Sale Of Corporate Debtor's Assets Can't Be Allowed At Reserve Price Reduced Beyond 25% As It Violates Liquidation Regulations: NCLT Bengaluru

The National Company Law Tribunal (NCLT), Bengaluru Bench of Shri. Sunil Kumar Aggarwal (Judicial Member) and Shri. Radhakrishna Sreepada (Technical Member) has held that the sale of the Corporate Debtor's assets cannot be allowed at a reserve price reduced beyond the 25% threshold, as it would violate Schedule I of the Liquidation Regulations. This cannot be done by the Adjudicating Authority even by exercising its powers under section 60(5) of the IBC as it would amount to creating a procedural and substantive remedy which was not contemplated in the statute. The present application has been filed under section 60(5) of the Insolvency and Bankruptcy Code, 2016 (IBC) by the Liquidator of the Corporate Debtor seeking to sell assets of the corporate debtor at reserved price reduced beyond the 25% threshold limit as recommended by the Stakeholders Consultation Committee under Regulation 31A. It is further prayed that the approval should be given to conduct a physical auction of the movable assets as per schedule I of the Liquidation Regulations. The Applicant submitted that the raw material is deteriorating and perishing with each passing day and immediate sale of the assets mentioned above is imperative to prevent further deterioration of the goods. It was further submitted that in the interest of greater transparency, the Applicant proposes to conduct a Physical-auction for sale of the remaining assets of the Corporate Debtor by reducing the reserve price beyond the 25 percent in interest of value maximization of the assets of the Corporate Debtor, rather than proceeding with the process of the Private Sale as specified in the IBBI (Liquidation Process) Regulations, 2016. The Tribunal observed that a bare perusal of the prayer relating to reducing the reserve price beyond 25 percent shows that the same violates Schedule- I, Mode of Sale under Regulation 33 of the IBBI Liquidation Process Regulations, 2016, which only permits the Liquidator to reduce the Reserve Price by up to twenty-five percent after the auction fails for 1st time and subsequently reduce by 10 percent for further auctions. The Tribunal held that granting further permission to the Liquidator to reduce the reserve price for the remaining assets would violate schedule I and Regulation 33 of the Liquidation Regulations. The Adjudicating Authority cannot use its powers under section 60(5) of the IBC to allow the reduction of the reserved price beyond the 25% threshold limit set by the Regulations. If such a relief is allowed, it would amount to creating a procedural or substantive remedy that was not contemplated by the Statute. Therefore such a prayer cannot be allowed. However, the applicant was permitted to sell assets physically under schedule I of the Liquidation Regulations and other applicable provisions and related rules. Accordingly, the present application was disposed of. Case Title: Supreme Overseas Exports India Private Limited Represented by its Liquidator Case Number:I.A. No. 318 of 2025 in C.P. (IB) No. 89/BB/2021 Order Date: 15/07/2025 Click Here To Read/Download The Order

Sale Of Corporate Debtor's Assets Can't Be Allowed At Reserve Price Reduced Beyond 25% As It Violates Liquidation Regulations: NCLT Bengaluru

Mohd Malik Chauhan

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