TaxTMI 
TaxTMI 
2026 (9) TMI 2011
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....l Company Law Tribunal (NCLT) and affirmed the forfeiture of Earnest Money Deposit (EMD) for reason of the successful bidder having not paid the balance sale consideration within 90 days. 2. We heard Ms. Meenakshi Arora, learned Senior Counsel for the appellant and Mr. Abhishek Anand, learned Counsel for the respondent-Resolution Professional (RP) of the Corporate Debtor (CD). 3. The subject property; Lot No. 5-measuring 68K, 17M situated at Village Nangal Khurd Tehsil, Sonepat, Haryana, with a reserve price of Rs. 25.56 crores was auctioned along with many other properties owned by the CD, through an e-auction notice for sale dated 25.10.2021. On the background facts, suffice it to notice that an Operational Creditor had approached the NCLT under Section 9 of the IBC. After admitting the CP, an Interim Resolution Professional (IRP) was appointed and later, the first respondent, as the RP. Despite expression of interest having been received by the IRP, none submitted a Resolution Plan. After replacement of the IRP by the RP, time was extended, within which, no Resolution Plan came to be filed, in which circumstance, a liquidation was proposed and approved by the NCLT. A suspe....
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....the bid of the appellant. The High Court subsequently rejected the prayer of the appellant for prior deeds and reserved liberty to the appellant to avail remedies as available in accordance with law. 7. Banking on the said liberty reserved, the appellant again initiated proceedings before the NCLT seeking annulment of forfeiture of EMD and refund of the same. The NCLT allowed it, which was reversed by the NCLAT, which order is impugned herein. 8. Learned Senior Counsel for the appellant contended that as per the Insolvency and Bankruptcy Board (Liquidation Process) Regulations, 2016 [Regulations, 2016], specifically Schedule I, there was no stipulation of forfeiture of EMD. In fact, the Schedule specifically stipulates that there can be only 10% of the estimated value demanded as EMD. It is further argued that there were other bidders, who were granted extension of time beyond the 90 days by the NCLT and the appellant was discriminated. It is also pointed out that the NCLT specifically looked at the Triple Test as propounded by this Court and found the same in favour of the appellant, thus, resulting in the direction to refund. It is argued, placing reliance on Authorised Off....
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....e appellant. We see from Schedule I of the Liquidation Process Regulations that there is a stipulation that EMD should not be more than 10%; brought in on 30.09.2021 and there is no forfeiture expressly provided, in the event of failure to pay the balance sale consideration. As pointed out by the learned Counsel for the respondent, the terms are explicit in the Tender Notice and the appellant, with open eyes, bid in auction as also deposited the amounts demanded without any protest. Having deposited 10% of the reserve price, along with a portion of the balance sale consideration, which itself is an undertaking to pay the balance amounts within a period of 30 days or 90 days with interest, brings in the consequences of forfeiture, on failure; which is automatic. 12. In the present case, the bidder had specifically sent an email just one day after the 30-day period was over, undertaking to pay the balance amounts with interest due before the 90th day. A request was made for prior deeds, which, in any event, was not permissible at that distance of time, since the auction notice was issued on an 'as is where is' basis and it specifically indicated the non-availability of sale deeds ....
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....d, the appellant had sought for prior sale deeds of the subject property and it was categorically found that the appellant had wilfully defaulted in the payment of the balance amount of Rs. 19.17 crores within the stipulated period. Especially considering the fact that the liquidation proceedings are strictly timebound and sufficient time had already elapsed from the default in payment. The NCLAT in its earlier order also blamed the appellant for not making the balance payment within the stipulated time, which was found to be a wilful default on the part of the appellant. The contention of the appellant that merely because the cancellation of the bid was upheld, that would not affect refund of EMD, cannot at all be countenanced. 16. Looking at the specific clause threatening forfeiture on failure of payment of balance sale consideration, on cancellation, forfeiture is a necessary consequence and there is no application of the Triple Test, on facts herein, to absolve the appellant from such forfeiture. The mere failure to make the balance sale consideration was to rig the auction proceedings, in which circumstance, admittedly, there was a fresh auction proposed and there was a hi....
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....t exceed 10% of the reserve price. The respondent relies on the decision in Westcoast Infraprojects Private Limited v. Mr. Ram Chandra Dallaram Choudhary Company Appeal (AT) (Ins) No.1258 of 2022 and Potens Transmission & Power Pvt Ltd v. Apex Buidlsys Ltd (In Liquidation) Company Appeal (AT) (Ins) No.1543 of 2023, which decisions have been affirmed by this Court respectively in Civil Appeal No.4087 of 2023 and Civil Appeal No.4116 of 2022. Westcoast Infraprojects Private Limited4 approved by this Court in a Civil Appeal, upheld the forfeiture, as per the clause in the e-auction notice, of both the EMD and any other deposit made by the bidder, in the event of the failure of the successful bidder to pay on time the balance sale consideration. 20. The respondent points out from Annexure R12, that in fact, the EMD stipulated was only Rs. 2.55 crores which is only 10% of the reserve price of Rs. 25.56 crores for Lot No. 5. The Liquidator, vide email dated 15.11.2021 informed the appellant that against the total bid of Rs. 25,56,00,000/-, 25% of the bid amount amounting to Rs. 6,39,00,000/- which included Rs. 2.55 crores EMD and a portion of the balance consideration coming to Rs.3.8....