# CASE DETAILS EVA AGRO FEEDS PRIVATE LIMITED v. PUNJAB NATIONAL BANK AND ANR

- **Citation:** 2023 INSC 809
- **Court:** Supreme Court of India
- **Decided:** 2023-09-06
- **Case number:** Civil Appeal No.7906 of 2021
- **Bench:** B. V. Nagarathna, Ujjal Bhuyan
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/case-details-eva-agro-feeds-private-limited-v-punjab-national-bank-and-anr-36670
- **Pages:** 44

## Headnote

Issue for consideration: Appellate Tribunal whether justifi ed in
upholding the decision of the Liquidator to cancel the auction sale without
assigning any reasons.
Insolvency and Bankruptcy Code, 2016 - Auction sale cancelled by
Liquidator without assigning any reasons - Appellant submitted its bid
dtd.16.07.21 to Respondent No.2-Liquidator in respect of the assets of
the corporate debtor (in liquidation) - On 20.07.21, appellant received
an E-auction certifi cate from certifying that it had won the auction of
the subject property- On 21.07.21, the appellant received an email from
Respondent No.2 simply informing that he had cancelled the E-auction
u/Clause 3(k) of the Disclaimer Clause in the E-Auction Process
Information Document and that a fresh E-auction would be conducted-
Appellant fi led application before the Tribunal- Tribunal directed the
respondent No.2 vide order dtd. 12.08.21 to send a communication to
the appellant requiring him to deposit the balance sale consideration-
Letter issued to the appellant, entire sum was deposited - Sale certifi cate
issued in favour of the appellant - Respondent No.1-fi nancial creditor
fi led appeal against order dtd. 12.08.21- Appellate Tribunal set aside the
said order and reversed the steps taken pursuant thereto, liberty given
to the Respondent No.2 to initiate fresh process of auction - He issued
sale notice dtd. 24.12.2021 for E-auction sale of the subject property -
Auction scheduled stayed:
Held: No reasons were assigned by the Liquidator for cancellation
of the E-auction - While the highest bidder has no indefeasible right
862
SUPREME COURT REPORTS
[2023] 13 S.C.R.
to demand acceptance of his bid, the Liquidator if he does not want to
accept the bid of the highest bidder has to apply his mind to the relevant
factors - Such application of mind must be visible or manifest in the
rejection order itself - It is incomprehensible that an administrative
authority can take a decision without disclosing the reasons for taking
a decision aff ecting the rights of parties - Further, while it is true that
para 1(11A), stating that where the Liquidator rejects the highest bid in
an auction process, he shall intimate the reasons for such rejection to
the highest bidder and mention it in the next progress report, came to
be inserted in Schedule 1 to the Regulations w.e.f 30.09.21, it does not
imply that an auction sale or the highest bid prior to the aforesaid date
could be cancelled by the Liquidator exercising unfettered discretion and
without furnishing any reason - Furthermore, in the present case, even
after cancelling the highest bid of the appellant, in the subsequent sale
notice dtd. 24.12.21, Respondent No.2 again fi xed the reserve price of
the subject property at Rs.10 crores which was the reserve price in the
previous round of auction sale and which was also the bid value of the
appellant - There was no rationale or justifi cation in rejecting the bid of
the appellant and going for another round of auction at the same reserve
price - Merely because the Liquidator has the discretion of carrying out
multiple auction it does not necessarily imply that he would abandon or
cancel a valid auction fetching a reasonable price and opt for another round
of auction process with the expectation of a better price - There can be no
absolute or unfettered discretion on the part of the Liquidator to cancel an
auction which is otherwise valid - Tribunal rightly held that there were
no objective materials before the Liquidator to cancel the auction process
and to opt for another round of auction - Appellate Tribunal not justifi ed
in setting aside the order of the Tribunal dtd.12.08.2021 - Impugned order
set aside, order dtd.12.08.2021 restored - Insolvency and Bankruptcy
Board of India (Liquidation Process) Regulations, 2016- Regulation 33;
Schedule 1, Para 1(11A)- Auction- National Company Law Tribunal
Rules, 2016- Administrative Law - Principles of natural justice. [Paras
20.1, 29, 34.1, 4

## Text

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[2023] 13 S.C.R. 861 : 2023 INSC 809
861
CASE DETAILS
EVA AGRO FEEDS PRIVATE LIMITED
v.
PUNJAB NATIONAL BANK AND ANR.
(Civil Appeal No.7906 of 2021)
SEPTEMBER 06, 2023
[B. V. NAGARATHNA AND UJJAL BHUYAN, JJ. ]
HEADNOTES
Issue for consideration: Appellate Tribunal whether justifi ed in
upholding the decision of the Liquidator to cancel the auction sale without
assigning any reasons.
