Nitin Jain Liquidator Of Psl Limited vs Lucky Holdings Pvt. Ltd

NITIN JAIN (Liquidator of PSL Limited) Having address at: E-10A, Kailash Colony New Delhi - 110048 ...Appellant

Versus

LUCKY HOLDINGS PVT. LTD. (Successful Auction Bidder of PSL Limited) Having office address at: 16B, Shakesp Sarani, 2nd Floor, Kolkata - 700071 ...Respondent

For Appellant: Shri Krishnendu Datta, Sr. Advocate with Mr. Aditya Gauri, Ms. Varsha Himatsingka, Mr. Amar Vivek, Mr. Abhinav Tyagi, Mr. Dhananyaja Sud, Mr. Chaitanya Bansal, Ms. Damini Sreshta and Mr. Shalya Agarwal, Advocates. For Respondent: Mr. Ramji Srinivasan, Sr. Advocate with Mr. Kanisk Khetan and Ms. Shruti Pandey, Advocates for R-1. Mr. Neeraj Malhotra, Sr. Advocate Ms. Vidhisha Haritwal, Mr. Nimish Kumar and Ms. Shreya, for EARC.

JUDGMENT

ASHOK BHUSHAN, J:

1. This Appeal has been filed by the Liquidator challenging the Order

dated 02.11.2022 passed by the National Company Law Tribunal,

Ahmedabad, Division Bench, Court 1 (hereinafter referred to as "The

Adjudicating Authority") by which I.A. No. 240 of 2022 filed by the

Successful Auction Bidder-the Respondent No. 1 to withdraw from e-auction -2-

process and to refund the EMD and first installment deposited, has been

allowed.

2. Brief facts of the case for deciding this Appeal are:-

(i) An application under Section 10 of the Insolvency and Bankruptcy

Code, 2016 (hereinafter referred to as "The Code") was filed by the

Corporate Debtor-PSL Limited and resolution process commenced in

which order of liquidation was passed on 11.09.2020.

(ii) The Appellant was appointed Liquidator. Appellant published sale

notice for selling the corporate debtor as a going concern. A sale notice

dated 27.11.2020 was issued. E auction scheduled to be held on

28.12.2020 was cancelled. Sale notice was republished on 05.01.2021

for e-auction on 28.01.2021. On 15.01.2021, Liquidator received a

summon from the Directorate of the Enforcement, PMLA (ED) seeking

certain documents from the Appellant in reference to investigation

under PMLA Act, 2002 regarding the payment of Rs. 300 Crores

sanctioned by Bank of Baroda to M/s. PSL Limited.

(iii) On 25.01.2021, Liquidator received an email from the ED asking the

liquidator not to proceed with the sale of the assets of the Corporate

Debtor. Liquidator filed a writ petition no. 3261 of 2021 before the

Delhi High Court seeking direction against the ED and continuation of

the liquidation of the Corporate Debtor. An interim order dated

17.03.2021 was passed by the Hon'ble High Court directing the

Appellant to proceed for the sale of the corporate debtor in accordance

with the provisions of the Code. Appellant accordingly republished the

sale notice for selling the corporate debtor as a going concern.

Company Appeal (AT) (Insolvency) No. 1390 of 2022 -3-

E-auction process information document was also issued. E-auction

was fixed for 09th April, 2021. On 09th April, 2021, the Respondent No.

1 participated in the e-auction and was declared as highest bidder.

(iv) First installment of Rs. 30 Crores was paid by the Respondent No.1 to

the Appellant on 23rd April, 2021. On 08.09.2021, the Adjudicating

Authority approved the sale of the Corporate Debtor as a going

concern in favour of the Respondent No. 1-Successful Auction

Purchaser. The Adjudicating Authority directed the balance payment

within 30 days from the date of the order.

