Fortune Global Solution Pte. Ltd. vs Mr. K. Vatsa Kumar & Anr.

[Per: Jatindranath Swain, Member (Technical)]

The instant appeal has been filed by the Appellant, Fortune Global Solution Pte. Ltd., being aggrieved by the impugned order dated 20.08.2026 passed by the Ld. NCLT-II, Hyderabad Bench, in IA(IBC) No.819/2026 in CP(IB) No.678/7/HDB/2018. The said application was filed by the Appellant under Section 60(5) of the IBC, 2016, seeking to set aside the e-auction dated 16.06.2022, the Letter of Intent dated 21.06.2022 and the Sale Certificate dated 26.03.2026 issued in favour of Respondent No.2, MCM Pacific Pte. Limited., in respect of Phase-III assets of Lanco Kondapalli Power Limited. The said application was dismissed by Ld. NCLT by virtue of the impugned order dated 20.08.2026, with a cost of Rs.10 lakhs.

On 23.04.2019, Lanco Kondapalli Power Limited (hereinafter referred to as the ‘corporate debtor’) was admitted into CIRP. As CIRP ended in failure, the corporate debtor was admitted into liquidation on 16.04.2021 and Mr. Pankaj Dhanuka was appointed as the Liquidator. The Liquidator issued a public announcement inviting claims from the stakeholders of the corporate debtor on 25.04.2021, in accordance with Regulation 12 of IBBI (Liquidation Process) Regulations, 2016. Thereafter, he conducted five rounds of e-auction between 11.01.2022 to 16.12.2022 for the sale of the corporate debtor as a going concern or for sale of assets of the corporate debtor on a piecemeal basis. Out of these five rounds of e-auction, the second round was conducted on 16.06.2022, in which Respondent No.2 was declared as the successful bidder for Phase-III assets and the Letter of Intent (LOI) was also issued in his favour on 21.06.2022. When the Respondent No.2 failed to pay the consideration within the stipulated period of 90 days, the LOI was cancelled by the Stakeholders’ Consultation Committee (SCC) on 20.09.2022. Subsequently, based on the application of the Respondent No.2, extensions were given by the SCC to pay the balance consideration and on 30.09.2023, Respondent No.2 paid the complete sale consideration excluding the GST portion. Since payment of GST on the sale consideration was in dispute, on application by Respondent No.2, the Ld. NCLT issued an order on 22.12.2023, permitting Respondent No.2 to initiate dismantling of the Phase-III assets subject to furnishing of a valid bank guarantee to the extent of GST component. Subsequently, Respondent No.2 remitted the applicable GST in full aggregating to a sum of Rs.24,50,03,526/- and requested the Liquidator to facilitate export of the Phase-III assets. This matter was deliberated by SCC on 30.10.2025 and SCC agreed to the same on a condition that the Respondent No.2 will bear additional GST liability, if any, that may arise over and above the GST amount already paid by it and the recurring cost that may have to be incurred by the Liquidator from 01.12.2025 including his fees. Subsequent to this, on 16.01.2026, Respondent No. 2 intimated the Liquidator that it will require a minimum of 18 months from the date of issuance of Sale Certificate to undertake dismantling and export of the Phase-III assets. Accordingly, the Liquidator filed IA No.422/2026 seeking grant of the reliefs requested by Respondent No. 2 and recommended by the SCC. Ld. NCLT disposed of the said application by its order dated 09.03.2026, directing issuance of Sale Certificate as per law. Consequently, Liquidator issued the Sale Certificate on 26.03.2026 in favour of Respondent No. 2 incorporating certain conditions which were not part of the e-auction process documents. Aggrieved by the said order, the Appellant filed IA(IBC)/819/2026, challenging the e-auction of 16.06.2022 and issue of Sale Certificate dated 26.03.2026, before the Ld. NCLT, Hyderabad, which was dismissed by Ld. NCLT by the said impugned order along with a cost of Rs.10 lakhs. The appeal has been filed challenging the said impugned order.