Insolvency and Bankruptcy Code, 2016 - Auction sale cancelled by
Liquidator without assigning any reasons - Appellant submitted its bid
dtd.16.07.21 to Respondent No.2-Liquidator in respect of the assets of
the corporate debtor (in liquidation) - On 20.07.21, appellant received
an E-auction certifi cate from certifying that it had won the auction of
the subject property- On 21.07.21, the appellant received an email from
Respondent No.2 simply informing that he had cancelled the E-auction
u/Clause 3(k) of the Disclaimer Clause in the E-Auction Process
Information Document and that a fresh E-auction would be conducted-
Appellant fi led application before the Tribunal- Tribunal directed the
respondent No.2 vide order dtd. 12.08.21 to send a communication to
the appellant requiring him to deposit the balance sale consideration-
Letter issued to the appellant, entire sum was deposited - Sale certifi cate
issued in favour of the appellant - Respondent No.1-fi nancial creditor
fi led appeal against order dtd. 12.08.21- Appellate Tribunal set aside the
said order and reversed the steps taken pursuant thereto, liberty given
to the Respondent No.2 to initiate fresh process of auction - He issued
sale notice dtd. 24.12.2021 for E-auction sale of the subject property -
Auction scheduled stayed:
Held: No reasons were assigned by the Liquidator for cancellation
of the E-auction - While the highest bidder has no indefeasible right
862
SUPREME COURT REPORTS
[2023] 13 S.C.R.
to demand acceptance of his bid, the Liquidator if he does not want to
accept the bid of the highest bidder has to apply his mind to the relevant
factors - Such application of mind must be visible or manifest in the
rejection order itself - It is incomprehensible that an administrative
authority can take a decision without disclosing the reasons for taking
a decision aff ecting the rights of parties - Further, while it is true that
para 1(11A), stating that where the Liquidator rejects the highest bid in
an auction process, he shall intimate the reasons for such rejection to
the highest bidder and mention it in the next progress report, came to
be inserted in Schedule 1 to the Regulations w.e.f 30.09.21, it does not
imply that an auction sale or the highest bid prior to the aforesaid date
could be cancelled by the Liquidator exercising unfettered discretion and
without furnishing any reason - Furthermore, in the present case, even
after cancelling the highest bid of the appellant, in the subsequent sale
notice dtd. 24.12.21, Respondent No.2 again fi xed the reserve price of
the subject property at Rs.10 crores which was the reserve price in the
previous round of auction sale and which was also the bid value of the
appellant - There was no rationale or justifi cation in rejecting the bid of
the appellant and going for another round of auction at the same reserve
price - Merely because the Liquidator has the discretion of carrying out
multiple auction it does not necessarily imply that he would abandon or
cancel a valid auction fetching a reasonable price and opt for another round
of auction process with the expectation of a better price - There can be no
absolute or unfettered discretion on the part of the Liquidator to cancel an
auction which is otherwise valid - Tribunal rightly held that there were
no objective materials before the Liquidator to cancel the auction process
and to opt for another round of auction - Appellate Tribunal not justifi ed
in setting aside the order of the Tribunal dtd.12.08.2021 - Impugned order
set aside, order dtd.12.08.2021 restored - Insolvency and Bankruptcy
Board of India (Liquidation Process) Regulations, 2016- Regulation 33;
Schedule 1, Para 1(11A)- Auction- National Company Law Tribunal
Rules, 2016- Administrative Law - Principles of natural justice. [Paras
20.1, 29, 34.1, 41, 42 and 51]
Insolvency and Bankruptcy Code, 2016 - ss.5(24), 29A - 'related
party' suff ering ineligibility u/s.29A - Intervenor argued that one 'VKG',
the director and principal shareholder of the appellant was also one of
863
the promotor director and principal shareholder of the corporate debtor
and therefore, a 'related party' of the corporate debtor and as such was
not eligible; rather debarred from participating in the auction of the
subject property of the corporate debtor:
Held: The disqualifi cation sought to be attached to the appellant is
without any substance as the related party had ceased to be in the helm
of aff airs of the corporate debtor more than a decade ago - He was not in
charge of the company or an infl uential member of the company i.e., the
corporate debtor when the appellant had made its bid pursuant to the auction
sale notice. [Para 50]
Insolvency and Bankruptcy Board of India (Liquidation
Process) Regulations, 2016 - Schedule 1, Para 1(11A) - Plea of the
intervenor that since para 1(11A) was inserted in Schedule I vide
notifi cation dtd.30.09.2021 w.e.f 30.09.2021 and this provision is
prospective thus, it cannot be applied to auctions conducted prior to
30.09.2021, including the auction in question - Therefore, there was
no requirement for the Liquidator to give reasons for cancellation of
the bid of the appellant:
Held: Plea not accepted - Furnishing of reasons is an important aspect
rather a check on the arbitrary exercise of power - It presupposes application
of mind to the relevant factors and consideration by the concerned authority
before passing an order - Absence of reasons may be a good reason to draw
inference that the decision making process was arbitrary - Therefore, what
para 1(11A) has done is to give statutory recognition to the requirement for
furnishing reasons, if the Liquidator wishes to reject the bid of the highest
bidder - Furnishing of reasons, which is an integral facet of the principles
of natural justice, is embedded in a provision or action, whereby the highest
bid is rejected by the Liquidator - Thus, what para 1(11A) has done is to
give statutory recognition to this well-established principle - It has made
explicit what was implicit. [Para 29]
Insolvency and Bankruptcy Code, 2016 - Powers and duties of the
Liquidator - Discussed - Insolvency and Bankruptcy Board of India
(Liquidation Process) Regulations, 2016.
EVA AGRO FEEDS PRIVATE LIMITED v. PUNJAB
NATIONAL BANK AND ANR.
864
SUPREME COURT REPORTS
[2023] 13 S.C.R.