(v) An application was filed by the Respondent No. 1 for modification of

the Order dated 08.09.2021 seeking payment in accordance with

paragraph 1(12) of Schedule 1 of Liquidation Process, Regulation

2016. On 05.10.2021, Application filed by the Respondent No. 1 was

allowed and Order dated 08.09.2021 was modified permitting payment

of balance sale consideration within 30 days from the order and in

accordance with paragraph 1(12) of the Schedule 1 of the Liquidation

Process, Regulations 2016.

(vi) The Liquidator wrote a letter to the Respondent No.1 on 11.10.2021

that with effect from 09.10.2021 the Respondent No. 1 is liable to pay

the interest also. On 02.12.2021, provisional attachment order was

issued by the Enforcement Directorate wherein assets of the Corporate

Debtor amounting to Rs. 274.60 Crores being equivalent to the value

of proceeds of crime were attached.

(vii) After order dated 02.12.2021 passed by the ED attaching assets of the

Corporate Debtor, I.A. No. 828 of 2021 was filed by the Respondent

Company Appeal (AT) (Insolvency) No. 1390 of 2022 -4-

No. 1 before the Adjudicating Authority where the Adjudicating

Authority passed an Order on 08th December, 2021 directing the

liquidator not to forfeit any amount of the Successful Bidder. Writ

petition no. 3261 of 2021 filed by the liquidator in the Delhi High

Court was heard by High Court on 06th and 07th December, 2021. An

application 43380 of 2021 was filed by Successful Bidder-Respondent

No. 1 to be impleaded in the writ petition which impleadment was not

allowed. The Delhi High Court vide its judgment and order dated

15.12.2021 allowed the writ petition filed by the Liquidator. Operative

directions were issued in paragraph 102 which is to the following

effect:

"102. Accordingly and for all the aforesaid reasons, this writ petition shall stand allowed in the following terms. The Liquidator is held entitled in law to proceed further with the liquidator process in accordance with the provisions of the IBC. The respondent shall hereby stand restrained from taking any further action, coercive or otherwise, against the liquidation estate of the corporate debtor or the corpus gathered by the liquidator in terms of the sale of liquidation assets as approved by the Adjudicating Authority under the IBC. The Court grants liberty to the petitioner to move the Adjudicating Authority for release of the amounts presently held in escrow in terms of the interim order passed in these proceedings.

Any application that may be made in this regard by the Liquidator shall be disposed of by the Adjudicating Authority bearing in mind the conclusions recorded hereinabove."

Company Appeal (AT) (Insolvency) No. 1390 of 2022 -5-

(viii) Enforcement Directorate filed a Letter Patent Appeal questioning the

order dated 15.12.2021 passed by Learned Single Judge. The Division

Bench of the Delhi High Court issued notice in the Letter Patent

Appeal and also passed an interim order directing parties to maintain

status qu qua the assets of PSL Limited. By Order dated 24.12.2021,

the Respondent No.1 Lucky Holdings Pvt. Ltd. was impleaded as one of

the Respondents in the Letter Patent Appeal.

(ix) In the Letter Patent Appeal, an Application was filed CM No. 9111 of

2022 for staying the proceedings before the Adjudicating Authority

under PMLA on which Application notices were issued. Before the

Division Bench, Learned Counsel appearing for the Successful Auction

Purchaser- Respondent No. 1 made a statement that Respondent No. 1

wishes to exit by withdrawing its bid from the e-auction. The said

statement was recorded. It is useful to extract the following portion of

the Order dated 22.02.2022 of Division Bench of Delhi High Court:

"Issue notice. Learned Counsel for the non-applicants accept notice.

Ms. Maneesha Dhir, learned counsel for the auction purchaser states that her client wishes to exit by withdrawing its bid from the e-auction process of the corporate debtor.

The statement made by Ms. Dhir is taken on record and accepted by this Court. Further, the parties are given liberty to take action in accordance with law in pursuance thereto."

