Liquidation Sale: Successful Bidder Liable for 12% Interest on Delayed Balance Consideration
- REEDLAW
- 1 day ago
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REEDLAW Legal News Network reports: In a significant ruling on liquidation auction enforcement, the Appellate Tribunal reaffirmed that successful bidders are bound by the terms of sale and the statutory payment timelines prescribed under Schedule-I. It was held that the delayed remittance of auction consideration necessarily entails interest liability, and such an obligation cannot be avoided on account of subsequently raised issues relating to title defects, documentation formalities or procedural delays by the Liquidator.
The National Company Law Appellate Tribunal (NCLAT), Principal Bench comprising Justice Ashok Bhushan (Chairperson) and Mr. Barun Mitra (Technical Member), while adjudicating a Company Appeal, held that during liquidation, delayed balance payment against confirmed e-auction terms attracts mandatory interest at the prescribed rate. The Tribunal observed that once a bidder accepts asset sale terms on an “as is, where is, and whatever there is” basis, it cannot subsequently seek waiver of statutory consequences, and any delay beyond the stipulated period under Schedule-I requires payment of compensatory interest irrespective of external administrative impediments.
The Liquidator, acting as Appellant, challenged the order by which the Adjudicating Authority exonerated the Successful Auction Purchaser from payment of statutory interest on the delayed payment of the balance sale consideration. The Corporate Debtor had gone into liquidation after the initiation of insolvency proceedings, and the Liquidator issued an e-auction notice for the sale of land assets. The Successful Auction Purchaser offered the highest bid and deposited only part of the consideration within the stipulated period, while the remaining amount was paid much beyond the initial 30-day and extended 90-day period contemplated in the tender terms and Liquidation Regulations.
The Appellant contended that, under Regulation 33 read with Schedule-I of the Liquidation Process Regulations, the balance consideration paid beyond 30 days mandatorily attracted interest at 12% per annum, which could not be waived by the Adjudicating Authority. It was asserted that issues relating to encroachments and tax department attachment had already been disclosed in the tender documents, and the auction being strictly on “as is where is”, “as is what is” and “whatever there is” basis, the Successful Auction Purchaser was not entitled to condition its payment obligations on removal of encumbrances or transfer readiness. It was argued that once the sale was confirmed and possession was attributable to the bidder, the statutory payment schedule applied regardless of subsequent title removal obstacles.
The Successful Auction Purchaser maintained that it was ready and willing to pay the balance consideration, but was prevented as the Liquidator was unable to convey a clear and marketable title due to a subsisting attachment by the taxation authorities. It placed reliance upon a prior interim order by the Adjudicating Authority, which permitted payment within five days of lifting of attachment and argued that payment having been made within such extended period, no interest liability survived. Reference was placed on reciprocal obligations under contract law, asserting that unless the Liquidator was capable of conveying title, the requirement to pay balance consideration did not arise.
The Appellate Tribunal noted the contractual and statutory scheme prescribed under the Liquidation Regulations, particularly the provisions mandating payment of full consideration within fixed timelines and requiring commencement of interest after 30 days. The terms of the tender documents indicated that bidders had expressly accepted the risks of encumbrances, title defects, property disputes and incomplete records, and had agreed that transfer-related processes would not affect payment timelines. In this backdrop, delayed payments beyond the maximum permissible period carried automatic financial consequences. The Tribunal observed that the earlier order extending time did not extinguish the statutory consequences of delayed payment, and the inability of the Liquidator to transfer title immediately could not retrospectively dilute the mandatory interest requirement embedded under Schedule-I, which governed liquidation sales.
Mr. Ramji Srinivasan and Mr. Sunil Fernandes, Sr. Advocates with Mr. Atul Sharma, Mr. Pankaj Jain, Mr. Arjun Bhatia, Ms. Shefali Munde, Ms. Aditi Sharma, Mr. Vikram Choudhary and Mr. Sarthak Dugar, Advocates, represented the Appellant.
Mr. Arun Kathpalia and Mr. Krishnendu Datta Sr. Advocates with Mr. Anirudh Bhat, Mr. Siddharth Aggarwal, Mr. Aditya Dhupar, Mr. Sanidhya Kumar, Mr. Harshit Chaudhary, Mr. Yash Tandon and Mr. Harsh Gurbani, Advocates, appeared for the respondent.
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