NCLAT Orders Adani Infrastructure To Pay 12% Interest For Delayed Payment In Ahmedabad Land Auction

The National Company Law Appellate Tribunal (NCLAT) has directed Adani Infrastructure & Developers to pay 12% interest on the delayed Rs 305-crore payment for Ahmedabad land bought in a liquidation auction. It held that a successful bidder cannot escape mandatory payment timelines by citing a tax attachment when the auction terms made clear that the buyer would have to take the property in its existing condition, with all encumbrances, defects and limitations.

Delivering its judgment on Monday, a bench of Chairperson Justice Ashok Bhushan and Technical Member Barun Mitra overturned the NCLT's order exonerating the company from interest liability and held that the timelines under the Liquidation Process Regulations are mandatory.

The tribunal observed that “the SAP was clearly liable to pay interest @ 12% on the balance consideration after expiry of 30 days from 29.12.2022(date of auction)”. It also held that present Liquidation Regulations made the timeline compulsory. The buyer had a maximum of 90 days to pay the full sale amount, and any payment made after the first 30 days necessarily attracted 12% interest.

The case arose from an e-auction of 1,44,856 sq. metres of land at Bapunagar, Ahmedabad, part of the liquidation estate of Anil Limited. Adani Infrastructure won the December 29, 2022 auction with a Rs 325-crore bid, after depositing Rs 20 crore as earnest money.

The tender conditions made clear that the sale was on an “as-is-where-is”, “as-is-what-is” and “whatever-there-is” basis, requiring bidders to undertake independent due diligence on title, encumbrances and statutory dues.

After the auction, Adani Infrastructure raised concerns over encroachment, a Gujarat State Tax Department charge on the land, and discrepancies in revenue records, and sought clarity on whether the liquidator could convey the land if payment was made by 29 March 2023.

The liquidator responded that although the sale deed could not be registered until the attachment was lifted, the payment timelines remained unaffected, as conveyance and payment obligations were independent of each other.

Adani Infrastructure then sought extension of time and waiver of interest. On June 15, 2023, the NCLT Ahmedabad extended the deadline, directing payment of Rs 255 crore within five days of lifting of attachment, but left the interest waiver undecided.

It subsequently relieved Adani Infrastructure of interest liability on the ground that payment timelines were directory, not mandatory.

Before the appellate tribunal, liquidator, argued that once the initial 30-day period expired, 12% interest became compulsory under Schedule I of the Liquidation Process Regulations and that the bidder could not rely on tax attachment when all facts had been disclosed upfront.

However, Adani Infrastructure, submitted that payment had been made within the extended timeline after the attachment was lifted and relied on Section 51 of the Contract Act, contending that reciprocal promises had to be performed together.

The NCLAT rejected this position, holding that contractual principles had no application in this case.

“The present is not a case for any breach of contract entered between the parties, rather is a case of sale of liquidation estate under the statutory provisions of Liquidation Process Regulations, 2016.” , it said.

It found that the 30-day period ended on January 28, 2023, rendering the balance Rs 305 crore liable for 12% interest until the NCLT extension granted on 15 June 2023.

Allowing the appeal partly, the tribunal directed Adani Infrastructure to pay 12% interest on Rs 305 crore from January 28, 2023 to June 15 2023 within two weeks, while clarifying that no interest was payable during the valid NCLT-granted extension period.

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