NCLAT sets aside private sale of Corporate Power Ltd, orders fresh bidding

The National Company Law Appellate Tribunal (NCLAT) has set aside the private sale of Corporate Power Ltd (CPL) to Orissa Alloy Steel Private Limited (OASPL), citing procedural lapses and lack of transparency in the liquidation process. The tribunal has directed the liquidator to conduct a fresh Swiss Challenge auction within 60 days. The ruling came in response to two appeals — one by OASPL, the original anchor bidder, and another by SM Steels and Power Limited (SMSPL), which had challenged the sale process after it was concluded.

Background of the case

Corporate Power Ltd was admitted into corporate insolvency in March 2020 and ordered into liquidation in October 2021. Over the next three years, the liquidator conducted nine unsuccessful auctions, with the reserve price dropping from ₹770 crore to ₹292.91 crore. n February 2024, OASPL submitted a private sale offer of ₹265 crore, which was approved by the Stakeholders’ Consultation Committee (SCC). A Swiss Challenge process was initiated with OASPL as the anchor bidder and an Earnest Money Deposit (EMD) of ₹150 crore. However, no other bids were received. SMSPL later expressed interest and offered ₹300.20 crore, but its bid was rejected by the SCC as it came after the bidding deadline.

Key grounds for NCLAT’s decision

The NCLAT highlighted several irregularities in the sale process:

• Prior permission not obtained: The liquidator failed to seek prior approval from the NCLT before initiating the private sale, as required under Regulation 33(2)(d) of the Liquidation Process Regulations.
• Opaque process document: The Process Document, which outlined bidding terms, was dated February 29, 2024 — two days after the deadline for submitting eligibility documents. This made it impossible for bidders to comply with the requirements.
• Unrealistic timelines: The tribunal found that the timelines for submitting documents and EMD were “illusory” and hindered genuine participation.
• Excessive EMD: The EMD of ₹150 crore was deemed disproportionately high and restrictive.

NCLAT’s directions

While the tribunal upheld the SCC’s commercial wisdom to opt for a private sale via Swiss Challenge, it ordered a fresh process with the following conditions:

• The reserve price shall remain ₹265 crore.
• EMD shall be capped at 10% of the reserve price.
• The process shall be open to all eligible bidders, including OASPL and SMSPL.
• The liquidator must complete the sale within 60 days.

The tribunal also dismissed allegations of collusion between OASPL and Assets Care and Reconstruction Enterprise Limited (ACRE), a major creditor, citing lack of conclusive evidence.

Implications

The ruling reinforces the importance of transparency and procedural fairness in liquidation processes under the Insolvency and Bankruptcy Code (IBC). It also underscores the need for liquidators to adhere to statutory timelines and ensure a level playing field for all bidders. Both appeals — filed by OASPL and SMSPL — were disposed of in light of the above directions.

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