TaxTMI 
TaxTMI 
2026 (3) TMI 1514
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.... the residential property situated at H. No. 117, First Floor, Uday Park, New Delhi-110049. The auction process was completed successfully on 27.06.2023 and the entire sale consideration had been deposited by the successful bidder. Thereafter, the Sale Certificate dated 05.07.2023 was issued in favour of the Appellant. 2. The Adjudicating Authority allowed the application filed by Union Bank of India on the grounds that the auction sale was undervalued and directed the Bankruptcy Trustee to conduct fresh valuation, followed by a fresh auction, simultaneously ordering refund of the entire sale amount to the Appellant. Feeling aggrieved by the cancellation of a legally concluded auction process and the consequential deprivation of vested rights created in his favour, the successful auction purchaser Mr. Akshat Gupta has preferred the present appeal. Brief facts of the case 3. The brief facts of the case are as given below: i. The bankruptcy process of Mr. Anil Syal commenced pursuant to his own application under Sections 121 and 122 of the IBC, which culminated in the order of the Adjudicating Authority dated 30.09.2022 appointing Mr. Ajay Gupta (Respondent No. 2 he....
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.... Authority finally decided the IA No. 4421/2023, vide the impugned order dated 04.07.2024, whereby the auction sale held on 27.06.2023 and the Sale Certificate dated 05.07.2023 were set aside, and directions were issued to conduct fresh valuations of the property, by both Respondent No. 1 and Respondent No. 2 and thereafter conduct a fresh auction. The Adjudicating Authority also ordered the refund of the entire sale consideration to the Appellant. The relevant paras 17 to 22 of the impugned order dated 04.07.2024 are extracted below: "17. The following issues arise for consideration: i. Whether the Bankruptcy Trustee has committed any illegality or material irregularity in conducting the e-auction? ii. Whether the e-auction dated 27.06.2023 (advertisement dated 02.06.2023) is liable to be set aside? 18. In order to answer the above questions, it would be relevant to note that the advertisement for conducting the e-auction was published in two newspapers namely Financial Express (English) and Jansatta (Hindi) on 02.06.2023. In the said advertisement the date of e-auction was mentioned as 27.06.2023. In the normal course, the e-auction wo....
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....rected to conduct a fresh valuation w.r.t. the sale of the property (50% undivided share in a residential flat which is indivisible) bearing H. No. 117, First Floor, Uday Park, New Delhi-110049. Thereafter, the Average of both the Valuation will be considered for the fresh auction by the meeting of the Creditors. 21. We further direct the Bankruptcy Trustee to return the e- auction sale proceeds to Mr. Akshat Gupta, Auction Purchaser including EMD, if any and cancel the sale certificate issued to Mr. Akshat Gupta, Auction Purchaser. 22. Accordingly, the IA-4421/2023 is allowed by setting aside the e-auction dated 27.06.2023 conducted by the bankruptcy trustee by directing the bankruptcy trustee to conduct a fresh auction by maintaining at least 30 days' time between the paper publication and the e-auction so as to enable more bidders to participate in the auction for fetching high value of the property. The bankruptcy trustee shall also clearly mention the timings for the inspection of the property in the paper publication." x. The impugned order dated 04.07.2024 resulted in the annulment of a concluded auction process in which the Appellant had already d....
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....ona fide auction purchaser. 6. The Ld. counsel for the Appellant submits that the auction process in the present case was completely transparent, competitive and compliant with law. The auction notice was publicly published on 02.06.2023. Two eligible bidders participated in the auction; both placed competing bids; the Appellant outbid the competitor; and the bid price exceeded the reserve price. No party has alleged fraud, collusion, manipulated bidding, lack of publicity, lack of participation, or any form of procedural unfairness. Where there is no allegation of fraud or procedural defect, the sanctity of auction cannot be destroyed merely to give a fresh opportunity for bidding. 7. Ld. Counsel further submits that it is the settled law of the Hon'ble Supreme Court that a public auction, once complete, cannot be interfered with except in extremely limited and exceptional circumstance such as fraud. The principle has been consistently affirmed, including in Valji Khimji and Co. v. Official Liquidator of Hindustan Nitro Product (Gujarat) Ltd., Civil Appeal No. 4992 of 2008, wherein Hon'ble Supreme Court held that entertaining objections after a confirmed sale should not be p....
