TaxTMI 
TaxTMI 
2024 (4) TMI 1343
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....(in short 'Rules') for seeking appropriate directions to the Liquidator (Respondent herein) to refund the amounts paid by the Appellant as Earnest Money Deposit (in short 'EMD') and part consideration towards its bid for sale of Corporate Debtor as a going concern, has been dismissed. 2. The brief facts of this case are that ICICI Bank Limited (Financial Creditor) filed an application under Section 7 of the Code against the Apex Buildsys Limited (Corporate Debtor) (now in liquidation) for the resolution of its debts which was admitted on 20.09.2018. 3. Since, the resolution plan remained unsuccessful, therefore, the order for liquidation of the Corporate Debtor was passed by the Adjudicating Authority on 09.01.2020. 4. The Liquidator (Respondent herein) put up the Corporate Debtor as a going concern for sale through e-auction on 22.01.2021 at a reserve price of Rs. 119.36 Cr. This e-auction failed. However, on 19.02.2021 only one unit of the Corporate Debtor was put up for sale through e-auction at a reserve price of Rs. 50 Cr. The said e-auction also failed. The third e-auction took place on 12.03.2021 of the Corporate Debtor as a going concern at a reserve price of Rs. 9....
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....ail in this regard on 03.06.2021 making it clear to him that "please note that all the terms and conditions applicable to successful bidder as mentioned in the e-auction process information document dated 17.05.2021 shall be applicable and binding on you, being the successful bidder." 9. Pursuant thereto, term sheet was executed between the Appellant and the liquidator on 15.06.2021 in which the following terms and conditions was agreed to "7.2 that the auction of CD is governed by the provisions of the Code r/w Liquidation Process Regulations. 7.3 That in the event of default by the auction purchaser to make the full payment of sale consideration amount by 01.09.2021 being the 90th day alongwith applicable interest @ 12% if the payment is made after 03.07.2021, if the payment is not made by 01.09.2021 the liquidator shall cancel the auction as per the liquidation process regulations and all the amounts deposited till that date shall be forfeited." 10. As per the aforesaid stipulation in the terms and conditions to which both the parties had agreed to, the amount was to be paid with interest within 90 days which expired on 01.09.2021. 11. It is pertinent to mention that be....
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....Adjudicating Authority on 25.04.2022 to cancel the sale and to proceed in accordance with law, therefore, through an email dated 25.04.2022, on the same date, the Respondent informed the Appellant about its decision to forfeit not only the EMD but also the part consideration amount. 16. The order dated 25.04.2022, by which the applications were disposed of bearing I.A. No. 3153 and 4317 of 2021 filed by the Appellant and allowed I.A. No. 5255 of 2021 filed by the Liquidator, was challenged in appeal by the Appellant bearing CA (AT) (Ins) No. 532 of 2022 which was dismissed on 12.05.2022 upholding the order of the Adjudicating Authority. The order dated 12.05.2022 passed by this Tribunal was challenged before the Hon'ble Supreme Court by way of Civil Appeal No. 4116 of 2022 in which the Hon'ble Supreme Court passed the order on 20.05.2022 which read as under:- "The appeal is admitted subject to the condition that the Appellant shall deposit Rs. 5,50,00,000/- within 23.05.2022 and another balance sum of Rs. 50,00,00,000/- within 01.06.2022. The auction may go on in the meanwhile, but no final decision shall be taken till 02.06.2022. If the petitioner pay....
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....ejected." 18. The Appellant then filed I.A. No. 116013 of 2022 before the Hon'ble Supreme Court for seeking directions for refund of the amount of Rs. 5.5 Cr. which was deposited by the Appellant with the Liquidator in terms of the order passed by the Hon'ble Supreme Court. The said application was allowed with the following order:- "Heard ld. Counsel for the parties. The application for directions/ clarifications being IA No. 116013 of 2022 is allowed. The Respondent No. 1 is directed to refund the amount of Rs. 5,50,00,000/- deposited in its account of 23.05.2022 in accordance with the directions passed by this court vide order dated 20.05.2022. The appeal is accordingly disposed of. Pending applications, if any, shall stand disposed of." 19. It is pertinent to mention that the main appeal i.e. Civil Appeal No. 4116 of 2022 filed before the Hon'ble Supreme Court was disposed of. 20. The Appellant thereafter filed an application bearing I.A No. 5450 of 2022 before the Adjudicating Authority in which the following prayer was made:- "Pass an order directing the liquidator to refund the amount of Rs. 18,25,25,000/- paid by the App....
