Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2026 Supreme(Online)(NCLAT) 292

NATIONAL COMPANY LAW APPELLATE TRIBUNAL
ASHOK BHUSHAN, J
Xylocopa Builders & Developers Pvt. Ltd. – Appellant
Versus
Namrata Amol Randeri Liquidator of Turning Point Estates Pvt. Ltd. – Respondent
Company Appeal (AT) (Insolvency) No. 658 of 2025 | I.A./5114/2024 in C.P. (IB)/3714(MB) 2019

Advocates:
For the Appellants/Petitioners:Mr. Abhijeet Sinha, Sr. Advocate with Ms. Neha Agarwal, Mr. Vinod Nagula, Ms. Samita Nangre, Mr. Saikat Sarkar
For the Respondents: Mr. Chitranshul A. Sinha, Mr. Shivam Shorewala, Ms. Rakshita Bhargava, Ms. Archie Garg, Ms. Esha Sharma

Liquidator's cancellation of auction for non-payment within 90 days and EMD forfeiture upheld per regulations; excess deposit beyond EMD refunded with interest to prevent unjust enrichment upon re-auction at same price.

Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Liquidation Process Regulations, 2016 - Schedule I, Rules 12 & 13 - E-Auction Process Memorandum - Cancellation of auction and forfeiture of deposits by liquidator - Successful bidder failed to pay balance 75% sale consideration within 90 days despite extensions due to encumbrance on assets - Liquidator cancelled sale and forfeited deposits as per process terms requiring payment within stipulated time with interest post 30 days - Word 'shall' in regulations mandates strict compliance; liquidator competent to cancel for non-payment - Subsequent auction for same reserve price sold to new bidder. Held, cancellation and forfeiture of EMD (5%) upheld as per Clause 11; forfeiture of additional 20% beyond EMD set aside to avoid unjust enrichment given same sale realisation in fresh auction. Refund of additional deposit with 9% interest directed. (Paras 11, 12, 20-25, 27-31)

(B) Unjust Enrichment - Principles of restitution applicable where bidder innocent of fault, deposited amounts in good faith, encumbrance hindered financing despite court orders for removal - Subsequent sale at identical price renders retention of excess deposit unconscionable. (Paras 28-30)

Facts of the case:
Corporate debtor under liquidation; assets e-auctioned at reserve price, appellant declared successful bidder, deposited EMD (5%) and additional 20% (total 25%). Discovered encumbrance preventing bank loan; sought extensions and lien removal. Liquidator cancelled sale post 90 days + extension for non-payment, forfeited 25%, re-auctioned assets for same price to new bidder. NCLT rejected injunction against cancellation.

Findings of Court:
Cancellation of 9th auction and fresh auction upheld; EMD forfeiture valid; additional Rs.16.20 crore (beyond EMD) refunded with 9% interest p.a. post 30 days to prevent unjust enrichment.

Issues: (I) Validity of liquidator's cancellation of auction per process memorandum. (II) Justification for forfeiting 25% deposit. (III) Effect of subsequent auction at same price. (Para 19)

Ratio Decidendi: Liquidation process time-bound; bidders must conduct due diligence on encumbrances (Cl. 3.4, 9.3); non-payment within 90 days mandates cancellation and EMD forfeiture. Equity mitigates excess forfeiture where assets re-sold at same price, invoking restitution against unjust enrichment.

Result: Appeal partly allowed.

Table of Content
1. appeal challenges nclt order rejecting ia against auction cancellation. (Para 1 , 2)
2. parties argue over payment delay due to encumbrance and forfeiture validity. (Para 4 , 5 , 6)
3. e-auction memorandum mandates due diligence and forfeiture for non-payment. (Para 9 , 10 , 11 , 12)
4. timeline of events, encumbrance removal efforts, and interim orders detailed. (Para 13 , 14 , 15 , 16 , 17 , 18)
5. liquidator's auction cancellation lawful per process memorandum and regulations. (Para 19 , 20 , 24 , 25)
6. supreme court affirms mandatory timelines in liquidation auctions. (Para 21 , 22 , 23)
7. emd forfeiture upheld; excess 25% refundable to avoid unjust enrichment. (Para 26 , 30 , 31)
8. restitution ordered for innocent purchaser against unjust enrichment. (Para 28 , 29 , 32)

JUDGMENT

ASHOK BHUSHAN, J.

