Director's challenge to completed auction sale dismissed for delayed approach after liquidation finalized

NCLAT Chennai dismissed an appeal by an erstwhile director/shareholder challenging auction sale conducted by liquidator. The appellant questioned the sale certificate after liquidation order attained finality and sale was completed on 05.05.2022. Court held that appellant's failure to approach liquidator during bid invitation stage and waiting until sale completion constituted inaction that precluded reopening auction proceedings. Since liquidation proceedings had attained finality and liquidator had distributed funds to satisfy claims, no merit existed to reopen the auction sale process.

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Issues involved:
The judgment involves challenges to an Impugned Order related to rejection of an Application and the conduct of Auction Sale by a Liquidator in a Company Appeal.

Impugned Order Challenge (Comp. App (AT) (CH) (INS) No. 167 / 2024):
The Appellant, an erstwhile Director of a Corporate Debtor engaged in Real Estate Projects, contested the rejection of their Application (IA (IBC)/ 118 (CHE) / 2023) in the Impugned Order dated 13.03.2024. The Appellant raised concerns regarding the validity of an Auction Sale conducted by the Liquidator, alleging mala fides and improper conduct leading to undervaluation of assets. The Appellant argued that the Auction Sale did not comply with regulations, lacked wide publicity, and was conducted in connivance with a buyer, depriving them of potential dividends.

Connected Order Challenge (Comp. App (AT) (CH) (INS) No. 168 / 2024):
This appeal arises from the same Impugned Order of 13.03.2024, which pertains to similar factual issues regarding the Auction Sale conducted by the Liquidator. The Appellant contended that the Auction Sale process was flawed and did not maximize the realization of the Corporate Debtor's assets, as required.

Key Details:
The Corporate Debtor was put into Liquidation, and the Auction Sale of a disputed property owned by the Corporate Debtor was challenged by the Appellant. The Appellant criticized the Auction Sale process, alleging procedural irregularities, lack of wide publicity, and undervaluation of assets. The Appellant also argued that the Liquidator should have explored a Compromise or Arrangement before resorting to asset sales. The Appellant's status as an Erstwhile Director/Shareholder and the finality of the Liquidation process were crucial factors in the judgment.

Conclusion:
The Tribunal dismissed both Company Appeals (Comp. App (AT) (CH) (INS) No. 167 / 2024 and Comp. App (AT) (CH) (INS) No. 168 / 2024) as it found no merit in the challenges raised against the Impugned Order. The Tribunal emphasized that the Appellant's delayed objections to the Auction Sale, coupled with the finality of the Liquidation process, did not warrant a review of the proceedings. The Interlocutory Applications were also closed in light of the judgment.

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