The Appellant’s main contentions are that the Sale Certificate dated 26.03.2026 is at material variance with the process document dated 08.04.2022 and the order dated 09.03.2026 passed in IA No.422/2026, that the said Sale Certificate permits a six-fold extension of the dismantling period from 30 days to 180 days, that facilitation for export is being provided by the Liquidator which was not envisaged under the process document, that a post-sale fee arrangement has been made which compromises the Liquidator’s neutrality and that a continuing post-sale role for the Liquidator has been created in violation of the doctrine of functus officio. He has stated that the process document is the foundational and binding charter of a sale process under IBC and the same cannot be violated as per the principles laid down in the judgment of the Principal Bench of this Tribunal dated 06.11.2025, in the matters of Orissa Alloy Steel Pvt. Ltd. v. S M Steels and Power Ltd., CA (AT) (Ins) No. 255-257 & 214-216 of 2025. He has further contended that the Sale Certificate dated 26.03.2026 has been issued 4 years after the e-auction and it incorporates terms that did not exist at the time of the e-auction which is a material irregularity. He has stated that the sale consideration was allowed to be paid nearly 3 years after the stipulated 90-days period from the date of LOI and this is a substantial deviation from the process document dated 08.04.2022. He has further contended that, the introduction of 6-month dismantling period and the commitment of export facilitation by the Liquidator was never envisaged in the process documents and the same could not have been given in the Sale Certificate. He has further contended that though Ld. NCLT in its order dated 18.03.2026 in IA No.332/2026 decided only the taxability of transaction under GST law, the same will not amount to judicial approval of whether the Sale Certificate was issued strictly as per law and whether the extended dismantling period and the export facilitation are material deviations from the process documents. Further, the Ld. NCLT, while dismissing his application, failed to see that the fee-bearing arrangement creates a conflict of interest. He has further stated that the entire process was tailored to accommodate repeated defaults of Respondent No. 2 alone at the cost of transparency and value maximization and that if the same conditions had been included in the process documents itself, he also would have bid for the said assets and could have probably have given a better price than Respondent No. 2. He has further prayed that based on these grounds, the impugned may be set aside and the Sale Certificate, Letter of Intent and the e-auction result may be set aside.

The Ld. NCLT after hearing both the parties in its proceedings in IA(IBC)/819/2026 has framed the following issues:

The Ld. NCLT has held that the applicant is only a prospective bidder, it is a settled principle that a person who has not participated in the auction cannot merely by expressing keen interest after issuance of the Sale Certificate, seek to reopen entire auction and the LOI unless a case of fraud, collusion or material irregularity of a serious nature is made out. In the present case, the applicant had not demonstrated sufficient interest in the auction process that would entitle it to seek setting aside of the concluded e-auction, LOI and the Sale Certificate. Therefore, it being a non-participant in the e-auction process has not established such locus that would entitle it to seek setting aside of the concluded e-auction, LOI and Sale Certificate. Ld. NCLT has also held that challenge to e-auction dated 16.06.2022 and LOI dated 21.06.2022 is barred by limitation because the auction sale has attained finality and has not been challenged till the date of filing of the said application.

Regarding the allegation that the Sale Certificate included certain stipulations such as extended dismantling period, export facilitation and reimbursement of professional fee which were not there in the process document, Ld. NCLT has held that in clause 11(ii) of the process document itself contemplates the removal of the auctioned assets within the stipulated period or such extended time as may be communicated by the Liquidator. Therefore, the 6-months period permitted by the Liquidator for removal of the assets in the Sale Certificate cannot by itself be treated as a post-auction alteration of the auction sale framework and in no way, it can be construed as authorizing the Liquidator to act outside the Code and the Liquidation Regulations or any other contemplated law.

