Mr. Dhan Prakash Gupta vs M/S Daehsan Trading India Pvt Ltd

(Arising out of Order dated 08th September, 2020 passed by National Company Law Tribunal, Division Bench - I, Chennai in IA/637/2020 in TCP/111/IB/2017)

IN THE MATTER OF:

Mr. Dhan Prakash Gupta S/o Late Mr. Kishan Das, R/o H. No. 1721, Gali No. 125, Shanti Nagar, Tri Nagar, Delhi - 110035 ...Appellant

Versus

M/S Daehsan Trading India Private Ltd., (A Company in Liquidation Under IBC Hence Through Its Liquidator Mr. S. Rajendran)

Office At:- 2nd Floor, HaiKrupa, 71/1, Mc Nicholas Road (Off Poonamallee High Road), Chetpet, Chennai - 600031. ...Respondent

Appellant: Ms. Ekta Choudhary, Advocate. Respondent: Mr. Anant A. Pavgi (Caveator). Ms. Yajura RV (Caveator).

JUDGEMENT

[Per; Shreesha Merla, Member (T)]

1. The present Appeal is preferred by the successful Auction Purchaser

under Section 61(1) of the Insolvency and Bankruptcy Code, 2016

(hereinafter referred to as the 'Code'), being aggrieved by the Impugned

Order dated 08.09.2020 in IA/637/2020 in TCP/111/IB/2017 passed by

the Adjudicating Authority, (National Company Law Tribunal, Division

Bench - I, Chennai), wherein the Appellant herein was directed to pay an -2-

amount of Rs. 6 Lakhs towards Maintenance Security Deposit in respect of

the property which was e-Auctioned by the Liquidator.

2. While dismissing the Application, preferred by the Appellant herein,

the Learned Adjudicating Authority has observed as follows:-

10. Thus, even in the Process Memorandum itself, the Liquidator has mentioned that the successful bidder will have to pay a sum of Rs. 6 Lakhs towards interest bearing maintenance security Deposit with DLF and it is understood that the said amount has to be paid over and above bid price. Hence, the attempt of the Applicant to say that the bid amount is inclusive of the Maintenance Security Deposit proves to be futile and not sustainable.

11. Further, when the terms and conditions of the bid have clearly postulated that the successful bidder has to pay the Maintenance Security Deposit, the stance of the Applicant that it will be paid only after getting clarification from this Tribunal is strange on the part of the Applicant. Hence, the Applicant is directed to pay the said sum of Rs. 6 Lakhs as Maintenance Security Deposit with the Liquidator over and above the successful bid price amount of Rs. 1.30 Lakhs.

12. During the course of arguments, it was submitted by the Learned Counsel for the Liquidator that certain dues are payable to the Corporation (MCD) and the Liquidator has undertaken to pay the same as of date; let the same be duly paid by the Liquidator.

13. As regards the payment made by the Applicant, it is seen that the Applicant has paid a sum of Rs. 10 Lakhs as EMD and the remaining sum of Rs. 120 Lakhs is yet to be paid and the Counsel for the Applicant has submitted that they are ready with the amount to be paid to the Liquidator. Taking into consideration, the said representation, we direct the Applicant to pay the remaining amount of Rs. 120 Lakhs to the Liquidator within seven days from the date of receipt of the Order. Further, the Applicant is also directed to pay a sum of Rs. 6 Lakhs to the Liquidator towards Maintenance Security Deposit within the said period of 7 days from the date of receipt of this order and the same to be remitted to DLF. Upon receiving the total bid amount and the

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Maintenance Security Deposit, the Liquidator is directed to execute the sale deed and hand over the possession of the property along with title documents within a period of 7 days thereafter and further it is clarified that the Liquidator will pay the pending tax arrears to MCD as undertaken.

