MANU/SC/0974/2024

Equivalent/Neutral Citation: AIR2024SC 4862, 2024 INSC 659

IN THE SUPREME COURT OF INDIA

Civil Appeal Nos. 9059-9061 of 2022
Decided On: 28.08.2024
V.S. Palanivel Vs. P. Sriram
Hon'ble Judges/Coram:
Hima Kohli and Ahsanuddin Amanullah, JJ.
Counsels:
For Appellant/Petitioner/Plaintiff: P. Chidambaram, Sr. Adv. and Sriram P., AOR
For Respondents/Defendant: C.U. Singh, Sr. Adv., K.V. Vijayakumar, AOR, Arvind Datar,
Sr. Adv., V. Balachandran, Siddharth Naidu, J. Prithviraj, Advs. and KSN & Co., AOR
Case Note:
Company -Sale consideration - Extension of time -Section 35 of Insolvency
and Bankruptcy Code, 2016 and Rules 11 and 12 of National Company Law
Tribunal Rules, 2016- One company having four shareholders purchased
immovable property in which company started running hotel and bar -
Company took loan from financial creditor - When disputes arose between
company and financial creditor, latter invoked arbitration clause in which
award was passed by Arbitral Tribunal in favour of financial creditor -
Company challenged said award but said petition was dismissed by High Court
- On non-payment of amounts awarded under Arbitral Award, financial
creditor filed application for initiating corporate insolvency resolution process
against company which was admitted -No resolution plan for revival of
Corporate Debtor was received and Committee of Creditors recommended that
company be liquidated which was accepted - Thereafter, auction was
conducted in which one company emerged as successful bidder, however said
company was unable to pay balance sale consideration within stipulated
period of ninety days -Appellant filed Miscellaneous Application before
Adjudicating Authority for setting aside auction proceedings which stand
dismissed - In meantime, due to onset of the Covid-19 pandemic, Government
imposedcountrywide lockdown - Auction Purchaser moved application before
Adjudicating Authority for extension of time for making payment of balance
sale considerationwhich was allowed - Dissatisfied with said order, Appellant
filed Company Appeal but before that, Auction Purchaser paid balance sale
consideration in respect of auctioned property and Sale Deed was executed by
Liquidator in favour of Auction Purchaser - Thereafter, Appellant filed
application seeking recall of order of extension of time passed by Adjudicating
Authority and challenging execution of Sale Deed - Adjudicating
Authoritydismissed bothapplications filed by Appellant - Said orders were
carried in appeal by Appellant before Tribunal which also stand dismissed -
Hence, present appeal - Whether impugned order of extension of time to
depositbalance sale considerationof property auctioned in auction process
warrant any interference.