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....ils to pay balance sale consideration amount within the stipulated time as per the clauses/terms of this e-auction process information document (terms and conditions of e-auction) after being intimated as a successful bidder by the liquidator. (d) In any of the above event, all the amounts deposited till that date shall be forfeited and the assets of the related lot, for which bid was submitted and declared as successful bidder, will be offered to the next highest bidder." 25. He has also submitted that the Appellant has given a declaration in writing on 29.05.2021, already referred to hereinabove, as per which the Appellant conceded that in case it fails to complete his part of the contract then the EMD and other money paid by him may be forfeited. He has also submitted that on 03.06.2021, the Appellant was categorically informed that all the terms and conditions applicable to the successful bidder, mentioned in the e-auction process information document, shall be applicable and be binding being successful bidder and in that eventuality, there shall be forfeiture not only of the EMD but also the sale consideration amount paid in part. He has also submitted that in the ....
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.... of Section 74 of the Act? 31. To appreciate the argument raised by the Appellant, it is relevant to refer to Section 74 of the Act which read as under:- "Section 74. Compensation for breach of contract where penalty stipulated for. 1[When a contract has been broken, if a sum is named in the contract as the amount to be paid in case of such breach, or if the contract contains any other stipulation by way of penalty, the party complaining of the breach is entitled, whether or not actual damage or loss is proved to have been caused thereby, to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named or, as the case may be, the penalty stipulated for. Explanation.-- A stipulation for increased interest from the date of default may be a stipulation by way of penalty.] Exception.-- When any person enters into any bail-bond, recognizance or other instrument of the same nature, or, under the provisions of any law, or under the orders of the 2 [Central Government] or of any 3[State Government], gives any bond for the performance of any public duty or act in which the public are interested, he shall b....
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.... informed by the Liquidator about the terms and conditions through the e-auction process information document in which it had been categorically mentioned that the liquidator would have competence not only to forfeit the amount of EMD but also any amount having been paid towards part payment of the sale consideration in case there is a failure of the contract on the part of the Appellant. It is also not in dispute that the Appellant was knowing fully well about the terms and conditions which were set out in the e-auction process information document in terms of Schedule 1 of the Regulations that in case of failure of the e-auction, the liquidator shall be competent not only to forfeit the EMD but also the part payment made by the Appellant. The Respondent then again informed the Appellant through its email dated 03.06.2021 in this regard as well. Thereafter, a term sheet was executed between the parties in which the same terms and conditions were also there which was duly signed by the Appellant. The sum and substance of the narration of the aforesaid facts and circumstances is that every step the appellant was made aware by the liquidator of its liability in case the Appellant fai....
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....the Hon'ble Supreme Court framed the following three questions which read as under: - "I. Whether, the underlying principle of Section(s) 73 & 74 respectively of the 1872 Act is applicable to forfeiture of earnest money deposit under Rule 9(5) of the SARFAESI Rules? In other words, whether the forfeiture of the earnest-money deposit under Rule 9(5) of the SARFAESI Rules can be only to the extent of loss or damages incurred by the Bank? II. Whether, the forfeiture of the entire amount towards the earnest-money deposit under Rule 9(5) of the Rules amounts to unjust enrichment? In other words, whether the quantum of forfeiture under the SARFAESI Rule is limited to the extent of debt owed? III. Whether a case of exceptionable circumstances could be said to have been made out by the respondent to set aside the order of forfeiture of the earnest money deposit?" 36. These three questions were decided accordingly but the Counsel for the Appellant has referred to Para 87 of the said judgment in which there is a reference of "Ex Parte Barrell: (L.R.) in Re. Parnell 10 Ch. App. 512" wherein it has been held that "a specific forfeiture clause might operate to defe....