Validity of E-Auction Upheld: NCLAT Dismisses Claims of Undervaluation and Procedural Irregularities
- REEDLAW
- Sep 5, 2024
- 2 min read
NCLAT Upheld the Validity of the E-Auction, Dismissing Claims of Undervaluation and Procedural Irregularities.
The National Company Law Appellate Tribunal (NCLAT), Principal Bench led by Justice Ashok Bhushan (Chairperson) and Technical Members Mr. Barun Mitra and Mr. Arun Baroka reviewed an appeal and upheld the NCLT's decisions by affirming that the e-auction of the shares, conducted with the proper valuation and according to legal procedures, was valid and rejecting the Appellant’s claims of undervaluation and procedural errors.
In Interlocutory Application Nos. 2504 and 2507 of 2024, the NCLAT condoned the delays of 3 days and 14 days in filing the appeals, respectively, as sufficient cause was shown. In Company Appeal (AT) (Insolvency) Nos. 702 and 703 of 2024, the appeals were filed against a common order dated January 12, 2024, by the National Company Law Tribunal (NCLT) Kolkata. The NCLT had rejected IA No. 334(KB) 2023, filed by the Appellant challenging the sale of 77,500 equity shares of Alliance Broadband Services Pvt. Ltd., and allowed IA No. 497(KB) 2023, which sought to declare the highest bidder in an e-auction as successful and issue a Sale Certificate.
The Appellant, a suspended director of the Corporate Debtor, argued that the shares were sold undervalued and that proper valuation was not conducted by the Liquidator. The Appellant also contended that the Liquidator lacked possession of the shares and that the right issue of the shares was still under challenge. The Liquidator and the Successful Auction Purchaser refuted these claims, asserting that the sale was conducted as per the legal process, with proper valuation and in accordance with the e-auction notice.
The NCLAT noted that the shares were valued at Rs. 9.21 crores by an IBBI-registered valuer and were sold for Rs. 9.61 crores, higher than the reserve price. It was found that the valuation process and auction notices were transparent, and the challenge to the right issue did not affect the auction sale. The Court held that there was no error in the NCLT's decision to dismiss IA No. 334(KB) 2023 and approve IA No. 497(KB) 2023. Consequently, the NCLAT dismissed both appeals, ruling in favour of the Liquidator and the Successful Auction Purchaser, with no order as to costs.
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