NCLAT Sets Aside Private Sale of Corporate Power Ltd, Directs Liquidator to Hold Fresh Swiss Challenge Auction with EMD Capped at 10% of ₹265 Cr Reserve Price
The NCLAT clarified that the NCLT had already granted approval for sale of CPL's assets by private sale, thereby meeting the necessary regulatory requirement
The National Company Law Appellate Tribunal (NCLAT), Principal Bench at New Delhi, has issued a significant ruling in the liquidation of Corporate Power Limited (CPL), setting aside the earlier private sale process and directing the liquidator to conduct a fresh sale via the Swiss Challenge Mechanism.
The judgment was delivered in a batch of appeals filed by Orissa Alloy Steel Private Limited (OASPL), the original anchor bidder, and SM Steels and Power Limited (SMSPL), which had challenged the process.
Corporate Power Limited was admitted into Corporate Insolvency Resolution Process (CIRP) in March 2020 and subsequently moved into liquidation. After multiple unsuccessful e-auctions, OASPL submitted a private sale offer of ₹265 Crore, which the Stakeholders’ Consultation Committee (SCC) approved.
A Swiss Challenge was then initiated with OASPL as the anchor bidder. However, the process failed to attract any competing bids, a factor the Tribunal found was directly linked to the restrictive and opaque conditions imposed by the liquidator.
The NCLAT bench, led by Justice Ashok Bhushan (Chairperson), observed serious procedural flaws in the previous sale attempt. Specifically, the Tribunal highlighted that the Earnest Money Deposit (EMD) of ₹150 Crore was disproportionately high and restrictive, severely hindering genuine participation.
Furthermore, the process document was found to be opaque, and the timelines for submitting bids and eligibility documents were deemed "illusory," preventing a level playing field. While SMSPL had raised allegations of collusion, the Tribunal did not find sufficient evidence to support those claims but concurred that the sale process itself suffered from grave irregularities.
NCLAT directed the Liquidator to restart the private sale process under the Swiss Challenge Mechanism. To address the previous issues, the Tribunal mandated that the EMD amount must now be capped at 10% of the reserve price to ensure reasonableness and maximize bidder participation. Importantly, the reserve price for the private sale process will be retained at ₹265 Crore.
The NCLAT also clarified that the Adjudicating Authority (NCLT) had already granted approval for the sale of CPL's assets by private sale, thereby meeting the necessary regulatory requirement. Further, the fresh process must be kept open for all eligible prospective bidders, including both OASPL and SMSPL.
The Tribunal directed the Liquidator to complete the entire liquidation proceedings and the fresh sale process within a period of 60 days from the date of the judgment. In light of these comprehensive directions, both the appeals filed by OASPL and SMSPL were disposed of.
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