Unsuccessful Bidder Cannot Challenge Completed IBC E-Auction: NCLAT Chennai

Startree Retailors Private Limited Vs Anil Kumar Birla (NCLAT Chennai)

Summary: NCLAT Chennai dismissed the appeal of Startree Retailors Private Limited challenging the e-auction sale of assets of the Corporate Debtor and upheld the order dated 18.03.2021 of NCLT Chennai dismissing I.A. No. 74 of 2021. The e-auction held on 21.01.2021 involved the Appellant and Mahalaxmi Wellman Fuel LLP. The Appellant’s last bid was Rs.17.80 crore at 17:37:34 hours, while the 3rd Respondent placed a bid of Rs.17.90 crore at 17:41:01 hours and was declared the successful bidder. The Appellant alleged that the latter bid was not visible on its screen, questioned the transparency of the auction and alleged manipulation and fraud, while also expressing willingness to offer a higher amount. NCLAT noted that the Appellant had been getting logged out, had simultaneously logged in through two browsers and had shared the auction screen through ZOOM. Its screenshots were not accompanied by the certificate contemplated under Section 65B(4) of the Indian Evidence Act, 1872. The Tribunal held that the Appellant, having remained inactive for more than 20 minutes and having failed to comply scrupulously with the auction conditions, could not attribute its difficulties to the Respondents.

It further held that an unsuccessful bidder cannot, after participating in an auction and after completion of the auction sale, challenge the entire auction merely by offering a higher amount under the guise of maximisation of value. The successful bidder had paid the full consideration, obtained the Sale Certificate, spent substantial amounts on revival of the plant and applied for renewal of licences, while the sale proceeds had already been distributed under the Section 53 waterfall mechanism. NCLAT found no material irregularity, fraud or legal infirmity in the e-auction and declined to unsettle the concluded sale. It separately dismissed I.A. No. 121 of 2021 seeking to introduce the subsequent Tata Communications and KPMG reports as additional evidence, holding that appellate proceedings cannot be used to fill evidentiary lacunae and that the appeal could be decided on the existing record.