Potens Transmission & Power Pvt. Ltd vs Apex Buildsys Limited

IN THE MATTER OF: Potens Transmission & Power Pvt. Ltd. ...Appellant

Versus

APEX Buildsys Ltd. In Liquidation Through Gian ...Respondent Chand Narang, Liquidator

Present: For Applicant : Mr. Sunil Fernandes, Mr. Malak Bhatt, Mr. Vaibhav Tomar, Ms. Neeha Nagpal, Mr. Tarun Mehra, Diksha Dadu, Rajshree Chaudhary, Adv.

For Respondent : Mr. Abhishek Anand, Mr. Karan Kohli, Ms. Kashish, Adv.

ORDER

(Hybrid Mode)

Per: Justice Rakesh Kumar Jain: (Oral)

08.04.2024: The Appellant has challenged the validity of the order

dated 04.10.2023, passed by the Adjudicating Authority (National Company

Law Tribunal, New Delhi) in I.A. No. 5450 of 2022 filed in CP (IB) No.

706/PB/2018 by the Appellant under Section 60(5) of the Insolvency and

Bankruptcy Code, 2016 (In short 'Code') r/w Rule 11 of the National

Company Law Tribunal Rules, 2016 (in short 'Rules') for seeking appropriate

directions to the Liquidator (Respondent herein) to refund the amounts

paid by the Appellant as Earnest Money Deposit (in short 'EMD') and part

consideration towards its bid for sale of Corporate Debtor as a going

concern, has been dismissed.

Comp. App. (AT) (Ins) No. 1543 of 2023 2

2. The brief facts of this case are that ICICI Bank Limited (Financial

Creditor) filed an application under Section 7 of the Code against the Apex

Buildsys Limited (Corporate Debtor) (now in liquidation) for the resolution of

its debts which was admitted on 20.09.2018.

3. Since, the resolution plan remained unsuccessful, therefore, the order

for liquidation of the Corporate Debtor was passed by the Adjudicating

Authority on 09.01.2020.

4. The Liquidator (Respondent herein) put up the Corporate Debtor as a

going concern for sale through e-auction on 22.01.2021 at a reserve price of

Rs. 119.36 Cr. This e-auction failed. However, on 19.02.2021 only one unit

of the Corporate Debtor was put up for sale through e-auction at a reserve

price of Rs. 50 Cr. The said e-auction also failed. The third e-auction took

place on 12.03.2021 of the Corporate Debtor as a going concern at a reserve

price of Rs. 90 Cr. Unfortunately, this e-auction did not take place as there

were no bidder. Thereafter, the liquidator put up the Corporate Debtor as a

going concern for sale through e-auction on 31.03.2021 at a reserve price of

Rs. 81 Cr. This e-action also failed. The Liquidator fixed e-auction of the

corporate Debtor for sale as a going concern and in blocks on 17.05.2021 for

a sum of Rs. 73 Cr. In this e-auction, the appellant was the sole bidder who

gave the highest bid of Rs. 73.01 Cr. The Appellant was considered as

Highest Bidder (H1).

5. It is submitted that e-auction process information document was

already given to the Appellant at the time when he submitted EMD

amounting to Rs. 7.30 Cr. (10%) of the reserve price.

Comp. App. (AT) (Ins) No. 1543 of 2023 3

6. As per the terms and conditions, set out in the e-auction process

information document, the Appellant was to deposit rest of the amount

within 30 days without interest and within 90 days with interest @ 12%. The

Appellant deposited a sum of Rs. 10,95,25,000/- on 10.06.2021 and

11.06.2021 towards the part payment of the bid amount. Thereafter, the

Appellant did not deposit any money.

7. The Appellant, however, made a declaration on 29.05.2021 to the

liquidator in which the following averments were made which read as

under:-

"3. We further understand and agree that if any of the statement/information revealed by us is found to be incorrect and / or untrue, the bid submitted by us is liable to be cancelled and in such case, the EMD and / or any monies paid by us is liable to be forfeited by the seller (liquidator) and the seller will be at liberty to annual the offer made to us at any point of time.