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....ppeal was filed by the Appellant on 18.07.2024, which was well before the Intervenor, Anil Sayal's Appeal was disposed on 30.07.2024. No notice at any stage was issued to the Appellant in the said proceedings. Even in the Intervenor's proceedings, the Intervenor's limited prayer was only for his discharge and not for annulment of auction, and he was directed to approach the NCLT again for that limited purpose. Therefore, the Appellant's challenge to the Impugned Order is on merits and cannot be extinguished on account of subsequent proceedings where the Appellant was neither heard nor impleaded. 12. The Appellant submits that Respondent Bank's allegation of undervaluation in its Application IA 4421/23 was wholly misconceived. The Bank relied upon a valuation of Rs. 3.81 crore for the full flat in 2021 and claimed the current market value should be Rs. 4.5 crore. However, the Bank deliberately compared the value of 100% unencumbered flat with peaceful possession to the subject asset, which consisted of only 50% rights in an indivisible residential unit without possession of any portion. The two values are not comparable in law or in valuation practice. The NCLT made no finding of....
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....eserve price. It is therefore factually and legally incorrect to hold that any stakeholder suffered prejudice. 17. The Counsel further submits that valuation is part of BT's Preliminary Report dated 23.03.2023, duly shared with the Bank on the same date. The Bank had three months to object before auction on 27.06.2023, but did not raise any concern. There is no provision under IBC making valuation by a single CoC member mandatory. Under IBC Regulations, auction is the default mode of sale and does not require prior permission of the CoC, except in matters enumerated under Section 153, where valuation, auction and sale do not appear. Therefore, even assuming, arguendo, that the valuation was needed to be reassessed, penalizing only the bona fide purchaser violates foundational fairness. 18. In light of the above submissions, the counsel for the Appellant prays that the Impugned Order dated 04.07.2024 be set aside, as it is contrary to settled law, unsupported by pleadings, inconsistent with the IBC, and gravely prejudicial to the vested rights of a bona fide auction purchaser, despite complete compliance from the Appellant. Submissions of Respondent No. 1: Union Bank of Ind....
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....s that the impugned order dated 04.07.2024 was once again affirmed by this Hon'ble Tribunal in its judgment dated 08.07.2025 passed in Company Appeal (AT) (INS) No. 523 of 2025 filed by Anil Syal (Intervenor herein), which arose from proceedings initiated by the Bankrupt himself. In the said judgment, while dealing with the discharge application, this Hon'ble Tribunal categorically recorded that the order dated 04.07.2024 directing re-auction of the property had already been upheld and was not interfered with earlier. Thus, the legality and correctness of the re- auction direction stands reaffirmed twice over by this Hon'ble Tribunal. 23. It is submitted that despite these categorical findings, neither the auction purchaser nor the Intervenor Anil Sayal has challenged either the order dated 30.07.2024 or the judgment dated 08.07.2025 by way of any further appeal or review. This deliberate inaction reinforces the finality attached to the impugned order. 24. Learned counsel further submits that the principles of res judicata squarely apply, even where an order is passed ex parte or at the first hearing, provided the parties are the same and the issue stands conclusively decided....
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....d the notice under Section 13(2) of the SARF AESI Act, 2002 with respect to the property in question which is jointly owned by the Bankrupt and Mrs. Meenakshi Syal who are husband and wife in relation. 29. Ld. Counsel further pointed out that despite being in the notice of the Respondent No. 2, the entire property is mortgaged to the Bank, the Respondent No. 2 being an officer of the Court did not give any heed to consult with the Respondent Bank nor any application is filed by impleading the Union Bank of India for seeking appropriate direction with respect to the way forward in the given scenario. 30. Ld. Counsel stated that despite the fact that the Bank has charge on the entire asset on which the Bankrupt have 50% share, the Respondent No.2 have failed to conduct any due diligence and did not even check the public records which clearly reflects that the Respondent Bank have charge on the entire property situated at First Floor 117, Uday Park, New Delhi110049. 31. It is submitted by the counsel for respondent that the valuation report was never shared transparently and was disclosed to the Respondent Bank for the first time, only as an annexure to the reply filed by the....
