TaxTMI 
TaxTMI 
2026 (9) TMI 12
X X X X Extracts X X X X
X X X X Extracts X X X X
....e purchase consideration, which was scheduled to be paid on or before 30.03.2023, and therefore, the 1st Respondent had proceeded to cancel the sale on 10.05.2023. Challenging the said action of cancellation, the Appellant had filed an IA(IBC)/496(CHE)/2024, in CP/IB/553/2017, invoking the provisions contained under Section 60(5) of the I & B Code, 2016, to be read with Rule 11 of the NCLT Rules, 2016, therein praying for the following reliefs: - "a) Declare the cancellation of the sale of Auction Property in favour of the Applicant vide letter dated 10.05.2023 by the 1st Respondent as null and void; b) Declare that the Applicant is entitled to make payment of the balance Purchase Consideration of Rs. 46,25,000/- together with interest at 12% p.a. from 30.03.2023; c) Direct the 1st Respondent to issue sale certificate in favour of the Applicant and in respect of the Auction Property upon receiving the balance Purchase Consideration of Rs. 46,25,000/- together with interest at 12% p.a. from 30.03.2023. d) Declare that any letter of intent or confirmation issued by the Respondents for sale of the Auction Property other than in favour of the Applica....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he balance consideration was to be made by the successful bidder by 30.03.2023. 4. Thus, on conclusion of the e-auction on 24.02.2023, the RP issued the Letter of Intent on 20.03.2023, to the Appellant, with the direction for remittance of balance sale consideration of Rs. 71,25,000/- by 30.03.2023. On receipt of the same, the Appellant requested the RP vide his letter dated 21.03.2023 for grant of extension of time till 20.04.2023 on the grounds that she received the Letter of Intent only on 21.03.2023, and though she will try her best to pay the balance before 30.03.2023, she may require time up to 20.04.2023 which may be considered. In response, the RP issued his letter dated 24.03.2023 wherein he had stated that full payment has to be made by 30.03.2023 as per process document and any payment made after 30.03.2023 up to 60 days thereafter (i.e., 30.05.2023) will attract an interest of 12 % per annum. The contents of the said letter is extracted below: - "Your attention is being invited to the Letter of Intent (LoI) dated 20th March 2023, it was informed in the LoI the balance consideration of Rs. 71,25,000/- will have to be paid on or before 30th March 2023 as per t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he balance amount and therefore the RP was bound by the terms and conditions of the bidding document and in particular the Note-2 to the schedule of payment given therein, to grant extension of time to him to make the balance payment as it was falling well within the ambit of the powers vested with the RP under the said Note-2. Note-2 of the timetable reads as under: - "Note 2 - The timeline for payment of final sale consideration may be extended at the sole discretion of Insolvency Resolution Professional, to the extent permissible under the applicable laws and regulations. In case the final sale consideration is not paid within the timeline, the Insolvency Resolution Professional shall forfeit the amounts paid by the successful bidder till last date of remittance." 8. On a simpliciter reading of the aforesaid clause, it cannot be said that, there was an absolute bar that, the period of payment cannot be extended beyond 30.03.2023 under any circumstances; in fact, the said note left open a certain scope to extend the timeline for paying the balance amount under the applicable laws and regulations and it had further stipulated that forfeiture could have been done only a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....(12) of Clause 1 of Schedule I of the said regulations, which was substituted with effect from 01.02.2024, i.e., much prior to the controversy in question, which prescribes as under: - "(12) [On the close of the auction, the highest bidder shall be invited to provide the balance sale consideration within ninety days or such period as mentioned in the auction notice under clause 3, of the date of such demand: Provided that payments made after thirty days shall attract interest at the rate of 12%: Provided further that the sale shall be cancelled if the payment is not received within the period provided under this clause." 12. If sub-clause (12) of Clause 1, as extracted above is taken into consideration and read with its first proviso, the condition of making the payment of the balance sale consideration within 30 days is not to be applied rigidly because as per the said provision, any payment made after 30 days will carry interest at 12% per annum and that such payments are to be allowed for a period of 90 days 'or such period', as to be mentioned in the auction notice. In that eventuality, the kick off period for the forfeiture in the instant case cou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....m to justify his action for forfeiting the amount deposited may not be correct in law because it will be the terms and conditions of the offer contained in the letter of intent and subsequent letter issued by RP will only determine when and under what conditions forfeiture can be resorted to, unless the said letters are contrary to provisions of the process memorandum. Since Note-2 to the timetable grants the discretion to the RP to extend timelines, the action of RP in extending the time period for depositing the amount by 30.05.2023 is well within the ambit of the guidelines framed under the process memorandum. 16. As per the terms and conditions given in the process memorandum, there is no dispute about the rights, being reserved for forfeiting the amount by the IRP, in an event of default. But then we cannot be ignorant of the fact of vesting of the powers of discretion and the powers of extension that has been conferred upon the IRP. Thus, when the RP extended the timeline for paying the balance sale consideration by his communication of 24.03.2023 by exercising his discretion, in the light of Note-2 as extracted above, forfeiture as prescribed under the process memorandum ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in 2026 SCC OnLine NCLAT 769, in the matters of Xylocopa Builders & Developers Pvt. Ltd. Vs. Namrata Amol Randeri, Liquidator of Turning Point Estates Pvt. Ltd. Para. 30 of the said judgment is extracted hereunder: - "30. The auction in the present case is being conducted under the IBBI Liquidation Process Regulations, 2016 and as per the Process Document, we are fully satisfied that insofar as forfeiture of the EMD that cannot be faulted, however in the facts of the present case, the amount of Rs. 16.20 crore which was deposited on 09.05.2023 could be permitted to be refunded to the appellant, due to the reason that in the subsequent 11th e-Auction held on 02.05.2025 assets have been sold by the liquidator for the same amount of Rs. 81 crore and liquidator has already realised the amount of Rs. 81 crore, permitting the amount of Rs. 16.20 crore to remain with liquidator shall clearly be unjust enrichment in the hands of the liquidator." 19. The contention of the Appellant is that, when the RP vide his communication of 24.03.2023 has already granted an extension of 60 days and that was made to be operational with effect from 30.03.2023, forfeiture ought to have been res....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... clause 8 will kick in after 90 days instead of 30 days. Thus, in all fairness, it was expected that, the RP should have waited till 30.05.2023, having waited till 10.05.2023, before taking any action against the Appellant, for the reason being that, the RP has created a trust in favour of the Appellant by grant of an extension vide his communication of 24.03.2023. The Ld. Tribunal in the impugned order has overlooked this aspect and simply relied upon the provisions of clause 8 to deny refund of Rs. 32,50,000/- as prayed for by the Appellant. Further, the RP, having granted an extension, should have maintained the same stand before the Ld. Tribunal when the prayer for refund of forfeited amount was being considered by Ld. Tribunal. 23. In view of the above, we would feel it apt to observe that, the Appellant has not been meted out a fair treatment at the hands of the RP, when the Appellant was making a plea before the Ld. Tribunal that the forfeiture clause, should not have been invoked by RP under changed circumstances, and that the RP was duty bound to have made the Ld. Tribunal conscious about the extension that has been already granted by him. Under these circumstances, whe....