4. We also agree that after our offer given in our bid for purchase of company as a going concern in totality is accepted by the seller and if we fail to accept or act upon the terms and conditions of the sale or am/are not able to complete the transaction within the time limit specified for any reason whatsoever and/or fail to fulfil any/all the terms and conditions of the auction and offer letter, the EMD and other monies paid by us along with the online form and thereafter, are liable to be forfeited. In case final sale consideration amount is not paid within timeline, the liquidator shall forfeit EMD and any other amount deposited by us by that date"

8. The Appellant was declared the successful bidder and was sent an

email in this regard on 03.06.2021 making it clear to him that "please note

that all the terms and conditions applicable to successful bidder as

mentioned in the e-auction process information document dated 17.05.2021

shall be applicable and binding on you, being the successful bidder."

Comp. App. (AT) (Ins) No. 1543 of 2023 4

9. Pursuant thereto, term sheet was executed between the Appellant and

the liquidator on 15.06.2021 in which the following terms and conditions

was agreed to "7.2 that the auction of CD is governed by the provisions of

the Code r/w Liquidation Process Regulations. 7.3 That in the event of

default by the auction purchaser to make the full payment of sale

consideration amount by 01.09.2021 being the 90th day alongwith

applicable interest @ 12% if the payment is made after 03.07.2021, if the

payment is not made by 01.09.2021 the liquidator shall cancel the auction

as per the liquidation process regulations and all the amounts deposited till

that date shall be forfeited."

10. As per the aforesaid stipulation in the terms and conditions to which

both the parties had agreed to, the amount was to be paid with interest

within 90 days which expired on 01.09.2021.

11. It is pertinent to mention that before the failure took place, the

Appellant filed an application i.e. I.A No. 3153 of 2021 on 21.07.2021 in

which various prayers were made in the form of concessions sought from

the Respondent. While this application was pending, another application

was filed i.e I.A. No. 4317 of 2021 by the Appellant on 31.08.2021 in which

one of the prayers was to decide I.A. No. 3135 of 2021 filed by the Appellant

seeking appropriate directions relating to sale of corporate debtor as a going

concern and also to extend the time period of 25 days for payment of the

balance consideration of Rs. 54,75,7500/- (75% of the total consideration)

alongwith interest of Rs. 1,09,51,500/- for the period 03.07.2021 to

01.09.2021 and further interest @ 12% p.a. till the date of actual payment

Comp. App. (AT) (Ins) No. 1543 of 2023 5

for purchase of CD in liquidation as going concern in totality alongwith its

employees/workers and direct the Respondent to maintain status quo and

not take any coercive steps against the Appellant till disposal of the I.A No.

3153 of 2021 and I.A. No. 4317 of 2021.

12. Both the aforesaid applications came up for hearing on 23.09.2021

and on that date the following order was passed by the Adjudicating

Authority:-

"List the matter on 28.09.2021 on the top of the list, in the meanwhile, as undertaken by the counsel for the liquidator, there shall not be any coercive steps against the Appellant. List on 28.09.2021"

13. The Liquidator also filed an application bearing I.A. No. 5255 of

2021 on 15.09.2021 in which prayer was made to allow the liquidator to

cancel the sale of the Corporate Debtor as a going concern in view of its

failure to make the payment in terms of 2nd proviso to clause 1(12) under

Schedule 1 of the liquidation process regulations, 2016 and also to grant

further time to the Liquidator to conduct a fresh e-auction in the matter of

the Corporate Debtor as a going concern in the interest of the stakeholders

and for maximization of value of the assets of the CD under Regulation 32A

of the Liquidation Process Regulations, 2016.

14. The Adjudicating Authority took up all the three applications together

and disposed of two applications bearing I.A. No. 3153 of 2021 and I.A. No.

4317 of 2021, both filed by the Appellant and allowed I.A. No. 5255 of 2021

filed by the liquidator vide its order dated 25.04.2022.

Comp. App. (AT) (Ins) No. 1543 of 2023 6

15. Since, the permission was granted to the liquidator by the

Adjudicating Authority on 25.04.2022 to cancel the sale and to proceed in

accordance with law, therefore, through an email dated 25.04.2022, on the

same date, the Respondent informed the Appellant about its decision to

forfeit not only the EMD but also the part consideration amount.

