NCLAT rejects application to recall liquidation order, allows objections to auction process during confirmation proceedings

NCLAT upheld the rejection of appellant's application to recall liquidation order dated 13.12.2023. The tribunal found no valid grounds for recall as the CIRP showed no substantial progress beyond 365 days, and appellant's grounds did not meet recall criteria. The liquidation order remains valid. NCLAT permitted appellant to file objections regarding the auction process before the Adjudicating Authority during confirmation proceedings, including challenges to asset valuation. The tribunal found no error in continuing the auction process and disposed of the appeal while preserving appellant's right to contest auction details.

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Issues Involved:

1. Whether the Adjudicating Authority committed an error in rejecting the application for recall of the liquidation order dated 13.12.2023.
2. Whether the continuation of the auction process by the liquidator, as directed by the Adjudicating Authority, was appropriate.

Detailed Analysis:

1. Recall of Liquidation Order:

The primary issue in this appeal was whether the Adjudicating Authority erred in rejecting the application for recalling the liquidation order dated 13.12.2023. The appellant argued that the liquidation order should be recalled due to procedural errors and the suppression of material facts. The appellant contended that the Corporate Insolvency Resolution Process (CIRP) period should have been extended beyond 330 days, citing the Supreme Court's decision in "Committee of Creditors of Essar Steel India Limited Through Authorised Signatory vs. Satish Kumar Gupta & Ors- (2020) 8 SCC 53," which allows for such extensions under exceptional circumstances.

The Adjudicating Authority, however, found that no substantial progress had been made in the CIRP, and there was no resolution plan pending. The Authority noted that the maximum prescribed timeline under Section 12(3) of the Insolvency and Bankruptcy Code (IBC) is 330 days, and any extension beyond this period requires exceptional circumstances, which were not present in this case. The Authority emphasized that the appellant had not demonstrated any exceptional circumstances or prospects of receiving a resolution plan, thus justifying the liquidation order.

Furthermore, the grounds for recalling a judgment are limited to procedural errors, lack of jurisdiction, or orders obtained by fraud or misrepresentation. The appellant's grounds did not fall within these categories, leading to the rejection of the recall application.

2. Continuation of Auction Process:

The second issue pertained to the continuation of the auction process by the liquidator, as directed by the Adjudicating Authority. The appellant challenged the order allowing the auction process to continue, arguing that it was based on undervalued reserved prices and should be stayed.

The Adjudicating Authority had directed that the auction process could proceed but would be subject to the decision of the appellate tribunal. The bank clarified that the One-Time Settlement (OTS) proposal was never agreed upon, and the appellant was free to withdraw the deposited amount without the bank's intervention.

The tribunal found no error in the Adjudicating Authority's decision to allow the auction process to continue. The appellant was given the liberty to file objections regarding the auction, including the valuation of assets, when the auction comes up for confirmation before the Adjudicating Authority. The tribunal emphasized that the appellant could raise all relevant issues concerning the auction in accordance with the law.

Conclusion:

The tribunal concluded that there were no grounds to interfere with the orders impugned in these appeals. The liquidation order dated 13.12.2023 remained unaffected, and the appellant was granted the liberty to raise objections regarding the auction process before the Adjudicating Authority. Both appeals were disposed of accordingly, with the tribunal upholding the decisions of the Adjudicating Authority.

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