Disclaimer: This case has been reported after the availability of the order of the Court and not on media reports so as to give an accurate report to our readers.
National Company Law Appellate Tribunal, New Delhi: In an appeal essentially questioning NCLT’s rejection of the sale of non-core assets of the Corporate Debtor, which was approved by the Committee of Creditors (“CoC”) as a sale of assets outside the course of business, aimed at maximization of value, the bench of Ashok Bhushan, J., (Chairperson) and Arun Baroka* (Technical Member) held that Regulation 29 of the Insolvency and Bankruptcy Board of India (Corporate Insolvency Resolution Process) Regulations, 2016 (CIRP Regulations) does not prohibit a CoC sanctioned sale of encumbered assets where secured creditors had given consent.
The NCLAT set aside NCLT’s directions requiring PRAs of NCR Rail and ANFL to bid for the subject parcels of land, and restored the CoC-approved two-part sale under CIRP Regulation 29.
Factual Matrix
In the instant matter, the three appeals were filed challenging a common order dated 16-07-2025 passed by the NCLT, Mumbai. The Resolution Professional of the Corporate Debtor, Arshiya Ltd. approached the Adjudicating Authority seeking approval for the sale of two subject parcels of land owned by the Corporate Debtor under CIRP Regulation 29.
The Corporate Debtor owned 42.08 acres of non-core land inside the Khurja FTWZ, comprising of 39.56 acres — “non-contiguous and situated on the site of NCR Rail Infrastructure Limited” and 2.52 acres of spine road — “the sole access to the FTWZ assets of both NCR Rail and ANFL.” Both the parcels were mortgaged to Edelweiss ARC and SREI Equipment Finance.
The NCR Rail and ANFL were wholly owned subsidiaries of the Corporate Debtor and had been undergoing their own CIRPs. Their resolution plans were already approved by their respective CoC, and “the successful resolution of NCR Rail and ANFL hinges upon securing access to the Subject Parcels”
In its 7th and 8th meetings, the CoC deliberated extensively on the treatment of the land. It was recorded in minutes that the land’s value “hinges upon their strategic location and seamless integration with adjoining assets owned by NCR Rail and ANFL.” A proposal to grant permanent right-of-way failed to gather requisite approval. The CoC concluded that outright sale, not access easements, would “maximize value, mitigate risk of future ambiguity and disputes” The CoC commissioned two independent valuers to ensure price discovery. Accordingly, with 85.46% voting, the CoC approved a two-part sale of the parcels to NCR Rail (or its SRA) and ANFL (or its SRA) respectively.
The NCLAT treated company appeal relating to the Corporate Debtor as the lead matter since “the respondent parties are same and the same order is being challenged…on similar grounds”
NCLT’s Order
The NCLT accepted that the land parcels could be sold, however held that “the process employed for price discovery must be transparent and ensure value maximization” and thus directed the Resolution Professionals of NCR Rail and ANFL to invite independent bids from all PRAs in those CIRPs.
Parties’ Contentions
The appellants contended that the parcels are non-core, and their sale is for maximisation of value under CIRP Regulation 29. It was contended that both secured creditors (EARCL and SREI) have consented, which is “functionally equivalent to a waiver of the prejudice that Regulation 29 guards against.” It was contended that Regulation 36A(1A) of the CIRP Regulations did not exist when CoC approved the sale, therefore cannot be applied retrospectively. It was further argued that the NCLT’s direction to solicit bids from PRAs of other corporate debtors is unknown to the IBC and would reset the CIRP back to Form-G stage, which “is impermissible under the Code and was neither sought nor suggested.”
The CoC contended that the land’s utility arises only from “contiguity and integration with the adjoining FTWZ assets” and fragmented title will trigger immediate value leakage. It was contended that public auction is not mandatory and that the CoC obtained valuations and resolved to sell at not less than average fair market value. It was contended that the commercial decision is non-justiciable and “judicial review of the CoC’s decision on matters of commercial wisdom is impermissible.” It was further contended that CIRP Regulation 29 permits sale of encumbered assets when secured creditors consent.