In respect to the export facilitation, Ld. NCLT has observed that nothing in the Sale Certificate dated 26.03.2026 can be read as authorizing the Liquidator to act as a exporter on record for MCM and that nothing in the Liquidation Regulations or the directions issued by it in order dated 14.02.2025 in IA/1954/2024, prohibits coordination by the liquidator for removal of the assets already sold, provided the same is done within the framework of the liquidation regulations and the process documents and other applicable laws and that such steps cannot be described as violative of the process document as Liquidator has, at no point assumed the statutory obligations of MCM as exporter of record.

On the issue of recurring costs and the Liquidator’s professional fee, Ld. NCLT has observed that the Liquidator’s professional fee remains subject to the approval and scrutiny under the Code and the Liquidation Regulations and that there has been no direct private payment of professional fee by MCM to the Liquidator. Therefore, mere recording that MCM will bear the recurring cost and Liquidator’s professional fee for the extended period, if applicable, doesn’t by itself vitiate the Sale Certificate of the concluded sale and that this stipulation is aligned with the object of preserving the liquidation estate from further depletion and cannot be treated as a ground to annul the sale.

In respect of fraud, collusion and lack of level playing field, Ld. NCLT has observed that apart from relying upon the terms of Sale Certificate, SCC minutes and the subsequent completion framework, the Appellant has not placed any independent material to establish fraud, collusion or mala fides of such nature that would justify setting aside a concluded liquidation sale at the instance of a non-participant.

Ld. NCLT has further observed that the contention that the Appellant and other prospective bidders would have participated in the auction, had the extended dismantling period, export facilitation and cost reimbursement mechanism been notified earlier remains hypothetical, that the Appellant has placed no material to show that he was interested to participate in the 2022 auction, and therefore a subsequent expression of interest after issuance of the Sale Certificate cannot create a right to seek annulment of a concluded auction.

Based on such observations, Ld. NCLT has concluded that the Appellant has not made any case for setting aside of the e-auction, the LOI or the Sale Certificate and that the 6-months dismantling / removal period cannot be treated as a fundamental deviation from the bid document and the auction terms and conditions and that since the facilitation and reimbursement stipulations in the Sale Certificate shall operate only subject to the Code and the Liquidation Regulations, the process document and applicable law. Proceeding further, Ld. NCLT has rejected the prayer for setting aside the e-auction. Further, holding that the challenge by way of filing the application is belated and speculative and that it has unnecessarily burdened the liquidation process, Ld. NCLT imposed a cost of Rs.10 lakhs payable by the applicant into the Prime Minister’s Relief Fund, within two weeks from the date of the said order.

We have heard both the parties at length. The Appellant admits that he has not participated in the e-auction dated 16.06.2022 and he has not shown any interest to participate in the same. He merely contends that he could have participated, had the said conditions which were later on added in the Sale Certificate, been made available at the time of the auction, which we find to be absolutely speculative. Though, he continues to harp on the deviations from the process documents while issuing the Sale Certificate, he has admitted that he is not an affected party and he is at best a potential bidder in case a fresh e-auction is conducted. His other contention which he stressed on during the hearing is that the cost of Rs.10 lakhs is excessive and disproportionate and that he has not intentionally burdened the liquidation process and he has no mala fide intention and that he was merely pointing out certain major anomalies that has crept into the e-auction proceedings of Phase-III assets which if rectified would enhance the value of the corporate debtor and that on this ground the said cost may be waived off.

We have gone through the records, the submissions of the parties and the impugned order in detail and are of the opinion that the Appellant has not made any substantive point on which the e-auction, LOI and the Sale Certificate can be set aside. Accordingly, we find no merits in the Appeal and dismiss the same.

As regards the cost, we find that the cost imposed is rather disproportionate to the alleged burdening of the liquidation process because the liquidation process has not been shown to be delayed by the said application. IBC proceedings is not a public interest litigation and therefore the Appellant who is a total stranger to the case at hand should not have filed this application. Therefore, certain cost need to be imposed to prevent such litigations in future. Accordingly, after giving a thoughtful consideration of over the issue, we are of the opinion that it will suffice if a cost of Rs.1 lakh is imposed on the Appellant to be remitted into the Prime Minister’s Relief Fund within two weeks from the date of this order.