AI Structured Summary
Not yet generated for this judgment
Judgment
ORDER
Oral Judgment : Justice Sharad Kumar Sharma, Member (Judicial):
M/s. Ganga Foundations Private Limited was a Company, which was initially put to face the CIRP proceedings by an Order dated 10.01.2022 and later on, was directed to be liquidated by an Order of 15.03.2023 and as a consequence thereto, liquidation process was initiated as per the provisions of IBBI (Liquidation Process) Regulations of 2016, and Respondent No. 1 was appointed as Liquidator to carry out the Liquidation process.
On appointment, Liquidator issued public announcement of the Liquidation process, constituted Stakeholders Consultation Committee (SCC), prepared the Asset Memorandum and after getting approval in SCC, decided to sell the Corporate Debtor as a going concern through e-auction in the manner provided in Schedule I of the said regulations.
The Liquidator issued the first e-auction sale notice on 31.05.2023. Subsequently, he issued 3 more such notices on 23.07.2023, 09.09.2023 and 27.10.2023, which failed to attract any bid. In the 5th e-auction, which was published on 11.12.2023 and held on 11.01.2024, the Appellant participated and was declared as to be the Successful Bidder having bid a sum of Rs. Rs.43,74,00,000/-, for purchase of the Corporate Debtor as a going concern.
Consequent to the Appellant being determined as to be a Successful Bidder, the Respondent / Liquidator filed IA (IBC) / 415 (CHE) / 2024, before the Ld. Adjudicating Authority, seeking inter alia, confirmation of the sale of Corporate Debtor as a going concern and declaration of the Successful Bidder, as the purchaser of Corporate Debtor along with immunity as prescribed under Section 32A and 238 of the Code. This Application stood allowed by an order of 27.09.2024 wherein the Ld. Adjudicating Authority directed the Successful Bidder / the Appellant to make the balance payment as per the settled terms of the bidding document. The relevant portion of the Order is extracted below:-
``33. In the light of authoritative pronouncement in the cases supra and the discussions as above, we confirm the sale of the Corporate Debtor as a going concern. The Successful Bidder is directed to make the balance payment within 30 days from today (or within 90 days from today provided that the payment made after 30 days will attract interest at the rate of 12% for such extended period i.e. from 31st day to the actual date of payment which shall not be later than 90th day) as provided in the letter of intent dated 11.01.2024 issued by the Liquidator. We also order that the Successful Bidder is entitled to avail immunity as prescribed under section 32A and 238 of the Code (i.e. waiving of all the existing liabilities, penalties, removing attachments, encumbrances, etc., if any made by the statutory authorities i.e. ESI, RoC, MCA, IT, GST, Electricity dues, Panchayats, revenue, Pollution Control Board, etc.,) including pending PMLA attachment in accordance with the law. We also direct the statutory authorities involved in management of the Corporate Debtor to modify their records by entering the successful bidder’s name as proposed by them.’’
As per the covenants contained in the bidding document, the Appellant was supposed to deposit the Earnest Money along with submission of bid for which he had deposited a sum of Rs.4,37,40,000/- on 11.01.2024 and 25% of the sale consideration (less the EMD already paid) within 24 hours of issue of Letter of Intent, for which, he had deposited an amount of Rs.6,56,10,000/-, on 02.02.2024, after getting approval from SCC for an extension of time. The balance 75% of the amount of the sale consideration amounting to Rs.32,80,50,000/- was to be paid by the Appellant within a period of 30 days, from the date of approval the Ld. Adjudicating Authority, i.e. 27.09.2024 or within 90 days of 27.09.2024 with interest at the rate of 12% per annum.
For whatsoever reasons and the financial constraints might have been, which the Appellant might have faced, it is clear that he was unable to deposit the amount as directed to be paid under the terms of the bidding document. The Appellant admittedly had defaulted in remittance of the amount, in compliance of the Order dated 27.09.2024 and requested the Liquidator vide his letter dated 26.12.2024 to grant time upto 31.01.2025 to make the balance payment as he was in the process of raising the required funds from Kotak Mahindra Bank. Further, he filed an Application before the Ld. being IA (IBC) / 2488 (CHE) / 2025, praying for extension of 30 days for payment of the balance 75% of the sale consideration to the tune of Rs.32,80,50,000/-.
