Liquidator Justified in Forfeiting EMD Where E-Auction Process Breached and Amount Not Deposited Within Allowed Timeline

In the matter of BRS Refineries vs. . Mr. Supriyo Kumar Chaudhari, the NCLAT New Delhi upheld the order passed by the Adjudicating Authority (National Company Law Tribunal), Allahabad Bench, rejecting an appeal filed by BRS Refineries. The earlier appeal had challenged the action of the liquidator for JVL Agro Industries Ltd., to forfeit the earnest money deposit (EMD) of Rs. 96 lakhs pursuant to the e-auction of the assets of JVL Agro Industries Ltd. 

The appellant was the successful bidder for the expired stocks of more or less 1000 tons of packed refined edible oil with a reserved price of Rs. 9.6 crore and an EMD of Rs. 96 lakh, which was paid by the appellant. The liquidator was, however, not allowed to proceed with issuing the sale certificate without the prior approval of the adjudicating authority. The appellant could not submit the sale certificate timely and missed the payment deadline for the balance amount. The liquidator demanded the payment along with interest, failing which the EMD was to be forfeited.  The appellant applied for cancellation and refund of EMD.

The NCLT Allahabad bench held that the Applicant had clear knowledge that the e-auction was subject to orders passed by NCLT, NCLAT and Supreme Court of India. The applicant had unconditionally accepted the Letter of Intent and was, therefore, not entitled for any compensation and claim made by the Applicant for refund of EMD was not sustainable. 

Upholding the decision, the NCLAT New Delhi observed that the clauses of the E-auction Process Document, provided a clear timeline for payment of balance amount. The appellant had neither deposited the balance amount nor complied with the terms and conditions of the Process Document. Hence, the Liquidator did not commit any error in forfeiting the EMD. The appellant was not entitled to refund of EMD and the application filed by the Appellant has rightly been rejected by the Adjudicating Authority. The claim of compensation made by the Appellant has also been rightly negatived by the Adjudicating Authority. 

The liquidator for JVL Agro Industries Ltd., was represented by Partner, Swati Dalmia, of Fox Mandal & Associates LLP.