Company Appeal (AT) (Insolvency) No. 1390 of 2022 -6-

(x) An I.A. No. 240 of 2022 was filed by the Successful Auction Bidder

before the Adjudicating Authority. In the I.A., Successful Bidder

pleaded that there being attachment of the assets of the corporate

debtor vide order of Enforcement Directorate dated 02.12.2021 the

Successful Auction Bidder be permitted to withdraw from the bid and

the EMD as well as the first installment deposited by the Successful

Bidder be permitted to be refunded. The Application filed by the

Successful Auction Bidder was opposed by the Appellant-the

Liquidator herein. The Adjudicating Authority after hearing the

Successful Bidder as well as the Liquidator and Learned Counsel for

the Enforcement Directorate passed an Order on 02.11.2022

permitting the Successful Auction Bidder to withdraw from e-auction.

Following is the order passed on 02.11.2022:

"1. The applicant is permitted to withdraw from E-auction process held on 09.04.2021.

2. The liquidator is directed to pay the applicant a sum of Rs. 30,00,00,000/- together with interest accrued thereon within two weeks from today.

The liquidator is allowed to retain sum of Rs.

5,00,000/-towards process costs already incurred for E-auction on 09.04.2021.

3. With the above directions, the application stands disposed of.

4. Urgent certified copy of this order, if applied for, to be issued to all concerned parties upon compliance with all requisite formalities."

Company Appeal (AT) (Insolvency) No. 1390 of 2022 -7-

3. The Appellant aggrieved by this Order dated 02.11.2022 has come up

in this Appeal.

4. We have heard Mr. Krishnendu Dutta, Sr. Advocate for the Appellant,

Mr. Ramji Srinivasan, Sr. Advocate for the Respondent No. 1 and Mr. Neeraj

Malhotra, Sr. Advocate for Edelweiss Asset Reconstruction Company Limited

who was permitted to intervene.

