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2025 (11) TMI 781
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....du, Advocates, Ms. Misha, Ms. Mahima Sareen, Mr. Abhilash Chaudhary and Ms. Sanyukta Fauzdar, Advocates for R1-R10 CoC Mr. Arun Kathpalia, Sr. Advocate with Ms. Misha, Ms. Mahima Sareen, Mr. Abhilash Chaudhary and Ms. Sanjukta Fauzdar and Ms. Diksha Gupta Advocates for R1-R8, R-11 and R-12 CoC. Mr. Vivek Jain, Mr. Swapnil Srivastava, Mr. Abhishek Gupta, Mr. Chirag Naik, Mr. Jayesh Srivastava, Mr. Rishabh Periwal and Mr. Santosh Kumar, Advocates for Intervenor. JUDGMENT [Per: Arun Baroka, Member (Technical)] The present Appeal is filed by the Resolution Professional (hereinafter referred to as the "Appellant" or "Resolution Professional") of (Arshiya Limited- CIRP initiated vide order dated 23rd April 2024) Arshiya Limited (the "Corporate Debtor"), challenging the order dated 16.07.2025 (the "Impugned Order") passed by the Hon'ble National Company Law Tribunal, Mumbai Bench (the "NCLT" or "Adjudicating Authority") in IA No. 1927 of 2025 (the "Application") arising out of CP (IB) No. 3143/MB/2019 (the "Company Petition"). The Appellant contends that the Adjudicating Authority erred in passing the Impugned Order by failing to appreciate the provisions of Regulation 29 o....
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....ough deliberation and documented discussions in various meetings along with all PRAs, approved the proposed sale as the best way to maximize value. The Appellant submits that the Impugned Order, by obstructing the sale, adversely affects the stakeholders' interests of all three involved CIRPs and defeats the fundamental objective of maximization of value envisaged under the Insolvency and Bankruptcy Code. 6. Thus, the appeal challenges the correctness of the Impugned Order and seeks its setting aside, asserting that it goes against the enabling provisions of the CIRP Regulations and the considered commercial decisions of the CoC. 7. Company Appeal (AT) (Insolvency) No. 1450 of 2025 is filed by the RP (Pankaj Mahajan) of CD i.e. Arshiya Limited- in which case CIRP was initiated vide order dated 23rd April 2024 against the impugned order dated 16.07.2025 in IA No. 1927 of 2025 arising out of CP (IB) No. 3143/MB/2019. 8. Company Appeal (AT) (Insolvency) No. 1451 of 2025 is filed by the RP (Bhuvan Madan) of Arshiya Northern FTZ Ltd. (ANFL) [in which case CIRP was initiated vide order dated 14.11.2022] against the same impugned order as noted above. The respondent parties are s....
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....29 of the CIRP Regulations, 2016. Therefore, permission of the Hon'ble Adjudicating Authority was required to sell the land parcels. 15. Pursuant to extensive discussions and multiple arrangements being explored by the Committee of Creditors of the Corporate Debtor, Interlocutory Application No. 1927 of 2025 was filed by the Appellant herein seeking permission to sell land admeasuring 39.56 acres to SRA of NCR Rail and spine road admeasuring 2.52 acres to SRA of ANFL, under Regulation 29 of the CIRP Regulations, 2016, as per the decision of the CoC in the 8th CoC meeting of the Corporate Debtor. 16. The subject land parcel in question i.e., 42.08 Acres of land owned by the Corporate Debtor which is a no-core asset, is scattered and is located at Khurja District in Uttar Pradesh while the actual core business of the Corporate Debtor is at Panvel FTWZ, Maharashtra. Hence, it is evident that the isolated land parcel i.e., 42.08 Acres are assets which are not used in the ordinary course of business of the Corporate Debtor and the only purpose of approaching the Adjudicating Authority by the Appellant was because the said asset is encumbered with the CoC members and major lenders ....
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.... value of such assets. 19. This Hon'ble Appellate Tribunal in the case of Jet Aircraft Maintenance Engineers Welfare Association Vs. Shri Ashish Chhawchharia RP for Jet Airways (India) Ltd, 2022 SCC OnLine NCLAT 278 has also laid down in para nos. 21, 22, 23, 25 and 28 that a resolution professional is empowered to sell unencumbered assets of the CD if he is of the opinion that the same is necessary for better realization of value. The judgment further lays down that even encumbered assets may be sold by a resolution professional, after taking necessary approvals from the committee of creditors and thereafter, seeking sanction from the Adjudicating Authority. There is no bar under the Code and/or the CIRP Regulations which restrict the sale of any non-core asset of a Corporate Debtor during its Corporate Insolvency Resolution Process. The restriction imposed is only against the CD from doing so. 20. Additionally, Appellant-RP contends that the contention of the Intervenor that an asset of the Corporate Debtor may only be sold through an open auction, the Appellant contends that the absence of a provision regarding a particular procedure/subject matter in a body of statute doe....