16. The order dated 25.04.2022, by which the applications were disposed

of bearing I.A. No. 3153 and 4317 of 2021 filed by the Appellant and

allowed I.A. No. 5255 of 2021 filed by the Liquidator, was challenged in

appeal by the Appellant bearing CA (AT) (Ins) No. 532 of 2022 which was

dismissed on 12.05.2022 upholding the order of the Adjudicating Authority.

The order dated 12.05.2022 passed by this Tribunal was challenged before

the Hon'ble Supreme Court by way of Civil Appeal No. 4116 of 2022 in

which the Hon'ble Supreme Court passed the order on 20.05.2022 which

read as under:-

"The appeal is admitted subject to the condition that the Appellant shall deposit Rs. 5,50,00,000/- within 23.05.2022 and another balance sum of Rs. 50,00,00,000/- within 01.06.2022.

The auction may go on in the meanwhile, but no final decision shall be taken till 02.06.2022.

If the petitioner pays the above-mentioned balance sum within 01.06.2022, no final decision on the auction shall be taken till further orders of this Court"

17. It is submitted that in compliance with the order dated 20.05.2022,

the Appellant deposited Rs. 5.5 Cr. before the Liquidator. Thereafter, while

the aforesaid appeal was pending, the Appellant filed I.A. No. 82662 of 2022

before the Hon'ble Supreme Court for extension of time for depositing the

Comp. App. (AT) (Ins) No. 1543 of 2023 7

rest of the amount because earlier the time was granted till 01.06.2022 by

its order dated 20.05.2022 by the Hon'ble Supreme Court. The said

application was dismissed on 02.06.2022 with the following order:-

"IA No.82662/2022 This application seeks extension of time period for three weeks to deposit the balance amount of Rs.50 Crores as directed by this Court vide order dated 20.05.2022.

By the said order, the appeal was admitted, subject to the appellant depositing an amount of Rs.5,50,00,000/- (Rupees Five Crores and Fifty Lakhs only) upto 23.05.2022 and the balance of Rs.50,00,00,000/- (Rupees Fifty Crores only) prior to 01.06.2022.

The order further directed that the auction may go on in the meanwhile but no final decision shall be taken till 02.06.2022.

Mr. Mukul Rohatgi, learned Senior Counsel appearing for the appellant, states that on account of financial difficulties, the appellant could not make the arrangements and is willing to pay the entire amount along with interest within two weeks.

Mr. Gopal Jain, learned Senior Counsel appearing for the respondent submits that the auction is already concluded and the said property has been sold in the fresh auction at a higher bid offer of Rs.91,00,00,000/- (Rupees Ninety One Crores) as against Rs.73,00,00,000/- (Rupees Seventy Three Crores), as was offered by the appellant.

In the last paragraph of the order dated 20.05.2022, this Court had observed as under: "If the petitioner pays the above- mentioned balance sum within 01.06.2022, no final decision on the auction shall be taken till further orders of this Court."

It would thus be clearly seen that the order is self-operative and on the failure to pay the balance amount prior to 01.06.2022, the parties were at liberty to take a final decision of the auction.

In that view of the matter, we are not inclined to entertain the application and it is thereby rejected."

18. The Appellant then filed I.A. No. 116013 of 2022 before the Hon'ble

Supreme Court for seeking directions for refund of the amount of Rs. 5.5 Cr.

Comp. App. (AT) (Ins) No. 1543 of 2023 8

which was deposited by the Appellant with the Liquidator in terms of the

order passed by the Hon'ble Supreme Court. The said application was

allowed with the following order:-

"Heard ld. Counsel for the parties.

The application for directions/ clarifications being IA No. 116013 of 2022 is allowed.

The Respondent No. 1 is directed to refund the amount of Rs. 5,50,00,000/- deposited in its account of 23.05.2022 in accordance with the directions passed by this court vide order dated 20.05.2022.

The appeal is accordingly disposed of.

Pending applications, if any, shall stand disposed of."

19. It is pertinent to mention that the main appeal i.e. Civil Appeal No.

4116 of 2022 filed before the Hon'ble Supreme Court was disposed of.

20. The Appellant thereafter filed an application bearing I.A No. 5450 of

2022 before the Adjudicating Authority in which the following prayer was

made:-

"Pass an order directing the liquidator to refund the amount of Rs. 18,25,25,000/- paid by the Applicant as EMD and part consideration towards its bid for sale of CD as a going concern."