Submissions on behalf of Learned Counsel for the Appellant:

3. Learned Counsel appearing for the Appellant vehemently contended

that the Learned Adjudicating Authority did not consider that the

Respondent/Liquidator has retracted from his statement made in e-mail

dated 10.04.2020, wherein it was clarified, that 'further, with regard to your

request on the Maintenance Security Deposit we do not wish to negotiate and

you are free to quote your final amount while participating in the said Auction,'

on the basis of which the Appellant had acted and the same was hit by the

Doctrine of estoppel. It is further submitted that Maintenance Security

Deposit ('MSD') is part of statutory dues, incurred during the period of

liquidation and hence, the liability of the Liquidator; that the dues occurred

primarily due to the negligence of the Liquidator; that the amount towards

'MSD' is an integral part of the property and that the Liquidator is not

entitled to revise the Process Memorandum and state new terms and

conditions after the Appellant insisted on e-Auction on the apprehension

that the property would be sold through a Private Sale to the favored

purchaser.

4. Learned Counsel for the Appellant strenuously argued that the

Liquidator issued a Process Memorandum on 24.03.2020, for which, the

Appellant had sought clarification on the terms and conditions of the said e-

Auction over 'MSD' charges vide an email dated 10.04.2020 as it was the 5 th

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Auction and all the previous Auctions had failed. The Learned Counsel drew

our attention to the email dated 10.04.2020 (Annexure P-25) which is

reproduced as hereunder:-

(Emphasis Supplied)

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5. Learned Counsel further drew our attention to the e-mails dated

01.10.2019, 03.03.2020 annexed as Annexure B and C to the Rejoinder,

wherein the Liquidator had sought for details of the prospective buyer and

details of the price quoted to them to improve their negotiation accordingly

and thereafter addressed an e-mail stating that the Liquidator shall sell the

property by way of a Private Sale to maximize the value of property in the

interest of all stakeholders.

6. Learned Counsel vehemently contended that the Appellant

participated in the e-Auction and found that the online Auction process

provided only for entering the bid amount and no separate field/provision

was available to enter the 'MSD' amount and hence was forced to quote the

consolidated bid amount of Rs. 130 Lakhs (inclusive of the 'MSD'), sincerely

believing that the bid amount being accepted was inclusive of 'MSD'.

Thereafter the draft Letter of intent dated 21.04.2020 separately demanded

an amount of Rs. 6 Lakhs over and above Rs. 130 Lakhs to consummate the

sale. It is submitted that the mala fide intention of the Liquidator is evident

from the fact that only after repeated requests, after filing of Application

before the Adjudicating Authority, the Liquidator provided the Appellant with

the Builder Buyer Agreement and also did not share the tax and

maintenance charges details.

Submissions on behalf of Learned Counsel for the Respondent:

7. Learned Counsel for the Respondent submitted that the Auction was

completed on 17.04.2020; LoI was issued on 21.04.2020 in line with the

Process Memorandum dated 24.03.2020, according to which, the Appellant

ought to pay the balance sale consideration of Rs. 120 Lakhs after adjusting

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EMD of Rs. 10 Lakhs on or before 19.07.2020, additionally, Rs. 6 Lakhs was

to be deposited with DLF towards 'MSD' as per the terms stipulated in the

Letter of intent and the Process Memorandum issued; as per the said terms

and in line with Schedule I of the IBBI (Liquidation Regulations, 2016)

interest at the rate of 12% p.a. was to be paid by the successful bidder in

case of any payment made beyond 30 days; on account of lockdown

situation caused by the pandemic the Liquidator had extended the last date

of payment; when the Liquidator was about to forfeit the EMD of Rs. 10

Lakhs due to non-payment of the balance sale consideration within the

specified time period, the Appellant had moved his Application before the

Learned Adjudicating Authority; that Clause 14(III) pertaining to the

payment of Rs. 6 Lakhs towards 'MSD', was not maintained in the Process

Memorandum pertaining to the previous four Auctions conducted during

2019, cannot be accepted as the Appellant did not even submit any interest

to participate in the previous Auctions; the Appellant participated only in the

5th Auction held on 17.04.2020 and therefore is bound by the terms and

conditions stipulated in the Process Memorandum dated 24.03.2020;

knowing fully well the terms and conditions of the Auction held on

17.04.2020, the stance of the Appellant that the terms of Auction was not

clear with regard to 'MSD' of Rs. 6 Lakhs cannot be justified; that the

Appellant mailed to the Liquidator on 13.08.2020 a copy of two DDs for Rs.

