NCLT/NCLAT Under IBC Lacks Jurisdiction To Set Aside Auction Sale Conducted Prior To Initiation Of CIRP: NCLAT

The National Company Law Appellate Tribunal (NCLAT) New Delhi bench of Justice Ashok Bhushan, Mr. Barun Mitra (Technical Member) and Mr. Arun Baroka (Technical Member) has held that an auction sale conducted before the commencement of the CIRP cannot be set aside by the NCLT while exercising its jurisdiction under the Insolvency and Bankruptcy Code, 2016 (IBC). Such an auction is not hit by section 14 of the IBC. The present appeal has been filed against an order passed by the National Company Law Tribunal (NCLT) by which the application filed by applicant Suraksha Asset Reconstruction Ltd. seeking to set aside auction sale was allowed. It was also ordered to hand over the assets to the Resolution Professional after the initiation of the Corporate Insolvency Resolution Process (CIRP). The Appellant submitted that Adjudicating Authority had no jurisdiction to set aside the auction which auction was conducted in pursuance of the order dated 25.11.2019, passed by additional Chief Metropolitan Magistrate in criminal proceedings and in pursuance of the said order auction of the Yacht had taken placed on 22.03.2021 that is much before initiation of CIRP. It was further submitted that in pursuance of the auction the amount was paid on 22.03.2021 and 26.03.2021 as per the terms of auction and the auction could not have been set aside by the Adjudicating Authority. Per contra, the Respondent submitted that the auction had not been completed even after the commencement of the CIRP on 30.04.2021. The Adjudicating Authority has rightly directed for setting aside the auction. The Tribunal noted that the auction was conducted in pursuance of an order passed by the Additional Chief Metropolitan Magistrate and it took place before the commencement of the CIRP. It held that since the auction had taken place before the initiation of the CIRP, the question of applicability moratorium under section 14 of the IBC does not arise. The auction was conducted in a lawful manner and could not be set aside by the NCLT as it is beyond the remit of its jurisdiction. The Tribunal relied on the Supreme Court's judgment in Kalyani Transco where it was held that the NCLT and NCLAT are constituted under sections 408 and 410 of the Companies Act, not under the IBC. Their jurisdiction extends to matters arising out of or in relation to insolvency resolution. Referring to the Embassy Development judgment, it was held that issues concerning public law or decisions of statutory authorities cannot be adjudicated by the NCLT/NCLAT. It concluded that this tribunal would not comment on the distribution of proceeds from sale of the Yacht in the auction as it is beyond the remit of the current proceedings. In light of the above discussion, it held that the Adjudicating Authority was not empowered to set aside the auction sale conducted before the initiation of the CIRP. Accordingly, the present appeal was allowed. Case Title: Unity Small Finance Bank Ltd. Versus Suraksha Asset Reconstruction Ltd. & Ors. Case Number: Comp. App. (AT) (Ins) No. 1480 of 2023 Judgment Date: 24/07/2025 Click Here To Download Order/Judgement

NCLT/NCLAT Under IBC Lacks Jurisdiction To Set Aside Auction Sale Conducted Prior To Initiation Of CIRP: NCLAT

Mohd Malik Chauhan

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