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2023 (9) TMI 1290 - AT - Insolvency and BankruptcyLegality of forfeiture of EMD deposited by the Respondent - failure to pay the balance 75% of sale consideration till 15.08.2020 which was the date stipulated for full payment in the EOI. Whether the parties are bound by the terms and conditions fixed by the Appellant in the EOI dated 08.07.2020 or the Appellant was required to follow the terms and conditions of Clause 12 of Schedule 1 of the Regulations which was amended on 25.07.2019? HELD THAT - The very fact that the circular dated 26.08.2019 has already been withdrawn and that the amendment dated 25.07.2019 was in vogue as on 08.07.2020, it was incumbent upon the Appellant to have followed the provisions of Regulation 33 much less Schedule 1 (Clause 12) of the Regulations which has not been followed and the terms and conditions have been provided by the Appellant on its own in the EOI overlooking the terms and conditions as envisage in Schedule 1. The action of the Appellant is totally unsustainable, therefore, there are no error in the order under challenge in which all the factors of this case have been thoroughly appreciated. In the end, Counsel for the Appellant requested that the component of interest which has ordered to be paid with EMD which has been forfeited would cause extra burden on the Appellant but at the same time, it is also submitted that the amount of EMD is lying deposited in Bank on which the interest is accruing. In such circumstances, there are no merit in this argument as well. There are no merit in the appeal and the same is hereby dismissed.
Issues Involved:
1. Legality of the forfeiture of Earnest Money Deposit (EMD). 2. Applicability of amended Clause 12 of Schedule 1 of the IBBI (Liquidation Process) Regulations, 2016. 3. Jurisdiction of the Adjudicating Authority to declare the circular of the board as non-est. Summary: 1. Legality of the forfeiture of Earnest Money Deposit (EMD): The Appellant, as the Liquidator of the Corporate Debtor, was aggrieved by the order of the Adjudicating Authority (NCLT, Kolkata Bench-1) which declared the forfeiture of EMD deposited by the Respondent as illegal. The Adjudicating Authority directed the Appellant to refund the forfeited EMD amount with interest at 4% from the date of forfeiture, failing which an interest of 7% would be applicable until actual payment is made. 2. Applicability of amended Clause 12 of Schedule 1 of the IBBI (Liquidation Process) Regulations, 2016: The Liquidator initiated liquidation proceedings and floated an Expression of Interest (EOI) for the sale of assets. The E-auction held on 30.07.2020 declared the Respondent as the highest bidder (H1), who deposited 25% of the sale consideration but failed to pay the remaining 75% within the stipulated time. The Appellant forfeited the EMD and the 25% sale consideration due to non-payment. The Respondent filed an application for an extension of the timeline and a refund of the forfeited amount. The Adjudicating Authority held that the Appellant should have followed the amended Clause 12 of Schedule 1 of the Regulations, which provides 90 days for payment of the balance sale consideration from the date of demand. 3. Jurisdiction of the Adjudicating Authority to declare the circular of the board as non-est: The Appellant argued that the Adjudicating Authority lacked jurisdiction to declare the board's circular as non-est. However, the circular dated 26.08.2019, which interpreted the amended Clause 12 of Schedule 1 to apply prospectively, was withdrawn. The Tribunal observed that the amended Regulation does not specify prospective application and should apply to ongoing liquidation processes irrespective of their initiation date. The Tribunal held that the Appellant's failure to follow the amended Regulation rendered its actions unsustainable. Conclusion: The Tribunal dismissed the appeal, upholding the Adjudicating Authority's order, and found no merit in the Appellant's arguments. The Appellant's request to reconsider the interest component was also dismissed, noting that the EMD amount was accruing interest in the bank. The appeal was dismissed with no costs.
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