LIST OF CITATIONS AND OTHER REFERENCES
S.N. Mukherjee versus Union of India (1990) 4 SCC 594: [1990]
1 Suppl. SCR 44; State of Orissa versus Dhaniram Luhar (2004) 5
SCC 568: [2004] 2 SCR 68; East Coast Railway versus Mahadev Appa
Rao (2010) 7 SCC 678: [2010] 7 SCR 908; Kranti Associates (P) Ltd.
Versus Masood Ahmed Khan (2010) 9 SCC 496: [2010] 10 SCR 1070;
Valji Khimji and Company Versus Offi cial Liquidator of Hindustan Nitro
Product (Gujarat) Limited and Others (2008) 9 SCC 299: [2008] 12
SCR 1; K. Kumara Gupta Versus Sri Markendaya and Sri Omkareswara
Swamy Temple and Ors (2022) 5 SCC 710 - relied on.
Swiss Ribbons Private Limited and Another versus Union of India
and Others (2019) 4 SCC 17: [2019] 3 SCR 535; Phoenix ARC Private
Limited versus Spade Financial Services Limited (2021) 3 SCC 475;
Arcelor Mittal (India) (P) Ltd. V. Satish Kumar Gupta (2019) 2 SCC 1:
[2018] 12 SCR 362; Arun Kumar Jagatramka Versus Jindal Steel and
Power Limited and Another (2021) 7 SCC 474: [2021] 3 SCR 114 -
referred to.
OTHER CASE DETAILS INCLUDING IMPUGNED
ORDER AND APPEARANCES
CIVIL APPELLATE JURISDICTION : Civil Appeal No.7906 of 2021.
From the Judgment and Order dated 30.11.2021 of the National
Company Law Appellate Tribunal (Principal Bench) at New Delhi in
Company Appeal (AT) (Insolvency) No.757 of 2021.
Appearances:
Neeraj Kishan Kaul, Sr. Adv., Parag Maini, Varun Lamba, Raghav
Chadha, Ms. Nishtha Kumar, Ms. Ira Mahajan, Advs. for the Appellant.
Siddharth Bhatnagar, Sr. Adv., Rajesh Kumar Gautam, Anant Achuni,
Dinesh Sharma, Sumit Sharma, Krishnaraj Thaker, Ms. Pallavi Langar,
Rahul Arya, Ashish Choudhury, Ms. Pracheta Kar, Aditya Sidhra, Nadeem
Afroz, Rohit Amit Sthalekar, Advs. for the Respondents.
865
JUDGMENT / ORDER OF THE SUPREME COURT
JUDGMENT
UJJAL BHUYAN, J.
Application (I. A. No.14220 of 2022) for intervention is allowed.
2. This appeal has been preferred under Section 62 of The Insolvency
and Bankruptcy Code, 2016 (hereinafter referred to as the 'Code') against
the order dated 30.11.2021 passed by the National Company Law Appellate
Tribunal, Principal Bench, New Delhi (briefl y 'the Appellate Tribunal'
hereinafter) allowing the appeal of Punjab National Bank i.e. Respondent
No.1 being Company Appeal (AT) (Insolvency) No.757 of 2021. The
aforesaid appeal was fi led by the Punjab National Bank against the order
dated 12.08.2021 passed by the National Company Law Tribunal, Kolkata
Bench, Kolkata (briefl y the 'Tribunal' hereinafter) in I.A. (IB) No.663/
KB/2021 in CP (IB) 440/KB/2018.
3. At the outset, it would be necessary to advert to the relevant facts:-
 (i) One Huvepharma Sea (Pune) Private Limited fi led an application
under Section 9 of the Code against M/s. Amrit Feeds Limited i.e.
corporate debtor before the Tribunal. The same was registered
as CP(IB) No.440/KB/2018. The Tribunal passed an order dated
22.10.2019 admitting the application fi led under Section 9 of the
Code as a result of which corporate insolvency resolution process
of the corporate debtor commenced.
(ii) On 19.02.2021, the Tribunal passed an order for liquidation of
the corporate debtor. Respondent No.2 was appointed as the
Liquidator to oversee the corporate insolvency resolution process.
(iii) Respondent No.2 by an e-mail dated 07.06.2021 forwarded a sale
notice dated 02.06.2021 for sale of the assets of the corporate
debtor. 23.06.2021 was the date fi xed by Respondent No.2 for
auction sale of the assets of the corporate debtor. It appears that
the aforesaid auction sale did not materialize. Thereafter by way
of an e-mail dated 29.06.2021, Respondent No.2 forwarded a
EVA AGRO FEEDS PRIVATE LIMITED v. PUNJAB
NATIONAL BANK AND ANR.
866
SUPREME COURT REPORTS
[2023] 13 S.C.R.
similar notice dated 28.06.2021 for auction sale of the assets of
the corporate debtor scheduled on 20.07.2021.
(iv) It is stated that the appellant i.e., Eva Agro Feeds Private Limited
was incorporated on 09.07.2021 under the provisions of the
Companies Act, 2013.
(v) Appellant submitted its bid dated 16.07.2021 to Respondent
No.2 on 17.07.2021 in respect of the assets of the corporate
debtor (in liquidation). The assets put up for auction were lands
admeasuring 1,05,250.40 sqft at Plot No.56, Khata Nos.27, 26,
29, 36, 36 (Old) and 362/363 (New), Mouza - Deoria, Pargana
Bhuli, Tehsil - Chunar, District - Mirzapur, Uttar Pradesh with
building, plant and machinery and other fi xed assets thereon on
a lump sum basis as mentioned at serial No.3 of the sale notice.
