SHRI KARSHNI ALLOYS PRIVATE LTD VS RAMAKRISHNAN SADASIVAN : CASE SUMMARY

The Supreme Court held in Shri Karshni Alloys Private Ltd. Vs. Ramakrishnan  Sadasivan  (Civil Appeals No. 3625-3628 of 2025)  that forfeiture condition stipulated by the NCLT in its order  while granting extension of time cannot be equated with a forfeiture clause in a contract

FACTS OF THE CASE

CIRP was initiated in the matter of Surana Industries Ltd. on 02.01.2018. CIRP was not successful as such Liquidation Order was passed vide order dated 12.10.2018. The Corporate Debtor has assets in Karnatka and Tamil Nadu. Assets in Tamil Nadu could not be sold despite several auctions, as such Liquidator with consent of Stakeholder Consultation Committee (SCC) decided to sell the said assets as scrap on 31.07.2021. On 09.09.2021, the appellant made an offer of 105.21 crore to buy the said assets as going concern. The appellant proposed to infuse to invest 40 crore as equity infusion and balance 65.21 crore as unsecured debt. The appellant deposited 10% of the amount as advance. NCLT allowed the application filed by Liquidator for private sale vide order dated 22.02.2022 and directed the appellant to pay within 15 days although the application has been filed on 22.09.2021.  The Appellant claimed that they were facing challenges in making payments within timeline and sought extension of time till 28.06.2022. The SCC vide its meeting held on 13.04.2022 extended the timeline till 30.05.2022.

The Appellant filed an application before NCLT seeking extension of time. The NCLT vide order dated 29.06.2022 noted that an amount of Rs. 36.30 crore has been paid. It directed for payment of   50% of balance consideration with 12% interest till 30.06.2022 and 50% of balance consideration with 12% interest till 31.07.2022. It also directed that if  payment are not made as per direction,  amount paid will be forfeited. Subsequently, the Appellant paid additional 1.50 crore bringing total at 37.80 crore.  The Appellant could not make payment as per timeline as such the amount of Rs. 37.80 Crore was forfeited. The Appellant filed Application before NCLT against forfeiture, which was dismissed vide order dated 10.08.2022.

 The Appellant filed Appeal bearing No. 443/2024 against order 29.06.2022. The Appellant filed another appeal bearing No. 438/2022 against order dated 10.08.2022. Appellant filed Writ Petition bearing No. 24262/2022 before High Court of Madras against order dated 29.06.2022. Both the appeals were dismissed by NCLAT and Writ Petition was also dismissed by the High Court. Aggrieved by the orders of NCLAT, the appellant filed appeals before the Supreme Court.

FINDINGS OF THE SUPREME COURT

The Supreme Court noted that the sale did not fall under Regulation 33 (2) (c) but under Regulation 33 (2) (d) of the Liquidation Regulations as the assets in question were sold with prior permission of NCLT. The Supreme Court noted that NCLT in its order dated  29.06.2022 had directed for forfeiture of paid amount  if the balance payment is not made.

The Supreme Court noted that this was not a case of a contract between the appellant and the liquidator/stakeholders, whereby the appellant could seek to fall back on Section 74 of the Indian Contract Act,1872. The sale in question was purely under the supervision of the Adjudicating Authority, i.e., the NCLT, and the forfeiture condition stipulated by the NCLT while granting extension of time cannot be equated with a forfeiture clause in a contract. Having made an offer, coupled with a temporal commitment, which was duly accepted by the NCLT, vide its order dated 22.03.2022, the appellant went before the NCLT and sought extension of time. That extension was granted, saddled with the condition of forfeiture in the event of failure, and was duly accepted and acted upon by the appellant. The appellant actually made payments to the tune of ₹1.50 crores after the passing of the extension order dated 29.06.2022 but failed to make the full payment by 31.07.2022. The appellant cannot, therefore, seek to approbate and reprobate at this stage by assailing the forfeiture clause in the said order, having accepted and acted upon the extension granted thereunder.

The Supreme Court also observed that filing of Writ Petition suppressing the fact of appeals before NCLAT against the same orders warranted non-suiting the appellant.

The Supreme Court dismissed the appeals.

_______________________________________________________________________