5. Learned Sr. Counsel-Mr. Krishnendu Dutta appearing for the

Appellant submits that the Respondent No. 1 failed to deposit the total bid

amount within the time allowed by Order dated 08.09.2021 as modified on

05.10.2021 and as per paragraph 1(12) of Schedule 1 of the Liquidation

Process, Regulations, 2016, the amount deposited by Respondent No. 1 are

deserved to be forfeited as per the process information document of e-

auction. It is submitted that Respondent No. 1 participated in the e-auction

fully knowing that Enforcement Directorate had initiated proceedings against

the Corporate Debtor. In the process sale notice "as is where is", "as is what

is" and "whatever there is basis", Respondent No. 1 participated in the e-

auction fully knowing well about the email dated 25.01.2021 received from

Enforcement Directorate which was disclosed in e-auction process

document, Respondent No.1 cannot withdraw from e-auction. It is further

submitted that within 90 days period as permitted under paragraph 1(12) of

Schedule 1 of Liquidation Process, Regulations 2016 Respondent No. 1 failed

to deposit balance amount from 08.09.2021. The Respondent No.1 has

violated the terms and conditions of sale notice and entire amount deserved

to be forfeited. It is submitted that order of the Hon'ble Delhi High Court

dated 24.12.2021 and 22.02.2022 passed by the Division Bench cannot be

Company Appeal (AT) (Insolvency) No. 1390 of 2022 -8-

read as permitting the Respondent No. 1 to withdraw from e-auction. The

division bench of the High Court only noticed the statement on behalf of the

Respondent No. 1 that they wish to withdraw from e-auction. The e-auction

process information document is binding on the Respondent No. 1. The

Adjudicating Authority committed error in allowing the Application of

Respondent No. 1 to withdraw from e-auction. It is further submitted that

Adjudicating Authority also committed error in directing the refund of the

EMD and amount of Rs. 30 Crore deposited as first installment whereas the

Respondent No. 1 having not complied with terms and conditions of the sale

notice the entire amount was required to be forfeited. It is further submitted

that the Adjudicating Authority committed another error in directing the

refund of the amount along with interest where as per the sale notice no

interest is payable on the EMD and installment deposited by the Respondent

No. 1

6. Mr. Ramji Srinivasan, Learned Sr. Counsel appearing for the

Successful Auction Purchaser refuting the submissions of Learned Counsel

for the Appellant contends that the Adjudicating Authority did not commit

any error in allowing the Application of Respondent No. 1 vide Order dated

02.11.2022 that is subsequent to approval of the e-auction and the time for

payment of the entire bid having not over by that time the Respondent No. 1

could not be asked to make the payment of balance bid amount. The assets

of the Corporate Debtor being under attachment, the Liquidator is not in a

position to hand over the assets or to complete the sale. The Order dated

08.09.2021 was modified on 05.10.2021 and time to make payment shall

start only from 05.10.2021. It is submitted that against the Judgment of the

Company Appeal (AT) (Insolvency) No. 1390 of 2022 -9-

Delhi High Court dated 15.12.2021, Letter Patent Appeal has been

entertained and Order of status quo has been passed. The sale in favour of

the Respondent No. 1 can never be concluded. The Respondent No. 1 had

therefore made statement before the division bench of the Delhi High Court

that Respondent No. 1 wish to withdraw from e-auction which statement

was recorded and Respondent No. 1 was permitted to withdraw from e-

auction. Hon'ble High Court having noted the aforesaid fact, the

Adjudicating Authority rightly has passed an order permitting the

Respondent No. 1 to withdraw from e-auction. Mr. Ramji Srinivasan further

submits that the liquidator himself has made an application before the High

Court seeking a permission to proceed with the sale of the assets of the

Corporate Debtor which has not been attached by the Order dated

02.12.2021. The Division Bench has permitted the Liquidator to proceed

with the sale and liquidator having sold the assets it is clear that the auction

sale dated 08.09.2021 cannot be given effect by any means.

7. Learned Counsel appearing for the EARC-Intervener submits that

financial creditor has given their consent before the Division Bench for

attachment by the Enforcement Directorate be transferred qua the properties

to sale proceeds.

8. We have considered the submissions of Learned Counsel for the

parties and have perused the record.

9. Considering the submissions and perusing the record, following are

the three questions which arise for consideration:

i. Whether the Successful Auction Purchaser (Respondent No. 1) having

not deposited the balance bid amount within 90 days from approval of

Company Appeal (AT) (Insolvency) No. 1390 of 2022 -10-

the e-auction sale, the EMD and the first installment paid deserved to

be forfeited as per terms and conditions of sale notice;

ii. Whether the Adjudicating Authority committed error in allowing

Successful Auction Purchaser to withdraw from e-Auction along with

the direction to refund the EMD and first installment;

iii. Whether the Adjudicating Authority while directing for refund of the

EMD and First Installment committed error in directing for refund

along with the interest since as per the terms and conditions of

Auction Sale Notice, no interest was payable on EMD and First

Installment even if in a case when auction sale is not approved.

10. The above three questions being inter related are being taken together.

11. Before we enter into rival submissions of Learned Counsel for the

parties it is relevant to notice sale notice issued for e-auction on 09th April,

2021 and certain terms and conditions of the sale notice. E-auction sale

notice issued has made reference to the Order of the Delhi High Court dated

17th March, 2021 as well as Email dated 25th January, 2021 issued from

Directorate of Enforcement. The e-auction notice also mentions that sale of

the company was 'as is where is basis'. It is useful to extract following part of

the terms and conditions:

"The sale of the Company is proposed to be done on "as is where is basis", "as is what is basis", "whatever there is basis" and "no recourse" basis and the proposed sale of the Company on going concern basis does not entail transfer of any other 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

Company Appeal (AT) (Insolvency) No. 1390 of 2022 -11-

defect or shortcoming in the moveable/immovable assets of the Company.

The Liquidator received an email dated 25.01.2021 from the Directorate of Enforcemnt with respect to proceedings under Prevention of Money Laundering Act, 2002 requesting the Liquidator not to dispose of the assets of the Corporate Debtor. Thereafter, the Liquidator filed a Writ Petition (W.P. 3261 OF 2020) before the Hon'ble High Court of Delhi, wherein the Court stated that "the impugned e-mail and any other direction issued by the Respondent against the liquidator shall remain stayed. In order to maintain a balance and to ensure that there is no prejudice caused, the Liquidator shall proceed in accordance with the provisions of the Insolvency and Bankruptcy Code, 2016 (hereinafter, 'IBC'). The link of the Order is ......................."