23-01-2025 (Page 1 of 35) www.manupatra.com VAISH ASSOCIATES

Facts:
One company having four shareholders namely, the Appellant herein, his wife,
his son and his daughter-in-law purchased an immovable property. The
company started running a hotel and a bar from the said premises. The
company took a loan from a financial creditor. When disputes arose between
the company and the financial creditor, the latter invoked the arbitration
clause governing the parties. The Arbitral Tribunal passed an award in favour
of the financial creditor along with interest. The company challenged the said
award but the said petition was dismissed by the High Court.On non-payment
of the amounts awarded under the Arbitral Award, the financial creditor filed
an application before the Adjudicating Authority for initiating corporate
insolvency resolution process against the company. The said petition was
admitted. As per the records, no resolution plan for revival of the Corporate
Debtor was received and the Committee of Creditorsrecommended that the
company be liquidated. The said recommendations were accepted by the
Adjudicating Authority. Thereafter, auction was conducted in which one
company emerged as successful bidder, however said company was unable to
pay balance sale consideration within stipulated period of ninety days. The
Appellant filed a Miscellaneous Application before the Adjudicating Authority
for setting aside the auction proceedings. The said application was dismissed
by the Adjudicating Authority. In the meantime, due to the onset of the
Covid-19 pandemic, Government of India imposed a countrywide lockdown.
The Auction Purchaser moved an application before the Adjudicating
Authority for extension of time for making payment of the balance sale
consideration. Besides taking the plea of the onset of Covid 19 pandemic, one
of the grounds taken by the Auction Purchaser for extension of time was that
the Income Tax Authority had passed an order attaching the auctioned
property. The said application was allowed by the Adjudicating Authorityand
the time granted for depositing the balance sale consideration was deferred
till the lockdown was lifted by the Central Government/State Government,
respectively.Dissatisfied with the aforesaid order, the Appellant filed a
Company Appeal. Well before that, the Auction Purchaser paid the balance
sale consideration in respect of the auctioned property and a Sale Deed was
executed by the Liquidator in favour of the Auction Purchaser. The Appellant
filed an applicationseeking recall of the order of extension of time passed by
the Adjudicating Authorityand challenging the execution of the Sale Deed. By
virtue of the common order, the Adjudicating Authority dismissed both the
applications filed by the Appellant, one for stalling the e-auction that was
conducted and the other for setting aside the Sale Deed. The said orders were
carried in appeal by the Appellant before the Tribunal which stand dismissed.
Held, while partly allowing the appeal:
(i) The period of ninety days for depositing the balance sale consideration had
expired just after the crucial date. There was no merit in the submission
made by the Appellant that the Tribunal ought not to have accepted the view
taken by the Adjudicating Authority that Covid-19 lockdown was a valid
reason for extension of time to deposit the balance sale consideration.[32.12]
(ii) The Appellant could not be permitted to argue that since the tax value of
the subject property was estimated by the Registered Valuers, the Liquidator

