E-auction sale consideration dispute over buyer's delay in paying balance; liquidator to accept only by deadline with costs

The dominant issue was whether the liquidator could be directed to accept the petitioner's balance sale consideration under the e-auction/letter of intent terms despite the petitioner's non-compliance. The HC noted that relevant auction clauses indicated the petition was not wholly untenable, but held that the impasse was attributable to the petitioner and had led to unnecessary consumption of judicial time. Consequently, the HC directed the liquidator to receive the balance sale consideration only if paid on or before the stipulated date, and made the relief conditional upon payment of costs, to be deposited with the State Legal Services Authority; the writ petition was disposed of on those terms.

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1. ISSUES PRESENTED AND CONSIDERED

(i) Whether the Court should direct the liquidator to accept the balance sale consideration from the highest bidder in an e-auction, despite a pending clarification application before the adjudicating authority, so that the sale can be concluded within the stipulated 90-day period and the bidder does not suffer forfeiture consequences.

(ii) What conditions, timelines, and consequential directions (including costs and issuance of sale certificate) should govern such acceptance of the balance consideration to ensure adherence to the e-auction terms.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Direction to liquidator to accept balance sale consideration within the contractual timeline

Legal framework: The Court proceeded on the admitted and operative e-auction sale conditions and the letter of intent, including the stipulated requirement that the sale be concluded within 90 days from the auction, and on the parties' concessions/consent placed before the Court.

Interpretation and reasoning: The Court treated the material facts as undisputed: the petitioner was the highest bidder, deposited 25% as required, and the balance was due within 90 days, with the last date falling on 18.06.2023. The petitioner's doubts and request for clarifications led to the liquidator moving an application before the adjudicating authority, which remained pending, creating a practical risk that the petitioner could lose the deposit if the sale was not completed within time. The liquidator's counsel fairly conceded the 90-day deadline and expressed willingness to receive the balance amount if directed. The petitioner, through counsel and in-court instructions, undertook to pay the entire balance by the next day and to seek no concessions, agreeing to abide by the auction conditions. Considering the predicament to both sides and the avoidable burden of redoing the sale exercise, the Court accepted the consensual resolution, while noting that the situation was brought about by the petitioner and had consumed judicial time.

Conclusion: The Court directed the liquidator to receive the balance sale consideration, provided it is paid on or before 18.06.2023.

Issue (ii): Conditions, timelines, costs, and consequence of default; issuance of sale certificate

Legal framework: The Court relied on the sale conditions and the letter of intent as governing documents for payment timelines and completion of sale, and exercised discretion to impose costs in view of the petitioner's role in creating the situation.

Interpretation and reasoning: To preserve the integrity of the auction terms while granting relief, the Court made its direction conditional upon payment within the stipulated deadline. It expressly provided that if payment is not made by 18.06.2023, the petitioner will not get the benefit of the order. The Court also accepted the petitioner's volunteered cost of Rs. 2,00,000/- to be deposited with the Karnataka State Legal Services Authority within two weeks, reflecting the Court's view that valuable judicial time had been expended due to the petitioner's conduct. Further, to ensure completion of the transaction upon timely payment, the Court directed that the liquidator shall issue the sale certificate within one week after receipt of the full balance sum as indicated in the letter of intent.

Conclusion: Relief was granted subject to (a) payment of the balance on or before 18.06.2023, failing which the order confers no benefit; (b) deposit of costs of Rs. 2,00,000/- with the Karnataka State Legal Services Authority within two weeks; and (c) issuance of the sale certificate by the liquidator within one week of timely receipt of the balance consideration.

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