The Chennai Bench of National Company Law Appellate Tribunal ( NCLAT ) upheld the e-auction process, prioritizing the sale of the Corporate Debtor ( CD ), as a going concern over a Scheme of Arrangement proposed under Section 230 of the Companies Act, 2013.
Narottamka Trade, appellant, a minority shareholder in M/s. Kamachi Industries ( Corporate Debtor ), challenged the process surrounding the liquidation of the Corporate Debtor. The Corporate Debtor entered the Corporate Insolvency Resolution Process ( CIRP ) on 19.02.2020, following an application by the State Bank of India for non-payment of debt. After the Committee of Creditors ( CoC ) rejected three Resolution Plans, it voted for liquidation on 14.09.2021, confirmed by the National Company Law Tribunal ( NCLT ) on 09.12.2022.
The Liquidator issued a Public Announcement for sale on 16.10.2023, later canceling the initial auction notice and issuing a fresh one on 27.12.2023. The e-auction was held on 31.01.2024, resulting in the issuance of a Letter of Intent to the highest bidders, which the tribunal approved on 19.07.2024.
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The appellant proposed a Scheme of Arrangement on 18.10.2023, which was rejected by the Stakeholders Consultation Committee (SCC) on 31.01.2024. The appellant’s application to set aside the e-auction and prioritize their Scheme over the sale process was dismissed by the NCLT on 19.07.2024.
On appeal, the appellant argued that its Scheme should have been prioritized and assessed through a Creditors’ meeting under Section 230(1) of the Companies Act, 2013, rather than being rejected by the SCC. The appellant also claimed that the Liquidator violated Regulation 2B of the IBBI (Liquidation Process) Regulations, 2016, which mandates a 90-day period for completing the Scheme process.
The respondents contended that the e-auction sale, conducted under Regulation 32(e) & 32A, was complete and aligned with the legislative objective of keeping the Corporate Debtor as a going concern.
The NCLAT upheld the NCLT’s decision, emphasizing that the sale of the Corporate Debtor as a going concern met the IBC’s objective. It noted that the appellant’s Scheme was submitted beyond the 90-day limit and that the SCC was competent to reject it. The NCLAT dismissed the appeal, stating that minor procedural discrepancies in the e-auction did not impact its validity.
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