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....asset value, yet in the very next CoC meeting, the Trustee astonishingly announced that the property stood sold. 37. It is submitted that despite objections being raised by the Bank's representative during the meeting, the same were not recorded in the minutes. Furthermore, the Trustee failed to adhere to the mandatory 30-day period between issuance of auction notice and conduct of auction, a requirement which has long been embedded in SARFAESI jurisprudence and later clarified by this Hon'ble Tribunal in Naren Seth v. Sunrise Industries. 38. Learned counsel submits that the said judgment is merely clarificatory and does not lay down any new law. The statutory requirement of maintaining adequate notice period has existed for more than two decades, and the Trustee cannot take shelter under the plea that the judgment was rendered after the auction. 39. It is further submitted that pursuant to the order dated 30.07.2024, the Bankruptcy Trustee has already refunded the sale consideration to the auction purchaser, which was accepted without protest. Having accepted the refund, the Appellant cannot approbate and reprobate by simultaneously challenging the setting aside of the au....
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....On the contrary, the CoC was always privy to the valuation report and was consistently apprised of each development, including in the 2nd Progress Report dated 18.04.2023 and the 3rd Progress Report dated 08.07.2023, both of which were circulated to the CoC without any protest. Moreover, in the 3rd CoC meeting held on 02.08.2023, the UBI/CoC, holding 100% voting share, approved the valuer's fee and all expenses incurred toward the e-auction. Having expressly approved all such actions, the Bank cannot now be permitted to contend that an additional valuer ought to have been appointed or that the valuation was undervalued. The belated challenge initiated only upon filing of the application on 08.08.2023 clearly establishes that the objection is an afterthought without any legal or factual basis. 44. Counsel for Respondent No. 2 submits that the challenge of UBI to the valuation and the e-auction is flawed and devoid of factual foundation. The asset in question was only a 50% undivided share in a residential flat in Uday Park, New Delhi, and therefore, the valuation necessarily required consideration of the inherent deterrents such as (i) the undivided nature of the title and (ii) p....
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....the bankrupt estate, leaving no room for suggesting any illegality in the process. 48. Counsel for Respondent No. 2 submits that the entire foundation of the impugned order rests solely on the assumption that a 30-day notice period was mandatory for the e-auction. It is submitted that there exists no provision under the Insolvency and Bankruptcy Code or the PG Regulations mandating a 30-day notice period for auction of assets by the bankruptcy trustee. The bankruptcy trustee is therefore not in breach of any statute or regulation. 49. He further submitted that the judgment relied on by the Adjudicating Authority in Naren Seth v. Sunrise Industries & Ors., Company Appeal (AT) (Ins) No. 401 of 2023, was delivered on 04.07.2023. By this date, the auction had already been conducted (27.06.2023), the full amount had been deposited (05.07.2023), and the sale certificate had been issued. There was therefore no occasion in law for Respondent No. 2 to comply with a judgment that arose after conclusion of the auction process. Thus, the sole ground on which the impugned order has been passed is unsustainable in law. 50. In view of the above submissions, Respondent No.2/ Bankruptcy Tr....
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....idential unit, i.e. an asset which is not simple to evaluate and does require deeper due diligence from potential buyers. The Bank highlights that the valuation was done close to the publication date and was never shared in advance for discussion, because the Trustee acted quickly and the CoC was informed, only after steps were completed. The Bank submits it had no meaningful opportunity to request a second valuation or examine, whether the valuation reflected the true market potential. According to the Bank, a 25-day notice is not enough for a fractional, legally complicated asset, and this shortened period could have prevented more bidders from participating and offering a higher value. 54. The Bankruptcy Trustee on the other hand maintains that every step was carried out properly and that Union Bank remained silent throughout. The Trustee says that two bidders' participation shows that the publication was effective and that the Tribunal should not have interfered with a sale already completed. 55. We note that, based on the claims admitted, the Committee of Creditors was constituted by the Bankruptcy Trustee, with Union Bank of India holding an overwhelmingly dominant shar....
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...., contrary to the objectives of IBC, which require keeping CoC informed well in time and consider its advice, if the same is in accordance with the Code. Bankruptcy Trustee, by keeping the CoC out of the loop, reinforced the Tribunal's conclusion that the sale process did not fully meet the standards of fairness and value maximisation mandated under the Code. This clearly shows procedural lapse on the part of Bankruptcy Trustee which could vitiate the auction proceedings. 59. It is in this context that the issue related to 25-day notice period becomes highly relevant. Although a 25-day gap between publication and auction may appear reasonable in a normal commercial sale, it cannot automatically be treated as adequate in an insolvency auction, particularly for a complex asset like a half-share in a residential flat. This is the type of property, where buyers require more time to understand co-ownership issues, marketability risks, legal limitations, and the practical feasibility of purchasing an undivided share. In such a circumstance, a longer notice period 30 days or more may be practical to ensure that the market has a proper window to respond. The shorter 25-day window, coupl....