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....ilarly NCR Rail will not able to access its entire land without crossing 39.5 acres scattered land parcel highlighted in the layout. It is due to this reason it is crucial for the PRA of NCR Rail. Considering this reason, it is difficult for any other entity to ascribe any value to 39.5 acres other than NCR Rail SRA. 24. This rationale was deliberated over at length by the CoC of the Corporate Debtor as well as NCR Rail and ANFL. Therefore, the decision to sell the said land parcels as proposed was arrived at in a completely transparent manner, after multiple rounds of discussions and the value was ascertained only after appointing 2 registered valuers in accordance with the provision of the Code/Regulations. The Intervenor has miserably failed to make out any procedural irregularities in the CoC minutes of the Corporate Debtor and is merely trying to mislead the Hon'ble Appellate Tribunal. 25. It is also pertinent to note, that the intervenor's primary objection is to the sale of the spine road of 2.52 acres which, evidently makes the smaller chunk of the land to be sold and not to the sale of the 39 acres to the SRA of NCR Rail. This only goes to show that the Intervention ....
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....lation is prospective in nature. When the CoC took the said decisions during the 7th CoC meeting and followed by the 8th CoC meeting, latter being held on 18th March 2025, the proposed Regulation 36A (1A) was not in existence. Therefore, considering the law prevailing at the relevant time only Regulation 29 could have been looked into and in view of the fact that the secured lenders have approved the "sale" and hence, the course of action decided by the CoC clearly falls within their realm of "commercial wisdom". 32. Appellant contends that the Intervenor in his submissions has relied on the case of B.K. Educational Services Private Limited Vs. Parag Gupta and Associates (2019) 11 SCC 633 has absolutely no bearing on the facts of the present matter as the case pertains to the retrospective applicability of the law of limitation to IBC, 2016. 33. The Appellant claims that, the Adjudicating Authority, by erroneously imposing that independent bids be invited from the PRAs of the entities, when the sale is already Regulation 29 compliant, has created a procedural requirement that is not found anywhere in the IBC or CIRP Regulations. 34. The Appellant submits the Adjudicating A....
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....CL") and SREI Equipment Finance Limited ("SREI"). Both EARCL and SREI form part of the CoCs of all three entities. The CoC of the Corporate Debtor deliberated upon the treatment of the Subject Parcels in its 7th and 8th meetings and thereafter approved a resolution, with 85.46% voting in favor, for two-part sale ("Subject Transaction") of: (i) 39.56 acres to NCR Rail, or its successful resolution applicant ("SRA"), and (ii) 2.52 acres of the spine road to ANFL, or its SRA. 39. Further the minutes of the 7th and 8th meetings record detailed deliberations leading to the CoC's conclusion that the commercial value of the Subject Parcels hinges upon their strategic location and seamless integration with adjoining assets owned by NCR Rail and ANFL. While a resolution for granting permanent right of way to NCR Rail through execution of a memorandum of understanding was tabled before the CoC at its 7 th CoC meeting, the same failed to gather requisite approval. Thus, after due consideration, the CoC concluded that outright sale rather than grant of limited right-of-way to the SRAs of both related entities would maximize value, mitigate risk of future ambiguity and disputes, and ensure t....
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....r the Code, each CIR Process is an independent statutory proceeding and cannot be contingent upon decisions arrived at in the CIR Processes of other entities. However, the directions requiring the RPs of NCR Rail and ANFL to advertise and invite independent bids for assets owned by the Corporate Debtor conflate separate proceedings and impermissibly make the Corporate Debtor's CIR Process contingent upon the outcomes of parallel CIR Processes. Thus, the directions contained in the Impugned Order are beyond the scope of the Ld. Adjudicating Authority's jurisdiction and warrant interference. 43. Furthermore, it is contended that the CIR Processes of NCR Rail and ANFL are at an advanced stage. After due deliberations, their respective CoCs have approved resolution plans for both entities. If the Impugned Order is not set aside, significant time and resources will be expended in inviting independent bids from PRAs while stalling judicial approval of the resolution plans. Further, and more significantly, the SRAs for both entities may be disincentivized against offering competitive bids for the Subject Parcels. Thus, the Impugned Order threatens to turn the clock back on the CIR Proc....
