SC: e-auction bidder in IBC liquidation who misses the deadline forfeits EMD and part-payment too
The Supreme Court dismissed an appeal by ASJ Finsolutions, the successful bidder for a plot of land sold in the liquidation of a company under the Insolvency and Bankruptcy Code, 2016, after it failed to pay the balance sale consideration within the time allowed. The e-auction notice required bidders to pay the balance within 30 days, extendable to 90 days on payment of 12% interest; the appellant paid a part of the balance along with the Earnest Money Deposit (EMD) but never paid the rest, instead pursuing litigation over an unrelated title dispute and, later, over access to prior title deeds. When the appellant's bid ultimately fell through, the property was resold for over Rs.
5 crore more, and the appellant sought a refund of everything it had already paid. The Court held that while the IBBI Liquidation Process Regulations, 2016 cap the EMD itself at 10% of the reserve price, they do not bar an e-auction notice from separately stipulating that the entire amount paid by a defaulting bidder, EMD included, can be forfeited if the balance is not paid on time. Since the appellant had voluntarily paid the money and the auction notice's forfeiture clause was clear, there was no ground to order any refund.
Quick checkIn this ruling on an IBC liquidation e-auction, what did the Supreme Court hold about the 10% cap on Earnest Money Deposit under the IBBI Liquidation Process Regulations, 2016?- It bars forfeiture of any amount beyond 10% of the reserve price under any circumstances
- It applies only to auctions conducted before the Code came into force
- It caps only the EMD itself, and does not prevent an e-auction notice from separately allowing forfeiture of all sums paid if the balance consideration is not paid on time
- It was struck down as unconstitutional in this judgment
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Answer: C. The Court held that the 10% cap governs only the EMD amount; it does not stop an e-auction notice from providing that all sums paid by a defaulting bidder, EMD included, can be forfeited.
Issued by Supreme Court of India. If this summary and the source differ, the source is right — tell us and we will correct it.