AU Metals Private Limited vs C. Ramasubramaniam, Liquidator of M/s. Naachiar Paper Boards Pvt. Ltd.

Oral Judgment : Justice Sharad Kumar Sharma, Member (Judicial):

The Appellant in the instant Company Appeal (AT) (CH) (INS) No. 572 / 2025 agitates his grievances, being aggrieved as against the impugned order dated 23.09.2025, that has been passed on IA No. 1903 (CHE) / 2024 in CP (IB) / 548 CHE / 2017, as it has been rendered by the Ld. NCLT, Chennai, and as a consequence of the impugned order, the reliefs sought by the Appellant by preferring of the Interlocutory Application seeking for the refund of the EMD deposit has been declined to be extended to the Appellant.

The factual backdrop under which the instant Company Appeal arises, are that there was a proceedings which were held under Section 9 of the I & B Code, 2016, which was carried by the Operational Creditor i.e. M/s. Mithesa Traders, as against the Corporate Debtor, which was numbered as CP (IB) / 548 (CHE) / 2017, the same was admitted and ordered for initiation of the CIRP process.

A Resolution Plan was submitted by the Promoters / ex-Directors of the Corporate Debtor and was approved by the Ld. Tribunal on 08.02.2019, but since, it did not fulfil the commitments as per the Resolution Plan, the plans failed. Consequent to which, the liquidation proceedings were initiated, and as a result thereto, the Corporate Debtor was directed to be liquidated by the order passed on 29.11.2019.

The Corporate Debtor had six Assets situated at Sathur Taluk, Sivakasi, which included Factory Land & Building and Plant & Machinery. In relation to it, there was 6 Auction proceedings that were conducted out of which 5 failed, but the one with which we are concerned is the 6^th Auction process, which was carried by virtue of issuance of a publication of the 6^th E-Auction notice on 25.08.2023.

The contention of the Appellant is that, in accordance with the E-Auction notice, which was published on 25.08.2023, the Appellant had responded to it and had submitted his EMD on 11.09.2023, as per conditions contained, under its Clause 11, which reads as under; it prescribed for certain conditions for the forfeiture of the EMD amount:

The Appellant submits that, the manner in which the Clause 11 of the Tender notice has been formulated it is arbitrary and against the interest of the prospective Applicants, who responded to the Auction notice, which was published by the Respondent, inviting the bids for the purposes of participation in the proposal as extended by the said Auction notice dated 25.08.2023.

At this juncture itself, before we venture upon the merits of the other issues as proposed to be argued by the Ld. Counsel for the Appellant. We make it very clear, that the offer, which was made by the E-Auction notice on 25.08.2023 will amount to have been accepted unconditionally by the Appellant having accepted and responded to it, without raising any objection to it. In particular to the challenge raised for the said Clause 11 alleging to be arbitrary in any manner whatsoever at this stage. Under the settled principles of law, once a proposed Bidder who had expected to participate in the E-Auction process as adopted and published by the Respondent by publication of E-Auction notice on 25.08.2023, which contained Clause 11 as extracted above, in all judicious propriety, the Appellant should not have responded to the Auction notice by submission of the EMD, rather, the Appellant should have challenged the arbitrariness of the clauses in question.

It is the settled principles as enunciated by the Hon’ble Apex Court in a Judgment reported in 2024 SCC Online SC 3184 Tej Prakash Pathak v. High Court of Rajasthan, an Applicant to the Auction proceedings would be deemed to have participated, only upon going through the terms and conditions as given in the Auction notice and having accepted the same. It would therefore be presumed by the Appellants conduct, having deposited the EMD amount, to have accepted the conditions. It is made clear that the rules of the game, which has been resorted to and were to be followed for the purposes of entitling the Appellant to participate in the bidding process, were made public, by its publication bringing it in public domain and its acceptance without challenging it, rather accepting it and having respondent to it.

Once the Applicant has submitted his EMD, much later on, on 11.09.2023 in response to the Auction notice as published on 25.08.2023, he cannot be permitted to revert back and now submit that the Clause 11 as contained in Auction notice was arbitrary.

The facts, which had come on record and as argued by the Ld. Counsel too for the Appellant that in pursuance to the aforesaid Auction notice as it was published by the Respondent, the Appellant had deposited the EMD of Rs.1,10,02,052 and had submitted the Tender Form on 11.09.2023.

As a consequence thereto, the E-Auction was conducted on 13.09.2023 but, it is the case of the Appellant and as observed in the impugned order itself that the Appellant did not respond to proceed with his bid during the E-Auction process held on 13.09.2023. The Appellants case for not participating was that, upon evaluation of the market value of property, the Appellant that, it was not lucrative and worth participation, this was a stand taken by the Appellant before Ld. NCLT, in his objection dated 12.06.2025.