21. The aforesaid application has now been dismissed by the impugned

order and hence this appeal has been filed.

22. Counsel for the Appellant has argued that though the application

bearing I.A. No. 5450 of 2022 was filed for the refund of the entire amount

deposited by the Appellant i.e. EMD + Part payment and the prayer has been

declined but at present the Appellant is confining its grievance only in

Comp. App. (AT) (Ins) No. 1543 of 2023 9

regard to the non-refund of amount of part amount paid by him. As a matter

of fact, the Appellant has conceded that the amount of EMD of Rs. 7.3 Cr.

forfeited by the Liquidator is in accordance with law, therefore, there is no

dispute about it.

23. The challenge to the competence of the liquidator to retain the amount

of Rs. 10,95,25,000/-, deposited by the Appellant towards consideration

amount is on the ground that as per Section 74 of the Indian Contract Act,

1872 (in short 'Act') the said amount could not have been forfeited /

retained by the Liquidator. It is submitted that in case there was any failure

on the part of the Appellant in not completing his part of the contract, the

Respondent could have, at the most claim damages by resorting to the

remedy available to it but for forfeiting the amount. In support of his

submissions, he has relied upon two decisions of the Hon'ble Supreme

Court, namely, Kailash Nath Associates Vs. Delhi Development Authority &

Anr. (2015) 4 SCC 136 and the Authorised Officer, Central Bank of India

Vs. Shanmugavelu, Civil Appeal No. 235-236 of 2023 decided on

02.02.2024.

24. On the other hand, Counsel for Respondent has submitted that

Section 74 of the Act is of no avail to the Appellant in view of the fact that e-

auction has been conducted in terms of Schedule 1 of the IBBI (Liquidation

Process) Regulations, 2016 (In short 'Regulations'). It is further submitted

that it was brought to the notice of the Appellant through e-auction process

information document on the basis of which the Appellant deposited the

EMD and in which it was stipulated that any other amount deposited by the

Comp. App. (AT) (Ins) No. 1543 of 2023 10

Appellant shall also be forfeited in case of failure on the part of the

Appellant. In this regard, the Respondent has also referred to clause (c) and

(d) which read as under:-

"(c) If the bidder is identified as the Successful bidder and it fails to pay balance sale consideration amount within the stipulated time as per the clauses/terms of this e-auction process information document (terms and conditions of e-auction) after being intimated as a successful bidder by the liquidator.

(d) In any of the above event, all the amounts deposited till that date shall be forfeited and the assets of the related lot, for which bid was submitted and declared as successful bidder, will be offered to the next highest bidder."

25. He has also submitted that the Appellant has given a declaration in

writing on 29.05.2021, already referred to hereinabove, as per which the

Appellant conceded that in case it fails to complete his part of the contract

then the EMD and other money paid by him may be forfeited. He has also

submitted that on 03.06.2021, the Appellant was categorically informed that

all the terms and conditions applicable to the successful bidder, mentioned

in the e-auction process information document, shall be applicable and be

binding being successful bidder and in that eventuality, there shall be

forfeiture not only of the EMD but also the sale consideration amount paid

in part. He has also submitted that in the terms sheet which was executed

between the Appellant and the Respondent, the same thing was reiterated

and accepted by the Appellant to which it is bound and cannot be denied.

He has also submitted that the Appellant seems to be short of funds,

therefore, the Appellant filed an application bearing I.A. No. 3153 of 2021

Comp. App. (AT) (Ins) No. 1543 of 2023 11

before the Adjudicating Authority seeking certain concessions from the

Liquidator which was in the garb of extension of time when I.A. No. 4317 of

2021 came to be filed at the instance of the Appellant when he actually

requested for extension of 25 days' time for completing his part of the

contract. It is thus submitted that prayers made in both the applications

were not found favour with the Adjudicating Authority rather the application

filed by the Liquidator was accepted by the Adjudicating Authority vide its

order dated 25.04.2022 by which permission was granted to the Respondent

to cancel the sale and proceed in accordance with law.

