2ND UPDATE, 10:30 PM: The 3D animation and effects studio based in Los Angeles and Mumbai emerged victorious tonight after an auction that stretched across two days. Its past high profile clients include Disney (TRON: Legacy, Planes), Paramount (Transformers: Dark Of The Moon), and The Weinstein Co. (Hoodwinked!), studios not involved in the recent bankruptcy saga of the Oscar-winning Rhythm & Hues. A court hearing is set for 10 AM tomorrow to finalize the sale.

UPDATE, 3:30 PM: The end of the Rhythm & Hues bankruptcy saga just got pushed back a little further. Judge Neil Bason has approved Rhythm & Hues’ request to continue its bankruptcy sale hearing Friday at 10 AM. The auction will resume today at 4 PM. Two bidders are currently battling for the company, but Rhythm & Hues lawyers will allow an unnamed bidder that previously withdrew to submit a new bid, according to statements made today in court. They may also allow Psyops to rejoin the fray bringing the potential number of bidders to four. Meanwhile, the court will decide tomorrow if stalking horse bidder JS Communications will receive its contentious break-up fee.

PREVIOUSLY, 11:48 AM: Bankrupt VFX house Rhythm & Hues was set to go on the auction block yesterday with a court hearing finalizing the deal today at 3 PM. Not so fast: Action continued into the wee hours of the morning without settling on a bidder and was to resume today at 11 AM. According to an objection filed today (read it here), stalking horse bidder JS Communications Co. claims that after the company declined to submit an official asset purchase agreement by the March 19 deadline, they were frozen out of the auction which took place behind closed doors at the offices of Rhythm & Hues’ legal team. Problem is, the court gave unusual approval to their stalking horse status on the basis of a letter of intent, entitling JS Communications to a break-up fee of $425,000 should another buyer outbid them by a mandated increment of at least $525,000.

In a colorful objection today accusing Rhythm & Hues of “pettifoggery”, JS Communications claims the company has invited other bidders to skirt the terms which would grant them the $425,000 break-up fee. This “Rube Goldberg scheme” encourages potential buyers to structure bids to include assumption of unsecured claims in lieu of a higher cash offering. “This court should not tolerate such a shell-game”, JS Communications said in their filing. We’ll update for more of this saga as it unfolds or unravels.

Ross Lincoln contributed to this report.