The Supreme Court has held that a defaulting bidder in an IBC liquidation e-auction cannot rely on the Liquidation Process Regulations' silence on forfeiture to recover sums it paid beyond the standard earnest money deposit, where the auction notice itself expressly provided for forfeiture of the entire deposit on default.
ASJ Finsolutions Pvt. Ltd. was declared the successful bidder in an e-auction conducted by the liquidator of Best Foods Ltd. under the Insolvency and Bankruptcy Code, depositing its earnest money of Rs. 2.55 crore along with part of the sale consideration, taking its total deposit to Rs. 6.39 crore. It then failed to pay the balance sale consideration within the stipulated 90-day window. The liquidator forfeited the entire sum paid, not merely the EMD, and both the NCLT and the NCLAT affirmed that forfeiture on ASJ Finsolutions' challenge.
Before the Supreme Court, ASJ Finsolutions argued that the IBBI (Liquidation Process) Regulations, 2016 nowhere expressly authorise forfeiture of amounts paid over and above the 10% EMD, and that this silence should limit the liquidator to forfeiting only the EMD. A Bench of Justices J.B. Pardiwala and K. Vinod Chandran rejected that argument, holding that the Regulations' silence on the point is not decisive where the e-auction notice itself contains a clear, express forfeiture clause extending to the whole deposit: terms the bidder accepted by participating and paying against them without protest. The Court accordingly dismissed the appeal and left the liquidator's forfeiture of the full Rs. 6.39 crore undisturbed.