NCLT Guwahati Says Unaccepted OTS Can't Stall Liquidation Sale, Dismisses ₹16.23 Cr. E-Auction Challenge

The National Company Law Tribunal (NCLT), Guwahati, on 10 September held that an unaccepted One-Time Settlement (OTS) proposal made before liquidation cannot be enforced as a matter of right to stop subsequent liquidation proceedings.

A Bench comprising Judicial Member Rammurti Kushawaha and Technical Member Yogendra Kumar Singh dismissed an application challenging the liquidation sale of Shree Sai Prakash Alloys Pvt. Ltd. and seeking cancellation of the e-auction and the Sale Certificate issued in favour of the successful bidder. It observed:

“Further it is noted that he OTS proposal dated 29.12.2023 was made prior to the passing of the order of liquidation dated 25.01.2024. Thus, at the time when the Page 19 of 23 IA(IBC)/126/GB/2024 In CP(IB)/24/GB/2019 said proposal was submitted, the liquidation process had not yet commenced. In the absence of any acceptance of the said proposal or a concluded and binding settlement between the Applicant and the Financial Creditor prior to the order of liquidation, the Applicant cannot seek enforcement of the said OTS as a matter of right after commencement of the liquidation proceedings. The subsequent liquidation process, therefore, cannot be interdicted merely on the basis of an OTS proposal which had remained unaccepted or which was made before the date of passing of the liquidation order.”

Punjab National Bank initiated the insolvency proceedings against Shree Sai Prakash Alloys under Section 7 of the Insolvency and Bankruptcy Code, 2016. After the resolution plan was rejected, the NCLT ordered liquidation of the company on 25 January 2024.

Before the liquidation order, the Applicant had submitted an OTS proposal dated 29 December 2023, offering Rs. 22.50 crore for settlement of the loan accounts. The Bank did not accept the proposal.

The liquidation sale was subsequently conducted through an e-auction on 6 June 2024. The successful purchaser paid Rs. 16.23 crore, following which the Sale Certificate was issued on 21 June 2024. The Applicant challenged the sale, contending that the OTS proposal offered a higher amount than the auction consideration and that the liquidation process had therefore failed to maximise the value of the assets.

Rejecting the challenge, the Tribunal held that the OTS proposal could not be enforced after commencement of liquidation since it had neither been accepted by the Bank nor resulted in a concluded and binding settlement before the liquidation order. It further held that a higher private OTS offer, by itself, could not invalidate the auction. It noted that neither the Applicant nor its proposed purchaser participated in the e-auction despite being aware of the process.

The Bench also found that the reserve price had been fixed at 120% of the liquidation value on the basis of the approved valuation report and the decision of the Stakeholders' Consultation Committee.

It held that differences between earlier valuations, private offers and the eventual sale consideration did not, by themselves, establish illegality or arbitrariness in the absence of statutory violation, fraud, collusion or material irregularity. The Tribunal also observed that the sale stood concluded upon payment of the full consideration and issuance of the Sale Certificate.

Accordingly, the NCLT dismissed the application and declined to interfere with the liquidation sale.