of proceeds. Given the developments after the auction and the Appellant’s failure to act in time, the Tribunal found no merit in the appeal. Since the auction had been concluded and the sale certificate issued, the Tribunal ruled that reopening the process would be futile. Consequently, the appeal was dismissed.
Mr. Raghav Menon, Advocate, represented the Appellant.
Mr. T Ravichandran, Advocate, appeared for Respondent No. 1.
Ms. Shalya Agarwal, the Advocate, appeared for Respondent No. 2.
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