NCLAT Rejects Late Higher Bid in Hema Automotive Liquidation, Says Fairness Must Protect Entire Process, Not Just One Bidder

NCLAT Rejects Late Higher Bid in Hema Automotive Liquidation, Says Fairness Must Protect Entire Process, Not Just One Bidder

Introduction

The National Company Law Appellate Tribunal (NCLAT) has held that fairness in insolvency liquidation processes cannot be viewed solely from the perspective of a single bidder, while refusing to entertain a belated higher offer.

A Bench comprising Judicial Member Justice N. Seshasayee and Technical Member Indevar Pandey dismissed the appeal filed by Sunrise Industries, emphasizing that fairness operates collectively and not as a “one-way street.”

Factual Background

Hema Automotive Pvt. Ltd. was admitted into CIRP in July 2022. Its primary asset was a leasehold industrial plot at RIICO Industrial Area, Neemrana. After unsuccessful resolution attempts, the company entered liquidation in April 2023. Multiple auctions failed due to uncertainties surrounding lease rights, leading the Stakeholders’ Consultation Committee (SCC) to adopt assignment of the asset as a Not Readily Realisable Asset (NRRA) under Regulation 37A of the IBBI (Liquidation Process) Regulations, 2016.

Procedural Background

A Process Information Memorandum was issued, and bids were invited. Sunrise Industries submitted a bid of ₹7 crore, while Respondent No. 3 submitted a bid of ₹10.55 crore. During the SCC meeting on December 4, 2023, bids were opened and Respondent No. 3’s offer was accepted. Subsequently, Sunrise Industries submitted a revised bid of ₹11.10 crore via email during the same meeting. The liquidator did not consider this revised bid and issued a sale certificate to Respondent No. 3 on December 29, 2023. Sunrise challenged this before the NCLT, which dismissed the application, leading to the present appeal before NCLAT.

Issues

1. Whether a belated higher bid submitted after the deadline should be considered in liquidation proceedings.

2. Whether exclusion of such bid violates principles of fairness and transparency.

3. Scope of judicial interference in liquidation sale processes.

Contentions of the Parties

The appellant contended that its higher bid was submitted before conclusion of the SCC meeting and should have been considered to maximise value. It argued that once negotiations were permitted, the process ceased to be strictly bound by sealed-bid norms.

It also alleged arbitrariness and discrimination in selectively negotiating with another bidder while ignoring its enhanced offer.

The liquidator and secured creditor argued that the revised bid was non-compliant as it was submitted after the deadline and without the required deposit. They also pointed out that the appellant had accepted refund of its earnest money, indicating acquiescence in the process.

The successful bidder submitted that it had already acted upon the sale, including restoration of lease and financial commitments, making reversal inequitable.

Reasoning and Analysis

The Tribunal held that adherence to timelines and procedural discipline is essential in insolvency processes to ensure certainty and credibility. It observed that entertaining belated bids would undermine the sanctity of the process and create uncertainty for stakeholders.

The Bench emphasized that fairness must be assessed in the context of all stakeholders, including secured creditors and successful bidders, and cannot be invoked selectively by one participant. It noted that the appellant had neither objected during the SCC meeting nor complied with procedural requirements for submitting a revised bid.

The Tribunal also considered that the successful bidder had already altered its position by making investments and regularising the asset, and that disturbing the process at this stage would be inequitable.

Decision

The NCLAT dismissed the appeal and upheld the rejection of the belated higher bid submitted by Sunrise Industries.

In this case the appellant was represented by Advocates Alok Kumar Aggarwal., Anushruti, Anushka Sharma, Singha Rajpal, Aanvi Oberai.