In the Application thus preferred, the Appellant sought for the following reliefs:
``The Applicant humbly prays that this Hon’ble Tribunal grant an extension of 30 days for the payment of the Balance consideration of Rs.32,80,50,000/- (Thirty-Two Crores, Eighty Lakhs, Fifty Thousand) to the Respondent as per the order dated 27th September 2024 passed in IA(IBC)/415(CHE)/2024 and pass such order or orders as it may deem fit and thus render justice.’’
During the pendency of this Application, the Respondent sent an e-mail dated in his mail dated 01.01.2025 to the Appellant stating that the amount of Rs.10,93,50,000/- already paid by him has been forfeited, because he failed to remit the balance amount within the stipulated time, i.e. on or before 27.12.2024. The Appellant challenged the said act of the Liquidator by filing another Interlocutory Application being IA (IBC) / 84 (CHE) / 2025, wherein he prayed for certain reliefs, which are extracted hereunder:
``A) Set aside the Letter of Forfeiture dated 31st December 2024 in Ref: MSK/GFPL/EA-05/2024-04, issued by the Respondent forfeiting an amount of RS.10,93,50,000/- (Rupees Ten crore ninety-three lakh fifty thousand Only) and consequently declare the forefeiture to be void and non est in law;
B) Declare the Initial Payment of Rs.10,89,00,000/- (Rupees Ten Core, Eighty-Nine Lakhs) which has been illegally forfeited by the Respondent, and the Balance Payment of Rs.32,80,50,000/- (Thirty-Two Crores, Eighty Lakhs, Fifty Thousand) as discharge of the entire Sale Consideration for the Sale of the Corporate Debtor as a going concern.
C) Pass such order or orders as it may deem fit and thus render justice.’’
Both the Interlocutory Applications were dismissed by the Ld. Adjudicating Authority by the Order dated 25.02.2025. Challenging the said Order, the Appellant has now filed the instant Appeal being Company Appeal (AT) (CH) (INS) Nos. 168 & 169 of 2025. In Company Appeal (AT) (CH) (INS) Nos. 168 & 169 / 2025, he seeks to challenge the Order dismissing his Application IA No. 2488 (CHE) / 2024, seeking extension of 30 days of time to make the payment.
In Company Appeal (AT) (CH) (INS) No. 168 / 2025, he prays for setting aside the Impugned Order, for declaring the letter of forfeiture dated 31.12.2024 issued by the Respondent / Liquidator forfeiting an amount of Rs.10,93,50,000/-as void and non-est in law and for declaring the said payment as amount paid towards the sale consideration for sale of the Corporate Debtor as a going concern.
The learned counsel for the Appellant has submitted that, owing to the certain financial constraints he had sought certain extension of time in depositing the balance amount and it ought to have been granted to him, in order to enable him to successfully complete the Auction proceedings, which was settled in his favour by the learned Adjudicating Authority vide its Order of 27.09.2024, but, the Liquidator maliciously invoked the Forfeiture Clause of the e-auction bidding document, described in Clause 9 and Clause 11 of the said document which was published by the Respondent on 11.12.2023.
The aforesaid Clauses are extracted hereunder:
``9. FORFEITURE OF EARNEST MONEY:
The Earnest Money, paid by bank transfer / DD will be forfeited, upon the occurrence of any of the following events:
•If any of the conditions under this E-Auction Process Document are breached by the Qualified Bidder or in case the Qualified Bidder is found to have made any misrepresentation; or
•If the Qualified Bidder or any person acting jointly or in concert with such Qualified Bidder is found to be ineligible to submit a bid under Section 29A of the IBC (as amended from time to time) or is found to have made a false or misleading declaration no eligibility under Section 29A of the IBC (as amended from time to time); or
•If the Successful Bidder does not accept the Letter of Intent issued by the Liquidator within the period and in the manner specified; or
•If the Successful Bidder fails to pay the balance sale consideration (plus any applicable taxes, if any, on 100% of the bid sum) before the expiry of the period for payment of the same for reasons other than as specified in 8th point of this Bidding Document.’’ Clause 11 reads as under:
``11. Since, the E-auction is for sale of M/s. Ganga Foundations Private Limited as a ``going concern in Lot-1 and sale of assets of the CD individually in other Lot-2 to 4’’, the payment term shall be as under:
| Earnest Money Deposit as mentioned under Clause 1 (Bidding information) | Along with the BID submission |
| 25% of Sale Consideration (Less EMD already paid) | Within 24 Hours from the date of completion of the auction / issuance of Letter of Intent to the Successful bidder |
| Balance amount (Sale Consideration less amount already paid) | Within 30 days (Upto 90 days) from the date of completion of the auction / issuance of Letter of Intent to the Successful Bidder / the approval of the Adjudicating Authority whichever is later. However, the payment made after thirty days shall attract interest at the rate of 12% (Refer Clause 12 of Schedule I of Liquidation Process Regulation). |
| The sale shall stand cancelled if the payment is not received within ninety days and all money’s paid until that date shall Stand forfeited. |
It can be seen that contrary to the contention of the Appellant, the Liquidator has merely acted as per the terms and conditions of the bidding document.
