By S&S Co. Advocates & Solicitors · Published 30 September 2026 · Informational content, not legal advice: see our disclaimer
The Baseline: Schedule I of the Liquidation Process Regulations
Schedule I of the IBBI (Liquidation Process) Regulations, 2016 sets out the standard process for a liquidator conducting an e-auction of a corporate debtor's assets, including baseline norms for the earnest money deposit a bidder must furnish to participate. Liquidators are not, however, confined to those baseline norms: they can, and routinely do, impose stricter, auction-specific terms in the published auction notice, including payment timelines and forfeiture conditions that go beyond what the Regulations themselves spell out.
Why the Regulations' Silence Does Not Protect a Defaulting Bidder
A recurring question is what happens to money a successful bidder pays beyond the EMD, such as a part-payment toward the sale consideration, if that bidder then defaults on the remaining balance. The Regulations themselves do not expressly address forfeiture of amounts beyond the EMD. Courts have made clear, however, that this silence does not create a right for a defaulting bidder to recover those additional sums where the e-auction notice the bidder accepted contains its own, express forfeiture clause covering the full deposit. The specific terms a bidder agreed to by participating in the auction, not the Regulations' general silence, govern what happens on default.
The Practical Due-Diligence Checklist
Before submitting a bid, a prospective bidder should read the auction notice's forfeiture clause in full and understand precisely what happens to every rupee paid, not just the EMD, if the balance sale consideration is not paid within the stipulated window: commonly 90 days from being declared the successful bidder, though the exact figure is set by the individual notice. Bidders should also check whether the notice permits any extension of that window, on what terms, and whether partial payment toward the balance before a final default still exposes the full amount paid to forfeiture, as it typically does under a clause drafted broadly enough to cover the entire deposit.
Funding Certainty Matters More Than It May Seem
Because forfeiture clauses of this kind have now been judicially tested and upheld, a bidder's funding plan for the balance sale consideration needs to be genuinely reliable before bidding, not merely plausible. A bidder relying on external financing, buyer syndication or asset sale proceeds to fund the balance should build in enough margin against the payment deadline to avoid a late payment that triggers forfeiture of the full deposit rather than only the EMD.
Limited Room to Challenge Forfeiture After the Fact
Once a bidder has participated in an auction with a clear forfeiture clause, paid money against it without objection, and then defaulted on the balance, the scope to challenge the resulting forfeiture is narrow. The better protection by far is thorough review of the auction notice's terms before bidding and before making any payment, rather than attempting to contest forfeiture after a default has already occurred.
Frequently Asked Questions
Can a liquidator forfeit more than the EMD if a successful bidder defaults?
Yes, where the e-auction notice itself expressly provides for forfeiture of the entire deposit, not just the EMD, courts have upheld forfeiture of the full amount paid, even though the IBBI (Liquidation Process) Regulations do not expressly address forfeiture beyond the EMD.
What is the typical timeline to pay the balance sale consideration after winning a liquidation e-auction?
Auction notices commonly require the balance sale consideration to be paid within 90 days of being declared the successful bidder, though the exact timeline is set by the specific auction notice and should always be confirmed before bidding.
What should a bidder check in the e-auction notice before participating?
A bidder should read the forfeiture clause closely to understand exactly what happens to all sums paid, not just the EMD, if the balance consideration is not paid in time, and should confirm the payment timeline and any permitted extensions before submitting a bid.
Can a bidder challenge forfeiture after defaulting on the balance payment?
Challenging forfeiture after the fact is difficult where the auction notice's terms clearly provided for it and the bidder participated and paid against those terms without objection: the better protection is due diligence before bidding, not a challenge afterward.
References & Further Reading
This article references the following statutory provisions and case law. Readers should always verify current rules, fees and timelines against the applicable statute and rules as amended, since these are revised from time to time.
- The IBBI (Liquidation Process) Regulations, 2016, Schedule I (process for conducting an e-auction).
- M/s ASJ Finsolutions Pvt. Ltd. v. Vikram Bajaj (Liquidator of Best Foods Ltd.) & Ors., 2026 INSC 1062, on forfeiture of a bidder's full deposit under an auction notice's express terms.