D. D. INTERNATIONAL PVT. LTD. VS RAJESH KUMAR AGARWAL, LIQUIDATOR : CASE SUMMARY
The NCLAT in D. D. International Pvt. Ltd. Vs. Rajesh Kumar Agarwal, Liquidator; Company Appeal (AT) (Insolvency) No. 1559 of 2023 held that the first duty is cast on the Liquidator to provide exact information to the bidder about the property which is put to sale.
FACTS OF THE CASE
Punjab National Bank filed Application under Section 7 IBC for initiating CIRP in the matter of Divine Alloys & Power Company Ltd. CIRP was not successful as such Liquidation Order was passed on 11.03.2021 and Rajesh Kumar Agarwal was appointed as Liquidator. Several attempts were made by the Liquidator to sell the Corporate Debtor as going concern. In 13th auction, the Appellant deposited 10 lac as refundable deposit and EMD to the tune of 4.225 Crore. The Appellant was declared highest bidder. LOI was issued to the Appellant. Appellant failed to deposit 1st installment despite extensions. The Appellant raised issue of non-disclosure by the Liquidator of the fact of land under DRI Plant which was not owned by the Corporate Debtor. Despite the same, the Respondent forfeited refundable deposit of Rs. 10 lac as well as EMD of 4.225 Crore, which was challenged before the NCLT. The NCLT noted that the Liquidator has not disclosed the dispute during the auction process. The NCLT also noted that Appellant has full access to data room and could have due diligence. The NCLT directed for forfeiture of refundable amount of Rs. 10 lac as well as forfeiture of 50% of security deposit in interest of justice. Appellant challenged the same before NCLAT
FINDINGS OF THE NCLAT
The NCLAT observed that the Liquidator was duty bound to give exact details of property which was to be auctioned. During the auction process the fact that the property under DRI plant did not belong to the Appellant was not disclosed. Although the Appellant has access to VDR and could have done due diligence, the first duty is cast upon the liquidator to provide exact information to the bidder about the property which is put to sale.
The NCLAT also observed that the Tribunal has erred in forfeiting 50% of EMD as there in no provision under the Code for imposing damages. Even if, for the sake of argument, it is presumed that the Tribunal has the jurisdiction to impose damages as well, it is incumbent upon the Tribunal to first quantify as to how much damages has been caused to the Corporate Debtor and how the said damages have to be compensated. The Tribunal has acted arbitrarily in awarding 50% damages.
The NCLAT set aside the order of NCLT and directed for refund of refundable participation deposit as well as refund of forfeited EMD amount.
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Mukesh Kumar Suman is an advocate and legal author based at Delhi. He regularly appears before various Judicial Forums including NCLT, NCLAT, High Courts and the Supreme Court. He can be approached at mukesh_suman@outlook.com or +91 9717864570.