NCLAT held that a Successful Bidder as a matter of right cannot lay a claim for an extension of time for the payment of the balance amount.
The National Company Law Appellate Tribunal (NCLAT), Chennai bench comprising Justice M. Venugopal (Judicial Member) and Naresh Salecha (Technical Member) was hearing an appeal on Monday and held that a Successful Bidder as a matter of right, cannot lay a claim to seek for an extension of time for the payment of balance amount. The only benefit that the Successful Bidder can derive is that no interest for 30 Days from the date of the Letter of Intent. The balance amount of full sale consideration is to be paid within 90 days, of course, with interest.
In the instant case, the ‘Respondent/Liquidator had issued a ‘Process Document’ dated 08.04.2022, in respect of an ‘E-Auction Process’ (Amended and Supplemented from time to time). In regard to the ‘Public Announcement’ and ‘Process Document’, the Appellant/ Petitioner had furnished a Bid, in the E-Auction process with a Financial Proposal of INR 136,11,30,698/-. In the E-Auction Process, the Petitioner was declared as the Successful Bidder.
The Respondent/Liquidator had issued a ‘Letter of Intent’ dated 21.06.2022 to and in favour of the Appellant/Petitioner, in regard to the purchase of aforesaid Assets. The Appellant in terms of the ‘Letter of Intent’ dated 21.06.2022, and the ‘Process Document’ dated 08.04.2022, was required to effect the Payment of the entire sale or purchase consideration, within 30 Days and in case, the payment was not made within 30 Days from the date of receipt of ‘Letter of Intent’, the unpaid sum, shall carry an interest of 12% per annum.
Indeed, the Petitioner/Appellant was required to make payment of the whole purchase consideration within 90 Days from the date of receipt of the ‘Letter of Intent’.
The ‘Petitioner/Appellant’ had already made payment of Rs.14,94,23,947/- to the Respondent/ Liquidator, in tune with the ‘Letter of Intent’ dated 21.06.2022 and the ‘Process Document’ dated 08.04.2022. Because of the unforeseen circumstances (including backing out of the ‘International Investors of the Petitioner/Appellant and sharp depreciation in Mayanmar currency, within a short time), the Petitioner/Appellant was unable to disburse the remaining Purchase Consideration. These aspects were brought to the Notice of the Respondent/Liquidator and the Petitioner/ Appellant had prayed for an extension of time before the Respondent/ Liquidator to extend some additional time of 4 to 5 months, approximately, to disburse the purchase consideration.
Since the 90 Days period from the receipt of ‘Letter of Intent’ dated 21.06.2022, was coming to an end on 18.09.2022, the Appellant/Petitioner had prayed for an extension of time to the Adjudicating Authority. National Company Law Tribunal, Hyderabad Bench, being the Successful Bidder for payment of balance consideration.
On perusal of the Reply of the Respondent/Liquidator showed that the Appellant/Petitioner, before the conduct of E-Auction, had submitted a Payment Schedule along with the Requisite Proof of Funds, and in fact, the Appellant was invited to the meeting of the Stakeholders Consultation Committee, that took place on 14.06.2022, to present its proposal, because of the assurances were given by the Appellant/Petitioner and the Payment Schedule of the Appellant/Petitioner having been considered by the Members of the Stakeholders Consultation Committee, the Committee that had fit to permit the Appellant to participate in the E-Auction.
Because of the lapse of 90 Days period, the Respondent/Liquidator had proceeded to forfeit the amount paid by the Appellant/Petitioner towards the acquisition of Parcel 4 of the Assets and cancelled the Letter of Intent dated 21.06.2022 and in fact, the forfeiture was made by the Respondent/Liquidator through an E-Mail dated 20.09.2022.
The Members of the Stakeholders Consultation Committee, after deliberating the issues, at length, had rejected, the request made by the Appellant because it had defaulted in honouring the Terms of ‘Letter of Intent’ for the 2nd time. Moreover, in the 1st of E-Auction that took place on 11.01.2022, the Appellant was declared as a ‘Successful Bidder’ for Phase III Assets and failed to furnish Performance Security and also proposed payment timeline of 6-9 months as against the timeline of 1-3 months as per IBBI Regulations. Therefore, the ‘Letter of Intent’ issued to the Appellant was cancelled in the 1st E-Auction round.
According to the Respondent/Liquidator, the Appellant/Petitioner has paid only 10% of the Total Consideration to date and there was no sufficient source of funds demonstrated by the Appellant for arranging the balance payment, and this aspect was observed by the Stakeholders Consultation Committee, in their 14th Meeting held on 21.09.2022.
The Respondent/Liquidator added further, the Appellant/Petitioner till date had not remitted any amount to the Respondent/Liquidator in relation to the incurring of all expenses, pertaining to the maintenance and preservation of Phase III Assets from the date of Declaration of the Successful Bidder in the Process Document, as per the Terms.
It was the stand of the Appellant that it had replied to the Notice of the Liquidator, explaining the circumstances in which the Appellant could not pay the Balance Purchase Consideration and had prayed for an ‘extension’ of time’, before the Liquidator, to make payment.
The Appellate Authority noted that the Appellant had pleaded with the Liquidator to the fact that the period of 90 days from the receipt of ‘Letter of Intent’ dated 21.06.2022 was coming to an end on 18.09.2022. But due to unforeseen circumstances, the Appellant was not in a position to make payment of the entire purchase consideration of the Liquidator.
The Appellate Authority observed that the Appellant either as a matter of routine or as a matter of right, cannot lay a claim to seek for an ‘extension of time’. The Appellate Tribunal pointed out that I&B Code, 2016 is an inbuilt and self-contained code. Speed is the Essence/Gist of the Code. Moreover, the Provisions of I&B Code, 2016 are summary in nature, and they are not adversarial in character. The Appellant is bound, as per the relevant clause of the ‘Letter of Intent’ concerning the Bid.
The Appellate Tribunal noted, "More importantly, a ‘Successful Bidder’ gets ‘30 Days’ time ‘without interest’. The payment of ‘Loan sum’, by the ‘Successful Bidder’ / ‘Bidder’ ought to be made, within ‘90 days with interest’ and ‘30 days without interest’. The only benefit that the ‘Successful Bidder’ derives is that no interest for ‘30 Days’ from the date of ‘Letter of Intent’. The balance ‘full sale consideration’ (money consideration) is to be paid within 90 days, of course, with ‘interest’, on some pretext or the other."
In the light of the foregoing, the Appellate Tribunal keeping in mind that the Appellant had defaulted in fulfilling the tenor and spirit of 'Letter of Intent’ for the second time, and also, the observations, made by the Members of the Stakeholders Consultation Committee, in their 14th Meeting held on 21.09.2022, the plea of the Appellant, in seeking ‘an extension of time’ towards the payment of balance purchase consideration, the said request could not be acceded to by the Appellate Tribunal.
The Appeal was dismissed.