Summary
After five failed e-auctions, ABG Shipyard's liquidator, with NCLT permission, ran a Swiss Challenge private sale of the Dahej material, in which R.K. Industries became Anchor Bidder. When Welspun offered Rs. 675 crore for the composite assets, the stakeholders' committee advised a composite private sale and the NCLT permitted it among the existing participants. The NCLAT upheld cancelling the Swiss Challenge but ordered a fresh private sale on open public notice. The Supreme Court dismissed R.K. Industries' appeal. The process documents let the liquidator abandon the sale at any stage, and an Anchor Bidder has no vested right beyond its right of first refusal. The liquidator's commercial decision, backed by stakeholders and approved by the NCLT, was not open to review, so the NCLAT's open-notice direction was set aside.
Issues
- Whether a liquidator could discontinue a Swiss Challenge private sale midway, after an Anchor Bidder was selected, in favour of a composite private sale of the corporate debtor's assets
- Whether the NCLAT could direct the private sale to restart on open public notice when the NCLT had approved negotiations among existing participants
Provisions considered
- Section 35(1)(f), (n) and 35(2), Insolvency and Bankruptcy Code, 2016The liquidator may sell by public auction or private contract, subject to NCLT directions. Stakeholder consultation is advisory only. (¶¶ 36, 39, 60)
- Regulations 31A and 33, Schedule I, IBBI (Liquidation Process) Regulations, 2016After failed auctions, a private sale with NCLT permission may proceed by direct liaison with buyers, and no public notice is required. (¶¶ 37, 38, 40, 56, 59)
Held
- The IBC and Liquidation Regulations let the liquidator choose auction or private sale, collectively or piecemeal, to maximise value. Auction is the ordinary mode, but private sale is permitted on stated conditions, including prior NCLT permission. Stakeholders' advice is not binding, but departures from it must be reasoned. (¶¶ 39, 40)
- The anchor bid and Swiss Challenge documents expressly let the liquidator abandon, cancel or modify the process at any stage, add bidders and sell the assets as a whole. The appellant had undertaken to be bound by them, so its selection as Anchor Bidder created no vested right to have the process concluded beyond its right of first refusal. (¶¶ 44, 45, 46, 47, 48, 49)
- Halting the Swiss Challenge for a composite sale was a reasoned commercial decision. It avoided a two-stage sale and a 15-18 month delay in clearing the material, promised higher and quicker recovery, and was endorsed by stakeholders. Without mala fides, courts will not review such decisions in commercial and tender matters. (¶¶ 50, 51, 52, 56, 57)
- A Swiss Challenge is itself a private sale, and a private sale requires no public notice. Once the NCLT approved the liquidator's chosen mode of sale, the NCLAT had no power to substitute its view by ordering a restart on open notice. No party had sought that relief, and the creditors later supported continuing the existing process. (¶¶ 56, 59, 60, 61)
Result
R.K. Industries' appeal (and the intervention application) dismissed; Welspun's appeal allowed: the NCLAT's direction to restart the private sale on open notice was set aside, and the liquidator was directed to conclude the private negotiations begun on 24.08.2021 among bidders who had made EMD deposits within four weeks.