NCLAT affirmed forfeiture of earnest money deposit and part payment after a successful liquidation auction bidder failed to complete payment as per terms.
NCLAT Upholds Forfeiture in Liquidation Auction Default
The National Company Law Appellate Tribunal (NCLAT) has upheld the forfeiture of the earnest money deposit (EMD) and part sale consideration after a successful bidder in a liquidation auction defaulted on payment obligations.
The tribunal held that strict adherence to auction terms is vital to maintain credibility of the liquidation process under the IBC. It observed that allowing defaults or delays would prejudice other bidders and undermine asset realizations for creditors.
The decision emphasizes the binding nature of auction terms approved by the liquidator and NCLT. Potential bidders must conduct financial due diligence before bidding and ensure fund availability to meet timelines. For liquidators, uniformity in drafting bidding conditions is critical.
Citations
- Insolvency and Bankruptcy Code, 2016