It has been argued by the learned counsel for the Appellant is that, the extension of time for the remittance of the amount, as it was prayed for in IA (IBC) / 2488 (CHE) / 2025 and also in the letter dated 26.12.2024 to the Respondent, ought to have been granted to the Appellant, owing to the amendments carried out in the IBBI (Liquidation Process) Amendment Regulations, 2024 which was issued by the Government of India vide its Gazette Notification No.IBBI/2023-24/GN /REG 112 dated 12.02.2024, which was not taken into account by the Respondent / Liquidator.
He has submitted that, he was entitled to be granted with the extension of time to remit the amount, owing to the implications flowing from Sub Clause (h) of Clause 31A (1) of the Notification dated 12.02.2024, which was issued by the Government of India for the purposes of carrying out the amendment in the Regulations while exercising powers under Section 240 of the I & B Code, 2016, which the Liquidator failed to consider while dealing with his request for extension of payment period of balance sale consideration by another 30 days beyond the prescribed 90 days. Clause 31A (1) (h) reads as under:
``(h) extension of payment of balance sale consideration as provided in clause (12) of Para 1 of Schedule I, beyond ninety days, to be disclosed in the auction notice.’’
Sub-Clause (h) as extracted above has been interpreted by the Ld. Counsel for the Appellant that, as if, it has permitted extension of time for payment of balance sale consideration beyond the specified period of 90 days. The said interpretation is a misnomer for the reason being that, if Clause 31A (1) (h) is read in its entirety, it is clear that it has only provided for that the said time period can be extended beyond 90 days and it has to be clearly mentioned in the Auction Notice and that it is not to be applied for the purposes of extension of time for payment of balance sale consideration in an Auction which has already been concluded. What has been mandated by the aforesaid amendment is, that the said extension of period for payment of balance sale consideration beyond 90 days has to be decided before hand in consultation with SCC and the same has to be ``disclosed in the auction notice’’, which will make it prospective in its application, and it will not be permissible to import this Clause to an Auction Notice which was published on 11.12.2023, prior to the issue of the amended Regulations.
Thus, this aspect of disclosure in the Auction Notice, as contemplated by the amendment made under the IBBI Regulations of 2024, makes it quite apparent that incorporation of the Clause of extension of period beyond 90 days, which is to be disclosed in the Auction Notice, would be a mandate to be applied hitherto for subsequent processes of Auction. It follows that the amended Regulations thus notified by the Government of India on 12.02.2024, cannot be treated to having a retrospective effect, to make it applicable to an Auction proceedings which already stood initiated much prior to the Amendment dated 12.02.2024 and accordingly, Clause (12) of Para 1 of Schedule I of the Regulations cannot be changed to permit extension of the said time period, especially when the same has not been disclosed in the Auction Notice, which has already been finalized and published by the Respondent on 11.12.2023 for conducting the 5th E-Auction.
Since, the amendment as made in the Regulations, is in the nature of an insertion of a Clause in Schedule I of the Regulations 2024, it cannot be expected that its implication could be made applicable to an Auction proceeding which has already been concluded by the Liquidator in favour of the Appellant having been determined as to be a Successful Bidder by an Auction, which stood concluded on 11.12.2023 i.e. much prior to the Amendment of 12.02.2024.
Even otherwise also, if the Notification as published on 12.02.2024 is taken into consideration particularly in the context of Clause 1, which is extracted hereunder:
``1. (1) These Regulations may be called the Insolvency and Bankruptcy Board of India (Liquidation Process) (Amendment) Regulations, 2024.
(2)They shall come into force on the date of their publication in the Official Gazette.’’ That is, it would apply with effect from 12.02.2024.
