TaxTMI 
TaxTMI 
2026 (3) TMI 1209
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.... i. The corporate debtor, Turning Point Estates Pvt. Ltd. was admitted to Corporate Insolvency Resolution Process (CIRP) on 10.01.2020. ii. Adjudicating authority vide order dated 09.02.2023 ordered the corporate debtor to be liquidated. The liquidator issued sale notice for sale of the property dated 18.03.2024. E-Auction Process Memorandum was also issued on 16.04.2024 for 9th e-Auction on 19.04.2024. iii. The reserve price was Rs. 81 crore and Earnest Money Deposit (EMD) of 5% being Rs. 4.05 crore was provided for. The appellant deposited EMD of Rs. 4.05 crore in the auction held on 09.04.2024, appellant was declared as Successful Auction Purchaser. Letter of Intent (LoI) was issued in favour of the appellant. iv. On 09.05.2024, balance amount toward 25% was deposited i.e. Rs. 16.2 crore totalling to Rs. 20.25 crore. Appellant has applied to Union Bank of India for grant of financial assistance for payment of the balance amount. v. It was observed by the appellant in June 2024 that there is a charge/encumbrance of the Department of Excise on the assets. Bank also informed the appellant of the charge/encumbrance of the Department of Exc....
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....o deposit the full amount and has applied loan from the Union Bank of India for payment of 75%. Bank has also sanctioned the loan which letter was produced before the adjudicating authority. Adjudicating authority being aware of the encumbrance created in favour of Excise Department has passed an order on 23.01.2025 directing for removal of the lien, whereas, liquidator on 14.09.2024 had already issued communication cancelling the auction in favour of the appellant and forfeiting the amount deposited. Adjudicating authority had also granted interim relief in the application of the appellant to protect the interest of the appellant, looking to the facts and circumstances of the case that there is encumbrance. It is submitted that the adjudicating authority has also directed the appellant to obtain confirmation of the Bank that Bank shall disburse the amount within three working days form the date of intimation about deletion of the lien, which order was passed on 06.02.2025. The ad-interim relief was vacated on 04.03.2025 leading to the liquidator in issuance of fresh auction notice dated 02.04.2025. On 04.03.2025, show cause notice was issued to Tehsildar, Mohali as to why proceedi....
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....dated 05.02.2025, hence the adjudicating authority has vacated the interim protection on 04.03.2025. No submission was advanced by the appellant to demonstrate the availability of funds, there being no availability of funds with the appellant auction has rightly been cancelled by the liquidator forfeiting the amount. Process Memorandum itself contemplated due diligence by all bidders and bidders cannot be heard that they were not aware of the encumbrance on the asset, hence are unable to pay the balance amount. Encumbrance or charge cannot be ground to refuse the payment of balance amount. In 11th e-Auction held on 02.05.2025, the assets have been sold for Rs. 81 crore and the property has been awarded to the highest bidder. 7. We have considered the submissions of the counsel for the parties and perused the records. 8. Learned counsel for both the parties have placed reliance on the various judgments of the Hon'ble Supreme Court and this Tribunal in support of their submissions, which we shall consider hereinafter. 9. Before we proceed, we need to notice certain clauses of e-Auction Process Memorandum dated 18.03.2024. Process Memorandum clearly contemplated that bidders ....
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.... found to have made any misrepresentation; or b) if the auction process applicant is found to be ineligible to submit the bid under Section 29A of the IBC (as amended from time to time) or is found to have made a false or misleading declaration of eligibility under Section 29A of the IBC (as amended from time to time); or c) if the auction process applicant is identified as the Successful bidder and it fails to pay the consideration amount as per schedule or does not accept the Letter of Intent issued by the Liquidator." 12. Further under the heading "Schedule to LoI - Time and Manner of Payment" under Clause 11 is captured in following manner: • "SCHEDULE TO LOI - TIME AND MANNER OF PAYMENT The successful bidder shall deposit: • 25% of the bid value (including EMD) to be remitted within 20 (twenty) days from the date of auction • The Balance 75% of the Sale / Bid Price is payable on or before the 30th day from the date of E- auction, but not exceeding 90 days from the date of E- auction where interest would be applicable on the payments made after 30 days from the date of E- auction, as per applicable law. ....
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....of payment which specified that 25% of the bid value was in be paid within 20 days, and the remaining 75% was to be paid on or before the 30th day from the auction date, not exceeding 90 days, additionally, an interest of 12% was applicable on payments made beyond 30 days, in line with the applicable laws. The successful bidder has paid 25% of the reserve price i.e. 5% of the reserve rese price towards EMD and 20% amount was paid before 20 days from the auction date whereas balance 75% was payable within the 30 days from the auction date, not exceeding 90 days, additionally, an interest of 12% was applicable on payments made beyond 30 days. The successful bidder was under obligation to deposit the total consideration amount within 90 days which was already expired on 18.07.2024. However, as the successful bidder has only deposited 25% of the bid amount till date and failed to pay the remaining 75% amount of the hid in due time. It is relevant to note that an extension was also granted to you by SCC in its 11th meeting held on 22.07.2024 in view of the Regulation 31A(h) of the 1BB1 (Liquidation Process) Regulations, 2016 but even after the expiry of extended period, the suc....
