TaxTMI 
TaxTMI 
2024 (7) TMI 933
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....ion /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 07.04.2022 to the Appellant along with bank details for remittance of the....
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....r 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 correspondence between the parties on record. The Liquidator in the Reply stated that the Liquidator is taking steps for disposal of IA No.98/2022. It was pleaded that the Appellan....
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....tion 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 the Appellant. 4. Learned counsel for the Liquidator refuting the submission of learned counsel for the Appellant submits that the E-auction Process Document clearly contemplate ....
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.... 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 of balance consideration, through speed post on your address mentioned in the EOI submitted by you. The same must be signed by the authorised person and one copy with the send to us on the same address provided to you earlier. We are also attaching a scanne....
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....ed 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 subject to such orders and directions as may be passed by the Hon'ble NCLT/NCLAT and the Hon'ble Supreme Court of India, as the case may be. While we express our sincere thanks for your participation in the E-Auction process, we would like to inform you that the Hon'ble National Company Law Tribunal (NCLT), Allahabad Bench, vide its order dated 4th April, 2022 directed to proceed with the auction, however, it is stated in the said order that the Liquidator shall not proce....
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....tructuring 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, receipt of sale certificate and non- reply to our other queries dated 23.06.22; we are expected to pay interest and balance amount. We had bid in the e-auction with absolute good faith. We were kept in the dark about the petition filed by Ex- Director up to the receipt of EMD. Further, we were assured that the case would wind up in a short period of time. We are already at huge loss as a result of delay in issue of sale certificate. The quality of material will further deteriorate with passage of time. In our e-mail dated 23.06.22, we had explained our perspective on the current situation of the case in detail and the various losses incurred by us as a result of non-receipt of material, to which we have not received your reply. ....
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....ve 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 declaration of eligibility as per the conditions set out in Section 29A of the IBC (as amended from time to time); or * If the Prospective Bidder is identified as the Successful Bidder and it fails to accept the Letter of Intent issued by the Liquidator; or * If the Prospective Bidder is identified as the Successful Bidder and it fails to extend the validity of the Earnest Money through the Bank Guarantee till the last date of submission of total sale consideration with an additional claim period of 30 days thereafter; or * 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 or the date of Letter of Intent (LOI), whichever is later." 13. Clause 5.....
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....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, preferably within two hours of receipt of LOI 12. Return of EM D for unsuccessful Prospective Bidders H+ 15 working days 13. Payment of total sale consideration/balance consideration by Successful Bidder along with GST/applicable Taxes (For Block A1 to A10) H+90 days, Payment after 30 days will attract interest at 12% p.a. 14. Payment of total sale consideration/ consideration by Successful Bidder along with GST/applicable Taxes (For Block A 11 only) balance H+7 days, on or before 13th April. 2022 15. Execution of sale certificate or any other document (For Block A1 to A10) Within (1 to 10 days) of (H+N+90 days) 16. Handing over charge of the assets of the Corporate Debtor as Stand-alone Block(s) of assets in terms of this E-Auction Process Information Document to Successful Bidder. Simultaneously with execution of Sale Certificate The Timeline as per the Table above may undergo change subject to any further development and/ or u....
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....ly 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 directions passed by NCLT/NCLAT. Clause 5.11 Sub-clause (viii) has already been extracted above which clearly provides that issue of sale certificate in respect of a particular Block of assets shall subject to such orders and directions as maybe passed by the NCLT/NCLAT. Thus, the Process Document already contemplated that issue of Sale Certificate is subject to orders passed by NCLT/NCLAT. Thus, the submission of the Appellant cannot be accepted that Appellant was not aware that the Sale Certificate shall not be issued without leave of the NCLT. When the Process Document itself contemplate issuance of Sale Certificate subject to order passed by NCLT, all bidders were clearly informed about the said contingency. Present is not a case where the Liquidator due to any deficiency on his part could not issue Sale Certificate or hand over the material but on account of order dated 04.04.2022, the Liquidator could not issue Sale Certificate and that was cleared only after passing of order dated 01.06.2023 when IA No.9....
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....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 validity period of 90 days and a contract comes into existence. Such conditions are included to ensure that only genuine parties make the bids. In the absence of such conditions, persons who do not have the capacity or have no intention of entering into the contract will make bids. The very purpose of such a condition in the offer/bid will be defeated, if forfeiture is not permitted when the offer is withdrawn in violation of the agreement. 13. In taking the above view, we are supported by the decision of this Court in National Highways Authority of India v. Ganga Enterprises & Anr. [(2003) 7 SCC 410] which was rendered in a similar case. In the said case, the appellant, National Highways Authority of India, by a notice, called for tenders by 31.7.1997 for collection of toll on a portion of a particular highway. The notice provided that toll plazas would be got completed by the appellant and handed over to the selected enterprise. The notice required the bidders to furnish: (i) a bid security in a sum of 50 lakhs in the form....
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....rity, 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 received would be lost if forfeiture was not permitted." We respectfully agree with the above view of this Court." 22. The Hon'ble Supreme Court ultimately set aside the order of the High Court and upheld the forfeiture of bid security of Rs.20 Lakhs. Hon'ble Supreme Court held that the bid security was liable to forfeiture in case the bidder withdrew his bid during the validity period of the bid or failed within the specified period to fur....
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....hich the e-Auction was held is binding on all including the bidders. Bidders give an unqualified undertaking for participation in the e-Auction after knowing fully well of clauses of the e-Auction Process Document and undertook to abide by the clauses. The submission of the Appellant cannot be accepted that Appellant's EMD cannot be forfeited even though he has committed default in making the payment of balance amount and the Liquidator should file a suit for forfeiting amount deposited by the Appellant. Such preposterous argument cannot be accepted in view of the fact that Liquidation Process is conducted under the statutory Liquidation Process Regulations, 2016. The terms and conditions of the Process Document has been framed as per statutory empowerment given to the Liquidator by Schedule I of the Liquidation Process Regulations, 2016 as noticed above. When the clauses of the Process Document as noted above, clearly empowers the Liquidator to forfeit the EMD and any payment made in event default is committed by the Highest Bidder, no exception can be taken to the action of the Liquidator in cancelling the sale and forfeiting the amount deposited by the Appellant." 24. The above....