23-01-2025 (Page 2 of 35) www.manupatra.com VAISH ASSOCIATES

ought not to have fixed the reserve price for the simple reason that though
the reports of the Registered Valuers mentioned the tax value of the subject
property at a little above forty eight crores, but the liquidation value in both
the reports was much lower and the Liquidator arrived at the average of the
two estimated liquidation values to fix the reserve price of the subject
property.[33.6]
(iii) Rule 12 would have to be treated as mandatory in character for the
reason that it contemplates a consequence in the event of non-payment of
the balance sale consideration by the highest bidder within the stipulated
timeline of ninety days, which was cancellation of the sale by the Liquidator.
To that extent, there was substance in the submission made on behalf of the
Appellant that since the second proviso under Rule 12 contemplates a
consequence of cancellation of the auction on non- payment of the balance
sale consideration within ninety days, the Liquidator was not empowered to
extend the timeline.[35.11]
(iv) The Adjudicating Authority exercised statutory powers under Section 35
of the IBC read with its inherent powers under Rule 11 of the NCLT Rules,
2016 for extending the time to deposit the balance sale consideration on
sufficient cause being shown, i.e., in view of the countrywide lockdown due to
the Covid- 19 pandemic. This latitude that was given in the aforesaid
extraordinary circumstances to meet the ends of justice, could not be faulted.
[35.16]
(v) The subject land has been utilized by the Auction Purchaser to build a
Mother and Child hospital which was operational. Huge amounts have been
pumped into the project by the Auction Purchaser. The hospital was fully
functional providing medical facilities to seven surrounding districts. In
contrast, the Appellant had not been a vigilant litigant. His conduct shows
that he had dragged his feet at every stage. Record reveal that belated
applications have been filed by him for seeking recall of the orders passed by
the Adjudicating Authority granting extension of time to the Auction
Purchaser. For reasons best known to him, it took nineteen months for the
Appellant to prefer an appeal before the Tribunal against the order passed by
the Adjudicating Authority, as provided for in the IBC. Furthermore, the
Appellant resisted handing over possession of the subject property to the
Respondents thereby causing more delay.[36.13]
(vi) For arriving at a just and fair figure, this court propose to take into
consideration the estimated value of the subject property in terms of the
Reports submitted by the Registered Valuers appointed by the Liquidator.
Based on their Reports, the Liquidator had fixed amount as the average
liquidation value of the subject property for the purpose of e-auction. This
figure was brought down by twenty percent in the second round of auction.
Keeping in mind the fact that the Auction Purchaser managed to retain the
balance sale consideration for over six months, this court deem it appropriate
to direct it to deposit fifty percent of the differential figure, with the
Liquidator along interest till date of actual payment. [36.15]
Insolvency Category:
Others: Auction/Bid - Initiate/Closure/Stay; Others: Pendency of Proceedings -
Sale/Disposal of Assets; Others: Release/Discharge/Attachment/Mortgage of
23-01-2025 (Page 3 of 35) www.manupatra.com VAISH ASSOCIATES
Property/Assets; Liquidation: Valuation Report
JUDGMENT
Hima Kohli, J.
A. BACKDROP
1 . The Appellant - V.S. Palanivel (shareholder/former Managing Director of M/s. Sri
Lakshmi Hotel Private Limited) has filed the present appeals against the judgment and
order dated 16th September, 2022, passed by the National Company Law Appellate
Tribunal, Chennai Bench1 in three Company Appeals2 preferred by him. The details of
the said Company Appeals are (i) Company Appeal No. 336 of 2021 (subject matter of
Civil Appeal No. 9059 of 2022) filed against the common judgment dated 17th
November, 2021 passed by the National Company Law Tribunal, Chennai Bench3
rejecting an application4 moved by the Appellant praying inter alia that directions be
issued to the Liquidator, Sri Lakshmi Hotel Private Limited to stall all proceedings in
respect of the e-auction conducted by him on 23rd December, 2019, to work on an
alternative manner of dividing the property put to auction and sell only a part of the
land and for grant of sufficient time to make payment to the financial creditor. (ii)
Company Appeal No. 339 of 2021 (subject matter of Civil Appeal No. 9060 of 2022)
arose from the common order dated 17th November, 2021 passed by the Adjudicating
Authority on an Interim Application5 seeking recall of its order dated 05th May, 2020
passed on an application6 filed by the Appellant. (iii) Company Appeal No. 343 of 2021
(subject matter of Civil Appeal No. 9061 of 2022) filed by the Appellant on 27th
October, 2021 Under Section 61 of the Insolvency and Bankruptcy Code, 20167 against
order dated 05th May, 2020 passed by the Adjudicating Authority allowing an
application moved by the successful bidder, M/s. KMC Speciality Hospitals (India)
Limited8 for extension of time to deposit the balance sale consideration after the
Central/State lockdown was lifted. All the aforesaid appeals were dismissed by the
Tribunal under the impugned judgment and order dated 16th September, 2022.
2 . It may be noted at the outset that Civil Appeal No. 9059 of 2022 does not survive
inasmuch as the auction proceedings have already been concluded and upon the Auction
Purchaser depositing the sale amount, the Liquidator has executed a Sale Deed in its
favour. Therefore, the scope of the present judgment is confined to Civil Appeals No.
9060 and 9061 of 2022.
B. SEQUENCE OF EVENTS
3. The facts of the case lie in a narrow compass. Sri Lakshmi Hotels Private Limited9, a
family held concern having four shareholders namely, the Appellant herein, his wife, his
son and his daughter-in-law purchased an immovable property10 at Tiruchirappalli
measuring 67,533 sq. ft. The company started running a hotel and a bar from the said
premises. In the year 2006, the company took a loan from a financial creditor to the
tune of ' 1,57,25,000/- (Rupees One crore fifty seven lakh twenty five thousand only).
When disputes arose between the company and the financial creditor, the latter invoked
the arbitration clause governing the parties. The Arbitral Tribunal passed an award on
27th December, 2014, for a sum of ' 2,21,08,244/- (Rupees Two crore twenty one lakh
eight thousand two hundred and forty four only) in favour of the financial creditor along
with interest at the rate of 24 % per annum from the date of claim petition till the date

23-01-2025 (Page 4 of 35) www.manupatra.com VAISH ASSOCIATES

of realisation. The company challenged the said award11 Under Section 34 of the
Arbitration and Conciliation Act, 1996, but the said petition was dismissed by the High
Court of Madras vide order dated 16th November, 201711.
4 . On non-payment of the amounts awarded under the Arbitral Award, the financial
creditor filed an application12 Under Section 7 of the IBC before the Adjudicating
Authority for initiating corporate insolvency resolution process against the company.
The said petition was admitted on 28th February, 2019 and the Respondent No. 2 was
appointed as an Interim Resolution Professional13. Later on, he was confirmed as a
Resolution Professional and finally, as a Liquidator. As per the records, no resolution
plan for revival of the Corporate Debtor was received and the Committee of Creditors14
recommended that the company be liquidated. The said recommendations were
accepted by the Adjudicating Authority, vide order dated 17th July, 2019.
5 . Pursuant to the above, the Liquidator engaged two Registered Valuers to give an
estimate of the valuation of the subject property. The Valuers submitted their Reports as
follows:

