A Successful Bidder Cannot Be Permitted To Wriggle Out Of Its Bid Claiming His Bid To Be A 'Conditional Offer'; NCLAT

Factual Background

The Corporate Debtor filed an application under Section 10 of the Insolvency and Bankruptcy Code, 2016, on which an order of Liquidation was passed the Adjudicating Authority. The Liquidator thereafter started inviting bids through e-Auction for sale of the company as a 'Going Concern'. The Appellant was the highest successful bidder.

He sent a clarificatory email to the Respondent/ Liquidator, proposing different terms and stated that their offer of acceptance would be subject to extinguishment of liabilities of the Corporate Debtor. The Liquidator informed the Appellant that the terms and conditions of the Bid Documents cannot be changed after the public notification, one of the terms being that the Corporate Debtor will be sold on an 'as is very basis'. The Appellant submitted the EMD amount to the Liquidator.

The Appellant thereafter filed an appeal in the NCLAT against the order of the Adjudicating Authority- NCLT, Kolkata Bench which dismissed the Appellant/ Bidder's application and directed him to pay the balance amount, excluding the EMD amount, failing which the Liquidator is at liberty to cancel the sale in favour of the bidder and forfeit the EMD amount paid by him.

Contentions Of Parties

The primary contention of the Appellant was that it had communicated to the Liquidator that its offer is conditional and it will participate in the e-Auction only if the liabilities attached to the units of the Corporate Debtor, both statutory and non-statutory were clarified and dispensed with/ extinguished on the completion of the liquidation process.

The Respondent/ Liquidator on the other hand contended that it had, in its email, stated that no changes can be made to the Information Document for auction once it is published in the public domain. As regards the extinguishment of liabilities is concerned, the Respondent submitted that the sale of the Corporate Debtor was on 'as is very basis'.

Issues

The Tribunal framed the following two issues:

a. Whether sale of Corporate Debtor as a 'Going Concern', in Liquidation Proceedings includes its liabilities; and

b. Whether the Appellant herein can withdraw from the Bid after payment of the EMD and seek for refund of the amount paid on the ground that the offer made by the Bidder was a 'conditional offer'.

Analysis And Decision

Going Concern and transfer of liabilities-

As regards the issue of sale of Corporate Debtor as a 'Going Concern' in liquidation proceedings and such sale including assets as well as liabilities, the Tribunal relied on Regulation 32A of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 and the IBBI Discussion Paper on Corporate Liquidation Process along with Draft Regulations and concluded that the sale as 'Going Concern' means sale of both assets and liabilities, if it is stated on 'as is where is basis'. Regulation 32A of the Liquidation Regulations states that for the purpose of sale of the Corporate Debtor, the group of assets and liabilities shall be sold as a going concern.

Withdrawal of Bid and refund of the EMD amount on the basis that the offer of the Bidder was conditional-

The Appellant had accepted all the terms of the Bid Documents, which made all dues of the Corporate Debtor, the sole responsibility of the Successful Bidder. Thus, he cannot revise the same.

The Tribunal observed-

"If the Bidder is allowed to withdraw from the Bid at this stage and seek refund on the ground that their conditional offer has not been accepted, then the liquidation process would be a never ending one, defeating the scope and objective of the Code."

In this regard, the NCLAT relied on the Supreme Court judgements in Pawan Kumar Agarwal Vs. Association of Management Studies and Anr.; Meerut Development Authority wherein the Court held that a tender is an offer which must be unconditional and the person to whom it is made, must be able to and willing to perform his obligations. Judicial review is not usually permissible; however, it may be allowed in cases where the terms of the invitation to tender were so tailor made to suit the convenience of any particular person with a view to eliminate all others from participating in the bidding process.

The Tribunal also relied on Punjab Urban Planning and Development Authority and Ors. Vs. Raghu Nath Gupta and Ors., in which the Apex Court referred to UT Chandigarh Admn. Vs. Amarjeet Singh. The Court held-

"…after having accepted the offer of the commercial plots in a public auction with a superimposed condition i.e. on "as-is-where-is" basis and after having accepted the terms and conditions of the allotment letter, including instalment facility for payment, the respondents cannot say that they are not bound by the terms and conditions of the auction notice, as well as that of the allotment letter."

Dismissing the appeal, the Tribunal held that the Bidder cannot wriggle out of the contractual obligations arising out of acceptance of his Bid. Having regard to Regulation 32A of the Liquidation Regulations and the judgment of the NCLAT in Mohan Gems and Jewels Pvt. Ltd. v. Vijay Verma and Anr., it was held that the Appellant cannot be entitled to the EMD amount if he does not comply with the terms of the contract.

Case Title:M/s. Visisth Services Limited v. S.V. Ramani

Counsel for the Appellant: Mr. Jeevan Ballav Panda, Ms. Shalini Sati Prasad, Mr. Gaurav Sharma & Ms. Meher Tandon, Advocates.

Counsel for the Respondents: Mr. Sanjeev Kumar and Mr. Anshul Sehgal, Advocates for R-1. Mr. Om Narayan Rai, Advocate for R-3.

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