(vi) In terms of the sale notice, appellant paid the earnest money
deposit (EMD) of Rs.1 crore in respect of the subject property.
While the last date/time for submission of bid was 20.07.2021 at
14:30 hours, appellant had submitted its bid on 19.07.2021 for
a sum of Rs.10 crores which was equivalent to the reserve price
as notifi ed in the bid which ended at 14:30 hours on 20.07.2021.
(vii) On 20.07.2021, appellant received an E-auction certifi cate from
Respondent No.2 certifying that it had won the auction for the
assets of the corporate debtor put up for auction sale (referred to
hereinafter as the 'subject property'). On 21.07.2021, appellant by
way of an e-mail requested Respondent No.2 to issue allotment
letter in respect of the subject property. It is stated that on
21.07.2021 itself appellant received an e-mail of the aforesaid
date from Respondent No.2 informing that Respondent No.2 had
cancelled the E-auction held on 20.07.2021 under Clause 3(k)
of the Disclaimer Clause in the E-Auction Process Information
Document. The appellant was further informed that a fresh
E-auction would be conducted for the subject property.
(viii) Aggrieved by the same, appellant fi led an application before
the Tribunal under Section 60 and related provisions of the
Code read with The Insolvency and Bankruptcy Board of India
867
(Liquidation Process) Regulations, 2016 as well as under Rule
11 of the National Company Law Tribunal Rules, 2016 which
was registered as I.A. (IB) No.663/KB/2021 in CP (IB) 440/
KB/2018. Tribunal vide order dated 12.08.2021 disposed of
the said application by directing the Liquidator i.e. respondent
No.2 to send a communication to the appellant requiring him to
deposit the balance sale consideration within the time specifi ed
in the E-auction notice.
(ix) According to the appellant, Respondent No.2 complied with
the order of the Tribunal and issued a letter to the appellant to
deposit the balance consideration money. Pursuant to the said
letter, appellant deposited the entire sum on 10.09.2021 following
which Respondent No.2 issued a sale certifi cate dated 15.09.2021
in respect of the subject property in favour of the appellant.
(x) While the Liquidator accepted the order of the Tribunal, one of
the fi nancial creditors i.e. Punjab National Bank (Respondent
No.1) fi led an appeal before the Appellate Tribunal under Section
61 of the Code against the order dated 12.08.2021 passed by the
Tribunal. The appeal was contested by the appellant. However,
by the impugned order dated 30.11.2021, Appellate Tribunal
allowed the appeal and set aside the order dated 12.08.2021
passed by the Tribunal. Consequently, the steps taken pursuant to
the said order were also reversed. Liquidator was given liberty to
initiate fresh process of auction in accordance with the provisions
of the Code read with The Insolvency and Bankruptcy Board
of India (Liquidation Process) Regulations, 2016 (briefl y the
'Regulations' hereinafter).
(xi) Aggrieved, the auction purchaser as the appellant has preferred
the present appeal.
4. This court by order dated 10.01.2022 had issued notice and passed
an interim order staying the subsequent auction which was scheduled on
17.01.2022.
5. Respondent No.1 - Punjab National Bank in its counter affi davit at
the outset pleaded that the appeal deserves to be dismissed at the threshold
EVA AGRO FEEDS PRIVATE LIMITED v. PUNJAB NATIONAL
BANK AND ANR. [UJJAL BHUYAN, J.]
868
SUPREME COURT REPORTS
[2023] 13 S.C.R.
and that the impugned order of the Appellate Tribunal upholding the decision
of the Liquidator to cancel the auction sale is fully justifi ed. Appellant was
the sole bidder and quoted exactly the reserve price. Reasoning given by
the Appellate Tribunal in paragraphs 11 to 22 of the impugned order are
just and proper and calls for no interference. In this connection, Respondent
No.1 has referred to Clause 3 (k) of the auction sale notice which says that
the Liquidator has the absolute right to accept or reject any or all the bids
or adjourn/postpone/cancel the E-auction or withdraw any asset/property or
portion thereof from the E-auction at any stage without assigning any reason.
Reliance has also been placed on Clause 5 (m) of the auction sale notice
as per which the bidder with the highest off er/bid does not get any right to
demand acceptance of its bid. It is in the above context that Respondent
No.1 has contended that the Liquidator was well within his rights to cancel
the auction sale, which decision has been rightly affi rmed by the Appellate
Tribunal.
5.1. According to Respondent No.1, it is a settled position that any
auction sale, before completion, can always be cancelled. Tribunal had
overlooked the provisions contained in Clause-13 of the Regulations which
makes it clear that auction sale shall stand completed only on payment of
full amount and not at the stage when the highest bidder is invited to provide
balance sale consideration within 90 days from the date of demand. Tribunal
relied upon Clause 12 of the Regulations as per which, on the closure of
auction, the highest bidder shall be invited to provide the balance sale
consideration within 90 days of the date of demand; fi rst proviso mentions
that payments made after 30 days would attract interest of 12% with the
second proviso clarifying that the sale would be cancelled if the payment
is not received within 90 days. According to Respondent No.1, Tribunal by
placing reliance on Clause 12 mis-directed itself in directing the Liquidator
to send a communication to the appellant for depositing the balance sale
consideration within the time specifi ed in the E-auction notice.