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....would maximize recoveries and avoid future disputes vis-à-vis access and interoperability. Judicial review of the CoC's decision on matters of commercial wisdom is impermissible, save to the limited extent necessary to ensure compliance with the Code and rules and regulations framed thereunder. The functions of the Ld. Adjudicating Authority are supervisory and limited to jurisdictional and compliance-based examination; they do not extend to re-appraising commercial decisions made by the CoC. The CoC's preference for an outright transfer, at fair value, to entities that will unlock operational synergies is commercially rational, within the CoC's exclusive domain, and thus non-justiciable. Therefore, the Impugned Order warrants being set aside inasmuch as it indulges in speculation vis-à-vis 'better' price discovery through invitation of independent bids. 47. CoC also contends that Regulation 29 does not bar the sale of encumbered assets in toto. Regulation 29 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 ("CIRP Regulations") is designed to protect secured creditors from prejudicial transfer of encumbered assets without their kn....
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....cheme of the Code and ought to be set aside. 51. Further the CoCs of both NCR Rail Infrastructure Limited -NCR Rail [R9] and Arshiya Northern FTWZ Limited - ANFL [R10] supports all arguments advanced and reliefs sought by the Appellant-RP of the CD-Arshiya Limited - AL and have filed similar arguments. Submissions of the intervenor-Suspended Director [IA No 5807 of 2025} 52. The intervenor (Ajay Shankarlal Mittal) advanced the following arguments during the hearing and as per his IA as noted herein after. 53. Mr. Ajay Mittal is the suspended director, personal guarantor, and shareholder of the Corporate Debtor (CD), Arshiya Limited (AL). The intervenor has a vital interest in the Corporate Insolvency Resolution Process (CIRP), as any reduction in the realizable value of the CD's assets increases his residual liability due to his personal guarantee. The Corporate Debtor is engaged in free trade warehousing zones (FTWZ) development and operations, with significant assets, including land parcels and operational warehouses. 54. Intervenor has prayed for following reliefs in his I.A. No. 5807 of 2025: "a. Declare the entire corporate insolvency resolution pro....
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.... the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. k. Grant ad interim reliefs as against prayer clause (b), (c), (d) and (e). l. Grant such other necessary reliefs as this Hon'ble Tribunal may deem fit and proper." 55. The intervenor alleges that the Committee of Creditors (CoC) and Resolution Professional (RP) have conducted the CIRP and asset sales in a manner prejudicial to value maximization and in favor of preferred bidders, violating principles of transparency, fairness, and procedural regularity. The RP and CoC have excluded the intervenor from meaningful participation in CoC meetings, withholding notice, agenda, and accurate minutes, thereby infringing his rights under the Insolvency and Bankruptcy Code (IBC) and related regulations. The intervenor contends the sale process of critical assets such as the 'Subject Land' and 'Spine Road' was irregular, non-transparent, and aimed at favoring particular resolution applicants at throwaway prices. 56. The RP and CoC failed to conduct a public auction, instead initiating a private sale to favoured parties, which disregards ....
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.... IBC. Appraisal 65. We have heard the counsel of both sides and also perused the material placed on record. 66. Before proceeding further, we recapitulate factual matrix noted hereinafter. The Resolution Professional ("RP") of the CD (CD is Arshiya Limited - AL) / Appellant filed I.A. No. 1927 of 2025 in CP (IB) No. 3143/MB/2019 with the AA seeking approval for the Subject Transaction (Subject Transaction: two-part sale of: (i) 39.56 acres to NCR Rail, or its SRA and (ii) 2.52 acres of the spine road to ANFL or its SRA) discussed herein. The Corporate Debtor, was admitted into corporate insolvency resolution process on 23 April 2024. We note that CD has non-core land assets of the Corporate Debtor situated within a free trade warehousing zone ("(FTWZ: free trade warehousing zone) FTWZ") in Khurja admeasuring 42.08 acres. We also note that of the (Subject Parcels: (i) 39.56 acres of land interspersed within and adjacent to railway siding operations of NCR Rail" (ii) and 2.52 acres forming part of a spine road providing sole access to the FTWZ assets of both NCR Rail and ANFL) Subject Parcels: (i) 39.56 acres are interspersed within and adjacent to railway siding operations ....