50 Lakhs and Rs. 70 Lakhs respectively but as the DDs were not handed

over to the Liquidator, the remittance of the said amount is still pending and

hence attracts interest at 12% p.a. from 19.07.2020, which is the 90th day

form the date of the issuance of LoI.

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8. The Learned Counsel for the Respondent drew our attention to the e-

mail correspondence exchanged between the Appellant and the Liquidator

annexed to the Reply filed before us pertaining to the period between

18.07.2020 and 10.09.2020, the sum and substance of which pertains to

the reminders issued by the Liquidator to the Appellant with respect to

payment of balance sale consideration of Rs. 120 Lakhs to be paid within

the time period specified, failing which the amount shall attract interest at

12% p.a. and if the amount is not paid by 12.08.2020, the EMD amount of

Rs. 10 Lakhs would stand forfeited. The correspondence also evidences that

there is some dispute between the Appellant and the Respondent and the

conduct of the Liquidator has been raised several times in these e-mails.

Assessment:

9. It is not in dispute that the Appellant participated in the 5th Auction

dated 17.04.2020 and was declared a successful bidder for a sum of Rs. 130

Lakhs as a bid price as per the terms of the Process Memorandum dated

24.03.2020. It is an admitted fact that the Letter of intent was issued on

21.04.2020, the relevant terms and conditions of which are reproduced as

hereunder:-

1. In accordance with the Process Memorandum issued to you, your deposit towards the Earnest Money Deposit of Rs. 10,00,000/-(Rupees Ten Lakhs Only) vide your transaction dated 10th April, 2020, paid via RTGS (Ref. No. BDBLH20101004010) shall be retained towards part sale consideration.

2. You shall remit the balance sale consideration of Rs. 1,20,00,000/- (Rupees One Crore Twenty Lakhs Only) which is after adjusting the Earnest Money Deposit, within a period of 90 days (i.e., on or before 19th July 2020) from the date of this Letter of intent.

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Provided that payment made after 30 days shall attract interest at the rate of 12% per annum in terms of Regulation 33 read with Schedule I of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016.

[Please note that due to the present lockdown imposed by the Central Government on account of Covid-19, the payments made beyond 30 days from the date of the lifting of lockdown in Delhi shall attract interest @ 12% per annum as communicated to you vide our email dated 16th April, 2020.]

3. In case you withdraw the auction bid or fail to remit the balance sale consideration of Rs.

1,20,00,000/- (Rupees One Crore Twenty Lakhs Only) within 90 days as specified above, the Liquidator shall forfeit the Earnest Money Deposit of Rs. 10,00,000/- (Rupees Ten Lakhs Only).

4. All applicable taxes (including stamp duty and registration charges etc.,) on Sale of Commercial Office Space as stated above, should be borne by you.

5. You will have to pay a sum of Rs. 6,00,000/-

(approximately) towards interest Bearing Maintenance Security Deposit with DLF (towards maintenance deposit), which will be your asset.

6. You shall be responsible for obtaining requisite regulatory or statutory or third-party approvals, no objections, permission or consents, if any, that are or may be required under Applicable Law for transfer of the said Property.

7. On payment of the full amount, the sale shall stand completed and the Liquidator shall issue a Certificate of Sale or Sale Deed to transfer the said Property.

8. The assets of the Company are sold on "As is where is basis", "As is what is basis", "Whatever there is basis" and "No recourse" basis and the sale does not entail transfer of any title except the title which the Company had on its assets as on date of transfer. The Liquidator does not take or assume any responsibility for any shortfall or defect or

Company Appeal (AT) (Insolvency) No. 820 of 2020 -9-

shortcoming in the movable/immovable assets of the Company.

9. Notwithstanding any as above, Liquidator shall revoke the Letter of intent, without being liable in any manner whatsoever to the recipient of this LOI (you), if the Liquidator, at his discretion, determines that the recipient of this LOI has (you have), directly or indirectly or through an agent, engaged in corrupt practice, fraudulent practice, coercive practice, undesirable practice or restrictive practice in the auction Process or has, undertaken any action in respect of such process which results in the breach of any Applicable Law including the Prevention of Corruption Act, 1988.