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.... any coercive steps in furtherance of the Impugned Email and Impugned Letter; iv. That this Tribunal during the pendency of the present application, be pleased to restrain the Respondent and for its agents, representatives and/or any person acting through the Respondent from taking any coercive steps in furtherance of the Notice of Sale dated 17.10.2024; ν. That this Tribunal during the pendency of the present application, be pleased to stay the operation of the Impugned Email, Impugned Letter and the Notice of Sale dated 17.10.2024; vi. For interim and ad-interim reliefs in terms of prayer clause (c) to (e); and vii. For such other and further reliefs, as this Hon'ble Tribunal may deem fit, proper and necessary in the circumstances of the present case." 15. Appellant has filed another application I.A.5917/2024 seeking a direction for deletion of the lien mark in favour of the Department of Excise & Taxation Commissioner, Mohali, which application was entertained and on 23.01.2025, which application prayed for following reliefs: "IA 5917/2024- 1. The present Interlocutory Application is filed by the Liquidator seeking ....
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....s issued show cause notice to Tehsildar, Mohali to show cause as to why proceeding under Contempt of Court be not initiated for disobedience of the order dated 23.01.2025. The application I.A.5114/2024 came to be rejected on 28.03.2025. 19. From submission of counsel for the parties and facts as noticed above, following questions arise for consideration: I. Whether action of the liquidator in cancelling the 9th e-Auction by email dated 14.09.2024 is in accordance with law and has rightly been upheld in accordance with the e-Auction Process Memorandum? II. Whether in facts of the present case, forfeiture of 25% amount deposited by the appellant in pursuance of the auction held on 19.04.2024 is justified? III. What is the consequence and effect of auction sale property in favour of another Successful Auction Purchaser for same amount of Rs. 81 crore held on 02.05.2025? Question No. (I) 20. We have already noticed relevant clauses of Process Memorandum as per the LoI issued to the appellant, entire payment was to be made by the appellant within 90 days and after 30 days payment also was to be made along with 12% interest. Auction was held on 1....
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.... it vests a discretion in the Liquidator to reduce the reserve price more than once and conduct multiple rounds of auctions with the purpose of maximising realisation from the sale of assets in the best interest of the creditors, in the remaining Rules, the word "shall" features prominently and without an exception. But that is not to say that wherever the word "shall" has been used in the Rules under Schedule I, it attains a mandatory nature. The Rule could still be construed as purely procedural if its infraction does not entail any serious or prejudicial consequence. Much will depend on the connotation and the textual context of the Rule." 22. The above judgment of the Hon'ble Supreme Court fully supports the submission of the respondent that after appellant having participated in the bidding process cannot be heard in saying that the payment of balance sale consideration was linked with lifting of the attachment order. In the present case, it is an admitted fact that payments of balance sale consideration was not made by the appellant within 90 days or even the extended period thereafter. 23. Liquidation process as per the IBBI Liquation Process Regulations, 2016 is a tim....
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....ent has entertained the application filed by the appellant being I.A.5917/2024 and allowed the said I.A. on 23.01.2025 as noted above. Even on 06.02.2024, adjudicating authority passed an order, where direction was issued to the successful buyer i.e., appellant to submit copy of the order 23.01.2025 to the Bank and after confirmation of the Bank that they shall be releasing the amount within three working days from the date of intimating deletion of lien in revenue records. Adjudicating authority has thus till that time had granted opportunity to the appellant to ensure that balance amount is paid. Learned counsel for the appellant submitted that appellant had filed the sanction letter from the Bank sanctioning loan for payment of 75%, however, no intimation of deletion having been issued to the Bank and Bank never released the amount. Learned counsel for the appellant has placed reliance on the judgment of the Hon'ble Supreme Court in 'Delhi Development Authority' Vs. 'Corporation Bank & Ors.' reported in [2025 SCC OnLine SC 2071]. In paragraph 30 & 31 of the judgment, Hon'ble Supreme Court laid down following: "30. We now address the position of the Auction Purchaser. In....
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....rties who offered their bid. In the above context, Hon'ble Supreme Court relying on the judgment in 'Delhi Development Authority' (supra) directed the trust to refund the amount, has made following observations in paragraphs 6, 9 & 12: "6. It was the legal duty on the part of the Trust to have made it clear in the auction notice itself that the subject plot is a subject matter of litigation. Authorities (such as banks, recovery officers, or state bodies) conducting public auctions are legally required to disclose all known encumbrances and litigation relating to the property, as failure to do so invalidates the sale. Suppressing such material facts renders the auction fraudulent or vitiated by material irregularity. 9. Public auction is one of the modes of sale intending to get highest competitive price for the property. Public auction also ensures fairness in actions of the public authorities and their officers who should act fairly and objectively. Their actions should be legitimate. Their dealing should be free from suspicion. Nothing should be suggestive of bias, favouritism, nepotism or beset with suspicious features of underbidding detrimental legitimate int....