Supreme Court upholds forfeiture of auction deposits in IBC liquidation

The Supreme Court of India has upheld the forfeiture of deposits made by a successful bidder during a corporate liquidation auction under the Insolvency and Bankruptcy Code (IBC). The ruling dismissed an appeal by ASJ Finsolutions Pvt. Ltd., which sought a refund of its Earnest Money Deposit (EMD) and additional payments after failing to settle the remaining balance within the stipulated timeframe.

The dispute originated from an e-auction for land in Haryana with a reserve price of ₹25.56 crore. The bidder paid a total of ₹6.39 crore, consisting of a ₹2.55 crore EMD and an additional ₹3.84 crore toward the sale consideration. However, the bidder failed to pay the remaining ₹19.17 crore within the required 30-day window or the extended 90-day period.

The bidder attempted to raise concerns regarding property title deeds shortly before the deadline, despite the auction notice specifying the sale was on an “as is where is” basis and disclosing pending civil disputes. The Supreme Court affirmed the National Company Law Appellate Tribunal’s decision, clarifying that a 10% cap on EMD does not prevent the forfeiture of further amounts paid by a defaulting purchaser when forfeiture clauses are present in the auction notice.