NCLAT held that the Appellants had not raised their concerns in a timely manner, having only filed their objections after the sale had been completed and the sale certificate issued.
The National Company Law Appellate Tribunal (NCLAT), Chennai Bench of Justice Sharad Kumar Sharma (Judicial Member) and Jatindranath Swain (Technical Member) was hearing appeals and held that the Appellant, as former Director of the Corporate Debtor, lacked the standing to challenge the finality of the liquidation process and auction sale, especially given their delay in raising objections and the procedural compliance of the Liquidator.
In the connected Company Appeals, namely Comp. App (AT) (CH) (INS) No. 167 of 2024 and Comp. App (AT) (CH) (INS) No. 168 of 2024, the Appellants, who were erstwhile Directors of M/s. RRP Housing Private Limited challenged the Impugned Orders. These Orders, dated 13.03.2024, had addressed their respective Interlocutory Applications, IA (IBC)/118 (CHE)/2023 and IA (IBC)/129 (CHE)/2023. The challenge in the first appeal concerned the rejection of the Appellant’s application, which questioned the validity of an auction sale of property held on 05.05.2022, following the liquidation of the Corporate Debtor. The second appeal arose from the same Impugned Order, which also addressed related issues regarding the liquidation process.
The facts were largely undisputed: the Corporate Debtor, engaged in real estate projects, was liquidated by an Order dated 04.04.2019. During the liquidation process, the property at Maraimalai Nagar, Chennai, was auctioned and sold at the reserve price to the second respondent. The Appellants argued that the auction sale was flawed due to inadequate publicity and the fact that only one bid was received. They contended that the auction was conducted in bad faith and undervalued the property, which deprived them of potential dividends.
The Appellants also challenged the manner in which the auction sale was conducted, claiming that the Liquidator failed to properly publicize the auction in widely circulated newspapers, as required under the applicable regulations. They further argued that the area description of the property in the sale notice was disputed and that the Liquidator should have sought a compromise or arrangement under Section 230 of the Companies Act before proceeding with the sale.
Upon review, the Appellate Tribunal noted that the status of the Appellants as former Directors meant their rights to question the auction proceedings were limited, especially given that the liquidation had attained finality and the sale had been confirmed. Additionally, the Appellants had not raised their concerns in a timely manner, having only filed their objections after the sale had been completed and the sale certificate issued. The Tribunal found that the challenges raised at this late stage, coupled with the procedural compliance of the Liquidator, did not warrant reopening the completed sale process.
Consequently, the Tribunal found no merit in the appeals. The Impugned Orders were affirmed, and the connected appeals were dismissed. The pending Interlocutory Applications were also closed.
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