5.2. There is no express bar or prohibition either under the Code or
under the Regulations restraining the Liquidator from cancelling an auction
sale even after declaration of the highest bidder but before completion of
sale as understood under Clause 13 of the Regulations. In the absence of
such express bar or prohibition and when the auction sale was yet to be
869
concluded, Liquidator was well within his rights in cancelling the auction
sale with the intent to have another round of auction sale. Tribunal had erred
in interfering with such action of the Liquidator.
5.3. Appellant had accepted the terms and conditions of the auction
sale notice while participating in the auction sale, including Clause 3 (k).
Therefore, it was not open to the appellant to question the decision of the
Liquidator to cancel the auction sale.
5.4. Respondent No.1 has also alleged that the appellant had made
incorrect statements in the appeal and did not bring on record relevant
documents. It is stated that Respondent No.2 in his written submission
before the Tribunal had stated that he was informed by way of e-mail
dated 05.08.2021 by Kapila Krishi Udyog Pvt. Ltd. that the promoters of
the appellant were also the founder promoters of the corporate debtor. On
receipt of such e-mail, Liquidator verifi ed the record and found that one of
the present directors of the appellant, Mr. Vijay Kumar Ghidia was a director
of the corporate debtor from its inception i.e. 22.09.1994 to 13.01.2009.
Liquidator had submitted that later on it had received letter dated 05.08.2021
from Sugna Feeds Pvt. Ltd. expressing its intention to participate in the
auction sale of the subject property. It was contended that Sugna Feeds
Pvt. Ltd. is a well-established player in the poultry feeds sector, whereas
appellant was incorporated only on 09.07.2021 i.e. after issuance of the
E-auction sale notice.
5.5. Appellant while submitting its bid vide application dated
16.07.2021 had accepted the terms and conditions of the auction process
shared by the Liquidator which contained paragraph-7. Paragraph-7 is
specifi c: it mentions that applicant would adhere to the terms and conditions
of the E-Auction Process Information Document as shared by the Liquidator.
6. Mr. Sunil Mohan Acharya- Liquidator of the corporate debtor i.e.,
Respondent No.2 has fi led counter affi davit. He was appointed as Liquidator
of the corporate debtor by the Tribunal vide order dated 19.02.2021.
According to him, the admitted debts of the corporate debtor are Rs.530
Crores of which claims of fi nancial creditors are Rs.371 Crores.
6.1. By an E-auction notice dated 02.06.2021, the assets of the
corporate debtor being, inter alia, poultry feed farms at Lucknow (Lot
EVA AGRO FEEDS PRIVATE LIMITED v. PUNJAB NATIONAL
BANK AND ANR. [UJJAL BHUYAN, J.]
870
SUPREME COURT REPORTS
[2023] 13 S.C.R.
No.2) and Mirzapur (Lot No.3) were put up for auction with reserve prices
of Rs.11.30 crores and Rs. 12.69 crores respectively. By an e-mail dated
07.06.2021, respondent No. 2 had forwarded the E-auction notice to the
prospective bidders, including to the appellant. However, as no bids were
received in respect of any of the assets of the corporate debtor, reserve
prices were reduced by 25% as provided in the Regulations, whereafter Lot
No.2 and Lot No.3-subject property, with revised reserve prices of Rs.8.50
crores and Rs. 10.00 crores respectively were again put up for auction vide
E-auction notice dated 28.06.2021. By an e-mail dated 29.06.2021, the
E-auction notice along with E-Auction Process Information Document were
sent to the prospective bidders, including the appellant.
6.2. Before the date of auction on 20.07.2021, earnest money deposit
(EMD) was paid by the appellant and another intending bidder both for Lot
No.2 and the subject property. Five minutes before the scheduled closure of
bidding time there was a spurt of counter bids for Lot No.2 by the appellant
and the other bidder, taking the price from Rs.8.50 crores to Rs.14.79 crores.
The pattern of bidding in respect of Lot No.2 and the fact that the same
two entities had submitted EMD for the subject property, but the bid being
ultimately made only by the appellant led Respondent No.2 to believe that
higher bids could be received for the subject property on further re-auction.
6.3. According to Respondent No.2, the subject property had a cost of
Rs.17.30 crores and written down book value of Rs.8.59 crores as compared
to Lot No.2, which had cost of Rs.9.28 crores and written down book value
of only Rs.2.45 crores. However, Lot No.2 was sold for Rs.14.39 crores
as against its reserve price of Rs.8.50 crores. Respondent No.2 therefore
expected a price higher than Rs.10 crores for the subject property as Lot
No.2 despite having a substantially lower worth as per the available record
had fetched bids higher than Rs.10 crores.
6.4. For the aforesaid reasons and to maximise the value of the
subject property which would enure to the benefi t of all stakeholders,
Respondent No.2 thought it prudent to explore the possibility of further
price enhancement in respect of the subject property and therefore decided
to cancel the auction for the subject property.
