TaxTMI 
TaxTMI 
2024 (7) TMI 933
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.... amount of Rs.98 Lakhs along with compensation /damages caused to the applicant due to non-issuance of Sale Certificate. Brief facts of the case necessary to be noticed for deciding this appeal are: (i) JVL Agro Industries Ltd. was directed to be liquidated by order of the Adjudicating Authority dated 19.08.2020. The Liquidator in pursuance of order of liquidation issued public notice for sale as a going concern, which auction having failed, a public notice dated 04.03.2022 was issued by the liquidator for sale of stand-alone assets (A-1 to A-11) of the Corporate Debtor. A-11 was old expired stocks of more or less 1000 tons of packed Refined Edible Oil, not fit for human consumption, lying at JVL's plant at Deoghat, District Purba Medinpur, Haldia, West Bengal. (ii) E-auction was fixed for 06.04.2022. Reserved price for asset A-11 being Rs.9.60 Crore, EMD of Rs.96 Lakhs was required for participation. Appellant submitted EMD of Rs.96 Lakhs and participated in the e-auction held on 06.04.2022. Appellant submitted bid of Rs.12.60 Crores and was declared as successful bidder for Block A-11. (iii) Letter of Intent was issued by the Liquidator on 07.04.202....
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....tten an email to the Liquidator praying for cancellation of the e-auction and refund the EMD. Appellant thereafter filed an application being I.A. 226/2022 before the Adjudicating Authority praying for following reliefs: "RELIEF/ PRAYER In view of the facts mentioned in the aforementioned paragraphs, the applicant prays for the following reliefs: i. Direction may be given to the Respondent/ Liquidator to withdraw his email dated 28.06.2022; ii. Direction may be given to the Respondent/ Liquidator to refund the EMD amount of Rs. 96,00,000/- along with interest; iii. Direction may be given to pay compensation towards the loss incurred by the Applicant; iv. Pass any other appropriate order as this Hon'ble Tribunal deem fit in the interest of justice. v. Interim Order, if prayed for Pending final decision of application the applicant prays for the following interim relief: That this Hon'ble Tribunal may be pleased to direct the respondent to withdraw his email dated 28.06.2022 and refund the amount of earnest money to the Applicant." (xi) The Liquidator filed reply to IA No.226/2022 bringing all corresponde....
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....n-issuance of Sale Certificate material could not be lifted. It is submitted that after Appellant being declared as successful bidder the Appellant has already entered into transaction with third parties for onward transportation of the edible oil and Appellant having not been able to handover the material to the third parties has suffered loss which had to be compensated by the Liquidator. It is submitted that non-payment of balance amount was not on account of any failure by the Appellant but because of inability of the Liquidator to handover the material on time. It is submitted that the under the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016, the Liquidator was required to execute the Certificate of Sale on payment of full amount. The Liquidator being not able to execute the Certificate of Sale and transfer of said assets, no fault can be laid on the appellant for non-payment of full amount. The Liquidator being unable to transfer the assets and issue Sale Certificate, the Appellant has written to the Liquidator on 22.06.2022 to refund the EMD. It is submitted that the EMD of the Appellant of Rs.96 Lakhs has been forfeited without any fault of....
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....d the submissions of learned counsel for the parties and perused the record. 6. There is no dispute between the parties that Appellant was declared as Successful Bidder with regard to Block A-11 which had reserve price of Rs.9.60 Crore. Appellant admittedly deposited EMD of Rs.96 Lakhs and submitted bid of Rs.12.60 Crores, which was accepted as highest bid for Block A-11. Liquidator sent two emails on 07.04.2022 to the Appellant informing about Appellant being declared the Successful Bidder for Block A-11 for amount of Rs.12.60 Crores. By email dated 07.04.2022 sent at 19.36 hours, Letter of Intent and Bank Details were sent, which email is as follows: ___________________________________________________ "LETTER OF INTENT ___________________________________________________ 7 April 2022 at 19:36 Liquidator JVL<[email protected]> To: [email protected] Cc: PRAMUKH BIO FOOD PRODUCT, Abhishek Kumar, Asit Das, Suhas Mitra, [email protected], Amrita Nandy, Supriyo Chaudhuri Dear Successful bidders Congratulations! We are sending two copies of LOI along with bank details fur remittance o....
