Seven years, five auctions, two defaulting bidders: How IBC failed IVRCL Ltd

On September 17, the liquidator of IVRCL Limited will try for the fifth time to sell the Hyderabad infrastructure company as a going concern. The reserve price is Rs 1,090.98 crore. In February 2020, GABS Megacorp Limited bid ₹1,654.77 crore for the same company. In the six and a half years since, IVRCL has lost ₹563.79 crore of its asking price — 34 per cent — without a single rupee reaching a creditor.

That is the story of the sale. The story of the process is worse.

The National Company Law Tribunal admitted IVRCL to insolvency on February 23, 2018 on State Bank of India’s application. It ordered liquidation as a going concern on July 26, 2019. Regulation 44 of the IBBI (Liquidation Process) Regulations expects a liquidator to finish the job within a year. IVRCL is now in its eighth. An application seeking a further 365-day extension, covering December 2025 to December 2026, was listed before the Hyderabad bench in January.

Nothing about IVRCL is exceptional. That is the point.

Winning a bid costs nothing

Two bidders have now been declared successful for IVRCL, and neither paid.

GABS Megacorp put down ₹5 crore in earnest money against a ₹1,654.77 crore bid — three-tenths of one per cent — and was declared successful on February 27, 2020. It did not pay the balance. The adjudicating authority cancelled the entire bid process on April 16, 2021, fourteen months later.

A second round in 2021 drew three expressions of interest and not one earnest money deposit, and was cancelled. A third round, at a reserve cut to ₹1,200 crore, produced a consortium led by P Prasad Reddy, promoter of Raghava Water and Raghava Construction. The NCLT cleared it over Section 29A objections and, on June 15, 2022, gave the consortium twelve months to pay ₹1,150 crore in six tranches on top of ₹50 crore already deposited. By August 2023 it had paid ₹100 crore and was asking for more time — and asking, separately, that eighteen months be excluded from the liquidation period altogether.

So, the asset sat. Between GABS’s default and today, the company was carried through five and a half years of preservation costs, liquidator’s fees, professional fees and depreciation, funded ultimately out of what creditors will eventually receive.

The Code has no real answer to a bidder who wins and walks. Forfeiture of earnest money is the remedy, and at 0.3 per cent of the bid in the first round it was not a deterrent — it was a cheap option on a distressed company. The current notice asks for ₹109 crore against a ₹1,090.98 crore reserve, which suggests the lesson has been learned in this case. It has not been generalised into the Code.

The ratchet only turns one way

IVRCL’s reserve has moved from ₹1,654.47 crore to ₹1,200 crore to ₹1,090.98 crore. Each cut is defensible on its own terms — an unsold asset is worth what someone will pay. Cumulatively, the ratchet does something else — it teaches bidders that waiting is profitable. Anyone who declined to bid at ₹1,654 crore in 2020 has been rewarded with a 34% discount for the patience.

IBBI is aware of the problem. Its Disciplinary Committee, in an order dated August 2, 2023, suspended the registration of Sutanu Sinha, IVRCL’s liquidator through all of this, finding among other things that the reserve price had been reduced beyond the limits permitted under the Liquidation Regulations, that the valuation was conducted outside prescribed timelines, and that he had shown a lack of objectivity in fixing the fee of a support-services entity.

Also Read: IVRCL liquidation process marred by delays, controversies