26. Apropos, the Respondent (Liquidator) sent an email on the same date

after getting the order i.e. 25.04.2022 to the Appellant bringing to his notice

that the entire amount deposited by the Appellant has been forfeited. This

order has not been challenged by the Appellant and attained finality.

27. It is further submitted that the judgments rendered in the case of

Kailash Nath Associates (Supra) and the Authorities Officer, Central Bank

of India (Supra) relied upon by the Appellant are not on the facts of the

present case and are distinguishable.

28. On the other hand, the Respondent has relied upon a decision of this

Court rendered in the case of West Coast Infraprojects Pvt. Ltd. Vs. Mr. Ram

Chandra Dallaram Choudhary, CA (AT) (Ins) No. 1258 of 2022 in which the

issue involved similar to the present case has been clearly decided, Section

74 of the Act has been discussed vis a vis auction conducted under the

Code and it has been held that that the parties shall be governed by the

Comp. App. (AT) (Ins) No. 1543 of 2023 12

terms and conditions of sale and the amount of EMD and part payment

made by the highest bidder was held to have been rightly forfeited.

29. We have heard Counsel for the parties and perused the record with

their able assistance.

30. The question in this case travels in a narrow compass in regard to the

refund of the amount of the part payment made by the Appellant after the

failure of the bid at his instance on the anvil of Section 74 of the Act?

31. To appreciate the argument raised by the Appellant, it is relevant to

refer to Section 74 of the Act which read as under:-

"Section 74. Compensation for breach of contract where penalty stipulated for.

1[When a contract has been broken, if a sum is named in the contract as the amount to be paid in case of such breach, or if the contract contains any other stipulation by way of penalty, the party complaining of the breach is entitled, whether or not actual damage or loss is proved to have been caused thereby, to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named or, as the case may be, the penalty stipulated for.

Explanation.-- A stipulation for increased interest from the date of default may be a stipulation by way of penalty.]

Exception.-- When any person enters into any bail-bond, recognizance or other instrument of the same nature, or, under the provisions of any law, or under the orders of the 2 [Central Government] or of any 3[State Government], gives any bond for the performance of any public duty or act in which the public are interested, he shall be liable, upon breach of the condition of any such instrument, to pay the whole sum mentioned therein.

Explanation.-- A person who enters into a contract with Government does not necessarily thereby undertake any public duty, or promise to do an act in which the public are interested.

Comp. App. (AT) (Ins) No. 1543 of 2023 13

Illustrations

(a) A contracts with B to pay B Rs. 1,000, if he fails to pay B Rs.

500 on a given day. A fails to pay B Rs. 500 on that day. B is entitled to recover from A such compensation, not exceeding Rs. 1,000, as the Court considers reasonable.

(b) A contracts with B that, if A practises as a surgeon within Calcutta, he will pay B Rs. 5,000. A practises as a surgeon in Calcutta. B is entitled to such compensation; not exceeding Rs. 5,000, as the Court considers reasonable.

(c) A gives a recognizance binding him in a penalty of Rs. 500 to appear in Court on a certain day. He forfeits his recognizance. He is liable to pay the whole penalty.

4 [(d) A gives B a bond for the repayment of Rs. 1,000 with interest

at 12 per cent. at the end of six months, with a stipulation that, in case of default, interest shall be payable at the rate of 75 per cent. from the date of default. This is a stipulation by way of penalty, and B is only entitled to recover from A such compensation as the Court considers reasonable.

(e) A, who owes money to B a money-lender, undertakes to repay him by delivering to him 10 maunds of grain on a certain date, and stipulates that, in the event of his not delivering the stipulated amount by the stipulated date, he shall be liable to deliver 20 maunds. This is a stipulation by way of penalty, and B is only entitled to reasonable compensation in case of breach.

(f) A undertakes to repay B a loan of Rs. 1,000 by five equal monthly instalments, with a stipulation that in default of payment of any instalment, the whole shall become due. This stipulation is not by way of penalty, and the contract may be enforced according to its terms.

(g) A borrows Rs. 100 from B and gives him a bond for Rs. 200 payable by five yearly instalments of Rs. 40, with a stipulation that, in default of payment of any instalment, the whole shall become due. This is a stipulation by way of penalty."