Based on the above Reports, the Liquidator arrived at the average value of the subject
property, i.e., ' 39,41,28,500/- (Rupees Thirty nine crore forty one lakh twenty eight
thousand five hundred only) and scheduled an auction on 25th November, 2019, with a
reserve price set at the above figure. Vide letter dated 08th November, 2019, the
Appellant objected to fixation of the reserve price. The Liquidator replied to the said
communication and turned down his objections. He also requested the Appellant to
nominate a person in the Stakeholders Committee, which the Appellant failed to do.
6. When the Liquidator did not receive any bid in the first auction, he published a notice
scheduling a second auction on 23rd December, 2019. This time, the reserve price was
reduced by 25% i.e. it came down from ' 39,41,28,500/- (Rupees Thirty nine crore forty
one lakh twenty eight thousand five hundred only) to ' 29,55,96,375/- (Rupees Twenty
nine crore, fifty five lakh ninety six thousand three hundred and seventy five only). M/s.
KMC Speciality Hospitals (India) Limited was the sole bidder in the second auction
process and on depositing an earnest amount of ' 2,95,59,698/- (Rupees Two crore
ninety five lakh fifty nine thousand six hundred and ninety eight only), it emerged as
the successful bidder.
7 . In terms of Rule 12 of Schedule-I under Regulation 33 of the Insolvency and
Bankruptcy Board of India (Liquidation Process) Regulations, 201615, the successful
bidder was required to pay the balance sale consideration within 90 days from the date
of demand. The Liquidator despatched a letter dated 24th December, 2019 to the
Auction Purchaser demanding the balance sale amount. Though arguments were initially
advanced on behalf of the Appellant that the period of 90 days for paying the balance
amount ought to be reckoned from 24th December, 2019 and not from 26th December,
2019, the date on which the Auction Purchaser received the communication from the
Liquidator, later on the said plea was not seriously pressed. If one takes the outer limit
for calculating the period of 90 days for the Auction Purchaser to pay the balance sale

