Order set aside blocking CoC-approved related-party sale; CoC's commercial choice non-justiciable; Reg 29 allows, Reg 36A(1A) inapplicable

NCLAT set aside the Adjudicating Authority's order that interdicted a CoC-approved sale of non-core assets of the corporate debtor, holding the CoC's commercial decision to pursue an outright transfer to related entities was rational, within its exclusive domain and non-justiciable. The tribunal found directions ordering separate RPs to invite independent bids impermissibly conflated parallel CIR processes pending before NCLT, Mumbai. Regulation 29 did not bar the sale where the secured creditors on the assets were CoC members and had consented, and Regulation 36A(1A) was inapplicable as it was introduced after CoC approval. The CoC-approved sale was permitted and the appeal disposed.

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ISSUES PRESENTED AND CONSIDERED

1. Whether the manner of sale of non-core assets approved by the Committee of Creditors (CoC) is a commercial decision within the exclusive domain of the CoC and therefore not amenable to re-appraisal by the Adjudicating Authority.

2. Whether public auction is the sole or mandatory mode of price discovery/value maximisation for the sale of the subject land parcels, notwithstanding CoC-commissioned valuations and an agreed reserve (floor) price.

3. Whether the Adjudicating Authority exceeded its jurisdiction by directing invitation of independent bids from Prospective Resolution Applicants (PRAs) in separate CIRPs of related entities, thereby making the Corporate Debtor's CIRP contingent on parallel CIRPs before other benches.

4. Whether sale of encumbered assets is permissible under Regulation 29 of the CIRP Regulations where charge-holders are members of the CoC and have consented to the transaction.

5. Whether Regulation 36A(1A) (inviting expressions of interest for sale of one or more assets) applies retrospectively to a CoC decision taken before its insertion and whether it mandates the mode of sale in the present facts.

6. Whether the intervenor (suspended director/personal guarantor) has shown procedural irregularity, mala fides, or such prejudice as to warrant setting aside the CoC decision or the RP's conduct.

ISSUE-WISE DETAILED ANALYSIS

Issue 1 - CoC's exclusive domain to determine manner of sale

Legal framework: The Code and CIRP Regulations vest commercial decision-making primarily in the CoC; judicial review is limited to jurisdictional and compliance checks and does not extend to re-appraising commercial wisdom.

Precedent treatment: The Tribunal follows established principle that courts/tribunals must defer to CoC's commercial choices except where they contravene statutory mandates or procedural compliance requirements.

Interpretation and reasoning: The CoC recorded detailed deliberations, commissioned two independent valuers, and approved a two-part sale with clear commercial rationale (operational synergies and FTWZ integration). The Adjudicating Authority's speculative suggestion that "better" price discovery might exist elsewhere amounted to re-appraising the CoC's commercial judgment. The Tribunal holds that such re-appraisal is impermissible absent demonstrated non-compliance or illegality.

Ratio vs. Obiter: Ratio - CoC's decision on manner of sale, supported by deliberations and valuation, is non-justiciable except for compliance; Adjudicating Authority cannot substitute its commercial view for that of CoC. Obiter - observations on contextual commercial factors (FTWZ) supporting deference.

Conclusion: The manner of sale lies within CoC's exclusive commercial domain; the Impugned Order's interference on grounds of speculative superior price discovery is unsustainable.

Issue 2 - Public auction as sole mode of price discovery

Legal framework: CIRP aims at maximisation of asset value; regulations prescribe transparent processes but do not universally mandate auction as the only mode of sale for non-core or encumbered assets.

Precedent treatment: The Tribunal recognizes authority allowing sale of assets by modes other than auction where commercial justification and transparent valuation exist; auction is not invariably prescribed where long-term commercial prospects or inter-entity synergies justify other routes.

Interpretation and reasoning: CoC obtained two independent valuations and fixed a floor (average fair value). Given the unique FTWZ commercial integration and that only related entities (or their SRAs) could effectively utilize the parcels, calling for a general public auction could depress value and derail parallel CIRPs. The AA's presumption that current process "does not ensure value maximisation" ignored these facts and valuations.

Ratio vs. Obiter: Ratio - public auction is not the sole or mandatory method of price discovery where the CoC's process includes independent valuation and commercial rationale for alternative sale modes. Obiter - general observations on desirability of auctions in other contexts.

Conclusion: Public auction is not the exclusive method; the CoC's alternative process (valuers + floor price + commercial rationale) suffices for value maximisation in the present facts.

Issue 3 - Jurisdictional limits: directions affecting parallel CIRPs

Legal framework: Each CIRP is an independent statutory proceeding; an Adjudicating Authority must not issue directions that impermissibly conflate or make one CIRP contingent upon outcomes of separate CIRPs before different benches.

