Liquidation auction default allows cancellation and EMD forfeiture, but double recovery cannot stand when a later sale fetches the same price.

A successful bidder's failure to pay the balance consideration within the prescribed liquidation timeline justified cancellation of the e-auction and forfeiture of the EMD under the Process Memorandum and liquidation rules. However, where a subsequent auction of the same assets fetched the same sale price, retaining the additional 25% earlier paid would amount to double recovery and unjust enrichment. The cancellation and EMD forfeiture were upheld, but forfeiture of the additional 25% was set aside and that amount was directed to be refunded with interest.

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Issues: (i) Whether the liquidator's cancellation of the 9th e Auction by email dated 14.09.2024 was in accordance with the e Auction Process Memorandum; (ii) Whether forfeiture of the 25% amount paid by the successful bidder is justified; (iii) Consequence of a subsequent e Auction selling the same assets for the same price.

Issue (i): Whether the liquidator validly cancelled the 9th e Auction by email dated 14.09.2024 in accordance with the e Auction Process Memorandum.

Analysis: The Process Memorandum required bidders to perform their own due diligence and specified the time frame and consequences for nonpayment. The liquidation regulations and Schedule I rules prescribe timelines for payment and permit cancellation where the successful bidder fails to pay within the prescribed period. The bidder did not pay the balance within the stipulated period or extended time and the liquidator acted under the contractual and regulatory framework governing forfeiture and cancellation.

Conclusion: The cancellation of the 9th e Auction by the liquidator dated 14.09.2024 is in accordance with the e Auction Process Memorandum and is upheld.

Issue (ii): Whether forfeiture of the 25% amount paid by the successful bidder (in addition to forfeiture of EMD) is sustainable.

Analysis: The Process Memorandum expressly provided for forfeiture of the EMD where the successful bidder fails to pay the balance consideration as per schedule. However, where a subsequent auction realized the identical sale consideration, retention of the additional 25% by the liquidator would result in the liquidator receiving the same sale proceeds twice. Principles of restitution and prevention of unjust enrichment permit refunding amounts which, in the special facts, would otherwise unfairly enrich the liquidator. The facts show the liquidator realised the full sale price again in a subsequent sale for the same amount.

Conclusion: Forfeiture of the EMD is upheld; forfeiture of the additional 25% (Rs. 16.20 crore) is not sustainable and the amount is to be refunded with interest.

Issue (iii): Effect of the subsequent e Auction selling the same assets for the same price of Rs. 81 crore.

Analysis: A subsequent sale for the same consideration demonstrates that the creditors' interest in maximisation of realisation was not prejudiced by resale; where the liquidator has realised the sale consideration again, retaining the earlier paid portion from the first successful bidder would produce unjust enrichment. Equitable refund with interest addresses the consequence of double realisation.

Conclusion: The amount of Rs. 16.20 crore paid by the first successful bidder is to be refunded in consequence of the subsequent e Auction held for the same amount; EMD forfeiture remains valid.

Final Conclusion: The appeal is partly allowed: the liquidator's cancellation and forfeiture of EMD are upheld, but the forfeiture of the additional 25% paid by the successful bidder is set aside and that amount is to be refunded with interest; the remaining orders stand.

Ratio Decidendi: Where a successful auction purchaser defaults under a time bound liquidation process, the liquidator may cancel the sale and forfeit EMD as per the Process Memorandum and applicable liquidation rules; however, if a subsequent sale realises the same consideration, retention of previously paid balance amounts would unjustly enrich the liquidator and restitution (refund with interest) is required to prevent unjust enrichment.

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