32. Counsel for the Appellant has not denied the fact that after becoming

HI and depositing EMD it was duly informed by the Liquidator about the

terms and conditions through the e-auction process information document

Comp. App. (AT) (Ins) No. 1543 of 2023 14

in which it had been categorically mentioned that the liquidator would have

competence not only to forfeit the amount of EMD but also any amount

having been paid towards part payment of the sale consideration in case

there is a failure of the contract on the part of the Appellant. It is also not in

dispute that the Appellant was knowing fully well about the terms and

conditions which were set out in the e-auction process information

document in terms of Schedule 1 of the Regulations that in case of failure of

the e-auction, the liquidator shall be competent not only to forfeit the EMD

but also the part payment made by the Appellant. The Respondent then

again informed the Appellant through its email dated 03.06.2021 in this

regard as well. Thereafter, a term sheet was executed between the parties in

which the same terms and conditions were also there which was duly signed

by the Appellant. The sum and substance of the narration of the aforesaid

facts and circumstances is that every step the appellant was made aware by

the liquidator of its liability in case the Appellant fails to honour his

commitment in so far as the contract is concerned regarding the payment of

bid amount. It is needless to mention that no time was extended by the

Tribunal when the application was filed by the Appellant as it was dismissed

and in appeal the said order was upheld by this Tribunal. It is also pertinent

to mention that when the Appellant filed the Civil Appeal before the Hon'ble

Supreme Court against the order passed by this Tribunal in order to gain

time, the Appellant offered an amount of Rs. 5.50 Cr. to prove his bonafide

that he would make the payment if some more time is given, the Hon'ble

Supreme court granted time to the Appellant to pay till 01.06.2022. The

Appellant did not deposit the amount within that period also and the

Comp. App. (AT) (Ins) No. 1543 of 2023 15

application was dismissed by the Hon'ble Supreme Court. Meaning thereby,

the time was not granted. However, the amount which was deposited by the

Appellant before the Hon'ble Supreme Court, in terms of the order passed by

it earlier, a sum of Rs. 5.50 Cr. deposited before the Liquidator was ordered

to be refunded but the order passed by the Tribunal was upheld by this

Tribunal and further upheld by the Hon'ble Supreme Court.

33. In so far as, the judgment in the case of Kailash Nath Associates

(Supra) is concerned, it is not applicable to the facts of this case because in

that case it was only in regard to the EMD. In this regard, the Appellant has

drawn our attention to Para 2 of the said judgment in which it is observed

that "2. The present appeal arises out of a public auction conducted by the

Delhi Development Authority ("DDA") wherein the appellant made the

highest bid for Plot No.2-A, Bhikaji Cama Place, District Centre, New Delhi

for 3.12 Crores (Rupees Three Crores Twelve Lakhs). As per the terms and

conditions of the auction, the appellant, being the highest bidder, deposited

a sum of Rs.78,00,000/- (Rupees Seventy Eight Lakhs), being 25% of the

bid amount, with the DDA, this being earnest money under the terms of the

conditions of auction."

34. It is the contention of the Appellant that the 25% of the bid amount

was part payment whereas we have found that the Hon'ble Supreme Court

has categorically mentioned that it was an EMD. Since, there is no dispute

about the EMD in this case, therefore, this judgment is not applicable.

Comp. App. (AT) (Ins) No. 1543 of 2023 16

35. In the case of the Authorised Officer, Central Bank of India (Supra)

the Hon'ble Supreme Court framed the following three questions which read

as under: -

"I. Whether, the underlying principle of Section(s) 73 & 74 respectively of the 1872 Act is applicable to forfeiture of earnest- money deposit under Rule 9(5) of the SARFAESI Rules? In other words, whether the forfeiture of the earnest-money deposit under Rule 9(5) of the SARFAESI Rules can be only to the extent of loss or damages incurred by the Bank?

II. Whether, the forfeiture of the entire amount towards the earnest-money deposit under Rule 9(5) of the Rules amounts to unjust enrichment? In other words, whether the quantum of forfeiture under the SARFAESI Rule is limited to the extent of debt owed?

III. Whether a case of exceptionable circumstances could be said to have been made out by the respondent to set aside the order of forfeiture of the earnest money deposit?"