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....icate without prior approval of the Adjudicating Authority. Email dated 12.04.2022 is as follows : ___________________________________________________ "Loading Of material Confirmation for Payment ___________________________________________________ 12 April 2022 at 20:23 Liquidator JVL<[email protected]> To: [email protected] Dear Sir, We refer to your letters dated 11th April, 2022 received via email. Further, to our email dated 11th April, 2022 informing you that you have been adjudged the successful bidder in the E-Auction held on 6th April,2022 in respect of Block A- 11, representing 'old expired stocks of more or less 1000 tons of packed Refined Edible Oil, not fit for human consumption, lying at JVL's Plant at Debhog, Dist. Purba Medinipur, Haldia, West Bengal to be unpacked and sold by E-Auction', we would like to draw your kind attention to Clause 1.15 read with Clause 5.11viii of the E-Auction Process Information Document dated 4th March, 2022 which inter alia stipulates that sale of the standalone block/(s) of assets and issuance of sale certificate or Invoice shall be subjec....
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....has remained outstanding (from 06-05-2022 to 28-06-2022): 53 days Interest Rate: 12% simple interest Interest amount: 11,64,00,000 x 12% x 53/365 INR 20,28,230/- Thanks & Regards Liquidator Team JVL Agro Industries Limited (in Liquidation)" 10. The Appellant wrote a letter to the Liquidator on 28.06.2022 praying for cancellation of E-auction and refund of EMD. Letter dated 28.06.2022 is as follows: "NO.BRS/SDNR/JVL/HAL/2022-23-14 Date: 28th June 2022 To, Mr. Supriyo Kumar Chaudhuri, Liquidator of JVL Agro Industries Limited, IP Reg. No. IBBI/IPA-P00644/2017-18/11098 BDO Restructuring Advisory LLP C/o BDO India LLP 4th Floor, Duckback House, 41 ShakespearSarani, Kolkata - 7000 17. Subject: Forfeiture of EMD amount. Ref: E-Auction of Block No. A-11 of the Blocks of Assets of JVL Agro Industries Limited Dear Sir, With regards to your e-mail dated 28.06.22, we are astonished that you expect us to pay the balance sale consideration along with interest. It is quite unjustified about how without supply of material, re....
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.... the adjudicating Authority (Hon'ble NCLT), Hon'ble NCLAT and the Hon'ble Supreme Court of India." 12. Clause 4.3 deals with Earnest Money Deposit (EMD) which was 10% of the reserve price. Reserve Price of all blocks was mentioned in Clause 4.1 where in respect of A-11 reserved price of Rs.9.06 Crore was mentioned. Clause 4.9 deals with forfeiture of EMD. Clause 4.9 is as follows: "4.9. Forfeiture of EMD: Without prejudice to any other terms of this E-Auction Process Document, the Ernest Money Deposit furnished by the Prospective Bidder in terms of this E-Auction Process Information Document can be forfeited at any time, upon the occurrence of any of the following events: * If there is a breach of any of the conditions under this E-Auction Process Information Document by the Prospective Bidder or in case the Prospective Bidder is found to have made any false statement, any inaccurate disclosure and/or any misrepresentation; or * If the Prospective Bidder is found to be ineligible to submit the bid as per the conditions set out in Section 29 A of the IBC (as amended from time to time) or is found to have made a false or misleading declaratio....
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....redentials and Application Form in Annexure I along with the documents as specified therein Upto 22nd March 2022 4. Submission of Bid Application Form as per Annexure IV along with Affidavit and declarations as per Annexure V after, due diligence by Prospective Bidders that include reference to documents and information Upto 4th April, 2022 5. Site visit, if required Up to 21st March, 2022, 5.00 PM 6. Submission of EMD On or before 4.00 PM of 4th April 2022 7. Communication to Prospective Bidders who are eligible to participate in auction and providing Login and password for participating in E-Auction 5th April 2022 8. Holding of E-Auction H i.e. 6th April 2022 between 11 AM and 1 PM (with unlimited extension of 5 minutes each) 9. Announcement of Successful Bidder and Demand of Payment Consideration H + 0 working day, i.e., 6th April, 2022 10. Letter of Intent (Lol) to be issued to Successful Bidder H + 1 working days, i.e., on or before 7th April, 2022 11. Unconditional acceptance and signing of Letter of Intent (LOI) H + 1 working days, immediately after receipt of LOI on or before 7th April, 2022, prefera....