10. Any dispute arising out of or in relation to this Letter of intent shall be subject to the exclusive jurisdiction of Hon'ble Chennai Bench of the National Company Law Tribunal.

11. The terms of this Letter of intent shall be binding on the recipient of this LOI.

(Emphasis Supplied)

10. It is pertinent to mention that the email relied upon by the Learned

Counsel for the Appellant in (Para 4) is dated 10.04.2020 whereas the draft

Letter of intent is dated 21.04.2020 wherein it has been stated that the

accepted copy of the Letter of intent should be submitted by 28.04.2020. In

the aforenoted e-mail, Annexure P-25, it is categorically stated that 'further,

with regard to your request on the Maintenance Security Deposit, we do not

wish to negotiate and you are free to quote your final amount while

participating in the said Auction'. This clearly substantiates the case of the

Respondent that the Appellant was in the knowledge of the additional Rs. 6

Lakhs to be paid towards 'MSD', prior to the acceptance of the Letter of

intent. It is the case of the Appellant that the Letter of intent was signed on

04.05.2020 and a legal notice was issued vide an e-mail dated 19.05.2020 to

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the Liquidator with respect to this additional amount of Rs. 6 Lakhs payable

towards 'MSD'. It is significant to mention that in this legal notice, the

Appellant had called upon the Liquidator to redraft the Letter of intent

modifying Clause 5 to reflect that the total bid amount of Rs. 130 Lakhs is

inclusive of the 'MSD'. We observe from the material on record that the

Appellant had participated only in the 5th Auction and therefore the question

of whether the 'MSD' charges were raised in the previous Auctions or not, is

irrelevant. The draft Letter of intent and the Process Memorandum dated

21.04.2020 clearly stipulates that an amount of Rs. 6 Lakhs (approximately)

towards interest bearing Maintenance Security Deposit with DLF (towards

Maintenance Deposit) is to be paid and would be a part of the asset of the

successful bidder. The Process Memorandum issued by the Liquidator

evidences the same in Clause 14(III) and therefore the stand of the Appellant

that Clause 5 of the Letter of intent should be redrafted making the 'MSD' a

part of the total bid amount of Rs. 130 Lakhs cannot be justified. At the cost

of repetition, the fact that the additional amount of Rs. 6 Lakhs payable

towards 'MSD' is not negotiable was admittedly brought to the notice of the

Appellant herein way back on 10.04.2020 whereas the draft LoI is dated

21.04.2020 and the same was subsequently signed, thereby giving an

opportunity to the Appellant herein to exercise their choice of bidding for the

subject Auction property or not. Having bid, paid the EMD and gone through

the Process Memorandum and terms of LoI, the Appellant herein has

exercised their choice of being a successful bidder and now cannot turn

around and state that Rs. 6 Lakh amount to be paid towards statutory dues

cannot be fastened upon them. Additionally, the record also establishes that

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the period of time for payment of the balance sale consideration was also

extended by the Liquidator on account of the pandemic situation in the

country. Taking into consideration the current Covid situation and the facts

and circumstances of the case, the Liquidator shall accept the balance sale

consideration of Rs. 120 Lakhs + Rs. 6 Lakhs ('MSD') without charging any

interest provided the amount is deposited in the account of the 'Corporate

Debtor' within 10 days from the date of receipt of a copy of this Order. The

other directions with respect to Title deeds and documents, issued by the

Learned Adjudicating Authority in the Impugned Order stand confined.

11. For all the aforenoted reasons we see no illegality or infirmity in the

Impugned Order passed by the Learned Adjudicating Authority and hence

this Appeal fails and is accordingly dismissed. No order as to costs.

[Justice Anant Bijay Singh] Member (Judicial)

[Ms. Shreesha Merla] Member (Technical)

NEW DELHI 01st June, 2021

ha

Company Appeal (AT) (Insolvency) No. 820 of 2020