Name of the case:Eva Agro Feeds Pvt. Ltd. Vs. Punjab National Bank and Anr.

Case Number: [Civil Appeal No. 7906 of 2021]

Name of Judges: Hon’ble Judges Ujjal Bhuyan and B. V. Nagarathna

Order Date: 06/09/2023

Facts of the Case:

• In this case, an appeal has been filed against the fresh conduct of auction. 
• Here, the appellant submitted the bid in respect of the assets of the corporate debtor, for which the appellant paid the EMD of Rs. 1 Crore.
• The Appellant received the E-auction certificate certifying that it had won the auction. Later on, the Respondent No. 2 informed the appellant that the E-auction had been cancelled 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.
• When an application was filed before the Tribunal against the cancellation and fresh conduct of auction, the Tribunal disposed the said application and directed 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 specified in the E-auction notice. 
• While the Liquidator (Respondent No. 2) complied with the order of the Tribunal, an appeal was filed before the Appellate Tribunal by the financial creditor against the said order. The Appellate Tribunal set aside the order of the Tribunal and in turn, 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 IBC read with the IBBI Regulations.
• Aggrieved by the aforesaid, the auction purchaser has preferred an appeal.

The Hon’ble Supreme Court Observed and Held as Follows:

• The Court observed that even after cancelling the highest bid of the appellant, the Liquidator had again fixed 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. If this is the position, we fail to find any rationale or justification in rejecting the bid of the appellant and going for another round of auction at the same reserve price.
• Thus, mere expectation of the Liquidator that a still higher price may be obtained can be no good ground to cancel an otherwise valid auction and go for another round of auction. Such a cause of action would not only lead to incurring of avoidable expenses but also erode credibility of the auction process itself. That apart, post auction it is not open to the Liquidator to act on third party communication and cancel an auction, unless it is found that fraud or collusion had vitiated the auction. The necessary corollary that follows therefrom is that there can be no absolute or unfettered discretion on the part of the Liquidator to cancel an auction which is otherwise valid.
• Therefore, the Court sets aside the order passed by the Appellate Tribunal and restores the order of the Tribunal. The appeal is allowed.