12. Respondent No. 1 was the Successful Auction Purchaser in the e-

Auction held on 09th April, 2021 and auction was approved on 08.09.2021

which order was modified on 05.10.2021 which permitted the Successful

Auction Purchaser to make the payment within 30 days from the date of

approval order and as per paragraph 1(12) of Schedule 1 of Liquidation

Process, Regulations 2016. The ninety days period computing from

08.09.2021 was to come an end on 08.12.2021 as per paragraph 1(12) of

Schedule 1 of Liquidation Process, Regulations 2016. Any amount if paid

after 30 days and within 90 days was required to be paid along with interest.

Regulation thus prescribed period of 90 days for payment of entire bid

amount. The Successful Bidder has deposited the amount of Rs. 30 Crore as

the First Installment within the time and it was entitled to deposit the entire

Company Appeal (AT) (Insolvency) No. 1390 of 2022 -12-

balance amount along with interest within 90 days. The most important

event which took place subsequent to the approval of the auction is the

attachment of the assets of the corporate debtor under the PMLA, 2002 by

Order dated 02.12.2021. Prior to 02.12.2021 only email was issued on

25.01.2021 by the ED which was not initiation of proceedings under PMLA

Act. After attachment of the assets of the corporate debtor it was not within

the power of the liquidator to hand over the assets to the Respondent No. 1

Successful Auction Bidder or to issue a sale certificate with regard to the

assets of the corporate debtor. The judgment of the Hon'ble Delhi High Court

allowing the writ petition was passed on 15.12.2021 which was after the

expiry of period of 90 days from approval of auction. The Single Judge of the

Delhi High Court has stayed the proceedings before the Adjudicating

Authority of the PMLA Court however said judgment of single judge is under

challenge in the Letter Patent Appeal No. 512 of 2021 before the Division

Bench of the Delhi High Court wherein Interim Order dated 24.12.2021 has

been passed to the following effect:

"Issue notice.

Mr. Sidharth Chopra, learned counsel accepts notice on behalf of the respondent.

Ms. Maneesha Dhir, learned counsel for the auction purchaser i.e. Lucky Holdings Pvt. Ltd. and Mr. R.P. Agarwal, learned counsel for the secured creditors led by Edelweiss Asset Reconstruction Company Ltd. state that though their clients were parties before the leared Single Judge, yet they have not been impleaded as parties to the present appeal.

Company Appeal (AT) (Insolvency) No. 1390 of 2022 -13-

Learned Additional Solicitor General states that h has no objection to their impleadment.

Accordingly, the Lucky Holdings Pvt. Ltd. and the Edelweiss Asset Reconstructino Company Ltd, are impleaded as respondents in the present appeal. Let an amended memo of parties be filed within ten days.

Ms. Maneesha Dhir states that Lucky Holdings Pvt. Ltd. is not ready and willing to make any further payment to the Official Liquidator till her application filed before the NCLT is decided. She points out that her application is listed for hearing on 02nd February, 2022. Mr. Neeraj Malhotra, learned senior counsel for the Edelweiss Asset Reconstruction Company Ltd. states that the secured creditors are also not agreeable to the shifting of the attachment order from the immovable assets to the money to be deposited by the auction purchaser.

List on 24th January, 2022 for hearing.

Parties are directed to complete the pleadings and file documents, if they so desire, before the date of hearing.

Till the next date of hearing, the parties shall maintain status quo qua the assets of PSL Limited, a company in liquidation."