6.5. In support of the above averments, Respondent No.2 has referred
to certain terms and conditions in the E-auction notice and the E-Auction
871
Process Information Document. Clause 3(f) binds the applicant to accept
the terms of the disclaimer, which forms an integral part of the E-Auction
Process Information Document. Clause 3 (k) says that the Liquidator has the
absolute right to accept or reject any or all bids or adjourn/postpone/cancel
the E-auction or withdraw any asset/property or portion thereof from the
E-auction at any stage without assigning any reason thereof. As per Clause
5 (m), the bidder with the highest off er/bid does not get any right to demand
acceptance of his bid. Clause 5 (n) provides for intimation to be sent to the
successful bidder via e-mail. Date of sending the mail would be considered
as the date of receipt of the intimation. As per Clause 2 (h), on the close
of the auction, the highest bidder shall be invited to provide balance sale
consideration within 90 days of the date of such demand. Clause 2 (i) makes
it clear that on payment of the full amount, the sale shall stand completed.
The Liquidator shall then execute certifi cate of sale or sale deed to transfer
such assets and thereafter the assets shall be delivered to the highest bidder
in the manner specifi ed in terms of the sale.
6.6. Respondent No.2 has contended that while submitting its bid for
the subject property, the appellant was well aware of the terms and conditions
governing the sale by auction. Appellant expressly accepted the aforesaid
terms and conditions while submitting its application dated 16.07.2021 for
participating in the auction bid process. According to him, on expiry of the
time to submit bids on 20.07.2021, an auto generated e-mail from the web
portal of 'eauctioneer.com' was sent to the appellant stating that the bid
submitted by it was the highest.
6.7. Thereafter, by an e-mail dated 21.07.2021, Respondent No.2
informed the appellant about cancellation of E-auction held on 20.07.2021
under Clause 3(k) of the E-Auction Process Information Document.
Appellant was advised to collect the EMD as a fresh E-auction sale was to
be conducted.
6.8. Respondent No.2 has mentioned that he had received an e-mail
dated 10.09.2021 from one Mr. Amit Ghidia alleging that the directors of
the appellant were also the founder promoters of M/s. Amrit Feeds Limited,
the corporate debtor. On receipt of such e-mail, Respondent No.2 carried
out inspection and upon verifi cation came to know that one of the present
directors of the appellant, Mr. Vijay Kumar Ghidia was a director and the
EVA AGRO FEEDS PRIVATE LIMITED v. PUNJAB NATIONAL
BANK AND ANR. [UJJAL BHUYAN, J.]
872
SUPREME COURT REPORTS
[2023] 13 S.C.R.
principal shareholder of the corporate debtor during the period 22.09.1994
to 13.08.2019. Respondent No.2 has also mentioned that appellant was
incorporated only in July, 2021.
6.9. Referring to the proceeding before the Tribunal instituted by the
appellant, he submits that the application fi led by the appellant against
cancellation of the E-auction was taken up for hearing on 29.07.2021 and
concluded on the same day without giving any opportunity to Respondent
No.2 to fi le reply. However, the parties were permitted to fi le written
submissions which were duly fi led by Respondent No.2.
6.10. By order dated 12.08.2021, Tribunal allowed the application of
the appellant and directed Respondent No.2 to send a communication to
the appellant for depositing the balance sale consideration within the time
specifi ed in the E-auction notice.
6.11. Punjab National Bank i.e., Respondent No.1, a fi nancial creditor
of the corporate debtor, having claims of Rs.136,61,93,948/- assailed the
order dated 12.08.2021 before the Appellate Tribunal. In such proceedings,
Respondent No.2 supported the stand of Respondent No.1. Appellate
Tribunal by order dated 30.11.2021 allowed the appeal of Punjab National
Bank and directed Respondent No.2 to initiate a fresh process of auction in
accordance with the provisions of the Code and the Regulations.
6.12. It is stated that after the order dated 30.11.2021 was passed by the
Appellate Tribunal, Respondent No.2 had sent an e-mail dated 02.12.2021
calling upon the appellant to comply with the order of the Appellate Tribunal
and to handover peaceful possession of the subject property. As there was no
response from the appellant, Respondent No.2 made several calls to Navneet
Kumar Ghidia, Director of Eva Agro Feeds Pvt. Ltd. on his mobile phone but
the calls went unanswered. Appellant did not allow even the representative of
Respondent No.2 to enter into the subject property. That apart, representative
of Respondent No.2 had informed him that the appellant was wrongfully
removing materials and equipments from the subject property.
6.13. It is further stated that subsequent to cancellation of the E-auction
sale of the subject property, Respondent No.2 had received a letter dated
05.08.2021 from Sugna Feeds Pvt. Ltd., a well-established player in the
poultry feeds sector, expressing its intention to participate in the auction of
873
the subject property. It is stated that in addition to the above, respondent
No.2 had received an e-mail dated 20.08.2021 from IFFCO KISAN Delhi,
a subsidiary company of Indian Farmers Fertilisers Cooperative (IFFCO)
expressing its interest in the assets of the corporate debtor.
6.14. In the above circumstances, Respondent No.2 has contended that
cancellation of E-auction was justifi ed and was done in the best interest of
the stakeholders of the corporate debtor.
7. Appellant has fi led rejoinder affi davit to the counter affi davit of
Respondent No.1.
