NCLAT New Delhi Orders Fresh Auction In MBSL Case, Holds JFC Finance Excluded Over BAANKNET Glitch

The New Delhi National Company Law Appellate Tribunal (NCLAT) on 29 May allowed the appeal filed by JFC Finance (India) Ltd., holding that the bidder was wrongfully excluded from the e-auction process due to a possible technical glitch on the BAANKNET platform and directing a fresh auction with a reserve price of Rs 54 crore.

Chairperson Justice Ashok Bhushan and Technical Member Barun Mitra observed:

“We are of the considered view that merely because the auction platform hinged on automation and was premised on a 'do it yourself process', the possibility of inadvertent technical bottleneck cannot be ruled out without ascertaining the facts. Assumption of the Adjudicating Authority that merely because the BAANKNET platform was an automated system and other participants did not face any technical difficulties, it was immune from suffering any systemic distortions or defects is misconstrued.”

The appeal arose from an order of the Principal Bench of the National Company Law Tribunal (NCLT), which had dismissed JFC Finance's challenge to the liquidation auction of Moser Baer Solar Ltd. (MBSL) and imposed costs of Rs 1.5 lakh while terming the bidder non-serious.

Liquidation proceedings against MBSL began in 2019. In the second round of sale, the liquidator shifted the auction to the BAANKNET platform pursuant to an IBBI circular. JFC Finance deposited an earnest money deposit of Rs 2.5 crore and uploaded the required documents but claimed that the pre-qualification submission link never appeared on its interface, preventing participation in the bidding process.

JFC Finance stated that despite repeated login attempts and calls to BAANKNET support, it could not enter the bidding hall. The auction concluded on 8 April 2025, with Chemester Food Industry Pvt. Ltd. emerging as the highest bidder at Rs 28.27 crore.

JFC Finance then approached the Delhi High Court. During the proceedings, the Liquidator stated that no further steps would be taken pursuant to the e-auction, but the Stakeholders' Consultative Committee (SCC) still proceeded and declared Chemester Food as the successful bidder.

Later, it filed a contempt petition before the Delhi High Court alleging disobedience of the Court's directions. The Court recorded JFC's willingness to offer Rs 54 crore and directed it to deposit the amount.

Thereafter, JFC Finance moved the NCLT seeking to set aside the auction and conduct a fresh e-auction. The NCLT dismissed the application, held that JFC was a non-serious bidder, and imposed costs of Rs 1.5 lakh, which led to the present appeal.

It argued before the NCLAT that it complied with all requirements, deposited the earnest money, and uploaded documents, and that its exclusion occurred solely due to a technical glitch. It further contended that the liquidator failed in his duty under Section 35(1)(d) of the Insolvency and Bankruptcy Code to maximise value and ensure fair participation. It also pointed out that it had already deposited Rs 54 crore, almost double the successful bid, which showed both seriousness and financial capacity.

The liquidator and successful bidder contended that BAANKNET functioned as a fully automated self-service portal and that no manual intervention could be allowed after expiry of deadlines. They argued that once an auction concluded, it could not be reopened merely because a party failed to participate, especially when other bidders faced no issues.

The NCLAT rejected the NCLT's reasoning. It noted that BAANKNET platform administrators had informed the liquidator about JFC Finance's complaint regarding non-visibility of the pre-qualification link and repeated login attempts, but the liquidator did not seek any technical report or clarification from the platform operator. The Tribunal also held that the NCLT wrongly treated JFC as a non-serious bidder without properly examining whether a technical failure had occurred. It observed:

“The Adjudicating Authority's insistence on proof of non-receipt of pre-qualification link from the Appellant is not a credible method of unearthing whether there was a technical glitch or not. No conclusive inference could not have been arrived at by the Adjudicating Authority without referring the matter to the BAANKNET platform administrator who was responsible for administering the auction portal as neither the Liquidator nor the Adjudicating Authority possesses the technical wherewithal or technical competence to conclusively establish whether such glitch occurred or not.”

On the enhanced offer, the Tribunal held that JFC Finance had already deposited Rs 54 crore and that value maximisation remained the core objective under the IBC, which could not be ignored.

Setting aside the auction conducted on 8 April 2025, the Bench directed the liquidator to conduct a fresh e-auction with a reserve price of Rs 54 crore, open to all eligible bidders including JFC Finance. It further held that if no higher bid emerged, JFC Finance's deposit would be treated as the successful bid, and if outbid, the amount would be refunded.

Accordingly, the NCLAT directed completion of the liquidation process within 60 days.

For Appellants: Senior Advocate Abhijeet Sinha with Advocates Gaurav Mitra, Varsha Banerjee, Udita Singh and Heena Kochar

For Respondents: Senior Advocate Krishnendu Datta with Advocates Mansumyer Singh, Niharika Sharma and Jaismeen Sharmaa for R1

Senior Advocate Arun Kathpalia with Advocates Shaunak Kashyap, Mayanka Dhawan and Vikram Kalra for R3