13. We may also notice that in the order dated 24.12.2021 statement on

behalf of Learned Counsel for the Successful Auction Purchaser recorded

that Successful Auction Purchaser is not making any further payment to the

liquidator, further in subsequent hearing of the LPA on 22.02.2022 clear

statement made on behalf of Learned Counsel for the Successful Auction

Company Appeal (AT) (Insolvency) No. 1390 of 2022 -14-

Purchaser that Successful Auction Purchaser wishes to exit by withdrawing

its bid from the e-auction. Statement was recorded and accepted by the

court following is the order passed on 22.02.2022 by the High Court:

"Ms. Maneesha Dhir, learned counsel for the auction purchaser states that her client wishes to exit by withdrawing its bid from the e-auction process of the corporate debtor.

The statement made by Ms. Dhir is taken on record and accepted by this Court. Further, the parties are given liberty to take action in accordance with law in pursuance thereto."

14. It is relevant to notice that with regard to proceedings under PMLA,

the Liquidator has filed a writ petition in the Delhi High Court being writ

petition no 3261 of 2021 where interim order by Learned Single Judge as

well as final judgment by the Single Judge was passed and thereafter orders

were passed in LPA. Division Bench of the High Court is clearly seized with

the matter on an Appeal filed by the ED where the High Court has recorded

the statement of Successful Auction Purchaser and accepted the said

statement, we are of the view that in view of the orders of the Delhi High

Court dated 22.02.2022 recording and accepting the statement of Learned

Counsel for the Successful Auction Purchaser that Successful Auction

Purchaser wishes to exit, liquidator cannot insist that the auction sale in

favour of the Successful Auction Purchaser to be proceeded with and

finalized. Division Bench granted liberty to the parties to take action in

accordance with law in pursuant thereto. Consequently the application for

Company Appeal (AT) (Insolvency) No. 1390 of 2022 -15-

withdrawal was considered and decided by the Adjudicating Authority on

02.11.2022.

15. Learned Counsel for the Appellant placed reliance on the terms and

conditions of the e-auction notice which provides for forfeiture of the Earnest

Money Deposited by the bidder. Reference has been made to paragraph

11.5.1. to 11.5.2 of the terms and conditions are as follows:

"11.5.1 It is to be noted that the EMD furnished can be forfeited at any time, upon the occurrence of any of the following events:

(i) If there is a breach of any of the conditions under this E-Auction Process Information Document (Sale of Corporate Debtor as a Going Concern) by the Bidder;

(ii) In case Bidder is found to have made any misrepresentation or fraud; or

(iii) If Bidder is found to be ineligible to submit the bid as per the conditions set out in Section 29A of the IBC (as amended from time to time) or is found to have made a false or misleading declaration of eligibility as per the conditions set out in Section 29A of the IBC (as amended from time to time); or

(iv) If the Successful Bidder attempts to reduce/renegotiate the Bid amount under any circumstances;

(v) If the bidder withdraws/cancels or make any attempt to withdraw or cancel its Bid at any time; or

(vi) If the Successful Bidder fails to renew the bank guarantee provided for the EMD till the final order and keep the same valid for a period of 6 months thereafter; or

Company Appeal (AT) (Insolvency) No. 1390 of 2022 -16-

(vii) If the Successful Bidder fails to make the payment of the 1st installment payment within 15 days from the declaration as Successful Bidder in accordance with the terms of the E-auction process document; or

(viii) If the Bidder is identified as the Successful Bidder and it fails to extend the validity of the EMD through the bank guarantee or does not accept the Letter of Intent issued by the Liquidator; or

(ix) If the Successful Bidder, fails to make the complete payment within the time stipulated in the Liquidation and/or the Final Approval Order.

11.5.2 In case of occurrence of any of the above events:

(i) All the amounts deposited by the Bidder or any other person on its behalf till that date shall be forfeited and the Bidder or any other Person shall not be entitled to refund of the same;

(ii) the option to acquire the assets of the Company/Company will be offered to the next highest bidder. It is clarified that the Liquidator shall, in his discretion, have the right to offer the option to acquire the assets of the Company, both to the next highest bidder under Option A or to determine the successful bidders under Option B and C and offer the option to acquire the assets of the Company to them."

