Liquidator rightfully forfeited Rs.96 lakh EMD after buyer failed to pay balance within 90-day deadline

NCLAT upheld liquidator's forfeiture of Rs.96 lakh EMD in e-auction of assets. Appellant failed to pay balance amount within stipulated 90-day timeline despite liquidator's communications and interest notifications. E-auction process document clearly stated EMD forfeiture for non-payment and that sale certificate issuance required NCLT/NCLAT approval. Court rejected appellant's claim for EMD refund and compensation, finding no liquidator deficiency as sale certificate delay resulted from judicial orders, not liquidator fault. Appeal dismissed.

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Issues Involved:
1. Forfeiture of Earnest Money Deposit (EMD)
2. Non-issuance of Sale Certificate
3. Claim for refund of EMD and compensation

Detailed Analysis:

1. Forfeiture of Earnest Money Deposit (EMD):
The Appellant, a successful auction purchaser, challenged the forfeiture of their EMD of Rs. 96 Lakhs by the Liquidator following an e-auction for the assets of JVL Agro Industries Ltd. The auction was subject to the terms of the E-Auction Process Information Document, which stipulated that the EMD could be forfeited if the successful bidder failed to make the complete payment towards the total sale consideration within the stipulated time of 90 days. The Appellant did not pay the balance amount within this period, leading to the forfeiture of the EMD. The Tribunal upheld the Liquidator's decision, citing Clause 4.9 of the E-Auction Process Document, which clearly provided for such forfeiture in case of non-payment.

2. Non-issuance of Sale Certificate:
The Appellant contended that they were not informed about the order dated 04.04.2022 by the Adjudicating Authority, which stated that the Sale Certificate could only be issued with the leave of the Adjudicating Authority. This order was communicated to the Appellant on 12.04.2022. The Tribunal noted that the E-Auction Process Document already stipulated that the issuance of the Sale Certificate was subject to orders from the NCLT/NCLAT, and thus the Appellant was deemed to have been aware of this condition. The Liquidator's inability to issue the Sale Certificate was due to the Adjudicating Authority's order, not a fault on the Liquidator's part.

3. Claim for refund of EMD and compensation:
The Appellant sought a refund of the EMD along with compensation for losses incurred due to the non-issuance of the Sale Certificate. The Tribunal rejected this claim, stating that the Appellant's failure to pay the balance amount within the stipulated time justified the forfeiture of the EMD. The Tribunal also referenced the Supreme Court's judgment in "State of Haryana vs. Malik Traders," which upheld the forfeiture of bid security in similar circumstances. Additionally, the Tribunal cited its own decision in "Westcoast Infraprojects Pvt. Ltd. vs. Mr. Ram Chandra Dallaram Chaudhary," affirming that the Liquidator's action in forfeiting the EMD was consistent with the terms of the E-Auction Process Document.

Conclusion:
The Tribunal upheld the order of the Adjudicating Authority, dismissing the appeal. The Appellant's claims for refund of the EMD and compensation were rejected, and the Liquidator's actions were deemed appropriate and in accordance with the stipulated terms of the E-Auction Process Document. The Tribunal emphasized that the Appellant's failure to comply with the payment terms justified the forfeiture of the EMD, and no compensation was warranted.

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