23-01-2025 (Page 5 of 35) www.manupatra.com VAISH ASSOCIATES

consideration reckoned from 26th December, 2019, the date when the Auction
Purchaser received the letter despatched by the Liquidator, the said period would have
expired on 25th March, 2020. It is not in dispute that the balance sale consideration
was not paid by the Auction Purchaser within the period of 90 days. The said amount
was paid only on 24th August, 2020.
8. The Appellant filed a Miscellaneous Application4 before the Adjudicating Authority for
setting aside the auction proceedings. The said application was dismissed by the
Adjudicating Authority, vide common order dated 17th November, 2021. In the
meantime, due to the onset of the Covid-19 pandemic, Government of India imposed a
countrywide lockdown on 25th March, 2020. On 22nd April, 2020, the Auction Purchaser
moved an application6 before the Adjudicating Authority for extension of time for
making payment of the balance sale consideration. Besides taking the plea of the onset
of Covid 19 pandemic, one of the grounds taken by the Auction Purchaser for extension
of time was that the Income Tax Authority had passed an order attaching the auctioned
property. The said application was allowed by the Adjudicating Authority3, vide order
dated 05th May, 2020 and the time granted for depositing the balance sale
consideration was deferred till the lockdown was lifted by the Central Government/State
Government, respectively.
9 . Dissatisfied with the aforesaid order, the Appellant filed a Company Appeal16, after
19 months, on 27th October, 2021. Well before that, the Auction Purchaser paid the
balance sale consideration in respect of the auctioned property on 24th August, 2020
and a Sale Deed was executed by the Liquidator in favour of the Auction Purchaser on
28th August, 2020. One month after completion of the sale transaction, the Appellant
filed an application on 25th September, 20205, seeking recall of the order dated 05th
May, 2020, passed by the Adjudicating Authority and challenging the execution of the
Sale Deed. By virtue of the common order dated 17th November, 2021, the Adjudicating
Authority dismissed both the applications filed by the Appellant, one for stalling the e-
auction that was conducted on 23rd December, 20194 and the other for setting aside
the Sale Deed dated 28th August, 2020. The said orders were carried in appeal by the
Appellant before the Tribunal. Vide common judgment and order dated 16th September,
2022, the Tribunal dismissed the appeals filed by the Appellant, giving rise to the
present appeals.
C. ARGUMENTS ADVANCED ON BEHALF OF THE APPELLANT
10. Mr. P. Chidambaram, learned Senior advocate appearing for the Appellant submitted
that the Tribunal failed to appreciate that the auction conducted by the Liquidator was in
violation of the provisions of the IBBI Regulations, 2016 particularly, Regulation 31A
that requires a Liquidator to constitute a Stakeholders' Consultation Committee and
Regulation 33 that prescribes the mode of sale of the assets of the Corporate Debtor
through an auction in the manner specified in Schedule I. Relying on the decision in
C.N. Paramasivam and Anr. v. Sunrise Plaza through Partner and Ors.
MANU/SC/0084/2013 : 2013:INSC:22 : (2013) 9 SCC 460, it has been contended that
Schedule I, Rule 12 of the IBBI Regulations, 2016 is mandatory and any non-
compliance thereof should result in cancellation of the sale. The decision in Sharif-ud-
din v. Abdul Gani Lone MANU/SC/0352/1979 : 1979:INSC:234 : (1980) 1 SCC 403
was cited by learned Counsel to make a point that when the rule provides a
consequence for failure to comply, then it ought to be treated as mandatory and not
directory in character. It was argued that having regard to the mandatory character of
the regulations, the Tribunal has erred in failing to appreciate that the Auction Purchaser

23-01-2025 (Page 6 of 35) www.manupatra.com VAISH ASSOCIATES

could neither have sought extension of time to deposit the balance sale consideration
nor could such an indulgence have been granted to it. Dovetailed to the above, is the
submission that the Liquidator was selective in applying the amended provisions of the
IBBI Regulations, 2016, based on a Circular dated 26th August, 2019.
11. The second submission made by learned Senior Counsel appearing for the Appellant
was that the Tribunal ought not to have concurred with the Adjudicating Authority to
hold that the extension granted to the Auction Purchaser to deposit the balance sale
consideration on account of the Covid-19 lockdown, was valid. It was submitted that
since banks were functioning during that time, the Auction Purchaser had all the
opportunity to deposit the balance sale consideration. Therefore, it had no defence for
not making the payment on time. It was further submitted that the order passed by the
this Court and relied on by the Auction Purchaser in GPR Power Solutions Pvt. Ltd. v.
Supriyo Chaudhuri MANU/SC/1315/2021 : 2021:INSC:799 : (2021) 17 SCC 312, as
also the order dated 02nd March, 2020 and the order dated 12th May, 2020 passed in
Civil Appeal No. 1902 of 202017, could not have enured to its benefit for the reason that
the said orders applied to filing of petitions, applications, suits, appeals or other
proceedings within the prescribed period of limitation. Citing the decision in Sagufa
Ahmed v. Upper Assam Polywood Products Pvt. Ltd. MANU/SC/0697/2020 :
2020:INSC:555 : (2021) 2 SCC 317 learned Senior Counsel submitted that the order
passed by this Court on 23rd March, 2020 in Suo Moto Writ Petition (Civil) No. 3/2020,
was only intended for the benefit of vigilant litigants who were prevented from initiating
proceedings within the period of limitation due to the pandemic and the lockdown. The
Auction Purchaser was not a litigant before the Court and could not have availed of the
said order. The Auction Purchaser was neither required to approach the Adjudicating
Authority, nor to file any petition before the Tribunal for remitting the balance sale
consideration.
12. It was next canvassed on behalf of the Appellant that the order of attachment by
the Income Tax Authorities in respect of the auctioned property is an irrelevant
consideration insofar as it relates to deposit of the balance sale consideration by the
Auction Purchaser within 90 days. Alluding to the terms and conditions of the auction,
learned Counsel argued that the e-auction was conducted on an 'As Is Where Is' basis
and clause 12 of the said Notice of auction clearly stated that the sale would be subject
to the IBC and the IBBI Regulations, 2016. Therefore, the Auction Purchaser cannot be
heard to state that it was unaware of the Income Tax attachment order. Having bid for
the subject property and agreed to the condition that the balance sale amount had to be
deposited within 90 days, the Auction Purchaser was under an obligation to comply with
the terms of the auction and on failure to do so, the Liquidator ought to have cancelled
the sale instead of accommodating the Auction Purchaser.
13. Lastly, learned Counsel submitted that even assuming that the last date for making
the payment towards the balance sale consideration was 25th March, 2020, as was
urged by the other side, the period of limitation would have recommenced on 23rd July,
2020, since the Liquidator had moved an application18 seeking exclusion of the period
between 23rd March, 2020 and 23rd July, 2020. In view of the above, there was no
justification for the Auction Purchaser to have made the payment on 24th August, 2020
i.e. after a period of one month reckoned from the date when the exclusion period had
ended.
D. ARGUMENTS ADVANCED BY LEARNED SENIOR COUNSEL FOR THE AUCTION
PURCHASER