16. There can be no dispute to the clear terms and conditions of the

auction sale notice. The question to be answered is as to whether even after

attachment of the assets of the corporate debtor under PMLA Act on

02.12.2021, the auction purchaser was required to deposit the entire sale

Company Appeal (AT) (Insolvency) No. 1390 of 2022 -17-

amount. Before the Order of attachment was passed on 02.12.2021, no

default can be said to have committed by Auction Purchaser in depositing

the amount since first installment was deposited within time and the

successful purchaser had 90 days time to deposit the balance amount and

before expiry of 90 days the assets of the corporate debtor were attached. In

view of the attachment of the assets of the corporate debtor on 02.12.2021,

Liquidator can neither complete the sale, can issue sale certificate nor can

hand over the assets of the corporate Debtor to the Successful Auction

Purchaser and due to aforesaid event the Application was filed by the

Successful Auction Purchaser to withdraw from auction and for refund of the

EMD. We are of the considered opinion that the Successful Auction

Purchaser has genuine case for not proceeding with the deposit of the

balance bid amount due to attachment of the assets of the corporate debtor

on 02.12.2021 as noted above. The 90 days period had not even come to an

end on 02.12.2021 so as to impute any violation of the term and conditions

by the Successful Auction Purchaser. The Adjudicating Authority after

considering the submissions of parties has taken the views that as on today

the liquidator is not in a position to hand over the custody of the units of the

corporate debtor for which e-auction was held and the Division Bench of the

High Court on 24.12.2021 has directed parties to maintain status quo. The

Adjudicating Authority has rightly passed an order permitting the Successful

Bidder to withdraw from the auction and directed to refund of the amount of

the EMD Rs. 5 Crores and First Installment of Rs. 30 Crores.

17. Now we come to the submission of Learned Counsel for the Appellant

that Adjudicating Authority ought not to have directed for refund of the

Company Appeal (AT) (Insolvency) No. 1390 of 2022 -18-

amount along with the interest. Learned Counsel for the Appellant has

referred to the terms and conditions of the E-Auction Sale Notice where it

was contemplated that even in the case of non-approval of the sale by the

Adjudicating Authority, EMD and first installment paid by Successful Bidder

shall be refunded but no interest shall be payable by the Liquidator on the

said amount refunded to the Successful Bidder. Clause 15.5 of the Terms

and Conditions is as follows:

"15.4 In the event, the Final Order is passed by the Judicial Authority rejecting the sale on going concern basis pursuant to this E-Auction Process Document and the same is not appealed by the Liquidator in the NCLAT or the Supreme Court (as the case may be), the Liquidator shall return/refund the EMD and 1st Installment payment made by the Successful Bidder within 60 days from the receipt of the Final Order. No interest shall be payable by the Liquidator on the said amounts to be refunded to the Successful Bidder."

18. Even in a case where Successful Auction Bid as going concern is not

approved, Successful Auction Bidder is not entitled for any Interest on the

EMD and 1st Installment. We are of the view that the Successful Auction

Bidder is not entitled for interest on the amount of EMD and First

Installment and the Adjudicating Authority without adverting to clause 15.4

has issued direction for refund of the EMD and 1st Installment along with

interest.

19. In view of the foregoing discussion, we are of the view that the

Adjudicating Authority has rightly permitted the Successful Auction

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Purchaser to withdraw from e-auction and directed for refund of the EMD of

Rs. 5 Crores and 1st Installment of Rs. 30 Crores. We further are of the view

that the direction to refund the amount of Rs. 5 Crores and 30 Crores along

with interest is unsustainable. In result, we partly allow the appeal setting

aside the direction of the Adjudicating Authority dated 02.11.2022 to refund

the amount with interest. The rest of the Order of the Adjudicating

Authority including the direction to refund EMD of Rs. 5 Crore and Rs. 30

Crore is upheld. Parties shall bear their own costs.

[Justice Ashok Bhushan] Chairperson

[Mr. Barun Mitra] Member (Technical)

18th January, 2023 New Delhi

Basant

Company Appeal (AT) (Insolvency) No. 1390 of 2022