In that eventuality, the Appellant has to blame himself, when he has not submitted the bids during the E-Auction process as conducted on 13.09.2023, after depositing of the EMD amount in response to the Auction notice of 25.08.2023. The quite logical inference which would follow is that, the deposit of the EMD amount will automatically stand forfeited in terms of Clause 11 of the Auction notice, to which the Appellant has already acceded to its conditions, by submission of the EMD amount.

The Ld. Counsel for the Appellant had argued to attempt to carve out an exception by submitting that the terms and conditions contained in the E-Auction notice itself will not have a binding effect inter-se amongst the parties who are participating in the E-Auction process, as it was an offer only inviting bids, and rather, his rights and liabilities inter-se would be governed by the tender document, was argued to have been furnished in extension to the terms and conditions of E-Auction notice of 25.08.2023.

So far we are concerned, we are of the view that the tender document and the conditions, which are contained therein, as relied by the Learned Counsel for the Appellant (Annexure 6), it relates to the document required to be submitted by the Appellant that, will constitute and would form to be the part and parcel of the Auction notice, rather, would be in extension to the terms and conditions of the E-Auction notice and the tender documents cannot be read in isolation governing the act of the Appellant, because that itself was followed by the Bidders including Appellant in compliance of the conditions that were given in the E-Auction notice of 25.08.2023, as the Auction notice and Tender documents both have co-existence to achieve a common object to ensure completion of the bidding process. Either of them have no independent existence.

Even it is for the time being it is presumed to accept what the Ld. Counsel for the Appellant has submitted, it is not at all sustainable, particularly when he refers and relies upon Clause 8 of the Tender documents, which contains as to the terms and conditions under which the EMD amount was required to be refunded.

Clause 8 becomes relevant to be considered by us at this stage. Clause 8 of the Tender conditions, which is an admitted document, which has been relied by the Ld. Counsel for the Appellant contains a condition, which reads as under:-

The conditions contained under Clause 8 of the Tender document calling for the conditions for refund of the amount would be only subject to the prior satisfaction of the condition that the Appellant after participating in the bidding process, is consequentially determined as to be an unsuccessful Bidder, is then only when the condition for refund comes into picture, after being determined to be unsuccessful. Admittedly, after submission of the EMD, the Appellant did not proceed and submit their Bid, during the E-Auction process, as would be apparent from the finding of fact rendered by the Ld. Tribunal.

In these eventuality, if the Appellant has not submitted the bid document during the E-Auction process held on 13.09.2023, he would be bound by the terms and conditions of Clause 11, which will automatically became applicable upon him, because he has responded to the terms and conditions of either the Auction Notice and particularly the Tender Document, by furnishing the EMD amount and this is the principle, which has been settled by the Hon’ble Apex Court in yet another Judgment of NTPC v. Ashok Kumar Singh, (2015) 4 SCC 252 which permits forfeiture due to breach of condition by purchaser, where it has provided that the forfeiture of the Earnest Money, where the Agreement contains of a Forfeiture Clause and there is a breach in the condition on part of the person intending to participate in the bidding process, the consequences of the forfeiture will automatically follow, since would be a binding accepted condition, since having voluntarily deposited the EMD.

For the reason that has been assigned by the Tribunal in the impugned order, exclusively on the ground that the Appellant, had not responded by submitting the bid, the conditions under Clause 8 of the E-Auction document, which is relied and accepted by the Appellant, are not fulfilled in this case for considering the refund of the Earnest Money as deposited by the Appellant.

Owing to the aforesaid reasons and after having heard the Ld. Counsel for the Appellant at length and going through the impugned order, the reason as justified by the Ld. Tribunal, while rejecting the Application, being IA (IBC) No. 1903 (CHE) / 2024, is justified for declining to refund the EMD amount which otherwise also automatically stands forfeited in terms of Clause 11 of the Auction notice dated 25.08.2023 and also because owing to the own conduct of the Appellant by non-furnishing of the bid document. Again at a cost of a repetition, we would assert that the Clause 8 of the Tender document itself contemplates or carves out an exception of refund, only upon a determination of being an unsuccessful Bidder, which is not a condition prevailing herein. Hence, the denial of a refund of the Earnest Money by the impugned order, does not suffer from any apparent error to call for any interference by us. Consequently, the Company Appeal (AT) (CH) (INS) No. 572 / 2025 lacks merit and the same is dismissed.