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2021 (1) TMI 658 - AT - Insolvency and BankruptcyForfeiture of part of the earnest money deposited by the Appellant - Sale of assets by the Liquidator of the company in liquidation - It is the case of the Appellant that in compliance of Clause 13 of this Corrigendum, the Appellant was ready to deposit the amount with 12% interest but the Respondent was not willing to consider their request - HELD THAT - In the present case, the material on record evidences that reminder e-mails dated 01.04.2020, 02.04.2020, 23.04.2020, 15.05.2020 and 18.05.2020 were issued by the Liquidator to the Appellant herein requesting for payment of the balance amount of the 25% of the consideration but the Appellant neither replied to the e-mails nor made any payment adhering to the terms and conditions. It can be safely construed that the Appellant, by his own conduct, precluded the coming into existence of the concluded Sale and cannot now be given an advantage or benefit of his own wrong doing by not allowing forfeiture. The contention of the Learned Counsel for the Appellant that Clause 13 of the Corrigendum is applicable to this case and that the same has not been considered by the Ld. Adjudicating Authority, is unsustainable on the ground that Clause 13 of the Corrigendum is with respect to payments regarding the balance 75% of the sale consideration. The timelines with respect to the initial payment of the 25% is clearly given as 25.03.2020 and the payment of balance consideration by the successful bidder was given as 24.04.2020. Thus, it cannot be construed that Clause 13 is applicable to the initial 25% payment of the EMD amount. Be that as it may, the documentary evidence, the e-mails dated 02.04.2020, 03.04.2020, 15.05.2020 and 18.05.2020 clearly establish that sufficient opportunity was given to the Appellant to make the balance payments, which the Appellant had failed to respond or comply with the requests made and therefore Clause 3 of the Forfeiture of Earnest Money Deposit from the E-Auction terms and conditions, squarely applies to the facts of this case. Appeal dismissed.
Issues Involved:
1. Jurisdiction of Civil Court vs. NCLT under IBC. 2. Timelines and conditions for payment of bid amount. 3. Forfeiture of Earnest Money Deposit (EMD). 4. Applicability of Section 74 of the Indian Contract Act, 1872. 5. Interpretation of auction terms and conditions. 6. Impact of COVID-19 lockdown on contractual obligations. Issue-wise Detailed Analysis: 1. Jurisdiction of Civil Court vs. NCLT under IBC: The Appellant initially filed a civil suit seeking a refund of the earnest money, which was dismissed by the Civil Court on grounds of lack of jurisdiction, as per Section 63 of the Insolvency and Bankruptcy Code (IBC). The NCLT then heard the matter, emphasizing that issues under IBC fall within its exclusive jurisdiction. 2. Timelines and Conditions for Payment of Bid Amount: The Liquidator issued a Letter of Intent (LoI) on 20.03.2020, received by the Appellant on 23.03.2020, requiring 25% of the total consideration to be paid by 25.03.2020. Despite an extension to 31.03.2020, the Appellant failed to comply, citing difficulties due to the COVID-19 lockdown. The Liquidator's timelines were clear and adhered to, with no further extensions granted beyond the initial grace period. 3. Forfeiture of Earnest Money Deposit (EMD): Clause 'J' of the auction terms specified conditions under which the EMD could be forfeited, including failure to pay 25% of the bid amount within the stipulated time. The Appellant's failure to make the required payment led to the forfeiture of the EMD, as per the terms agreed upon during the auction process. 4. Applicability of Section 74 of the Indian Contract Act, 1872: The Appellant argued that Section 74, which deals with compensation for breach of contract, should apply, referencing the Supreme Court judgment in Kailash Nath Associates v. DDA. However, the Tribunal found this inapplicable as the forfeiture occurred due to non-compliance with the auction terms, not due to any breach post-agreement. 5. Interpretation of Auction Terms and Conditions: The Tribunal rejected the Appellant's interpretation of Clause 13 of the Corrigendum, which pertains to the payment of the remaining 75% of the bid amount with interest. The Tribunal clarified that this clause did not apply to the initial 25% payment, which had a strict deadline that the Appellant failed to meet. 6. Impact of COVID-19 Lockdown on Contractual Obligations: The Tribunal acknowledged the lockdown but noted that the Appellant was aware of the pandemic's impact when accepting the LoI unconditionally on 23.03.2020. Digital banking services were operational, and the Appellant had multiple reminders and opportunities to make the payment, which were not utilized. Conclusion: The Tribunal upheld the Liquidator's decision to forfeit the EMD, emphasizing the Appellant's failure to adhere to the auction terms and timelines. The appeal was dismissed, affirming that the forfeiture was justified and in accordance with the agreed terms. The Tribunal also highlighted that the Appellant's conduct precluded the finalization of the sale, thus validating the forfeiture.
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