ASJ Finsolutions Private Limited vs M/s Best Foods Limited
IA NO. 1047 OF 2024 IN CP (IB) NO. 117/Chd/Chd/2017
Facts:
1) Application against the Corporate Debtor (CD) namely, Best Foods Ltd., under Section 9 of IBC, 2016, which was admitted vide Order dated 02.02.2018 of this Adjudicating Authority. Subsequently, vide order dated 01.03.2021 of this Adjudicating Authority, Liquidation proceedings were initiated regarding the Corporate Debtor.
2) Through the present Application, the Applicant is seeking refund of 25 % of the bid amount of Rs. 6,39,00,000/- along with interest @ 12%, which was forfeited by the Liquidator in terms of the e-auction dated 15.11.2021.
Issue: Whether the application can be allowed ?
Arguments:
Applicant:
1) Counsel submitted that Applicant, at no stage expressed its unwillingness or inability to pay the balance consideration. Even during the pendency of the IA85/2022, the Applicant expressed its willingness to pay the balance amount vide its e-mail dated 31.05.22.
2) It was submitted that respondent vide e-mail dated 10.5.2023 replied by saying that the amount towards 25 % of the bid amount, which sums up to an amount of Rs. 6,39,00,000/- stands forfeited. It submitted that The subject property was put to fresh auction on 14.6.2023 and finally auctioned for a sum of Rs. 31.10 crore, i.e., Rs. 5.54 Crore over and above the last auction. Thus, there was no loss caused to the stakeholders
Respondent:
1) Counsel submitted that present Application is not maintainable since the Order dated 31.03.2023 passed by this Adjudicating Authority has merged with the Order dated 21.04.2023 passed by the Hon’ble NCLAT. The Applicant has admittedly failed to pay the balance consideration within 30 days and furthermore, within 90 days along with interest as stipulated under clause 12 of Schedule I of the Liquidation Process Regulations, 2016
2) It was submitted that Vide letter dated 16.11.2021, the Liquidator communicated that the amount deposited with respect to the auction shall be liable to be forfeited on failure to deposit the balance sale consideration by the outer limit of 14.02.2022. The Applicant confirmed vide letter dated 15.12.2021 that the balance sale consideration of Rs.19,17,00,000/- is to be deposited by 14.02.2022 with an interest @ 12%. However, the same was not done and in terms of clause 12 of Schedule of the Liquidation Process Regulations, 2016, the sale stood cancelled
3) The use of word ‘shall’ in Clause 1(12) of Schedule I of the Liquidation Process Regulations, 2016 leaves no doubt that the same is mandatory in nature and upon completion of 90 days and on failure of an Applicant to pay balance sale consideration, the same requires to be cancelled.
Decision: NCLT allowed the application.
Rationale:
1) It held that it would be not be correct to say that the forfeiture of EMD was made in terms of the provisions of the I&B Code or Regulations. It further held that From a perusal of the terms and conditions of the Auction, it is observed that the Liquidator had specifically made a clause for forfeiture of the entire amount paid including the EMD. The inclusion of the forfeiture clause is not a new innovation, but it is a practice followed from years, which can be generally seen in the Auctions under Government Tenders, Auctions under the SARFAESI Act etc.
Order:
