2021 (6) TMI 72 - AT - Insolvency and Bankruptcy

Levy of Maintenance Security Deposit in respect of the property which was e-Auctioned by the Liquidator - Section 61(1) of the Insolvency and Bankruptcy Code, 2016 - HELD THAT - The Appellant had participated only in the 5th Auction and therefore the question of whether the MSD charges were raised in the previous Auctions or not, is irrelevant. The draft Letter of intent and the Process Memorandum dated 21.04.2020 clearly stipulates that an amount of ₹ 6 Lakhs (approximately) towards interest bearing Maintenance Security Deposit with DLF (towards Maintenance Deposit) is to be paid and would be a part of the asset of the successful bidder. The Process Memorandum issued by the Liquidator evidences the same in Clause 14(III) and therefore the stand of the Appellant that Clause 5 of the Letter of intent should be redrafted making the MSD a part of the total bid amount of ₹ 130 Lakhs cannot be justified. Having bid, paid the EMD and gone through the Process Memorandum and terms of LoI, the Appellant herein has exercised their choice of being a successful bidder and now cannot turn around and state that ₹ 6 Lakh amount to be paid towards statutory dues cannot be fastened upon them - Taking into consideration the current Covid situation and the facts and circumstances of the case, the Liquidator shall accept the balance sale consideration of ₹ 120 Lakhs ₹ 6 Lakhs (MSD) without charging any interest provided the amount is deposited in the account of the Corporate Debtor within 10 days from the date of receipt of a copy of this Order. The other directions with respect to Title deeds and documents, issued by the Learned Adjudicating Authority in the Impugned Order stand confined. There are no illegality or infirmity in the Impugned Order passed by the Learned Adjudicating Authority - appeal dismissed.

Summary

Issues Involved:

1. Obligation to pay Maintenance Security Deposit (MSD) by the successful auction purchaser.
2. Interpretation of terms and conditions in the Process Memorandum and Letter of Intent (LoI).
3. Applicability of the Doctrine of Estoppel.
4. Extension of time for payment of the balance sale consideration due to the pandemic.

Issue-wise Detailed Analysis:

1. Obligation to pay Maintenance Security Deposit (MSD) by the successful auction purchaser:

The core issue revolves around whether the successful auction purchaser (Appellant) is obligated to pay an additional ?6 Lakhs towards the Maintenance Security Deposit (MSD) over and above the bid price of ?130 Lakhs. The Adjudicating Authority directed the Appellant to pay the MSD, emphasizing that the Process Memorandum explicitly mentioned this requirement. The Tribunal upheld this view, stating that the terms and conditions of the auction clearly stipulated the payment of MSD, and the Appellant's claim that the bid amount included MSD was not sustainable.

2. Interpretation of terms and conditions in the Process Memorandum and Letter of Intent (LoI):

The Appellant argued that the Liquidator retracted from an earlier statement made in an email dated 10.04.2020, which indicated that the MSD could be negotiated. However, the Tribunal noted that the Process Memorandum dated 24.03.2020 and the LoI dated 21.04.2020 clearly required the payment of ?6 Lakhs as MSD. The Tribunal found that the Appellant was aware of this requirement before accepting the LoI, as evidenced by the email stating that the MSD was non-negotiable. Therefore, the Appellant's contention that the MSD should be included in the bid amount was rejected.

3. Applicability of the Doctrine of Estoppel:

The Appellant invoked the Doctrine of Estoppel, arguing that they acted based on the Liquidator's email, which suggested that the MSD was negotiable. However, the Tribunal concluded that the email did not create any estoppel because the subsequent LoI and Process Memorandum explicitly required the payment of MSD. The Tribunal emphasized that the Appellant had the opportunity to review these documents and decide whether to participate in the auction, thus estoppel did not apply.

4. Extension of time for payment of the balance sale consideration due to the pandemic:

The Tribunal acknowledged the impact of the COVID-19 pandemic and the lockdown on the payment timelines. It noted that the Liquidator had extended the deadline for the payment of the balance sale consideration. The Tribunal directed that the balance amount of ?120 Lakhs plus ?6 Lakhs towards MSD should be paid without interest if deposited within 10 days from the receipt of the order. This direction was given considering the pandemic situation and to provide relief to the Appellant.

Conclusion:

The Tribunal upheld the Adjudicating Authority's order, finding no illegality or infirmity. The Appellant was directed to pay the balance sale consideration and the MSD within the stipulated time without interest. The Tribunal dismissed the appeal, reiterating that the terms and conditions of the auction were clear and binding on the Appellant.