The Chennai Bench of National Company Law Appellate Tribunal(NCLAT) The Chennai Bench of National Company Law Appellate Tribunal (NCLAT) denied the appellant’s request for an extension to deposit the remaining bid amount in a corporate auction, citing repeated failures to meet deadlines despite multiple opportunities, and granted partial refund of the Earnest Money Deposit (EMD) due to challenges arising from the COVID-19 pandemic.
The Corporate Debtor(CD) was admitted to the Corporate Insolvency Resolution Process (CIRP) on 10.02.2017. The National Company Law Tribunal(NCLT) approved the resolution plan on 27.11.2017, but appeals were filed. On 06.09.2018, the NCLAT directed the liquidation of the Corporate Debtor, and the Supreme Court upheld this decision on 13.10.2018. Liquidation proceedings were started, and Mr. Racharla Ramkrishna Gupta was appointed as the liquidator.
The liquidator invited bids for the assets, but previous attempts failed. On 26.08.2020, the appellant submitted the highest bid of Rs. 351 Crores, and a Letter of Intent was issued. However, the appellant failed to pay the remaining Rs. 346 Crores by the deadline of 24.11.2020, despite multiple extensions. The NCLT cancelled the sale and forfeited the Rs. 5 Crore EMD on 25.08.2021.
Turn Section 148 Challenges into Opportunities – Enroll Now
The appellant filed several applications for more time, but these were rejected. On 18.04.2022, the NCLT confirmed the cancellation and ordered the liquidator to restart the bidding process. A new liquidator, Mr. Kallat Vatsa Kumar, was appointed on 08.11.2023, and the bidding process resumed. On 05.01.2024, Kalyani Steels Limited became the highest bidder with Rs. 450 Crores. The assets were handed over to Kalyani Steels on 10.02.2024, and the dissolution of the Corporate Debtor was ordered on 10.05.2024.
Due to developments in the case, the right of M/s. Kalyani Steels Limited was confirmed after the 6th e-auction and the sale certificate was issued on 10.02.2024. At this point, it was not appropriate to allow the appellant an extension to deposit the amount, as they had failed to do so multiple times despite having been given several opportunities. The appellant’s bid had been canceled and not challenged, and the subsequent sale was confirmed with a higher bid.
The Respondents argued that the 90-day deposit period was fixed and could not be extended. The appellant’s counsel, however, argued that the deposit could not be made on time due to financial difficulties caused by the COVID-19 pandemic and delays in obtaining approval from the Reserve Bank of India. They requested a refund of the EMD, which would not harm the Respondents as the property was later sold at a higher price.
Turn Section 148 Challenges into Opportunities – Enroll Now
The two member bench comprising Justice Sharad Kumar Sharma(Judicial Member) and Jatindranath Swain(Technical Member) agreed that the appellant’s inability to deposit the amount was due to factors beyond their control. They decided that 25% of the EMD (Rs. 1.25 Crores) would be retained, and the remaining 75% (Rs. 3.75 Crores) would be refunded within a month.
As a result, the appeal was partially allowed for the refund of the EMD, while the other reliefs sought were dismissed. This decision was made due to the exceptional COVID-19 situation and was not intended to set a precedent.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
