IBC Is Now Being Misused Like Anything": CJI Surya Kant Flags Pre-Planned Auctions and Asset Undervaluation

The Supreme Court recently flagged the issue of IBC provisions being misused by Insolvent Companies to stage pre-planned auctions and sell assets at undervalued rates.

The Chief Justice of India, Justice Surya Kant remarked on the gravity of instances where the IBC procedure is being misused, the CJI said :

"Unfortunately, the IBC platform is now being misused like anything, you get the company's all assets undervalued, then you indulge in a kind of an auction, which is also a completely pre-planned game, somebody from the family or the close friends comes and buys it."

Notably, S.35 of the IBC Act 2016 deals with the duties and powers of the liquidator, empowering the liquidator to sell the immovable and movable property and actionable claims of the corporate debtor by public auction or private contract (or in parcels or in a slump sale) in the manner as may be specified.

While S.36 (1)-(3) defines a 'liquidation estate' and mandates that all assets of the corporate debtor which are part of the estate are to be realised and distributed. S.53 details how the sale proceeds from the auctioning/sale are to be divided amongst the creditors.

These observations were made by a bench comprising Chief Justice of India Surya Kant and Justices Joymalya Bagchi and Vipul Pancholi was hearing a Public Interest Litigation filed by EAS Sarma, former Union Government Secretary, seeking a Court-monitored investigation into the Bank Fraud allegations against Anil Dhirubhai Ambani Group (ADAG) companies.

The plea seeks a probe into bank collusions in the alleged bank loan fraud of over Rs 40,000 crores by ADAG companies.

During the hearing, Advocate Prashant Bhushan for the petitioners submitted that Reliance Communications and Reliance Infra had 47,000 crores of outstanding dues, and in Bankruptcy, the company was sold for Rs. 455 crores. He stressed that it was just "1% of the total outstanding amount, and it was sold out to whom? to the brother's company."

Sr Advocate Mukul Rohatgi, appearing for Anil Ambani, mentioned that the resolution of the companies under the IBC is still pending.

Noting the gravity of instances where the IBC procedure is being misused, the CJI remarked :

"Unfortunately, the IBC platform is now being misused like anything, you get the company's all assets undervalued, then you indulge in a kind of an auction, which is also a completely pre-planned game, somebody from the family or the close friends comes and buys it."

Agreeing to the same, the SG replied, "The Government of India is also seriously considering this issue in the IBC. I cannot say much, I am a part of the discussion, but it is under very serious consideration."

The CJI added that such instances are being seen routinely before the Supreme Court. He added that under the present regime, companies facing insolvency are able to undervalue their assets and even sell them to known persons/ family members.

" Voluntary declarations by the companies (of Bankruptcy), then your own people evaluate you, the evaluation is not even 10% of the actual market value, and then you eventually find out this....everyday Iam observing."

Ultimately, the Court directed the CBI to investigate the possibility of collusion on the part of bank officers as well.

Case : EAS Sarma v. Union of India and others |W.P.(C) No. 1217/2025