The Intervenor (Suspended Director) alleged exclusion from CoC proceedings and claimed that the sale “goes against the spirit of IBC” and that PRAs were kept in the dark. It was further argued that the sales were done at “throwaway prices” and the process was non-transparent. They sought the court’s direction to declare entire CIRP as void.
Moot Points
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Is the manner of sale a commercial decision lying within the exclusive domain of the CoC?
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Whether the Subject Transaction ensures price discovery and value maximization and whether a public auction is the sole feasible method of price discovery despite commission of valuation by the CoC?
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Whether the AA exceeded its jurisdiction in issuing directions that render the CIR Process of the CD contingent upon the CIR Processes of ANFL and NCR Rail pending before separate fora?
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Whether the commercial context of the Khurja FTWZ necessitates the Subject Transaction for value maximization?
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Is the sale of encumbered assets permitted under CIRP Regulation 29?
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Whether Regulation 36A(1A) of the CIRP Regulations inapplicable?
NCLAT’s Reasoning
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CoC’s Commercial Wisdom on manner of Sale
NCLAT emphasised that the CoC had approved the Subject Transaction “after detailed deliberations, considering the interdependent nature of the Subject Parcels, the operational synergies with NCR Rail and ANFL and the advanced stage of the CIR Processes of the related entities.” It was noted that the minutes of the 7th and 8th CoC meetings recorded that alternative solutions (including an MoU for right of way) were tabled but did not gather requisite approval.
The NCLAT noted that the CoC concluded that “outright sale… would maximize value, mitigate risk of future disputes, and ensure that the Subject Parcels are deployed to their most value-accretive use.” The NCLAT held that “the CoC’s preference for an outright transfer…is commercially rational, within the CoC’s exclusive domain, and thus non-justiciable.”
The NCLAT asserted that judicial review of CoC decisions on commercial wisdom is very limited. It was held that the NCLT erred by “speculating for ‘better’ price discovery through invitation of independent bids” as commercial decision lies entirely with the CoC.
“Judicial review of the CoC’s decision on matters of commercial wisdom is impermissible, save to the limited extent necessary to ensure compliance with the Code…”
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Transparent Price Discovery
The NCLAT noted that the CoC had commissioned valuation reports from two independent, reputed valuers, and then decided to sell at not less than the average of fair market value. It was noted that no objections were raised to valuation. Thus, “the CoC has employed a process that ensures transparent price discovery and maximization of value”
The NCLAT rejected the assumption that only public auction ensures transparency. Referring to Binani Industries Ltd. v. Bank of Baroda, 2018 SCC OnLine NCLAT 521, the NCLAT asserted that “reliance on principles governing maximization of value in auction processes holds little weight… a resolution process under the Code is not a myopic auction but instead aimed at long-term commercial prospects”
The NCLAT further accepted the CoC’s submission that in the unique commercial context of the FTWZ, NCR Rail and ANFL (or their SRAs) were the only possible transferees, making auction futile and potentially harmful.
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Commercial Context of FTWZ
The NCLAT accepted that the subject parcels are not stand-alone landbanks; they are inseparable from the FTWZ ecosystem and have always been utilized by NCR Rail and ANFL for seamless operations within the FTWZ ecosystem. The NCLAT described the FTWZ as a “special category of SEZ… where commercial utility arises from contiguity and integration with adjoining assets.”
The NCLAT noted that the third-party purchasers would face “customs/SEZ alignment issues” and “integration challenges,” and on the other hand sale would “preserve the FTWZ’s throughput economics,” unlocks synergies, and ensure value maximization for all three CIRPs.
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NCLT’s direction regarding CIRPs of NCR Rail and ANFL
The NCLAT observed that NCLT itself had acknowledged that the CIRPs of NCR Rail and ANFL were pending before separate NCLT benches and were beyond its jurisdiction, yet the NCLT still directed their Resolution Professionals to issue independent bid invitations. The Tribunal held that
“The directions requiring the RPs of NCR Rail and ANFL to advertise and invite independent bids for assets owned by the CD conflate independent proceedings… [and] render the CD’s CIR Process contingent upon the outcomes of parallel CIR Processes”
The NCLAT noted that these CIRPs were at an advanced stage, with CoCs of both entities having already approved resolution plans and the NCLT’s directions to the Resolution Professionals of NCR Rail and ANFL to invite independent bids would stall judicial approval of plans and disincentivize SRAs from continuing.