7.1. While reiterating its contentions, appellant has stated that the
adjudicating authority i.e., the Tribunal had rightly set aside the decision
of the Liquidator (Respondent No.2). Respondent No.2 after issuing the
certifi cate certifying that appellant had won the auction of the subject property,
cancelled the E-auction without giving any justifi cation or reason for such
cancellation. Referring to Clause 3 (a) of the E-Auction Process Information
Document, appellant has contended that the said clause is contrary to the
Regulations. In the facts and circumstances of the case, Respondent No.2
could not have cancelled the auction. Such act of cancellation of E-auction
was wholly illegal and arbitrary. In this connection, reliance has been
placed upon para 1(12) of Schedule I to the Regulations. Appellant was the
highest and sole bidder in the second round of auction and its bid amount
matched the reserve price as mentioned in the sale notice. Reserve price
in the fi rst round of auction was fi xed at Rs.12,69,00,000/-. However, as
the auction sale did not materialise, Respondent No.2 in the second round
reduced the reserve price in order to get bidders to at least match the reserve
price. This was done successfully by the appellant whereafter appellant was
informed that it had won the bid. Action of Respondent No.2 in cancelling
the E-auction after e-mailing the appellant that it had won the bid is a clear
case of abuse of the process.
7.2. Respondent No.2 vide public notice dated 24.12.2021 scheduled
fresh E-auction on 17.01.2022 again fi xing the reserve price in relation
to the subject property at Rs.10 crores which was the same amount as the
reserve price in the second round of bidding and which was the bid amount
of the appellant
EVA AGRO FEEDS PRIVATE LIMITED v. PUNJAB NATIONAL
BANK AND ANR. [UJJAL BHUYAN, J.]
874
SUPREME COURT REPORTS
[2023] 13 S.C.R.
7.3. Respondent No.1 has misinterpreted Clause 3 (k) to mean that
since full amount was not paid, it was entitled to invoke the said clause
and cancel the bid. Such a contention is wholly untenable having regard
to the overall scheme of the Regulations. No reasons were assigned by the
Liquidator while cancelling the auction process. The order cancelling the
auction being devoid of any reasons does not indicate application of mind
by the Liquidator.
7.4. Appellant has asserted that the Liquidator i.e. Respondent No.2
had accepted the decision of the Tribunal by not fi ling any appeal against
the order dated 12.8.2021. Therefore, it is not open to the Liquidator to
contest the claim of the appellant.
8. As noticed above, one Mr. Harish Bagla has fi led an application
seeking intervention which we have allowed.
9. In addition to narrating the facts and commenting thereupon, the
intervenor has averred that the principal person in control of the appellant
is one Mr. Vijay Kumar Ghidia who is a director and principal shareholder
of the appellant. Mr. Vijay Kumar Ghidia was also one of the promoter
directors and principal shareholders of the corporate debtor. Sale of any
asset of the corporate debtor could not have been conducted in favour of
a related party of the corporate debtor in view of the specifi c bar under
Section 29A of the Code. As a matter of fact, Mr. Vijay Kumar Ghidia is
also the maternal uncle of the intervenor who is the ex-managing director
of the corporate debtor. Mr. Vijay Kumar Ghidia therefore comes within
the meaning of 'related party' as defi ned under Sections 5(24) and 5(24A)
of the Code. Therefore, the auction sale in favour of the appellant is bad in
law and cannot be sustained.
9.1. This aspect was also brought to the notice of Respondent No.2
i.e. the Liquidator.
9.2. It is stated that the intervenor had fi led an appeal before the
Appellate Tribunal being Company Appeal (AD) (Insolvency) No.789 of
2021. In the said appeal, an interim order was passed on 27.09.2021 directing
the parties to maintain status quo. Before the appeal of the intervenor could
be heard, the Appellate Tribunal had passed the order dated 30.11.2021
allowing the appeal of Respondent No.1 by setting aside the order of the
875
Tribunal dated 12.08.2021. Therefore, when the appeal of the intervenor
came up for hearing before the Appellate Tribunal, the same was disposed
of vide order dated 09.12.2021 as having been rendered infructuous. When
the intervenor came to know that the appellant has fi led the present appeal,
it had fi led the intervention application.
10. We have heard Mr. Neeraj Kishan Kaul, learned senior counsel for
the appellant; Mr. Rajesh Kumar Gautam, learned counsel for Respondent
No.1; Mr. Krishnaraj Thakker, learned counsel for Respondent No.2; and
Mr. Siddharth Bhatnagar, learned senior counsel for the intervenor - Mr.
Harish Bagla.
11. Mr. Neeraj Kishan Kaul, learned senior counsel for the appellant
at the outset submits that Appellate Tribunal fell in complete error in setting
aside the order of the Tribunal and restoring the order of the Liquidator.
Adverting to the order of the Liquidator cancelling the auction sale, he
submits that the same is devoid of any reasons. Such an order is not only
arbitrary but is non est in the eye of law. There could not have been any
occasion for the Liquidator to go for a fresh auction keeping the reserve
price at the same amount of Rs.10 crores which was the bid off ered by the
appellant and accepted by the Liquidator. In fact, Liquidator had declared
that the appellant had won the bid. Tribunal had rightly appreciated the
grievance of the appellant and interfered with the aforesaid order of the
Liquidator. Liquidator did not challenge the order of the Tribunal dated
12.08.2021, rather Liquidator had complied with the same by accepting
the balance sale consideration from the appellant and issuing the sale
certifi cate. Since Liquidator had accepted the order of the Tribunal, it was
not open for him to support Respondent No.1 or the order of the Appellate
Tribunal in the appeal fi led by the appellant. He has also pointed out that at
the time of auction, Mr. Vijay Kumar Ghidia was no longer connected with
the corporate debtor having retired from the said company way back in the
year 2011. Therefore, he cannot come within the ambit of the expression
'related party' as defi ned under the Code. He submits that the present is a
fi t case for setting aside the order of the Appellate Tribunal and restoring
the order of the Tribunal which as a matter of fact has been complied with
by the Liquidator.