The legislature while notifying the subordinate legislation, had made it clear that the covenants contained therein for doing an act, will be applicable from the date of publication of the notification, in the Gazette, that is, w.e.f. 12.02.2024 and in that eventuality, this notification will not be governing the instant Auction proceeding, which has already been initiated on 11.12.2023 and concluded too on 11.01.2024, i.e. much prior to the publication of the Notification of the said amendment.
The learned counsel for the Appellant had made reference to a Press release, which he calls as a Memorandum, which has been issued on 13.02.2024, to support his case, for extension of the period for the payment of the amount. He has particularly referred to Clause 2(1) of the said document which really cannot be read beyond the actual amendment as made in the subordinate legislation, since being exclusively a set of executive instructions. Clause 2(l) is extracted hereunder:
``2(1). The liquidator may extend the payment period of balance sale consideration beyond ninety days, after consultation with the SCC.’’
In fact, this Clause, if it is read together with the notification of amendment Rules issued on 12.02.2024, it can be seen that it is nothing but a reiteration of the amended Regulations, which have been inserted by way of a notification of 12.02.2024, and that, it attempts to explain the new features of the said Regulations inserted by the amendment.
Thus, contrary to the argument of the Appellant, Clause (l) of the so-called Memorandum by the Appellant with regards to the extension of the period beyond 90 days for payment of the balance sale consideration, will not be having a retrospective effect to make it applicable for the purposes of extension of the time period as sought for by the Appellant by filing IA (IBC) / 2488 (CHE) / 2025, for extending the period than what was already earlier prescribed for depositing the amount, after the Appellant was determined as to be a Successful Bidder, within the time period as prescribed therein, which stood expired on 27.12.2024.
The learned counsel for the Appellant has further contended that the order of refusal to extend the time to deposit the amount, as under challenge in the instant Appeal is bad owing to the fact that, it runs contrary to the amendment, as well as, being in contravention to the terms of the bidding document, which he has referred to during the course of the argument. The said terms of the bidding document which has been alleged to have been violated is extracted below:
“Applicable Laws” shall mean, all the applicable laws, codes, regulations, rules, guidelines, circulars, re-enactments, revisions, applications and adaptations thereto, judgments, decrees, injunctions, writs and orders of any court, arbitrator or governmental agency or authority, rules, regulations, orders and interpretations of any governmental authority, court or statutory or other body applicable for such transactions including but not limited to the IB Code 2016, IBBI (Liquidation Process) Regulations 2016, Companies Act, 1956 / 2013 (as applicable), Competition Act, 2002, Transfer of Property Act, 1882, Sale of Goods Act, 1930, Foreign Exchange Management Act, 1999, whether in effect as of the date of this Bidding Document or thereafter and each as amended from time to time;’’
As far as his argument relating to the bidding document, with the amendment is concerned, that the above definition allows amendment of bidding document in accordance with change in Regulation thereafter, yet again with all due reverence at our command, we are not in agreement with the argument extended by him for the reason being that, the publication of the document inviting bids was made on 11.12.2023, and it would be exclusively governing the terms and conditions of the Bidding process, to be resorted to for sale of the Corporate Debtor which was to be resorted to for the purposes of the Corporate Debtor under Liquidation i.e. M/s. Ganga Foundations Private Limited.
Another question, which emerged for consideration during the course of argument, and which is the subject matter of consideration in the accompanying Company Appeal (AT) (CH) (INS) No. 168 / 2025 is with regards to the implications of the forfeiture clause, due to non-payment of the balance sale consideration within the stipulated time period as per the Bidding document.
The bidding document as published by the Respondent on 11.12.2023, provides for Forfeiture of the amount already paid in Clause 9 of said document, which has to be read with Clause 11.
The Forfeiture Clause as given therein, specifically provide that in an event of failure of the Successful Bidder to deposit the balance sale consideration before the expiry of the period of payment of the same, will lead to forfeiture of the Earnest Money Deposit amount.
Subsequently, another question, which incidentally arose for consideration was, as to what would be the status of any subsequent deposit, apart from EMD towards the sale consideration in the event of such default which in the instant case will be the deposit made by the Appellant on 02.02.2024 of the amount i.e. Rs.6,56,10,000/- and whether it could also be forfeited.
The same has been answered by the learned counsel for the Respondent by drawing our attention to Sub Clause 11 of Clause 5 of the bidding document where the Schedule of Payments has been prescribed which is extracted below:
``The sale shall stand cancelled if the payment is not received within ninety days and all money’s paid until that date shall Stand forfeited.’’
