2024 (6) TMI 135 - AT - Insolvency and Bankruptcy

Refusal to revise timeline for making balance payments - private sale - doctrine of pprobation and reprobation. Whether, the Indian Contract Act, 1872 would be applicable for private sale or the private sale would be covered as per provisions of the Code r/w Liquidation Regulation, 2016? - HELD THAT - After perusal of the minutes it becomes quite obvious that lenders did not concur with the extension of timeline proposed by the Appellant for which the Appellant undertook to file suitable application before the Adjudicating Authority - it is unable to subscribe to the contention of the Appellant that the 10th SCC Meeting was unanimous in endorsing the extended timeline proposed by the Appellant. Doctrine of pprobation and reprobation - HELD THAT - It is a fact that the Appellant moved an application for seeking extension of the timelines and based on the request of the Appellant the Adjudicating Authority vide its Impugned Order extended the timelines but also stipulated condition regarding forfeiture. It is already noted that in the earlier discussion that the clause of forfeiture was added by the Adjudicating Authority in terms of Rule 15 of the NCLT Rules, 2016. It is settled principle based on doctrine of approbation and reprobation that party can either accept benefit arising of the same order or can challenge the same but not both. The Appellant gave his deemed acceptance to the Impugned Order dated 29.06.2022 by making their two payments. Hence, there are force in the logic of the Respondent and the Appellant cannot be allowed such pleadings. Appeal dismissed.

Issues Involved:
1. Whether the private sale was subject to Regulation 33(2)(c) or Regulation 33(2)(d) of the Liquidation Regulations, 2016.
2. Applicability of the Indian Contract Act, 1872 to the private sale.
3. Applicability of Sections 73 and 74 of the Indian Contract Act, 1872.
4. Whether the application before the Adjudicating Authority was for seeking exemptions under Liquidation Regulations, 2016 or for confirmation of the private sale.
5. Authority of the Adjudicating Authority to impose conditions not recommended by the SCC, specifically the forfeiture clause.
6. Validity of liquidated damages in the form of forfeiture.
7. Unanimity of the 10th SCC Meeting minutes.
8. Concealment of information by the Appellant regarding the Writ Petition before the Hon'ble High Court of Madras.
9. Doctrine of approbation and reprobation concerning the acceptance of the Adjudicating Authority's order.
10. Whether the payments made by the Appellant after the Impugned Order indicated acceptance of the order.

Summary of Judgment:

Issue 1: Regulation 33(2)(c) vs. Regulation 33(2)(d)
The private sale was subject to Regulation 33(2)(d) of the Liquidation Regulation, 2016, requiring prior permission from the Adjudicating Authority. The Appellant sought several concessions that needed approval from the Adjudicating Authority, confirming the sale under Regulation 33(2)(d).

Issue 2: Applicability of the Indian Contract Act, 1872
The private sale was governed by the provisions of the Insolvency and Bankruptcy Code (IBC) and Liquidation Regulations, 2016, not by the Indian Contract Act, 1872. The sale required approval from the Adjudicating Authority, making it subject to the Code.

Issue 3: Sections 73 and 74 of the Indian Contract Act, 1872
Sections 73 and 74 of the Indian Contract Act, 1872, are not applicable. The Adjudicating Authority's power to impose conditions, including forfeiture, was derived from Rule 15 of the NCLT Rules, 2016.

Issue 4: Application for Exemptions or Confirmation
The application was for seeking confirmation of the private sale under Regulation 33(2)(d) of the Liquidation Regulations, 2016, as the Appellant sought several concessions that required approval from the Adjudicating Authority.

Issue 5: Authority to Impose Conditions
The Adjudicating Authority had the power to impose conditions, including forfeiture, under Rule 15 of the NCLT Rules, 2016. The condition of forfeiture was imposed to ensure compliance with the extended timelines.

Issue 6: Validity of Liquidated Damages
The forfeiture of the amount paid by the Appellant was valid. The Adjudicating Authority's order was within its jurisdiction, and the forfeiture was a consequence of the Appellant's failure to adhere to the extended timelines.

Issue 7: Unanimity of the 10th SCC Meeting
The 10th SCC Meeting did not unanimously endorse the extended timeline proposed by the Appellant. The Stakeholders expressed dissatisfaction and indicated that any extension required approval from the Adjudicating Authority.

Issue 8: Concealment of Information
The Appellant did not disclose the Writ Petition before the Hon'ble High Court of Madras, indicating concealment of information. This act was considered misleading and affected the Appellant's credibility.

Issue 9: Doctrine of Approbation and Reprobation
The Appellant accepted the benefit of the extended timeline but challenged the forfeiture clause, which is not permissible under the doctrine of approbation and reprobation. The Appellant's acceptance of the order by making subsequent payments indicated deemed acceptance of the forfeiture condition.

Issue 10: Acceptance of the Impugned Order
The payments made by the Appellant after the Impugned Order indicated acceptance of the order, including the forfeiture clause. The Appellant's actions were inconsistent with challenging the forfeiture condition.

Conclusion:
The Appeals were dismissed, and the Impugned Orders were upheld. The Appellant's arguments regarding undue enrichment, applicability of the Indian Contract Act, and the validity of the forfeiture clause were found to be without merit. The Adjudicating Authority acted within its jurisdiction, and the conditions imposed were justified.

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