Sale Certificate Issued In Favor Of Successful Bidder Can Be Cancelled If Bid Amount Is Not Paid Within 90 Days: NCLAT

The NCLAT New Delhi bench of Mr. Justice Ashok Bhushan (Chairperson), Mr. Barun Mitra (Technical Member) and Mr. Arun Baroka (Technical Member) has held that as per Liquidation Regulations, the bid amount has to be paid within 90 days. If the amount is not paid, sale certificate issued in favor of the Successful Bidder can be cancelled and the security amount be forfeited. Brief Facts: This Appeal has been filed challenging the Order passed by the Adjudicating Authority dated 11.12.2023 in IA 626/2022. The Liquidation Proceedings against the Corporate Debtor commenced by an Order passed by the Adjudicating Authority on 16.09.2020 and 06.11.2020. The Liquidator published Sale Notice for reserve price on 12.08.2021 fixing sale price of 6.50. No bids came hence another e-Auction Notice was issued. The Appellant submitted its e-bid in pursuance of Sale Notice 12.09.2021. EMD amount was also deposited by the Appellant of Rs.58.10 Lakhs. E-Auction was conducted on 17.09.2021 and the Appellant highest bid of Rs.5,81,00,000/- was accepted. On 18.09.2021, Appellant was declared as Successful Bidder by email and thereafter Appellant made further payment of Rs. 58.10 Lakhs as 2nd instalment. On 08.11.2021, Liquidator has also issued a Sale Certificate to the Appellant. The Appellant however did not make the payment within the time allowed. The Liquidator issued a show cause Notice on 04.12.2021 asking the Appellant to pay the balance amount with interest on or before 11.12.2021, however the balance was not paid and the Liquidator cancelled the Sale Certificate. Aggrieved by the cancellation of Sale Certificate the I.A. was filed by the Appellant before the Adjudicating Authority being I.A. No. 626/2024 which came to be rejected by the Impugned Order. Submissions: The appellant submitted that Letter of Intent (LoI) was never issued which was one of the terms and conditions in the e-bid documents and further even the Sale Certificate which was issued by the Appellant also provided in Clause 9 that LoI be issued. LoI having not been issued, the Liquidator could not have forfeited the EMD and cancelled the Sale Certificate. Per contra, the respondent submitted that more than three opportunities were given to the Appellant to pay the balance amount in which the Appellant failed and that Sale Certificate was already issued on the receipt of EMD and further payment of Rs.58.10 Lakhs and the Appellant having not paid the amount, Liquidator had no option except to cancel the Sale Certificate and forfeit the EMD. Observations: The tribunal noted that the bid document itself contemplated for payment of the entire sale consideration within the time period which also contained the Clauses for default of Successful Bidder in making the payment. The tribunal also noted that the appellant was declared as successful bidder in an e auction conducted and a sale certificate was also issued.The Liquidator on 17.09.2021 has communicated that Appellant is a Successful Bidder and he was asked to follow the terms and conditions of the bid document. It is also on the record that Appellant made further payment of Rs. 58.10 Lakhs as 2nd instalment and the sale certificate was issued thereafter by the Liquidator. It is the contention of the appellant that the sale certificate also contained a provision for the Letter Of Intent to be issued which was not issued. While refuting the above submission,the tribunal noted that in the present case, admittedly the Sale Certificate was issued to the Successful Bidder, after issuance of Sale Certificate on 08.11.2021, there is no relevance of LoI which was referred to in Clause 9. Under the Liquidation Regulation 2016, there is a statutory requirement of payment of bid amount within 90 days. Based on the above, the tribunal concluded that the submission of the Appellant that he was never intimated that he has to make the payment of 90 days cannot be accepted. The bid document as well as Regulation clearly provided for payment. Appellant having failed to make the payment of the balance amount. Liquidator did not commit any error in forfeiting the EMD and cancelling the Sale Certificate. The amount of Rs.58.10 Lakhs which was paid after e-Auction has already been refunded to the Appellant. Accordingly, the present appeal was dismissed. Case Title: S P Construction v. Narendra Kumar Sharma Case Reference:Company Appeal (AT) (Insolvency) No. 858 of 2024 Judgment Date: 22/11/2024 For Appellant : Mr. Ashish Kumar Pandey, Mr. Vedant Sharma and Mr. Yashwant Singh, Advocates. For Respondent : CS Gaurav Joshi, for Liquidator Click Here To Read/Download The Order

Sale Certificate Issued In Favor Of Successful Bidder Can Be Cancelled If Bid Amount Is Not Paid Within 90 Days: NCLAT

Mohd Malik Chauhan

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