Liquidator's Error Upheld: Bidder's Appeal Dismissed, Refund Ordered

The appeal challenged the Adjudicating Authority's order directing the Liquidator to declare Respondent No.1 as the successful bidder and refund the amount deposited by the Appellant. The Liquidator's mechanical adherence to the auction platform without considering the broader objective of the Insolvency and Bankruptcy Code led to the erroneous declaration of the Appellant as the highest bidder. The Tribunal upheld the Authority's decision, emphasizing the Liquidator's failure to prioritize bids under option 1, resulting in the dismissal of the appeal and the protection of the Appellant's interests through a refund with accrued interest.

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Issues Involved:
1. Validity of the Appellant's bid acceptance by the Liquidator.
2. Compliance with the E-auction Process Information Document.
3. The Liquidator's duty in declaring the highest bidder.
4. Consideration of bids under different auction options.
5. Judicial review of the Liquidator's decision.

Summary:

1. Validity of the Appellant's bid acceptance by the Liquidator:
The appeal challenges the order dated 20.06.2022 by the Adjudicating Authority (NCLT), which directed the Liquidator to declare Respondent No.1 as the successful bidder and refund the amount deposited by the Appellant with interest. The Appellant's bid of Rs.38,40,00,000/- was initially accepted by the system, but Respondent No.1's subsequent bid of the same amount was rejected by the system.

2. Compliance with the E-auction Process Information Document:
The E-auction Process Information Document stipulated that bids must increase by a minimum incremental amount of Rs.5,00,000/-. It also stated that if bids under options 1 and 2 are equal, the bidder for the sale of the Corporate Debtor as a going concern (option 1) shall be declared the successful bidder. The Liquidator conducted the e-auction on 28.02.2022, where the Appellant's bid was accepted, but Respondent No.1's bid was rejected due to non-compliance with the incremental increase criteria.

3. The Liquidator's duty in declaring the highest bidder:
The Adjudicating Authority found that the Liquidator should have considered the broader objective of the Insolvency and Bankruptcy Code, 2016, which prioritizes the sale of the Corporate Debtor as a going concern. The Liquidator acted mechanically by following the auction platform without applying the relevant conditions from the Process Document, which led to the erroneous declaration of the Appellant as the highest bidder.

4. Consideration of bids under different auction options:
The Adjudicating Authority observed that the Respondent No.1's bid, although rejected by the system, matched the Appellant's bid and was for the sale of the Corporate Debtor as a going concern. This aspect should have been considered by the Liquidator, as the Process Document clearly gave preference to bids under option 1 when bids under options 1 and 2 were equal.

5. Judicial review of the Liquidator's decision:
The Tribunal emphasized that the Liquidator, as the author of the tender document, is the best person to interpret its requirements. However, the Liquidator failed to give effect to the clause that prioritized bids under option 1. The Tribunal upheld the Adjudicating Authority's decision, stating that the Liquidator's mechanical approach led to an error. The appeal was dismissed, and the interests of the Appellant were protected by ordering a refund with accrued interest.

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