2021 (2) TMI 1179 - Tri - Insolvency and Bankruptcy

Tribunal rules in favor of Applicant, deems demanded interest unjustified.

The Tribunal ruled in favor of the Applicant, concluding that the delay in payment of the balance sale consideration was not the Applicant's fault. The ... Seeking directions pertaining to auction sale of assets for waiver of interest demanded on balance sale consideration - seeking direction to the Respondent not to treat non-payment of interest on the balance sale consideration by the Applicant as a default - seeking to refrain from disqualifying the Applicant as successful bidder - seeking to forfeit the earnest money deposit - HELD THAT:- It is apparent that there was a delay on the part of the Applicant to pay balance sale consideration but the issue to be decide in this case is whether the delay was solely on account of the Applicant and if yes, the Applicant has to pay interest for the delayed period @12 % P.A. as per regulation, auction notice. In the instant case the Applicant had sought a specific clarification from the Liquidator who has clarified as discussed in pre-para GIDC also taken time to arrive at the amount payable as sub division charges, surveys conducted on various occasions, issued provisional order to pay “concession charges” along with other conditions to be fulfilled etc. From the submissions it is noted that the Applicant never denied payment of balance sale consideration neither on account of incapable, financial difficulty, nor willful nonpayment but on the other hand because of the specific clarification issued by the Respondent, time taken by GIDC as discussed above and finally on account of COVID 19 situation and Regulation 47 A of IBBI Regulation etc. It is also noted that the Applicant had made payment of ₹ 1,57,46,696/- on 25.06.20202 towards interest under protest. The submissions of the Applicant is acceptable. The delay in payment of balance sale consideration cannot be attributed to the Applicant, successful bidder. The interest burden thus cannot be fastened on him. The Applicant is not liable to pay interest as claimed by the Respondent. Therefore, an amount of ₹ 1,57,46,696/- paid towards interest by the Applicant under protest is to be refunded/adjusted by the Liquidator within 30 days from the date of this order - Application allowed. Issues Involved:1. Waiver of interest on balance sale consideration due to delay in sub-division of land.2. Whether the delay in payment of balance sale consideration was attributable to the Applicant.3. Applicability of Regulation 47A of the Liquidation Process Regulations during the COVID-19 lockdown.4. Responsibility for sub-division charges and conditions imposed by GIDC.Detailed Analysis:1. Waiver of Interest on Balance Sale Consideration:The Applicant sought directions to waive the interest on the balance sale consideration as demanded by the Respondent, citing that the delay was due to the sub-division of land by GIDC. The Respondent, in an email dated January 09, 2020, clarified that interest on delayed payment would be waived to the extent the delay was due to sub-division of leased land. This pre-bid clarification was crucial in forming the Applicant's understanding that interest would not be charged if the delay was due to sub-division issues. The Tribunal concluded that the Respondent's claim for interest was not tenable as the delay was not attributable to the Applicant.2. Attribution of Delay in Payment:The Tribunal examined whether the delay in payment was solely on account of the Applicant. It was noted that the Applicant never denied payment of the balance sale consideration due to financial incapability or willful non-payment. Instead, the delay was due to the time taken by GIDC to complete the sub-division process and the specific clarification issued by the Respondent. The Tribunal found that the delay was not attributable to the Applicant, as the sub-division process was a necessary function to be completed by the Respondent to ensure the successful bidder could legally enter the property.3. Applicability of Regulation 47A During COVID-19 Lockdown:Regulation 47A of the Liquidation Process Regulations, introduced during the COVID-19 pandemic, stated that the period of lockdown imposed by the Central Government would not be counted for the purposes of computation of the timeline for any task that could not be completed due to such lockdown. The Applicant argued that interest could not be charged during the lockdown period. The Tribunal agreed with the Applicant, stating that the Respondent's demand for interest during the lockdown period was contrary to Regulation 47A and therefore illegal.4. Responsibility for Sub-division Charges and Conditions Imposed by GIDC:The E-Auction Memo specified that the successful bidder would bear the sub-division charges. The Respondent was responsible for applying for the sub-division, and the Applicant was to pay the charges within 10 days from the date of demand. The Tribunal noted that the Respondent had applied for sub-division, but GIDC took time to issue a provisional order with various conditions, including payment of outstanding dues and sub-division charges. The Applicant provided its consent to purchase the additional land area as requested by GIDC, showing its bona fide and financial capacity. The Tribunal found that the delay in sub-division by GIDC could not be fastened upon the Applicant.Conclusion:The Tribunal concluded that the delay in payment of the balance sale consideration was not attributable to the Applicant. The interest burden could not be imposed on the Applicant, and the amount of Rs. 1,57,46,696/- paid towards interest under protest was to be refunded or adjusted by the Liquidator within 30 days from the date of the order. The Interlocutory Application was allowed, and the Applicant was not liable to pay the interest claimed by the Respondent.