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....nd parcels can only be Respondent No. 9 and 10 or its Successful Resolution Applicant for respective parcels of the land, however, the Resolution Process of Respondent No. 9 and 10 as well as that of Corporate Debtor must have contemplated this arrangement since beginning, as approved by the CoC of the Corporate Debtor so that the Prospective Resolution Applicants in all three cases would have been aware of what is available and for what they are bidding for, so that the competitive biddings could have been received in respect of land parcels in question. This would have ensured maximisation of the value of Respondent No. 9 and 10 as well as value of these land parcels, as the Prospective Resolution applicants in those processes shall have clarity on the issues, which were not clear to them while placing their bids for the Resolution of Respondent No. & 10. Since, CIRP process of Respondent No. 9 & 10 is not before us, we can't comment on those processes and our observations herein should not prejudice the independent finding or conclusion of the Adjudicating authority dealing with CIRP process of Respondent No. 9 & 10 or their CoC's further decision in this regard. ....
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....nutes of the CoC meetings, submissions made by the Appellant and the discussions that were undertaken in the CIRP of the Corporate Debtor, Respondent No. 9 and Respondent No. 10, respectively. 69. For determining the sustainability of the order of the Adjudicating Authority we need to answer the following questions: I. Whether the manner of sale is a commercial decision lying within the exclusive domain of the CoC. II. Whether the Subject Transaction ensures price discovery and value maximization and whether a public auction is the sole feasible method of price discovery despite commission of valuation by the CoC. III. Whether the AA exceeded its jurisdiction in issuing directions that render the CIR Process of the CD contingent upon the CIR Processes of ANFL and NCR Rail pending before separate for a. IV. Whether the commercial context of the Khurja FTWZ necessitates the Subject Transaction for value maximization. V. Whether the sale of encumbered assets is permitted under Regulation 29. VI. Whether Regulation 36A(1A) of the CIRP Regulations is inapplicable 70. The above-raised questions are interrelated. To the extent th....
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....luations. We note that the CoC has employed a process that ensures transparent price discovery and maximization of value. 73. We also note that the AA has ignored the fact that the subject land parcel was the asset of the Corporate Debtor which was proposed to be sold and hence the interests of stakeholders of the present Corporate Debtor was to be kept in mind while adjudicating the instant application rather than dealing with what could have been done in the resolution processes of Respondent No. 9 and Respondent No. 10 (undergoing CIRP before other benches) and the concept of value maximisation was to be looked into from the CIRP of the present Corporate Debtor. Therefore, we answer in the affirmation that CoC's approval of the subject transaction reflects considered commercial wisdom, warrants deference and is non-justiciable. 74. We further delve into a related issue whether a public auction is the sole feasible method of price discovery or not. We note that while recognizing that the Subject Transaction is necessary for the successful resolution of all three entities and that NCR Rail and ANFL (or their SRAs) are the only possible transferees of the Subject Parcels, the....
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....PRAs of NCR Rail and ANFL. Further judicial approval of the resolution plans will remain stalled; and the SRAs for both entities may be disincentivized against offering competitive bids for the Subject Parcels or even continuing to participate in the resolution efforts. In effect, the value achieved in the CIR Processes NCR Rail and ANFL may also be lost. We agree with the arguments canvassed by the CoC and we therefore conclude that such directions makes the CIR Process of the CD contingent upon CIR Process of ANFL and NCR Rail and thus this direction by the AA is not sustainable. 76. We now consider another important question whether the commercial context of the Khurja FTWZ necessitates the Subject Transaction for value maximization or not. We note that the Subject Parcels are not stand-alone landbanks; instead, they have always been utilized by NCR Rail and ANFL for seamless operations in the Khurja Free Trade Warehousing Zone-FTWZ. We note that an FTWZ is a special category of SEZ governed by the Special Economic Zones Act, 2002. Therefore, the commercial utility of the Subject Parcels arises from contiguity and integration with the adjoining FTWZ assets. If the Subject Tra....
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....n its reply to the captioned Appeal, no material circumstances warrant conduct of a public auction at the risk of derailing the CIRPs of all three entities. We also note that for an enabling action under Regulation 29 of the CIRP Regulations, there is no requirement for undertaking any public auction and the law does not contemplate any such process which is being suggested by the Adjudicating Authority in the Impugned Order and therefore such directions are unsustainable. 79. Further, even though the IBBI (Liquidation Process) Regulations, 2016 ("Liquidation Regulations") have no application in the present facts. However contrary to the averments made by the Intervenor, even the Liquidation Regulations impose no bar upon private sale of assets of the Corporate Debtor. 80. Lastly, we look into the question whether Regulation 36A(1A) of the CIRP Regulations is inapplicable in the present case or not. We note that Regulation 36A(1A) of the CIRP Regulations, which permits invitation of expressions of interest for sale of one or more assets of a CD, is wholly inapplicable in the present case. While the Subject Parcels are assets of the CD, the Impugned Order contains directions f....