Thus, it provides that the sale shall stand cancelled, if the payment is not received as per the Schedule of Payments after the Appellant having been determined as a Successful Bidder and all monies, which have been paid until the relevant date, shall stand forfeited.
The question would be that, as to whether insertion of these Clauses in the initial bidding document of 27.10.2023, which was followed for the 5th Auction of 11.12.2023, could at all be held to be a commercially arbitrary clause and the forfeiture of 25% of the deposit ought not to have been made in view of Clause 9, where the forfeiture of the Earnest Money Deposit amount has already been contemplated.
There has had to be a logical interpretation which has to be given to the interplay of Sub Clause 11 of Clause 5 to be read with Clause 9 and the justification for the same is, that the Appellant has participated in the Auction Sale and submitted his bid upon the publication of Auction Sale Notice on 27.10.2023. The logical presumption would be that he had gone through the terms and conditions of the bidding document and has understood the same and that, once he has already submitted his Expression of Interest and has voluntarily participated in the bidding process without raising objection, he would be bound by its terms and conditions and he cannot take a somersault subsequently, contending that the Sub Clause 11 of Clause 5 of the bidding document was commercially arbitrary, once, he has submitted himself to the terms of documents after his participation and has reaped the fruit of having being declared as to be a Successful Bidder, which stood adjudicated and determined by the learned Adjudicating Authority vide its Order dated 27.09.2024.
The settled principle of law is, that once the rules of the game have already been brought into a public domain and a person voluntarily participates in the process as contemplated under the rules of the game, which has been published, he cannot, on a later date, upon being determined unsuccessful or upon arising of any dispute regarding the terms and conditions of the said document, he cannot take a somersault or a stand converse to the terms and conditions of the bidding document contending thereof, that these Clauses are arbitrary.
This is not a percept available under law, because, once a person who intends to the reap the fruits of participation in the Auction process is also equally bound to the liabilities which will be flowing from the documents based on which he has participated in the bidding process.
Owing to the fact that it is not in controversy that the last date thus fixed for deposit of the balance sale consideration was 27.12.2024 and that the Appellant was not able to deposit the amount as settled, after he being determined as to be a Successful Bidder, the consequences of Sub Clause 11 of Clause 5 being that of cancellation of his bid and forfeiture of the entire amount already deposited would automatically follow, for which the Appellant would be bound by it also.
In these eventualities, the Impugned Order which has been subjected to challenge by the Appellant, as far as the determination, which has been made in IA (IBC) / 2488 (CHE) / 2024, where he has prayed for extension of the time period for payment of balance sale consideration and in IA (IBC) / 84 (CHE) / 2025 for setting aside the Order of Forfeiture is concerned, since no provision is available either under the bidding document or by virtue of the implication of the amended regulations, which has been attempted to be made applicable under the given set of circumstances of the instant Company Appeal, the denial to grant an extension of 30 days as prayed for in the Application and to set aside forfeiture of the amount already deposited is absolutely justified and it does not suffer from any apparent error as such, calling for any interference.
Even otherwise also, there is a settled proposition as it has been laid down by the Hon’ble Apex Court in V.S. Palanivel supra that in an Auction process when a Bidder participates and he has been determined as to be a Successful Bidder, he has to strictly adhere to the time slab provided therein for depositing the amount. There cannot be any avenue of deviation even by a judicial adjudication or interference for extension of time, which has been otherwise fixed by an executive determination.
Thus, denial of extension of time period by the Tribunal, by the Impugned Order does not call for any interference. The instant Company Appeal (AT) (CH) (INS) No. 169 / 2025 lacks merit and the same would stand dismissed.
Consequentially, having answered the argument of the learned counsel for the Appellant, the controversy in the connected Company Appeal, being Company Appeal (AT) (CH) (INS) No. 168 / 2025, which deals with the adjudication made on IA (IBC) / 84 (CHE) / 2025, which was filed by the Appellant as against the forfeiture of the amount made in accordance with Clause 9 and Sub Clause 11 of Clause 5 of the bidding document, has already been answered in the above paragraphs and hence, no independent adjudication is required in this Company Appeal. Accordingly, this Company Appeal (AT) (CH) (INS) No. 168 / 2025, would too stand covered by the observation which has been made by us in the preceding paragraphs.
Subject to the above, this Company Appeal (AT) (CH) (INS) No. 168 / 2025, would too is laid to rest in the records. All pending Interlocutory Applications, if any, would too stand closed.