2025 (9) TMI 200 - AT - IBC

Appeal dismissed: e-auction on 06.09.2023 upheld as fair and transparent; bidder validly registered, no evidence of collusion

Jai Agarwal Versus Satyendra Prasad Khorania, Liquidator of M/s Atlas Alloy (India) Private Limited, Punjab National Bank and Novelty Textiles, Beawar

Jai Agarwal Versus Satyendra Prasad Khorania, Liquidator of M/s Atlas Alloy (India) Private Limited, Punjab National Bank and Novelty Textiles, Beawar - ... ISSUES PRESENTED AND CONSIDERED 1. Whether the e-auction conducted in liquidation was vitiated by fraud, collusion or material irregularity so as to render the auction void and warrant quashing of the auction or directing confirmation of the Appellant's bid or a re-auction. 2. Whether the Liquidator's conduct - including alleged use of his office/computer to assist the Appellant's representative and alleged late introduction of another bidder - amounted to breach of statutory duties of fairness, transparency and maximisation of value under the Code and attendant regulations. 3. Whether the documentary and technical record (bank entries, portal logs, screenshots) support the Appellant's allegations or, conversely, establish that the rival bidder was validly registered and that the Appellant had the opportunity to place a valid higher bid but failed to do so. 4. Whether interference with a concluded auction and a registered sale deed is justified where the successful purchaser has paid consideration, taken possession and made investments, in the absence of established material irregularity. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of the e-auction: fraud, collusion or material irregularity Legal framework: Auctions in liquidation are governed by the statutory scheme under the Code and associated regulations which require transparency, fairness and maximisation of value for stakeholders; judicial review of auctions is available where fraud, collusion or material irregularity is proved. Precedent treatment: No specific judicial authorities were relied upon in the record to alter the standard; the Tribunal applied settled principles that interference is warranted only upon proven manipulation or material irregularity. Interpretation and reasoning: The Tribunal examined documentary proof produced by the Liquidator and successful bidder - notably bank entries evidencing deposit of EMD by the rival bidder two days prior to the auction, portal acknowledgements and audit logs. The presence of these contemporaneous records undermines the allegation that a bidder was 'introduced' at the eleventh hour. The Tribunal balanced the need to protect the integrity of the process against the disruption that overturning a concluded auction would cause, and held that mere suspicion or bald allegations do not suffice to vitiate an auction. Ratio vs. Obiter: Ratio - an auction will not be set aside in the absence of cogent, contemporaneous evidence of fraud, collusion or material irregularity; speculative or unsupported allegations are insufficient. Obiter - observations on the importance of auction mechanisms under the Code and the harm of frivolous challenges to concluded sales. Conclusion: The auction was not shown to be vitiated by fraud, collusion or material irregularity; contention to quash the auction therefore fails. Issue 2 - Alleged improper use of Liquidator's office/computer and breach of duties Legal framework: Liquidators must adhere to the duties of fairness and maintain confidentiality and transparency in conducting e-auctions; any misuse of Liquidator-controlled systems that compromises process integrity can invalidate proceedings. Precedent treatment: The Tribunal required proof beyond allegation to impugn the Liquidator's conduct; in absence of a contemporaneous complaint or independent evidence of interference, admissions of presence in the office are insufficient to prove misuse. Interpretation and reasoning: The record showed the Appellant's representative attended the Liquidator's office and that the Liquidator admitted the representative's presence. However, portal login logs demonstrated that the Appellant had active logins from his own computer during the bidding period (with multiple timestamps), and no contemporaneous complaint was made about Liquidator interference. The Tribunal found no direct evidence that the Liquidator accessed or manipulated the Appellant's credentials or bidding, and no proof of illegal gratification. Ratio vs. Obiter: Ratio - physical presence in the Liquidator's office, without demonstrable interference corroborated by logs or independent evidence, does not establish a breach of duties sufficient to set aside an auction. Obiter - the statement that specific and strict proof is required to establish fraud or corruption. Conclusion: Alleged improper use of the Liquidator's computer or breach of duties was not established by admissible evidence; the contention is rejected. Issue 3 - Sufficiency and interpretation of technical records and screenshots (ability/opportunity to bid) Legal framework: Technical logs, timestamps, bank entries and portal screenshots are admissible and material to determine sequence of events in e-auctions; the onus of proving irregularity rests on the challenger. Precedent treatment: The Tribunal treated contemporaneous technical records as decisive where they either corroborate or contradict parties' narratives. Interpretation and reasoning: The Tribunal considered the Appellant's own screenshots and portal logs, which showed (i) Appellant's logged-in sessions at various times including continuous login till after auction closure; (ii) the system-displayed 'next valid bid' amount at the relevant moment; and (iii) the Appellant entered an invalid/insufficient bid instead of the next valid minimum increment. The auction platform's automatic extension feature was noted as an additional safeguard that would have allowed last-second valid bidding. The Tribunal concluded the Appellant had both opportunity and technical capability to place a valid higher bid but failed to do so, and that his screenshots, instead of supporting his case, undermined it. Ratio vs. Obiter: Ratio - portal logs and screenshots that demonstrate active login and display the next valid bid can defeat allegations of denial of opportunity; self-produced contemporaneous records contrary to a party's later allegation are fatal to that allegation. Obiter - emphasis on utility of automatic extension and platform safeguards in ensuring fairness. Conclusion: Technical records establish that the Appellant had the means and opportunity to place a valid higher bid but did not; the screenshots do not prove deprivation of opportunity. Issue 4 - Reliefs sought after completion of sale and registration (quashing, confirmation, re-auction) and protection of bona fide purchaser Legal framework: Judicial interference with completed auctions and registered transfers is exceptional and requires demonstration of material infirmity; courts weigh prejudice to bona fide purchasers and creditors against any impropriety. Precedent treatment: The Tribunal applied the general balancing principle that unsettlement of completed sales without clear proof of illegality harms stakeholders and undermines commercial certainty. Interpretation and reasoning: The successful bidder had deposited requisite sums within prescribed timelines, the sale deed was executed and registered, possession transferred and investments made. The Tribunal observed that overturning such completed transactions on speculative grounds would prejudice the purchaser and delay distribution to creditors. Given the failure to establish any material irregularity, the Tribunal declined to grant reliefs of quashing the auction, confirming the Appellant's bid, or directing a re-auction. Ratio vs. Obiter: Ratio - where a sale is completed and a purchaser acted in good faith by depositing consideration and taking possession, a court/tribunal will not unwind the sale absent proven material irregularity. Obiter - remarks on prejudice caused to bona fide purchasers and the wider interests of liquidation processes. Conclusion: Reliefs sought by the Appellant were not warranted; the concluded sale and subsequent registration stood unimpeached. Final Disposition (as applied to issues above) The Tribunal found no infirmity in the impugned order dismissing the challenge to the auction: allegations of collusion, improper use of Liquidator's systems, bribery and denial of opportunity were unsupported or contradicted by contemporaneous documentary and technical records. The auction procedure, safeguards of the platform and proof of EMD and timely payments by the successful bidder established fairness and transparency. Consequently, the appeal was dismissed and no costs were awarded.