Supreme Court: A liquidation-auction bidder who misses the payment deadline cannot get its deposit back

The Court noted that it was admitted that the appellant paid neither within the first 30 days nor, with 12 per cent interest, within 90 days. The only question was whether its refusal was bona fide. Schedule I of the Regulations does not expressly provide for forfeiture, but the terms were explicit in the tender notice, and the appellant bid with open eyes and deposited the amounts demanded without protest. Having deposited 10 per cent of the reserve price along with part of the balance, an undertaking to pay the rest within 30 or 90 days, it faced forfeiture on failure, which is automatic. The argument that the regulations are silent on forfeiture fails in the face of the specific condition in the auction notice.

The Court disagreed with the NCLT's finding that the triple test was met. That test asks whether the bidder acted with a hidden agenda to rig the auction, was not a genuine bidder with financial capacity, or was prevented by extraneous reasons from paying. The appellant had never asked to verify the title deeds before bidding or depositing the earnest money, and could not use that request, made close to the last date and long after the auction notice had warned about the sale deed, as a reason not to pay. Proof of financial capacity must come from materials produced to substantiate it, not from repeated assertions of willingness to pay. The earlier proceeding had already found its default wilful. The extraneous reason it cited was an afterthought: another company, on the strength of a High Court direction, merely filed an application before the NCLT and withdrew it later. The higher price in the fresh auction was only the inherent value of the property, not a set-off against the expenses incurred. The discrimination plea was too late and the orders on which it relied were produced only with written submissions.

The Court also noted the decisions in Westcoast Infraprojects Private Limited v. Ram Chandra Dallaram Choudhary and Potens Transmission & Power Pvt. Ltd. v. Apex Buildsys Ltd. (In Liquidation), both of which this Court had affirmed in civil appeals. Westcoast had upheld forfeiture, under a clause in the e-auction notice, of both the earnest money and any other deposit made by the bidder, when the successful bidder failed to pay the balance on time. The notice here said that the entire amount paid by a bidder, including the earnest money, could be forfeited if a successful bidder fails to pay the balance consideration as per the terms of the sale. The appellant having paid the money voluntarily, there was no reason to order a refund. The impugned NCLAT order was not interfered with, the appeal was dismissed and pending applications were rejected.