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Sale of Encumbered Assets under Regulation 29
The NCLAT noted that CIRP Regulation 29 protects secured creditors against prejudicial transfer of encumbered assets. The NCLAT unequivocally held that CIRP Regulation 29 does not bar sale of encumbered assets where secured creditors has consented and stated that “EARCL and SREI — the sole charge-holders over the Subject Parcels — form part of the CoC and have expressly consented… This is functionally equivalent to a waiver of the prejudice Regulation 29 guards against.”
The NCLAT cited Jet Aircraft Maintenance Engineers Welfare Assn. v. Ashish Chhawchharia, 2022 SCC OnLine NCLAT 278, where sale of encumbered assets with creditor’s consent was allowed.
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Applicability of Regulation 36A(1A)
The NCLAT noted that CIRP Regulation 36A(1A), inserted on 26-05-2025, allows Resolution Professional to invite EOIs for sale of assets of the Corporate Debtor. It was noted that the CoC had approved the sale on 18-03-2025, before the amendment.
The NCLAT held that even if Regulation 36A(1A) were considered, it does not support NCLT’s directive to invite bids from PRAs of NCR Rail and ANFL. Moreover, CIRP Regulation 36A(1A), is prospective and “not applicable in the facts and circumstances of the case.” The NCLAT further held that “no provision in the Code allows invitations of bids for sale of assets owned by a separate entity in the CIR Process of a Corporate Debtor.”
NCLAT’s Decision
The NCLAT allowed the sale of 39.56 acres to NCR Rail/SRA and 2.52-acre spine road to ANFL/SRA. The NCLAT called the intervenor’s objections “dilatory tactics” and an attempt “to thwart the resolution process” and dismissed the same. The NCLAT held that —
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The manner of sale is exclusively within the commercial domain of the CoC, and NCLT cannot re-appraise or substitute its own view. The NCLAT set aside the NCLT’s interference in the sale process.
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Public auction is not the sole feasible method of price discovery and the CoC’s valuation-based process ensured transparency and maximisation of value,therefore, NCLT’s insistence on auction/bid-invitation was unjustified.
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The commercial context of FTWZ necessitates the transaction and upheld the sale as being in the best commercial interests of all stakeholders.
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NCLT exceeded its jurisdiction while directing the Resolution Professionals of NCR Rail and ANFL to invite independent bids from all PRAs in those CIRPs and the directions were unsustainable. The NCLAT set aside the impugned directions in entirety.
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The sale of encumbered assets is permitted under CIRP Regulation 29 when secured creditors have consented to it. NCLT had erred in applying CIRP Regulation 29 restrictively.
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CIRP Regulation 36A(1A) is wholly inapplicable, and NCLT’s reliance on principles of public bidding was contrary to the regulatory scheme.
[Pankaj Mahajan v. Edelweiss Asset Reconstruction Co., Company Appeal (AT) (Insolvency) Nos. 1450—1452 of 2025, Decided on 07-11-2025]
*Judgment by Arun Baroka (Technical Member)
Advocates who appeared in this case:
Mr. Abhijeet Sinha, Sr. Advocate with Mr. Ayush Rajani and Ms. Heena Kochar, Counsel for the Appellant
Mr. Arvind Nayyar, Sr. Advocate with Mr. Vivek Jain, Mr. Swapnil Srivastava, Mr. Abhishek Gupta, Mr. Chirag Naik, Mr. Jayesh Srivastava, Mr. Rishabh Periwal, Mr. Shubham and Ms. Diksha Dadu, Counsel for the Respondent
Mr. Arun Kathpalia, Sr. Advocate with Ms. Misha, Ms. Mahima Sareen, Mr. Abhilash Chaudhary and Ms. Sanjukta Fauzdar and Ms. Diksha Gupta, Counsel for the Respondent No. 1, 8, 11 and 12