NCLAT Upholds Rejection Of Belated Higher Bid In Hema Automotive Liquidation, Says Fairness Not One-Way Street

The bench of Judicial Member Justice N Seshasayee and Technical Member Indevar Pandey observed that,

“Fairness is a constant that works differently in different factual context. And it needs to be understood in the context. The appellant who worries about denial of fairness to it has overlooked fairness to which the second respondent is entitled to. It is desperate to realise its dues....Fairness does not exist to the exclusion of all, but works in conjunction with all. It is not a one-way street.”

The appeal was filed by Sunrise Industries against an order passed by the Delhi Bench of the National Company Law Tribunal (NCLT) which had dismissed an application that had sought directions to consider its enhanced offer submitted during the auction process/NRRA assignment process conducted under Regulation 37A of the IBBI (Liquidation Process) Regulations, 2016, and to set aside the selective and non-transparent acceptance of the offer of Respondent No.3.

Hema Automotive Pvt. Ltd. was admitted into CIRP in July 2022, with its sole substantial asset being a leasehold industrial plot at RIICO Industrial Area, Neemrana. After resolution attempts failed, liquidation commenced in April 2023.

Multiple auctions of the asset failed due to uncertainty over lease rights, prompting the Stakeholders' Consultation Committee (SCC) to explore assignment of the asset as a Not Readily Realisable Asset (NRRA) under Regulation 37A of the IBBI (Liquidation Process) Regulations, 2016.

A Process Information Memorandum was issued, inviting expressions of interest. Sunrise Industries submitted its bid and deposited the required earnest money. During the 10th SCC meeting on 4.12.2023, sealed bids were opened. The appellant's offer was for Rs.7.0 crores, whereas the 3rd respondent's offer was Rs.10.55 crores

The Stakeholders' Consultation Committee resolved to accept Respondent No. 3's bid. While the meeting was still ongoing, Sunrise emailed an enhanced offer of Rs 11.10 crore. The liquidator, however, did not place this revised offer before the SCC and proceeded to issue a sale certificate to Respondent No. 3 on 29.12.2023. Sunrise challenged this before the NCLT, which dismissed its application. This is what led to the present appeal before NCLAT.

Sunrise Industries argued that Regulation 37A requires transparency and fairness, and the liquidator's selective negotiation with Respondent No.3 while ignoring its enhanced offer was arbitrary.

It was also submitted that as negotiations were permitted after opening bids, the process was no longer a rigid sealed-bid mechanism. The appellant contended that its higher offer was submitted during the SCC meeting, before any final conclusion, and should have been considered to maximise value.

It alleged hostile discrimination, citing precedents that fairness and non-arbitrariness are essential in asset sales.

Sunrise maintained that no concluded contract existed when its revised bid was made, and exclusion from negotiations violated principles of equality.

The liquidator and secured creditor countered that the revised offer was submitted after the cut-off date and without the mandatory 20% deposit, making it non-compliant. Sunrise's representative present at the SCC meeting raised no objection when another bidder's (Respondent No.3) bid was accepted.

Moreover, Sunrise later sought and accepted a refund of its earnest money. Thus, making it aware that the process had concluded and had also accepted its outcome.

They argued that entertaining belated offers would undermine the finality and credibility of liquidation processes. The successful bidder emphasised that it had already restored the lease with RIICO, cleared dues, and invested substantial sums to operationalize the property, making reversal inequitable.

The NCLAT noted that the secured creditor had already made repeated unsuccessful attempts to auction the asset, and the liquidator too had failed in multiple e‑auctions before resorting to NRRA assignment as a last option.

The bench further emphasized that the appellant's conduct weakened its claim of fairness. Sunrise submitted its revised offer after the cut‑off date, without the mandatory deposit, and then accepted a refund of its earnest money deposit.

More critically, it waited 52 days before filing its challenge, which the Tribunal described as speculative and inconsistent with a genuine grievance. It was observed, "After all, courts are not casinos for any litigant to use law for adventurous speculation.”

The tribunal also highlighted the practical consequences of disturbing a concluded sale. Respondent No.3 had already restored the terminated lease with RIICO at considerable cost, cleared statutory dues, and invested heavily to operationalize the property. It was observed that, “Hence, clock cannot be put backwards to derail the interest of the 3rd respondent off its legitimate path on the pretext of maximisation of asset value.”

Accordingly, the appeal was dismissed.

For Appellants: Advocates Alok Kumar Aggarwal., Anushruti, Anushka Sharma, Singha Rajpal, Aanvi Oberai

For Respondents: Advocates Sharad Tyagi, Archana Tyagi, K Gayatri and Samarth Gogia for R3