36. These three questions were decided accordingly but the Counsel for

the Appellant has referred to Para 87 of the said judgment in which there is

a reference of "Ex Parte Barrell: (L.R.) in Re. Parnell 10 Ch. App. 512"

wherein it has been held that "a specific forfeiture clause might operate to

defeat the buyer's right of recovery of even an advance payment. But equity

might step in to relieve the buyer from forfeiture".

37. In this regard, Counsel for the Respondent has relied upon a decision

of the Hon'ble Supreme Court in the case of Pratap Technocrats Pvt. Ltd. &

Ors. Vs. Monitoring Committee of Reliance Infratel Limited & Anr., (2021) 10

SCC 623 in which the Hon'ble Supreme court while dealing with the

jurisdiction to approve a resolution plan has held that "there is no equity-

based jurisdiction with NCLT, under the provisions of IBC"

Comp. App. (AT) (Ins) No. 1543 of 2023 17

38. Be that as it may, Counsel for the Respondent has relied upon a

decision of this Court rendered in the case of Westcoast Infraprojects Pvt.

Ltd. (Supra) in which, the facts were, that the highest bidder not only

deposited EMD but also a part payment was made which was forfeited.

Counsel for the Appellant therein raised a legal issue while referring to

Section 74 of the Act submitting that the liquidator ought to have filed a suit

for recovery of the penalty by way of compensation and the liquidator had no

jurisdiction to forfeit the EMD and that the amount of Rs. 1,75,00,000/-

deposited by the Appellant be refunded.

39. This question has been answered by this Court while referring to

Section 74 of the Act and held that "20. For purpose of this case, law as laid

down in Paragraph 43.7 is relevant where Hon'ble Supreme Court has

clearly held that when forfeiture takes place under the terms and conditions

of a public auction before agreement is reached, Section 74 would have no

application. The statement of law in paragraph 43.7 is fully applicable in the

case of the present case. The present is a case where Appellant participated

in the eAuction conducted by the Liquidator under the Liquidation Process

Regulations, 2016. Section 74 of the Indian Contract Act has no application

in the case of Auction conducted by the Liquidator under the Liquidation

Process Regulations, 2016. The terms and conditions of the sale as finalized

by the Liquidator under which the e-Auction was held is binding on all

including the bidders. Bidders give an unqualified undertaking for

participation in the e-Auction after knowing fully well of clauses of the e-

Auction Process Document and undertook to abide by the clauses. The

Comp. App. (AT) (Ins) No. 1543 of 2023 18

submission of the Appellant cannot be accepted that Appellant's EMD

cannot be forfeited even though he has committed default in making the

payment of balance amount and the Liquidator should file a suit for

forfeiting amount deposited by the Appellant. Such preposterous argument

cannot be accepted in view of the fact that Liquidation Process is conducted

under the statutory Liquidation Process Regulations, 2016. The terms and

conditions of the Process Document has been framed as per statutory

empowerment given to the Liquidator by Schedule I of the Liquidation

Process Regulations, 2016 as noticed above. When the clauses of the

Process Document as noted above, clearly empowers the Liquidator to forfeit

the EMD and any payment made in event default is committed by the

Highest Bidder, no exception can be taken to the action of the Liquidator in

cancelling the sale and forfeiting the amount deposited by the Appellant."

40. It is pertinent to mention that the aforesaid judgment passed by this

court was further challenged by the aggrieved party before the Hon'ble

Supreme court by way of Civil Appeal No. 4087 of 2023 which was

dismissed on 05.07.2023.

41. Therefore, in such circumstances, the judgments which has directly

answered the question involved in the present appeal are not the judgments

relied upon by the Appellant in the case of Kailash Nath Associate (Supra)

and the Authorised Officer, Central Bank of India (Supra) but it is the case

of Westcoast Infraproject Pvt. Ltd. (Supra) which we would respectfully

follow as the correct statement of law.

Comp. App. (AT) (Ins) No. 1543 of 2023 19

42. Thus, in view thereof, we do not find any merit in the present appeal

and the same is hereby dismissed though without any order as to costs.

[Justice Rakesh Kumar Jain] Member (Judicial)

[Mr. Naresh Salecha] Member (Technical)

[Mr. Indevar Pandey] Member (Technical)

Sheetal/Ravi

Comp. App. (AT) (Ins) No. 1543 of 2023