The NCLAT, Principal Bench comprising of Justice Anant Bijay Singh and MS. Shreesha Merla in the case of M/s. Visisth Services Limited v. S.V. Ramani held that a successful bidder cannot shun the contractual obligations and withdraw the bid after payment of Earnest Money Deposit and seek a refund of the amount on the ground that the offer made by the Bidder was a “conditional offer”.
Factual Background
The Corporate Debtor instituted an application under Section 10 of the Insolvency and Bankruptcy Code, 2016 on which an order of Liquidation was passed by the Adjudicating Authority. The Liquidators started inviting bids through e-auction for the sale of the company as a “Going concern”. The Appellant was the highest successful bidder.
A clarification email was sent to the Respondent/Liquidator, stating certain terms and stated in their offer of acceptance would be subject to extinguishment o liabilities of the Corporate Debtor. However, the Liquidator informed the Appellant that the terms and conditions of the Bid documents cannot be reformed after it has been notified in the public.
The Appellant thereafter submitted the EDM amount.
Case of the Appellant
The Appellant filed an appeal in the NCLAT against the order of the Adjudicating authority which dismissed the Appellant/Bidder’s application and directed him to pay the balance amount, excluding the EDM amount.
Case of the Respondent
The Respondent/Liquidator on the contrary contended that it had in its email, stated that no changes can be made to the Information Document for auction once it is published in the public domain. With respect to the extinguishment of liabilities, the Respondent submitted that the sale Of Corporate Debtor was on “as very basis”.
Observation of the Court
The Court has to deal with two legal questions:
Whether the sale of Corporate Debtor as a “Going Concern” in Liquidation proceedings include its liabilities and; Whether the Appellant can withdraw from the Bid after payment of the EDM and seek for a refund of the amount paid on the ground that the offer made by the Bidder was a “conditional offer”?
With respect to the issue of sale of Corporate Debtor as a “Going Concern” in liquidation proceedings and such sale including assets as well as liabilities, the Tribunal relied on Regulation 32 A of the Insolvency and Bankruptcy Board of India Regulations 2016 and IBBI Discussion paper on Corporate Liquidation Process along with Draft Regulations and concluded that the sale as “Going Concern” means the sale of both assets and liabilities, if it is stated on “as is where is basis”.
The regulation states that for the purpose of sale of the Corporate Debtor, the group of assets and liabilities shall be sold as a going concern.
The Tribunal observed,
“If the Bidder is allowed to withdraw from the bid at this stage and seek refund on the ground that their conditional offer has not been accepted, then the liquidation process would be a never-ending one, defeating the scope and objective of the Code.”
Dismissing the appeal, the Tribunal held that the Bidder cannot wriggle out of the contractual obligations arising out of the acceptance of his Bid. As far as Regulation 32A of the Liquidation Regulations and the judgment of the NCLAT in Mohan Gems and Jewels Pvt Ltd v. Vijay Verma and Anr., it was held that the Appellant cannot be entitled to the EDM amount if he does not adhere to the terms of the contract.
Case Details
Before: NCLAT
Case Title: M/s Visisth Services Limited v. S.V. Ramani
Coram: Hon’ble Justice Anant Bijay Singh and Ms. Shreesha Merla
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