The Madras High Court has held that a pending appeal before the National Company Law Appellate Tribunal (NCLAT) does not restrain a bank from proceeding with the Swiss Challenge auction of stressed assets.

Aban Offshore Limited, a listed public company engaged in offshore drilling operations, had availed multiple credit facilities from PNB. Following persistent defaults, the account was classified as Non‑Performing Asset (NPA) on 2 May 2017, with outstanding dues exceeding ₹ 1,062 crore.

PNB initiated recovery under the SARFAESI Act, issuing notices under Sections 13(2) and 13(4), and later filed an insolvency petition under Section 7 of the Insolvency and Bankruptcy Code (IBC) before the NCLT, Chennai. The NCLT admitted the petition on 1 September 2025, triggering the Corporate Insolvency Resolution Process (CIRP).

The company appealed to the NCLAT, which stayed the insolvency proceedings upon noting a One‑Time Settlement (OTS) proposal submitted by the borrower.

R. Sankaranarayanan, appearing for the petitioner Reji Abraham, argued that the auction violated Articles 14, 19, and 21 of the Constitution and the RBI’s 2025 Directions on Resolution of Stressed Assets and Transfer and Distribution of Credit Risk.

He contended that PNB had ignored the pending OTS proposal and failed to disclose any board‑approved policy governing such transfers. The petitioner maintained that the bank should have allowed the debtor to match the highest bid to protect its interest, and that the auction during the pendency of the NCLAT appeal was arbitrary and unsustainable.

On the other hand, Counsel M. L. Ganesh, representing PNB, countered that Aban Offshore owed over ₹ 1,000 crore and had repeatedly defaulted despite opportunities to settle. He argued that the OTS proposal was rejected after due consideration and that the petitioner, being part of the erstwhile management, was barred under Section 29A of the IBC from participating in any resolution or matching bids.

Counsel relied on precedents including Sri Devi Karumariamman Educational Trust v. Central Bank of India (2020 SCC OnLine Mad 21516) and Ravi Development v. Shree Krishna Prathisthan [(2009) 7 SCC 462], to assert that adoption of the Swiss Challenge Method does not violate Article 14. He also cited Bijnor Urban Co‑operative Bank Ltd. v. Meenal Agarwal [(2023) 2 SCC 805] to emphasize that granting OTS benefits lies within the commercial wisdom of banks, not judicial mandate.

The Division Bench comprising Chief Justice Sushrut Arvind Dharmadhikari and Justice G. Arul Murugan noted that the NCLAT had already recorded PNB’s rejection of the OTS proposal and held that “there was no possibility of settlement between the parties.”

The Bench observed that the pendency of the appeal did not bar the bank from proceeding with the auction, as the issue of OTS acceptance or rejection no longer survived. It further held that the petitioner’s plea to match the highest bid was untenable in view of Section 29A, which disqualifies erstwhile management from participating in resolution processes.

On the challenge to the Swiss Challenge Method, the Court reiterated that the procedure had been upheld by both the Madras High Court and the Supreme Court, and judicial interference in commercial decisions of banks is warranted only when actions are arbitrary or illegal which was not the case here.

Finding no merit in the petitioner’s contentions, the Court dismissed the writ petition with no order as to costs, closing all connected applications.

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