TaxTMI 
TaxTMI 
TaxTMI 
2021 (1) TMI 658
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...., District Sirmour, Himachal Pradesh in relation to this issue and obtained exparte order, over which when the liquidator filed Order VII Rule 11 application stating that Civil Court has no jurisdiction to deal with the issue falling within IBC as per Section 63 of Insolvency and Bankruptcy Code, that civil suit was dismissed vide order dated 13.08.2020. 6. Soon after dismissal of the aforesaid suit, since the liquidator is bound by time to complete process of liquidation, the liquidator has again conducted the bidding process and sold the assets of the company including the assets involved in the earlier bidding and liquidated the company, now he is about to file dissolution application before this Bench. 7. As against the submission of the liquidator, the applicant counsel has stated that the applicant is at liberty to make payments after thirty days along with the interest @12 %, if at all bidder has failed to make payment within thirty days from the date on which 25% to be made, then only sale shall be cancelled if the payment is not received within ninety days. 8. To which, the liquidator counsel has stated that this clause is applicable only to the item 13 in the column....
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....ce amount of 25% of the bid amount by 25.03.2020 on account of lockdown imposed in the Country which led to closure of their Unit and hence in the e-mail dated 25.03.2020 the Appellant had sought for extension of time; that the Liquidator responded vide e-mail dated 29.03.2020 and extended the time by only two days i.e. upto 31.03.2020 and that despite several e-mails exchanged between the parties explaining the difficulties experienced due to lockdown, the earnest money deposited was forfeited on 23.05.2020. 4. The Learned Counsel drew our attention to the clauses mentioned in the 'Corrigendum to Extension of Timelines for E-Auction' (hereinafter referred to as 'the Corrigendum') dated 11.03.2020. For better understanding of the case, the same is being reproduced as hereunder: "CORRIGENDUM TO EXTENSION OF TIMELINES FOR E-AUCTION FOR SALE-NOTICE FOR CASE COLD ROLL FORMING LIMITED-IN LIQUDATION CIN; U67200DL2017PTC322243 (Sale of Assets under the Insolvency and Bankruptcy Code, 2016) Notice is hereby given that in furtherance of the E-Auction Process Document dated 20th February, 2020, the timelines of E-Auction has been revised and shall be as follows; S. No. Description of....
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.... SCC 136. The relevant paragraphs are reproduced as hereunder: "41. It must, however, be pointed out that in cases where a public auction is held, forfeiture of earnest money may take place even before an agreement is reached, as DDA is to accept the bid only after the earnest money is paid. In the present case, under the terms and conditions of auction, the highest bid (alongwith which earnest money has to be paid) may well have been rejected. In such cases, Section 74 may not be attracted on its plain language because it applies only "when a contract has been broken". 42. In the present case, forfeiture of earnest money took place long after an agreement had been reached. It is obvious that the amount sought to be forfeited on the facts of the present case is sought to be forfeited without any loss being shown. In fact, it has been shown that far from suffering any loss, DDA has received a much higher amount on re-auction of the same plot of land. 43.7. Section 74 will apply to cases of forfeiture of earnest money under a contract. Where, however, forfeiture takes place under the terms and conditions of a public auction before agreement is reached, Section 74 would have no ....
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....ended from time to time); or 3. if the Bidder is identified as the Successful bidder and it fails to pay 25 % of the Money within the stipulated time as per the clauses of this E-auction documents after being intimated as successful bidder by the Liquidator. 4. if the Successful Bidder fails to make the complete payment as per the terms of the Letter of Intent issued by the Liquidator. 5. in any of the above event, all the amounts deposited till that date shall be forfeited and the property will be offered to the next highest bidder" (Emphasis Supplied) 9. The interpretation of Clause 5 by the Learned Counsel appearing for the Appellant that as the property was re-auctioned and the entire amount realized, the EMD was consequently to be refunded resulting in the non-applicability of the aforenoted clauses, is untenable, as the Clause of forfeiture does not anywhere specify that it is subject to the happening of any event viz. realization from any 'Sale'. Undisputedly as per the timelines under the auction, the Appellant was required to make the payment of upto 25% of the total sale consideration by 25.03.2020 and the 'LoI' issued, was unconditionally accepted, by the Appella....
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....sit of 25% of sale consideration from 25.03.2020 to 31.03.2020 vide its mail dated 29.03.2020 without relaxing the timeline to submit the balanced amount. It is most unfortunate that despite our repeated mails dated 01.04.2020, 02.04.2020, 23.04.2020 & 15.05.2020 we neither received any response nor any consideration. The undersigned also tried to reach you over the call. The undersigned contacted Mr. Manish Saini (on Mobile No. 9816500028) on 09.05.2020 who assured to pay within 2 days. However, you failed to deposit the same. In view of the aforesaid facts and circumstances and in terms of the provisions of the Code, the undersigned, being a custodian of the assets of the Corporate Debtor, hereby by virtue of the present notice call upon you to forthwith upon receipt of the present notice, deposit the whole consideration for sale of Inventory i.e. INR. 3,75,00,786;- (Rupees Three Crore Seventy Five Lakh Seven Hundred and Eighty Six only) plus GST within 48 hours failing which the undersigned will be at liberty to forfeit the EMD of an amount of INR 16,00,000 (Rupees Sixteen Lakh only) which has been retained by the undersigned in terms of process document and LoI as unconditi....
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....eiture of earnest/security money which has been given for a particular purpose. A person may have a right to withdraw his offer but if he has made his offer on a condition that some earnest money will be forfeited for not entering into contract or if some act is not performed, then even though he may have a right to withdraw his offer, he has no right to claim that the earnest/security be returned to him. Forfeiture of such earnest/security in no way, affects any statutory right under the Indian Contract Act. Such earnest/security is given and taken to ensure that a contract comes into existence. It would be an anomalous situation that a person who, by his own conduct, precludes the coming into existence of the contract is then given advantage or benefit of his own wrong by not allowing forfeiture. It must be remembered that, particularly in government contracts, such a term is always included in order to ensure that only a genuine party makes a bid. If such a term was not there even a person who does not have the capacity or a person who has no intention of entering into the contract will make a bid. The whole purpose of such a clause i.e. to see that only genuine bids are receive....