Public Auction Not Compulsory For Sale Of Encumbered Assets If Charge Holders Consent: NCLAT New Delhi

The present appeals were filed by Resolution Professionals-Pankaj Mahajan and Bhuvan Madan, representing Arshiya Limited, NCR Rail Infrastructure Limited, and Arshiya Northern FTWZ Limited (ANFL), respectively. All three entities are group companies undergoing CIRP before different benches of the NCLT Mumbai.

The dispute originated from the Committee of Creditors (CoC)'s approval to sell 42.08 acres of non-core land parcels owned by Arshiya Limited—including 39.56 acres interspersed within the railway siding operations of NCR Rail Infrastructure Limited and 2.52 acres forming part of a spine road providing sole access to assets of ANFL and NCR Rail.

The CoC had approved the sale under Regulation 29 of the CIRP Regulations with 85.46 voting in favor of the Successful Resolution Applicants (SRAs) of NCR Rail and ANFL citing value maximisation, operational synergy within the Khurja Free Trade Warehousing Zone (FTWZ). The NCLT while granting in principle approval directed the RPs to invite independent bids from all prospective resolution applicants to ensure transparent price discovery. This direction had been challenged before the NCLAT by the RPs and the CoC.

The Bench comprising Justice Ashok Bhushan and Mr. Arun Baroka (Technical Member) allowed the present appeals and held that the NCLT has exceeded its jurisdiction by interfering with the commercial decision of the CoC and by passing directions which affected the CIRPs of other corporate debtors pending before different benches.

The Tribunal further observed that the manner of sale and evaluation of assets fall within the exclusive domain of the CoC under its commercial wisdom which cannot be interfered with by the NCLT unless to ensure compliance with the Code.

“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. 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. Therefore, the Impugned Order can be set aside for speculating for 'better' price discovery through invitation of independent bids.,” the Bench observed.

Rejecting the NCLT's insistence on public auction, the Tribunal observed that the CoC had ensured the transparent price discovery through valuations by two independent agencies and decided not to sell below the average fair market price. “Public auction is not the sole feasible method of price discovery. The CoC's process ensured value maximization consistent with the Code,” the Tribunal stated.

The Tribunal further observed that each CIRP is a separate statutory process, therefore the NCLT clearly erred in making sale of the Arshiya's assets contingent upon the bidding processes in the CIRP of NCR Rail and ANFL.

“Such directions conflate separate proceedings and render the Corporate Debtor's CIRP contingent upon outcomes of parallel CIRPs, which is impermissible,” the Bench ruled.

Citing Jet Aircraft Maintenance Engineers Welfare Association, the Tribunal further held that sale of encumbered assets is permissible under Regulation 29 if consented to by the secured creditors. “Edelweiss ARC and SREI Equipment Finance Ltd., being charge-holders and CoC members, expressly consented to the transaction. This is functionally equivalent to a waiver of prejudice that Regulation 29 guards against,” the Tribunal said.

The Tribunal further noted that Regulation 36A(1A) was inserted which permitted the invitation of expressions of interest for sale of assets on May 26, 2025 after the approval of the sale in March, 2025. Therefore, it was prospective, not retrospective in nature.

“Not only Regulation 36A(1A), but no other provision in the Code allows invitations of bids for sale of assets owned by a separate entity in the CIR Process of a Corporate Debtor. Furthermore, Regulation 36A(1A) was only inserted into the CIRP Regulations vide a notification dated 26 May 2025. However, the Subject Transaction was approved by the CoC on 18 March 2025 – much prior to the introduction of Regulation 36A(1A),” the Bench held.

Accordingly, the Tribunal allowed the present appeals allowing the sale of non-core parcel lands as approved by the CoC under Regulation 29 of the CIRP Regulations.

Case Title: Pankaj Mahajan Versus Edelweiss Asset Reconstruction Asset Company

Case Number: Company Appeal (AT) (Insolvency) No. 1450 of 2025

Judgment Date: 07/11/2025

For Appellant : Mr. Abhijeet Sinha, Sr. Advocate with Mr. Ayush Rajani and Ms. Heena Kochar, Advocates

For Respondent : Mr. Arvind Nayyar, Sr. Advocate with Mr. Vivek Jain, Mr. Swapnil Srivastava, Mr. Abhishek Gupta, Mr. Chirag Naik, Mr. Jayesh Srivastava, Mr. Rishabh Periwal, Mr. Shubham and Ms. Diksha Dadu, Advocates.

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.