- The Principal Bench of NCAT (National Company Law Appellate Tribunal) comprising Justice Anant Bijay Singh and Ms. Shreesha Merla, in a case titled M/s Visisth Services Ltd. vs. S.V.Ramani has held that the successful bidder cannot escape his contractual obligations and withdraw his bid after paying the Earnest Money Deposit (EMD) on the ground that the offer made by the bidder was a conditional one.
- In the instant case, the Corporate Debtor had filed an application under section of IBC, pursuant to which an order of liquidation was passed by the Adjudicating Authority. The Liquidator, in pursuance of the aforementioned order, started inviting bids through e-Auction for the sale of the Company as a ‘Going Concern’. The appellant in the case was the highest successful bidder.
- The appellant sent a clarificatory email to the Liquidator (respondent). He proposed different terms and stated that their acceptance would be subject to extinguishment of liabilities of the Corporate Debtor. To this, the Liquidator clarified that the terms and conditions of the Bid Document cannot be changed once it has been brought to the public domain. One of the terms in the bid document was that Corporate Debtor will be sold on an ‘as is very basis’. The appellant thereafter filed an appeal before the NCLAT.
- The appellant contended that he had communicated to the Liquidator that his offer was conditional and he will participate in the auction only when the liabilities attached to the Corporate Debtor were already taken care of. Whereas the respondent Liquidator contended that it had, in its email, specifically stated that no changes can be made to the information document once it has been brought to the public domain. As far as the extinguishment of the liabilities is concerned, the sale of the Corporate Debtor was on ‘as is very basis’.
- While adjudicating upon the contention of the appellant as regards the ‘Going Concern’, the Tribunal relied upon regulation 32A of the Insolvency and Bankruptcy Board of India(Liquidation Process) Regulations, 2016 and concluded that the sale as going concern meant the sale of both assets and liabilities, as Regulation 32A states that for the purpose of the sale as an Corporate Debtor, the group of assets and liabilities has to be sold as a going concern.
- As regards the withdrawal of the bid and the refund of the EMD amount, the tribunal observed that if the bidder is allowed to withdraw his bid at such a stage citing that their conditional offer has not been accepted, then the process of Liquidation would be a never ending one. The Tribunal, in this regard, relied upon the decision of the Apex Court in the case of Pawan Kumar Aggarwal vs. Association of Management Studies and anr. wherein it was held that the tender is an offer which must be unconditional and the person to whom the same is made must be willing to perform his obligations. Judicial review can only be allowed in cases where the conditions of the bid have been so strategically made that they suit a particular bidder, to the exclusion of all others.
- Thus, dismissing the appeal, the Tribunal also held that the appellant is not entitled to the refund of the EMD amount if he does not comply with the conditions of the contract.
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