The National Company Law Tribunal (NCLT), Mumbai, on 16 October held that an auction purchaser cannot indefinitely withhold the balance sale consideration on the ground that statutory permissions for the transfer of auctioned properties remain pending.
A Bench comprising Judicial Member Vinay Goel and Technical Member Charanjeet Singh Gulati considered an application filed by the liquidator of Vindhyavasini Corporation Pvt. Ltd., seeking payment of the balance consideration for two land parcels sold through e-auction.
The company entered the Corporate Insolvency Resolution Process (CIRP) following a petition filed by the State Bank of India. After no resolution plan was approved, the NCLT ordered its liquidation in 2022.
During the liquidation process, the liquidator auctioned three land parcels. The respondent, Abhisheksinh Chauhan, emerged as the successful bidder for all three parcels.
After the auction, Chauhan discovered that the non-agricultural permissions for two parcels had expired. By an order dated 10 November 2023, the NCLT excluded 90 days from the auction date and directed the liquidator not to forfeit the earnest money deposit (EMD) pending the grant of the permissions.
Subsequently, Chauhan paid the balance consideration for the third parcel, and the NCLT confirmed its sale. However, the competent authorities rejected the applications for non-agricultural permissions for the remaining two parcels.
The liquidator then approached the NCLT seeking payment of the outstanding consideration of Rs. 5,25,09,600 with 12% interest or, alternatively, cancellation of the auction and forfeiture of the EMD.
The Tribunal examined the sale notice and letters of intent and observed that a conjoint reading of these documents made it clear that the auction purchaser had accepted the obligation to deposit the balance sale consideration within the stipulated period.
It noted that he had also assumed responsibility for obtaining the statutory and regulatory permissions required for the transfer. The auction terms prescribed interest for delayed payment and specified the consequences of failure to deposit the consideration within the prescribed period.
Further, the Bench clarified that the liquidator was required to facilitate the transaction and extend necessary cooperation in accordance with law. However, this obligation could not be construed as an unconditional undertaking to secure statutory permissions from the competent authorities.
It also relied on the Calcutta High Court's ruling in Cotton Casuals India Pvt. Ltd. & Ors. v. State of West Bengal & Ors. (W.P.O. 1235 of 2024). It observed that where assets are sold on an “as is where is” basis, the purchaser must independently conduct due diligence and bear the responsibilities arising from the auction terms.
Invoking its powers under Rule 11 of the NCLT Rules, the Tribunal allowed the auction purchaser 30 days to pay the outstanding Rs. 5,25,09,600 with 12% annual interest from the due date. It directed the liquidator to issue sale certificates for the two parcels and assist the purchaser in obtaining or renewing the non-agricultural permissions upon receiving the payment.
Accordingly, the NCLT disposed of the application.
For the Applicant: - Adv. Shadab Jan, Adv. Abdullah Qureshi & Adv. Vaidehi, Kulkarni i/b India Law LLP (PH)
For the Respondent: Adv. JVL Bharati (VC)