EVA AGRO FEEDS PRIVATE LIMITED v. PUNJAB NATIONAL
BANK AND ANR. [UJJAL BHUYAN, J.]
876
SUPREME COURT REPORTS
[2023] 13 S.C.R.
12. Mr. Rajesh Kumar Gautam, learned counsel for Respondent
No.1 submits that appellant has failed to point out any particular provision
either in the Code or in the Regulations prohibiting the Liquidator from
cancelling the auction sale after declaring the highest bidder but before
completion of sale. Power of cancellation is available to the Liquidator under
Clause 3(k) of the auction notice. Such a power could be exercised by the
Liquidator without assigning any reason. While bidding, the appellant had
unconditionally accepted all the clauses of the auction notice, including
Clause 3(k). Therefore, the Tribunal was not justifi ed in interfering with
such a decision of the Liquidator and further directing the Liquidator to
conclude the auction sale process. Before completion of sale, highest bidder
has no vested right for confi rmation of sale in his favour. Insofar as the
maintainability of the appeal before the Appellate Tribunal is concerned,
he submits that there is no bar or prohibition restraining a fi nancial creditor
from preferring an appeal against an order of the Tribunal since the fi nancial
creditor is certainly an aggrieved person and has substantial interest in the
auction sale of the subject property of the corporate debtor. That apart,
under para 1(11) of Schedule I to the Regulations, the Liquidator has the
discretion to conduct multiple rounds of auction to maximize realization in
the sale of assets and to promote the best interest of the fi nancial creditors.
He submits that reliance on para 1(13) of Schedule I to the Regulations by
learned senior counsel for the appellant is misplaced inasmuch as a sale
can be said to have been completed only on payment of the full amount
and not on declaration of a bidder as the highest bidder who in any case
has no vested right to claim confi rmation of sale. He submits that appellant
is in no way prejudiced by the next round of auction which was scheduled
on 17.01.2022 but could not proceed because of the restraint imposed by
this Court. Appellant can certainly participate in the next round of auction.
12.1. In the above context, he submits that Tribunal was not justifi ed
in interfering with the decision of the Liquidator and therefore, Appellate
Tribunal rightly set aside the said order of the Tribunal and in restoring the
order of the Liquidator. He has referred to Clause 3 (k) of the auction notice
which confers discretion upon the Liquidator to cancel the E-auction at any
stage without assigning any reason. Adverting to the facts of the present
case, he submits that the appellant was the sole bidder and his bid amount
was exactly the same as the reserve price. It was in that context that the
877
Liquidator decided to cancel the auction with a view to have another round
of auction to fetch a better price. There was nothing wrong or illegal in the
exercise of such discretion by the Liquidator.
13. Mr. Krishnaraj Thakker, learned counsel for Respondent No.2 has
also adopted and reiterated the above submissions made by learned counsel
for Respondent No.1. Additionally, he submits that Liquidator had received
an e-mail dated 10.09.2021 from one Mr. Amit Ghidia informing him that
the promoter of the appellant was also the founder promoter of the corporate
debtor. Mr. Vijay Kumar Ghidia who is one of the directors of the appellant
was also a director and principal shareholder of the corporate debtor. Recent
incorporation of the appellant in the month of July 2021 also raised suspicion
about the nature of the appellant and its intentions.
13.1. Appellant while submitting its bid had accepted the terms and
conditions of the auction process. Therefore, it is not open to the appellant
to question the exercise of discretion by the Liquidator, which is one of the
terms and conditions of the auction.
13.2. In so far issuance of e-mail to the appellant declaring it as the
winner of the auction process is concerned, he submits that on expiry of
the time for placing of bids, an auto generated e-mail from the e-auction
website "www.eauctioneer.com" was sent to the appellant stating that the
bid submitted by it was the highest. It was an auto-generated e-mail and
cannot be construed to be the E-auction certifi cate. In so far acceptance of
the balance sale consideration and issuance of sale certifi cate is concerned,
he submits that the same was done as per the direction of the Tribunal.
13.3. In the course of the hearing, he submitted that there were two
assets of the corporate debtor; one at Lucknow (Lot No. 2) and the other at
Mirzapur (Lot No.3). Since the assets at Lot No.2 fetched Rs.4.79 crores
more than the reserve price, Liquidator believed that the subject property
could fetch a higher amount than the reserve price of Rs.10 crores. Keeping
this in mind, he had cancelled the E-auction process.
13.4. On the submission that Liquidator did not assail the decision of
the Tribunal and therefore had accepted the same, his contention is that in all
the proceedings Liquidator had contested the case projected by the appellant.
Now that the appeal of Respondent No.1 has been allowed by the Appellate
EVA AGRO FEEDS PRIVATE LIMITED v. PUNJAB NATIONAL
BANK AND ANR. [UJJAL BHUYAN, J.]
878
SUPREME COURT REPORTS
[2023] 13 S.C.R.
Tribunal, Liquidator is bound by the same.