Precedent treatment: The Tribunal reiterates limits on adjudicatory intervention where separate benches and proceedings are concerned; supervisory powers are circumscribed by jurisdiction and compliance review.

Interpretation and reasoning: Although the AA noted that transferees would likely be parties in other CIRPs, it nonetheless directed RPs of separate CIRPs to invite independent bids, thereby intruding into parallel processes and potentially delaying/derailing approved resolution plans. Such directions conflated independent proceedings and exceeded the AA's jurisdiction.

Ratio vs. Obiter: Ratio - AA cannot direct conduct of parallel CIRPs or make one CIRP contingent on another where such directions interfere with separate benches' jurisdiction and advance of those CIRPs. Obiter - practical consequences of such contamination (delays, disincentivising SRAs).

Conclusion: Directions that rendered the Corporate Debtor's CIRP contingent upon outcomes of other CIRPs were unsustainable and set aside.

Issue 4 - Sale of encumbered assets under Regulation 29

Legal framework: Regulation 29 guards against prejudicial transfer of encumbered assets without charge-holders' knowledge/consent; it requires judicial sanction where necessary but does not operate as an absolute bar to sale of encumbered assets when secured creditors consent.

Precedent treatment: The Tribunal follows precedent recognizing that encumbered assets may be sold during CIRP post consent/relinquishment by charge-holders; Regulation 29 is protective, not prohibitory, where charge-holders are part of decision-making and consent.

Interpretation and reasoning: The sole charge-holders in respect of the parcels are members of the CoC and have expressly consented. Such consent functionally waives the prejudice Regulation 29 seeks to prevent. The AA's emphasis on encumbrance without accounting for secured creditors' consent therefore misapplied Regulation 29.

Ratio vs. Obiter: Ratio - Regulation 29 does not bar sale of encumbered assets where charge-holders (secured creditors) have consented and the CoC has sanctioned the transaction; judicial oversight is limited to ensuring consent/compliance. Obiter - liquidation regulation analogies are inapposite to CIRP.

Conclusion: Sale of the encumbered parcels is permissible under Regulation 29 given the express consent of the charge-holders and CoC approval.

Issue 5 - Applicability of Regulation 36A(1A)

Legal framework: Regulation 36A(1A) permits invitation of expressions of interest for sale of one or more assets; its scope and timing determine applicability to transactions approved prior to its insertion.

Precedent treatment: The Tribunal treats intervening regulatory changes as prospective unless explicitly retrospective; substantive powers inserted after CoC approval do not automatically invalidate prior lawful decisions.

Interpretation and reasoning: The CoC approved the subject transaction on 18 March 2025; Regulation 36A(1A) was notified on 26 May 2025. The provision is prospective and not mandatory in the present facts. Even if applicable, the language is not an absolute mandate displacing CoC's commercial discretion where compliance and transparency have already been met.

Ratio vs. Obiter: Ratio - Regulation 36A(1A) is inapplicable retrospectively to a CoC decision taken before its insertion and does not automatically mandate the AA's directions where CoC's process satisfied transparency and valuation requirements. Obiter - remarks on interpretive approach to regulatory insertions.

Conclusion: Regulation 36A(1A) does not apply to or invalidate the CoC-approved Subject Transaction in this case.

Issue 6 - Intervenor's allegations of procedural impropriety and locus

Legal framework: Standing/intervention and reliefs based on alleged procedural lapses require demonstration of material prejudice, mala fides, or breach of statutory process capable of vitiating CoC decisions.

Precedent treatment: Tribunal requires cogent material showing procedural infirmity that affects compliance or the integrity of the process; speculative or dilatory allegations are insufficient.

Interpretation and reasoning: The intervenor alleges exclusion, non-production of minutes/video, collusion and rigging. The record shows CoC deliberations, two independent valuations, and no established procedural irregularity, malafide or undervaluation. The intervenor's claims amount to attempted derailment and fail to demonstrate material prejudice affecting the CoC's decision or compliance with the Code/Regulations.

Ratio vs. Obiter: Ratio - intervention alleging procedural irregularity dismissed where there is no material showing of non-compliance, mala fides or prejudice to justify setting aside CoC's commercial decision. Obiter - guidance that personal guarantor's residual liability does not ipso facto confer a right to annul compliant CIRP processes.

Conclusion: Intervenor's application is unsustainable and is dismissed.

Overall Conclusion

The Tribunal sets aside the directions of the Adjudicating Authority which (i) required invitation of independent bids from PRAs in parallel CIRPs, (ii) treated public auction as necessary despite CoC's valuation-backed process, and (iii) relied on Regulation 36A(1A) retroactively. The CoC-approved sale under Regulation 29 (with consent of charge-holders and independent valuations) is upheld; the intervenor's IA is dismissed. The Impugned Order is modified accordingly.

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