The Supreme Court has dismissed the appeal of a successful bidder in an IBC liquidation auction that did not pay the balance price within 90 days, upholding the NCLAT’s order affirming forfeiture of its earnest money and the other sums it paid, on the strength of the forfeiture clause in the e-auction notice.
New Delhi: The Supreme Court on Monday dismissed the appeal of the successful bidder in an auction held during a corporate debtor’s liquidation under the Insolvency and Bankruptcy Code, 2016 (IBC), upholding the forfeiture of its Earnest Money Deposit (EMD) and the other amounts it had paid after it did not pay the balance sale consideration within 90 days [M/s ASJ Finsolutions Pvt. Ltd. v. Vikram Bajaj].
A Bench of Justice J.B. Pardiwala and Justice K. Vinod Chandran delivered the judgment on September 28, 2026 in Civil Appeal No. 13023 of 2025 [2026 INSC 1062], authored by Justice Chandran. It is marked non-reportable. The appeal was against the order of the National Company Law Appellate Tribunal (NCLAT), which had reversed an order of the National Company Law Tribunal (NCLT) that directed a refund.
Background of the case
The corporate debtor went into liquidation after no resolution plan was filed. An e-auction notice of October 25, 2021 offered several properties, including Lot No. 5 at Village Nangal Khurd, Tehsil Sonepat, Haryana, with a reserve price of Rs 25.56 crore. The notice said that a civil suit was pending over the sale deed for part of the land and that the sale was on an “as is where is” basis. The appellant bid at the reserve price on November 15, 2021 and succeeded.
The EMD was Rs 2.55 crore, which is 10% of the reserve price. The Liquidator asked for 25% of the bid, Rs 6.39 crore, which included the EMD and Rs 3.84 crore towards the balance, and the appellant paid it without protest. The remaining Rs 19.17 crore was due within 30 days, that is by December 14, 2021, or within 90 days, by February 14, 2022, with interest at 12% a year. On December 15, 2021 the appellant emailed that it would pay the balance with interest by February 14, 2022. It did not pay.
The earlier proceedings
Another company, Agarwal Trading Company, had obtained a Punjab and Haryana High Court direction to approach the NCLT, with a direction that no sale deed be executed for the lot until February 14, 2022, and it filed an application before the NCLT on February 11, 2022, which it withdrew on September 22, 2022. The appellant filed its own application for the prior title deeds on February 11, 2022, which the NCLT rejected on March 31, 2023, and its appeal was dismissed on April 21, 2023. While its writ petition in the High Court was pending, a fresh auction sold the lot for Rs 31.10 crore, Rs 5.54 crore more than the appellant’s bid. The High Court rejected the prayer for prior deeds and left the appellant free to avail other remedies. The appellant then went to the NCLT to annul the forfeiture and seek a refund, which the NCLT allowed and the NCLAT reversed.
What the parties argued
Senior Advocate Meenakshi Arora, for the appellant, argued that Schedule I of the IBBI (Liquidation Process) Regulations, 2016 contains no provision for forfeiture of EMD and caps EMD at 10% of the estimated value, that other bidders had been given more time beyond 90 days while the appellant was discriminated against, that the NCLT had rightly found the “triple test” satisfied, and that the forfeiture in Authorised Officer, Central Bank of India v. Shanmugavelu rested on a statutory basis under the SARFAESI Act that is absent here. In the alternative, she said, forfeiture could be only of 10% of the reserve price.
Advocate Abhishek Anand, for the Resolution Professional, argued that the appellant knew of the dispute over the sale deed and bid with open eyes, that the EMD was only 10% and the 25% deposit was paid without protest, and that forfeiture was a specific term of the e-auction notice from which the appellant could not resile. He said that the appellant had earlier been found to be in wilful default and its bid cancelled, that a third party had taken over the property in the fresh auction without difficulty, and that the appellant would have had the remedy of a refund with interest had it paid and faced any trouble with possession or ownership.
The Court’s reasoning
The Court noted that it was admitted that the appellant did not pay the balance within 30 days or within 90 days with 12% interest. It held that the absence of an express forfeiture provision in the Regulations does not help the appellant, because the e-auction notice made forfeiture an inevitable consequence of failing to pay the balance. The clause allowed the entire amount paid by the bidder, including the EMD, to be forfeited if the successful bidder fails to pay the balance sale consideration as per the terms of the sale. The Court said that the appellant paid Rs 6.39 crore voluntarily and without demur, and that with the notice providing for forfeiture of the entire amount paid, there was no reason to order a refund.
It agreed with the NCLAT that the triple test, under which forfeiture may be avoided if 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, was not satisfied on the facts. The Court said that proof of financial capacity lies in material substantiating it and not in repeated assurances of willingness to pay, that the appellant’s email came long before the 90 days ended when it already knew of the cloud over the sale deeds, and that it had not asked to verify the title deeds before bidding or paying the EMD. It called the reliance on the other company’s application an afterthought, since that company filed and withdrew it. It also noted that the higher price in the fresh auction reflected the property’s inherent value and was not a set-off against the expenses incurred.
The Court held that it was too late to raise the discrimination point about another purchaser being given time, which the appellant could have raised in the earlier proceedings, and that the orders relied on were produced only with written submissions, which it declined to look at. On the 10% limit, it relied on the NCLAT’s decisions in Westcoast Infraprojects Pvt. Ltd. v. Ram Chandra Dallaram Choudhary and Potens Transmission & Power Pvt. Ltd. v. Apex Buildsys Ltd. (In Liquidation), both affirmed by the Supreme Court, and held that Westcoast upheld forfeiture of both the EMD and other deposits under a clause in the e-auction notice.
The order
Finding no reason to interfere with the NCLAT’s order, the Court dismissed the appeal, and pending applications stood rejected.
Why it matters
The judgment holds that, in an IBC liquidation auction, forfeiture of the EMD and the other sums a bidder has paid can rest on the terms of the e-auction notice, even if the liquidation regulations are silent on forfeiture. It also shows that the Court expects a defaulting bidder to prove its financial capacity with material, and not to rely on assurances, and that objections about the title should be raised before bidding.
The Court decided the appeal on its facts and on the terms of this auction notice, and marked the judgment non-reportable. The appellant’s arguments on the 10% limit and discrimination were rejected on the record before the Court.
Case Title: M/s ASJ Finsolutions Pvt. Ltd. v. Vikram Bajaj [Civil Appeal No. 13023 of 2025; 2026 INSC 1062]
Bench: Justice J.B. Pardiwala and Justice K. Vinod Chandran, Supreme Court of India
Date of Judgment: September 28, 2026
Appearances: Senior Advocate Meenakshi Arora appeared for the appellant, and Advocate Abhishek Anand appeared for the respondent Resolution Professional.