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....r after expiry of one month also informed the Appellant from 06.04.2022 that the balance amount has to be paid along with interest. Admittedly, the Appellant has not made the balance payment. Clause 4.9, as extracted above, clearly contemplate that EMD could be forfeited if the Successful Bidder fails to make the complete payment towards total sale consideration as per the terms of the Letter of Intent issued by the Liquidator within the stipulated time not exceeding 90 days from the date of e-auction. Admittedly, the Appellant has not paid the balance amount within the period of 90 days and Clause 4.9 clearly entitle the Liquidator forfeit the EMD. 18. The submission which was advanced by learned counsel for the Appellant is that the Appellant was not aware of order dated 04.04.2022 passed by the Adjudicating Authority that Sale Certificate shall be issued only after leave of the Adjudicating Authority. It is submitted by the Appellant that information of the said order was communicated by the Liquidator only on 12.04.2022. When we look into the E-Auction Process Document, there was clear stipulation that entire sale including issue of Sale Certificate is subject to orders and ....
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.... of said period of 90 days, the Malik Traders wrote for withdrawal of EMD. The bid security given by Malik Traders was cancelled and amount of Rs.20 Lakhs was forfeited, against which a Writ Petition was filed before the High Court, which was allowed by the Division Bench, which order was challenged by State of Haryana before the Hon'ble Supreme Court. In reference to the aforesaid fact, the Hon'ble Supreme Court laid down following in Para 12 and 13 : "12. The right to withdraw an offer before its acceptance cannot nullify the agreement to suffer any penalty for the withdrawal of the offer against the terms of agreement. A person may have a right to withdraw his offer, but if he has made his offer on a condition that the Bid Security amount can be forfeited in case he withdraws the offer during the period of bid validity, he has no right to claim that the Bid Security should not be forfeited and it should be returned to him. Forfeiture of such Bid Security amount does not, in any way, affect any statutory right under Section 5 of the Act. The Bid Security was given by the respondent and taken by the appellants to ensure that the offer is not withdrawn during the bid valid....
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.... (2003) 7 SCC 410". In Para 15 of the judgment following was held: "15. Allowing the appeal, this Court held as follows: "In our view, the High Court fell in error in so holding. By invoking the bank guarantee and/or enforcing the bid security, there is no statutory right, exercise of which was being fettered. There is no term in the contract which is contrary to the provisions of the Indian Contract Act. The Indian Contract Act merely provides that a person can withdraw his offer before its acceptance. But withdrawal of an offer, before it is accepted, is a completely different aspect from forfeiture 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 contra....
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....ng failed to deposit the amount, it need not interfere with the cancellation of the sale. An appeal was filed by the Appellant challenging the order of the Adjudicating Authority, which appeal came to be dismissed by order dated 28.04.2023 of this Tribunal. In Para 20 of the judgment this Tribunal laid down following : "20. For purpose of this case, law as laid down in Paragraph 43.7 is relevant where Hon'ble Supreme Court has clearly held that when forfeiture takes place under the terms and conditions of a public auction before agreement is reached, Section 74 would have no application. The statement of law in paragraph 43.7 is fully applicable in the case of the present case. The present is a case where Appellant participated in the e-Auction conducted by the Liquidator under the Liquidation Process Regulations, 2016. Section 74 of the Indian Contract Act has no application in the case of Auction conducted by the Liquidator under the Liquidation Process Regulations, 2016. The terms and conditions of the sale as finalized by the Liquidator under which the e-Auction was held is binding on all including the bidders. Bidders give an unqualified undertaking for participation ....