Case Note & Summary
The case involved an appeal by Sun Paper Ltd. against an order from the National Company Law Tribunal (NCLT) directing it to deposit ₹2.0 crores as a bank guarantee to the liquidation estate of a corporate debtor. The corporate debtor was undergoing liquidation, and both the appellant and another company had submitted schemes for its sale. The NCLT had previously remanded the matter for reconsideration, and the appellant later withdrew its appeal due to delays caused by the Covid pandemic. The liquidator subsequently sought to recover the EMD from both scheme proponents. The appellant contended that it was not liable to pay the EMD as its scheme was not accepted, and it had withdrawn from the process. The liquidator argued that the withdrawal of the appeal did not equate to withdrawing from the scheme submission. The court analyzed the legal obligations arising from the scheme submission and concluded that the appellant's withdrawal from the process was valid, and it should not be penalized for exercising its commercial judgment. The court ultimately allowed the appeal, setting aside the NCLT's order and closing all pending applications without costs.
Headnote
A) Company Law - Liquidation Process - Liability for EMD Payment - Insolvency and Bankruptcy Code, 2016 - The appellant challenged the order directing payment of EMD after withdrawing from the scheme submission process, arguing no legal obligation arose post-withdrawal. The court held that once the scheme was not accepted, the appellant had the right to withdraw and was not liable for the EMD payment (Paras 6-10).
Issue of Consideration
Whether the appellant is liable to pay the EMD amount after withdrawing from the scheme submission process.
Final Decision
The appeal was allowed, and the order of the Adjudicating Authority dated 12.05.2023 was set aside. All pending interlocutory applications were closed without costs.
Law Points
- Liquidation process
- EMD guarantee
- scheme submission
- withdrawal of appeal
- commercial decision