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....for 50% of the property, as determined by its registered valuer in 2023 (the valuation of full property would be Rs. 1.80 cr.). It is material to note that this valuation of Rs. 0.90 crore, which ultimately formed the basis of the auction and sale in favour of the Appellant, was never shared with Union Bank of India prior to the conduct of the auction. The Bank was thus deprived of any meaningful opportunity to examine, question, or object to this valuation, despite being the principal creditor. The non-sharing of such a crucial valuation figure, especially when it was substantially lower than all earlier valuations on record, seriously affected transparency and fairness of the sale process and prevented the Bank from raising timely concerns before the auction was concluded. 62. We also take note of Regulation 30(3) of the IBBI (Bankruptcy Process) Regulations, 2019, which is extracted below: "Regulation 30. Valuation of assets. (3) The bankruptcy trustee may appoint an additional registered valuer, for valuing the assets of the bankrupt if required in the circumstances of the case, who shall independently submit his estimate as per sub-regulation (2)." As p....
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....al facts before the Adjudicating Authority. In the present case, Respondent No. 2 did not disclose that the entire property, comprising the 50% share of the bankrupt and the remaining 50% share of his wife, Mrs. Meenakshi Syal, was mortgaged in favour of Union Bank of India and was already under SARFAESI proceedings initiated by the Bank. It was also not disclosed that the bankrupt had filed an application under Section 94 of the Code, the effect of which was to stall the SARFAESI action. Further, having taken assistance from the bankrupt under Section 153(1)(c) of the Code for administering the estate, the Trustee could not have been unaware of these facts. Despite such knowledge, the Trustee proceeded with valuation and sale without factoring in the existing encumbrance or coordinating with the secured creditor. This omission deprived the Adjudicating Authority of a complete factual picture and demonstrates a lack of due diligence, thereby undermining the fairness and transparency of the sale process. 67. We also find it necessary to look into the Company Appeal (AT)(Ins) No. 1437 of 2024 in the same C.P. (IB) No. 589 (PB)/2020 filed by the bankrupt Sh. Anil Syal who is also a....
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....e held by another authority. 70. We now examine the judgments relied upon by the Appellant in the context of the present factual matrix of this case: i. The first Judgment relates to Hon'ble SC's decision in 'Valji Khimji & Co. v. Official Liquidator (Civil Appeal No. 4992 of 2008)'. In this case Hon'ble Supreme Court observed that once a sale is confirmed and no illegality is found, it should not be lightly interfered with. In the present case, however, the irregularity identified goes to the heart of the insolvency sale process: information was shared only post-facto; and the auction notice allowed only a 25-day period for a complex asset requiring deeper market exposure. These circumstances created a real possibility of suppressed participation and incomplete value discovery. Valji Khimji (supra) involved no analogous irregularity; the ratio is distinguishable and cannot be applied to validate the present auction. ii. In 'Celir LLP v. Bafna Motors (Civil Appeal Nos. 5542-5543 of 2023)' Hon'ble Supreme court declined to interfere in an auction, where the process had been repeatedly exposed to the market, multiple rounds of bidding had taken place, a surplus o....
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....natha Textiles v. Tax Recovery Officer (2008) 12 SCC 582' In this case Hon'ble Supreme Court held that unless a substantial injury or prejudice is shown, confirmed sales should not be set aside. This dealt with a tax recovery sale where the issue was whether minor procedural defects could invalidate an otherwise lawful auction. The present case, however deals with auction sale under Bankruptcy Proceedings under the code which is a complete legislation providing a comprehensive framework wherein all procedures are conducted according to the Act Rules and Regulations of the Code. Unlike the sale in Janatha Textiles, which involved no procedural error affecting market exposure or valuation integrity, the irregularities in the present case were significant and directly connected to the objective of achieving maximum value under the IBC. Therefore, Janatha Textiles offers no protection to the Appellant. We can see from the case laws cited by the appellant that none of the cases cited in support of his contentions are applicable in the current factual matrix. 71. We have also gone through the judgment of this Appellate Authority in 'Naren Seth v. Sunrise Industries, [Compa....