This appeal has been filed challenging the order dated 28.03.2025 passed by the adjudicating authority (National Company Law Tribunal, Court Room No. 1, Mumbai Bench) rejecting I.A. No.5114/2024 filed by the appellant. Aggrieved by the order rejecting I.A. No.5114/2024 this appeal has been filed.

2. Brief background facts of the case giving rise to this appeal are:

i. The corporate debtor, Turning Point Estates Pvt. Ltd. was admitted to Corporate Insolvency Resolution Process (CIRP) on 10.01.2020.

ii. Adjudicating authority vide order dated 09.02.2023 ordered the corporate debtor to be liquidated. The liquidator issued sale notice for sale of the property dated 18.03.2024. E-Auction Process Memorandum was also issued on 16.04.2024 for 9th e-Auction on 19.04.2024.

iii. The reserve price was Rs.81 crore and Earnest Money Deposit (EMD) of 5% being Rs.4.05 crore was provided for. The appellant deposited EMD of Rs. 4.05 crore in the auction held on 09.04.2024, appellant was declared as Successful Auction Purchaser. Letter of Intent (LoI) was issued in favour of the appellant.

iv. On 09.05.2024, balance amount toward 25% was deposited i.e., Rs.16.2 crore totalling to Rs.20.25 crore. Appellant has applied to Union Bank of India for grant of financial assistance for payment of the balance amount.

v. It was observed by the appellant in June 2024 that there is a charge/encumbrance of the Department of Excise on the assets. Bank also informed the appellant of the charge/encumbrance of the Department of Excise.

vi. On 17.07.2024, extension for deposit of balance 75% was sought by the appellant, which was granted till 21.08.2024. I.A. No. 5831/2024 was filed by the appellant seeking removal of the charge of Department of Excise.

vii. On 14.09.2024 an email was sent by liquidator cancelling the 9th Auction conducted on 19.04.2024 and forfeiting the amount deposited by the appellant. On 26.09.2024 another letter was sent by liquidator informing that 25% amount deposited by the appellant has been forfeited. On 17.10.2024, liquidator issued fresh notice of sale and an I.A. No.5114/2024 was filed by the appellant to restrain respondent from taking steps in terms of the email dated 14.09.2024.

viii. On 25.10.2024, interim stay was granted in favour of the appellant. On 23.01.2025, adjudicating authority directed for deletion of the lien mark in favour of the Excise Department. On 06.02.2025, adjudicating authority directed the appellant to submit confirmation from the Bank about disbursement within three days after removal of lien. On 04.03.2025, interim order was vacated by the adjudicating authority and Comp. App. (AT) (Ins.) No.445/2025 filed by the appellant which was disposed of on 18.03.2025, giving liberty to the appellant to press for any interim relief in the pending matter. The order was reserved on I.A. No. 5114/2024. Fresh e-Auction notice was issued on 02.04.2025 for e-Auction on 02.05.2025.

ix. Adjudicating authority by the impugned order dated 28.03.2025, rejected the I.A.5114/2024. The e-Auction in pursuance of the notice 02.04.2025 took place and assets have been sold for the amount of Rs.81 crore, in pursuance of 11th e-Auction

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2026 Supreme(Online)(NCLAT) 292

NATIONAL COMPANY LAW APPELLATE TRIBUNALASHOK BHUSHAN, JXylocopa Builders & Developers Pvt. Ltd. – AppellantVersusNamrata Amol Randeri Liquidator of Turning Point Estates Pvt. Ltd. – RespondentCompany Appeal (AT) (Insolvency) No. 658 of 2025 | I.A./5114/2024 in C.P. (IB)/3714(MB) 2019

Liquidator's cancellation of auction for non-payment within 90 days and EMD forfeiture upheld per regulations; excess deposit beyond EMD refunded with interest to prevent unjust enrichment upon re-auction at same price.

Cases Referred (1)

NATIONAL COMPANY LAW APPELLATE TRIBUNAL
ASHOK BHUSHAN, J
Xylocopa Builders & Developers Pvt. Ltd. – Appellant
Versus
Namrata Amol Randeri Liquidator of Turning Point Estates Pvt. Ltd. – Respondent
Company Appeal (AT) (Insolvency) No. 658 of 2025 | I.A./5114/2024 in C.P. (IB)/3714(MB) 2019