Case Note & Summary
The dispute arose from an auction conducted under the Insolvency and Bankruptcy Code, 2016, where the appellant, M/S ASJ FINSOLUTIONS PVT. LTD., was the successful bidder for a property in liquidation. The auction took place on 15.11.2021, with a reserve price of Rs.25.56 crores, and required the balance sale consideration to be paid within 90 days. The appellant failed to remit the balance amount by the deadline, leading to the forfeiture of the Earnest Money Deposit (EMD) as per the auction terms. The appellant contested the forfeiture, arguing that the National Company Law Appellate Tribunal (NCLAT) had reversed the National Company Law Tribunal's (NCLT) order which had initially allowed the refund of the EMD. The appellant claimed that the regulations did not stipulate forfeiture and that other bidders were granted extensions. The respondent, the Resolution Professional, contended that the appellant was aware of the pending civil suit regarding the property and had bid knowingly. The court analyzed the auction terms, the appellant's failure to pay, and the implications of the Triple Test. Ultimately, the court upheld the NCLAT's decision, affirming the forfeiture of the EMD due to the appellant's wilful default in payment. The appeal was dismissed, and the court found no grounds to interfere with the forfeiture order.
Headnote
A) Insolvency Law - Forfeiture of Earnest Money Deposit - Justification of Forfeiture - Insolvency and Bankruptcy Code, 2016, Section 9 - The appellant, a successful bidder, failed to pay the balance sale consideration within the stipulated time, leading to forfeiture of the Earnest Money Deposit. The court held that the terms of the auction notice clearly stipulated forfeiture upon failure to pay, and the appellant's arguments regarding discrimination and absence of stipulation for forfeiture were rejected. Held that the forfeiture was justified (Paras 1-24).
Issue of Consideration
Whether the forfeiture of Earnest Money Deposit was justified under the circumstances of the case.
Final Decision
The Supreme Court dismissed the appeal, affirming the NCLAT's order that upheld the forfeiture of the Earnest Money Deposit due to the appellant's failure to pay the balance sale consideration within the stipulated time.
Law Points
- Insolvency and Bankruptcy Code
- 2016
- forfeiture of Earnest Money Deposit
- auction process
- Liquidation Process Regulations
- Triple Test
