“Undue Haste in Liquidation? Delhi High Court Flags Liquidator’s Conduct but Clears Path for ₹54 Crore Re-Auction

“Putting Proposal to Vote Went ‘Way Beyond Internal Meetings’ –  Delhi High Court delivered a significant ruling on the contours of a liquidator’s conduct during liquidation proceedings under the Insolvency and Bankruptcy Code, 2016.

Justice Sachin Datta, while exercising jurisdiction under Article 215 of the Constitution and the Contempt of Courts Act, 1971, examined allegations of wilful breach of an undertaking given by the Liquidator regarding the e-auction of Moser Baer Solar Ltd. Though the Court found “some credence” in the petitioner’s apprehensions of “undue haste”, it refrained from returning findings of contempt in light of subsequent corrective developments aimed at maximising the value of the liquidation estate.

The case revolved around an e-auction conducted on 08 April 2025 for sale of the corporate debtor as a going concern. On 09 April 2025, the High Court had recorded the liquidator’s statement that “the respondent no.1 shall not take any further steps pursuant to the e-auction process… till 21.04.2025”, except for conducting internal meetings with stakeholders. This assurance became the fulcrum of the contempt petition.

The petitioner alleged that despite this undertaking, the Liquidator proceeded to secure stakeholder approval and regulatory clearances to declare a consortium as the “successful bidder” at ₹28.27 Crores. The Court examined the minutes of the 23rd Meeting of the Consultative Committee of Stakeholders held on 15 April 2025, where a resolution was placed to advise the Liquidator to declare the highest bidder successful. All six public sector banks present voted in favour.

Justice Datta observed that the act of obtaining regulatory permissions and putting to vote the proposal to declare a successful bidder appeared to go “way beyond the mere conduct of ‘internal meetings’” and thus prima facie “ran afoul of the statement/undertaking” recorded by the Court. The Court further noted that immediately after the NCLT dismissed the petitioner’s challenge on 19 November 2025, the Liquidator declared the successful bidder “virtually before the ink was dry” on the order—prior to the NCLAT directing maintenance of status quo on 21 November 2025.

Yet, rather than proceeding to record findings impugning the Liquidator’s conduct, the Court took note of a dramatic development. During the contempt proceedings, the petitioner expressed willingness to offer ₹54 Crores—almost double the auction price—for the very same assets. The Liquidator, present in Court, undertook that if a bank draft of ₹54 Crores was furnished, he would move the NCLAT to set aside the earlier auction and seek permission to conduct a re-auction with a reserve price of ₹54 Crores.

The Court approved this course in clear terms, holding, “This Court approves of the aforesaid course inasmuch as the same will maximise the value of the ‘liquidation estate’.” A bank draft of ₹54 Crores was subsequently handed over to the Liquidator, subject to further orders of the NCLAT.

Significantly, the Court relied upon the Process Information Document dated 06 March 2025, which expressly empowered the Liquidator to “reject all or any of the Bidders or Bids without assigning any reason whatsoever” and to “annul the Bid Process and reject any/all Bids for any reason, at any point of time.” The judgment underscored that the liquidator’s discretion is fundamentally guided by the objective of maximisation of value.

“Previous Stand of Liquidator Shall Not Preclude Course Correction” – Deference to NCLAT’s Regulatory Authority

Emphasising jurisdictional discipline, the Court clarified that it would be for the NCLAT to pass appropriate consequential orders in the pending appeal. The Court observed that “the previous stand/decision/s taken by the liquidator… shall not come in the way of the liquidator pursuing the course set out” nor preclude the NCLAT from taking an appropriate decision.

Applications filed by the consortium that had emerged as the highest bidder seeking recall of the Court’s earlier order were dismissed. The Court clarified that it had merely recorded the Liquidator’s undertaking to approach the NCLAT and that all substantive objections must be adjudicated by the appellate tribunal.

The utilisation of the ₹54 Crore bank draft was directed to remain subject to NCLAT’s orders. The Court further safeguarded transparency by providing that, if required, the amount could be placed in an interest-bearing FDR or returned with an undertaking to re-furnish it as and when necessary.

In disposing of the contempt petition, the High Court struck a careful balance. While signalling concern over the apparent haste and procedural overreach, it prioritised the larger objective embedded in the IBC framework—value maximisation for stakeholders, including public sector banks forming the Stakeholders’ Consultation Committee.

The ruling reinforces that liquidation is not a mechanical ritual but a fiduciary process, and that where a substantially higher offer surfaces, corrective steps—even reopening an auction—may be justified to serve the statutory mandate.

Date of Decision: 11 February 2026