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TMI Blog2021 (1) TMI 658X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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. - Company Appeal (AT) (Insolvency) No. 1098 of 2020 - - - Dated:- 18-1-2021 - Justice Bansi Lal Bhat, The Acting Chairperson Justice Anant Bijay Singh, Mem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hen the question of invocation of the clause aforesaid will not arise. 10. At last, the applicant counsel has requested this bench to consider the aspect on equity ground and direct the liquidator to refund the money that was paid by the applicant. 11. When law is very clear and the applicant has entered into the bidding process based on the terms and conditions in the bidding documents, today the applicant cannot turn around and ask for refund after failing to comply with the terms and conditions of the agreement, therefore we have not found any merit in this application, hence this application is hereby dismissed as misconceived. 2. Succinctly put, the facts in briefs are that the liquidator of the second Respondent Company invited EPI for sale of raw material, scrap, stores, spares, consumables and finished goods on 20.02.2020 at a Reserved Price of ₹ 1.59/- crores. The Appellant participated in the E-Auction and deposited 10% of the EMD amount, amounting to ₹ 16/- lakhs and also submitted a bid for ₹ 3,75,00,786/-. The E-Auction was held on 18.03.2020 and the Appellant was declared as a successful bidder. On 20.03.2020, the Liquidator issued the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 KYC declaration, Due Diligence Monday, 16 th March, 2020 4 Request to Liquidator to permit submission of Earnest Money by the Interested Bidder through its Associate Company Monday, 16th March, 2020 5 EMD submission Tuesday, 17th March, 2020 6 Opening of E-voting for successful bidders and communication with them Tuesday, 17th March, 2020 7 Proposed E-Auction Date Wednesday, 18th March, 2020 8 Announcement of Successful Bidder Wednesday, 18th March, 2020 9 Letter of Intent (LoI) to be issued to the Successful Bidder Friday, 20th March, 2020 10 Unconditional acceptance of LoI Monday, 23rd March, 2020 11 P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase, forfeiture of earnest money took place long after an agreement had been reached. It is obvious that the amount sought to be forfeited on the facts of the present case is sought to be forfeited without any loss being shown. In fact, it has been shown that far from suffering any loss, DDA has received a much higher amount on re-auction of the same plot of land. 43.7. Section 74 will apply to cases of forfeiture of earnest money under a contract. Where, however, forfeiture takes place under the terms and conditions of a public auction before agreement is reached, Section 74 would have no application. The Appellant Counsel strenuously argued that in public auctions, Section 74 of the Indian Contract Act, 1872 cannot be invoked at a pre-contractual stage and further that the amount sought to be forfeited on the facts of the present case is sought to be forfeited without any loss being shown. 6. Learned Counsel appearing for the Respondent contended that the submission by the Appellant that only two days extension was granted is factually incorrect as the Corrigendum shows that the proposed E-Auction date was 18.03.2020; announcement of the successful bidder was on 18. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplied) 9. The interpretation of Clause 5 by the Learned Counsel appearing for the Appellant that as the property was re-auctioned and the entire amount realized, the EMD was consequently to be refunded resulting in the non-applicability of the aforenoted clauses, is untenable, as the Clause of forfeiture does not anywhere specify that it is subject to the happening of any event viz. realization from any Sale . Undisputedly as per the timelines under the auction, the Appellant was required to make the payment of upto 25% of the total sale consideration by 25.03.2020 and the LoI issued, was unconditionally accepted, by the Appellant on 23.03.2020. The Covid-19 situation in the country at that point of time was already an ongoing pandemic and there was declaration of Nationwide Lockdown by the Central Government vide a notification dated 24.03.2020 and hence it can be safely construed that the Appellant was well aware of the circumstances prevalent in the country. 10. The e-mail dated 18.05.2020 addressed by the liquidator to the Appellant herein is significant to the facts of this case and is reproduced as hereunder: Dear Mr. Saini, This is in furtherance to emai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deposit the same. In view of the aforesaid facts and circumstances and in terms of the provisions of the Code, the undersigned, being a custodian of the assets of the Corporate Debtor, hereby by virtue of the present notice call upon you to forthwith upon receipt of the present notice, deposit the whole consideration for sale of Inventory i.e. INR. 3,75,00,786;- (Rupees Three Crore Seventy Five Lakh Seven Hundred and Eighty Six only) plus GST within 48 hours failing which the undersigned will be at liberty to forfeit the EMD of an amount of INR 16,00,000 (Rupees Sixteen Lakh only) which has been retained by the undersigned in terms of process document and LoI as unconditionally accepted by you. (Emphasis Supplied) The aforenoted e-mail establishes that despite repeated requests made by the Liquidator, there was no response from the Appellant herein which substantiates the case of the Respondent that the Appellant did not adhere to the timelines given in the Corrigendum. The liquidator addressed an email on 18.05.2020 asking the Appellant to deposit the total consideration amount of ₹ 3,75,00,786 by 20.05.2020, failing which, the EMD would be forfeited. As admitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an Contract Act. Such earnest/security is given and taken to ensure that a contract comes into existence. It would be an anomalous situation that a person who, by his own conduct, precludes the coming into existence of the contract is then given advantage or benefit of his own wrong by not allowing forfeiture. It must be remembered that, particularly in government contracts, such a term is always included in order to ensure that only a genuine party makes a bid. If such a term was not there even a person who does not have the capacity or a person who has no intention of entering into the contract will make a bid. The whole purpose of such a clause i.e. to see that only genuine bids are received would be lost if forfeiture was not permitted. 13. The Hon ble Supreme Court in State of Haryana V/s. Malik Traders, (2011) 13 SCC 200, held as under: The right to withdraw an offer before its acceptance cannot nullify the agreement to suffer any penalty for the withdrawal of the offer against the terms of agreement. A person may have a right to withdraw his offer, but if he has made his offer on a condition that the bid security amount can be forfeited in case he withdraws the off ..... X X X X Extracts X X X X X X X X Extracts X X X X
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