Case Note & Summary
The appellant, Sri Pankaj Srivastava, Liquidator of M/s Samrudhi Realty Ltd., appealed against an order dated 12.12.2024 passed by a learned Single Judge in W.P.No.5759/2024. The writ petitioner, Sri Dinesh Pulipati, had challenged a letter dated 09.02.2024 by which the Liquidator disqualified him as a successful bidder, cancelled the Letter of Intent (LOI), and forfeited the Earnest Money Deposit (EMD) of Rs. 70,00,000 and Participation Deposit Money (PDM) of Rs. 3,70,000. The Single Judge allowed the writ petition, directing refund of Rs. 70,00,000 without interest, while permitting forfeiture of the balance Rs. 3,70,000. The Liquidator appealed, arguing that the forfeiture was justified as per the terms of the process memorandum and the Insolvency and Bankruptcy Code (IBC) regulations. The Division Bench examined the facts: the writ petitioner was declared the highest bidder in the liquidation sale of the corporate debtor's assets, an LOI was issued on 19.12.2023 requiring payment of the balance sale consideration by 18.01.2024. The petitioner sought extensions, which were granted until 31.01.2024, but failed to pay. The Liquidator then issued the impugned letter forfeiting the deposits. The court held that the forfeiture was in accordance with the terms of the process memorandum and Regulation 33 of the IBBI (Liquidation Process) Regulations, 2016. The writ petitioner's default was clear, and the Single Judge erred in ordering refund of the EMD. The appeal was allowed, setting aside the Single Judge's order and dismissing the writ petition. The court emphasized that writ courts should not interfere with commercial contracts unless there is arbitrariness or mala fides, which were absent here.
Headnote
A) Insolvency and Bankruptcy Code - Liquidation Process - Forfeiture of EMD and PDM - The Liquidator issued LOI to the writ petitioner as successful bidder for sale of assets of corporate debtor - Petitioner failed to pay balance consideration within extended time - Liquidator disqualified petitioner, cancelled LOI, and forfeited EMD and PDM - Held that forfeiture of EMD and PDM was justified as per terms of process memorandum and IBC regulations, and the writ court ought not to interfere with contractual forfeiture in the absence of arbitrariness or mala fides (Paras 1-10). B) Constitutional Law - Writ Jurisdiction - Contractual Matters - The writ petitioner invoked Article 226 to challenge forfeiture of deposits in a liquidation sale - Held that while writ jurisdiction is available, the court should be circumspect in interfering with commercial contracts, especially where the terms are clear and the default is admitted - The Single Judge's direction to refund part of the forfeited amount was set aside (Paras 11-15).
Issue of Consideration
Whether the Liquidator was justified in forfeiting the Earnest Money Deposit (EMD) and Participation Deposit Money (PDM) of the writ petitioner for failure to pay the balance sale consideration within the stipulated time, and whether the learned Single Judge erred in directing refund of a portion of the forfeited amount.
Final Decision
Appeal allowed. Order dated 12.12.2024 passed by the learned Single Judge in W.P.No.5759/2024 is set aside. W.P.No.5759/2024 is dismissed. No order as to costs.
Law Points
- Forfeiture of earnest money deposit
- forfeiture of participation deposit money
- liquidation process under IBC
- default by successful bidder
- refund without interest
- jurisdiction of writ court in contractual matters
