Court upholds auction purchaser's withdrawal, orders EMD refund. No interest on refunds per auction terms.

The court upheld the Adjudicating Authority's decision to allow the Successful Auction Purchaser to withdraw from the e-auction and directed the refund of the Earnest Money Deposit (EMD) and first installment. However, the court set aside the direction to refund these amounts with interest, in line with the terms of the e-auction sale notice that specified no interest on such refunds.

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Issues Involved:
1. Forfeiture of Earnest Money Deposit (EMD) and first installment due to non-payment of balance bid amount.
2. Legitimacy of allowing the Successful Auction Purchaser to withdraw from the e-auction.
3. Appropriateness of refunding the EMD and first installment with interest.

Detailed Analysis:

1. Forfeiture of Earnest Money Deposit (EMD) and First Installment:
The primary issue was whether the Successful Auction Purchaser (Respondent No. 1) should forfeit the EMD and first installment for failing to deposit the total bid amount within the stipulated time. The Liquidator argued that the Respondent No. 1 participated in the e-auction with full knowledge of the Enforcement Directorate's (ED) ongoing proceedings against the Corporate Debtor and the terms of the sale notice, which included forfeiture clauses. The Respondent No. 1, however, contended that the attachment of the Corporate Debtor's assets by the ED on 02.12.2021 made it impossible to complete the sale, thus justifying their inability to pay the balance amount.

2. Legitimacy of Allowing the Successful Auction Purchaser to Withdraw:
The Adjudicating Authority allowed the Successful Auction Purchaser to withdraw from the e-auction and ordered the refund of the EMD and first installment. The Liquidator challenged this decision, arguing that the Respondent No. 1 was bound by the terms of the sale notice and should not be allowed to withdraw. However, the court noted that the attachment of the Corporate Debtor's assets by the ED on 02.12.2021, before the expiry of the 90-day period for payment, made it impossible for the Liquidator to hand over the assets or issue a sale certificate. The court also took into account the Delhi High Court's order dated 22.02.2022, which recorded and accepted the statement of the Successful Auction Purchaser's counsel that they wished to exit the e-auction process.

3. Appropriateness of Refunding the EMD and First Installment with Interest:
The Adjudicating Authority directed the refund of the EMD and first installment along with interest. The Liquidator argued that as per the terms of the e-auction sale notice, no interest was payable on the refunded amounts. The court agreed with this contention, citing Clause 15.4 of the terms and conditions, which explicitly stated that no interest shall be payable on the EMD and first installment even if the auction sale is not approved. Consequently, the court found the direction to refund the amounts with interest to be unsustainable.

Conclusion:
The court upheld the Adjudicating Authority's decision to allow the Successful Auction Purchaser to withdraw from the e-auction and directed the refund of the EMD and first installment. However, it set aside the direction to refund these amounts with interest, aligning with the terms of the e-auction sale notice that no interest was payable on such refunds.

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