23-01-2025 (Page 7 of 35) www.manupatra.com VAISH ASSOCIATES

14. Rebutting the submissions made by learned Counsel for the Appellant, Mr. Arvind
Datar, Senior Advocate appearing for the Auction Purchaser submitted that the time to
complete all actions under the IBC stood extended from 15th March, 2020 onwards in
view of the Covid-19 circulars and orders passed by this Court in the Suo Motu Writ
Petition19 initiated by this Court read in conjunction with Regulation 47A of IBBI
Regulations, 2016. Therefore, there was no default on the part of the Auction Purchaser
in making payment of the balance sale consideration at a later date. Referring to the
decision of this Court in GPR Power Solutions Private Limited (supra) learned Senior
Counsel submitted that the extension orders were applied by this Court even to
submissions of claims by creditors to the resolution professionals. For this reason, it
would be erroneous to state that extension could apply only to litigants before courts
and Tribunals, as sought to be urged by the other side. The decisions in Standard Surfa
Chem India Private Limited v. Kishore Gopal Somani MANU/NL/0127/2022 and Prakash
Chandra Kapoor v. Vijay Kumar Iyer MANU/NL/0250/2021 were cited by learned
Counsel to argue that timelines prescribed under the IBBI Regulations, 2016 are
directory and not mandatory in character. Learned Counsel submitted that reliance
placed by the Appellant on C.N. Paramasivam (supra) to contend that the timeline of 90
days is absolute, is misplaced for the reason that the provisions governing the Debt
Recovery Tribunal 20 and the Adjudicating Authority are not pari materia. Learned Senior
Counsel submitted that unlike DRT's, Adjudicating Authority has special inherent powers
Under Rule 11 of the National Company Law Tribunal Rules, 201621. Furthermore, even
in cases initiated under the Securitization and Reconstruction of Financial Assets and
Enforcement of Security Interest Act22, this Court had granted extension to an Auction
Purchaser to deposit the balance sale consideration in view of the Covid-19 lockdown
situation. For this, learned Senior Counsel referred to the order dated 12th May, 202023
passed by this Court in Union Bank of India v. Rajat Infrastructure Private Limited and
Ors. MANU/SC/0249/2020 : 2020:INSC:250. Similarly, he submitted that the Sagufa
Ahmed case (supra) referred to on behalf of the Appellant, cannot apply to the facts of
the instant case for the reason that in the captioned case, the timeline for filing an
appeal before the Tribunal had expired before 15th March, 2020, which was not so here
as the timeline for the Auction Purchaser to deposit the balance sale consideration had
expired after declaration of the COVID-19 lockdown by the Government of India on
22nd March, 2020.
1 5 . Learned Senior Counsel clarified that the Auction Purchaser had applied to the
Liquidator on 28th February, 2020, for extension of time to deposit the balance sale
consideration after the Income Tax attachment orders were lifted. The Liquidator
responded to the said communication only on 02nd April, 2020 stating that he did not
have the powers to extend the time and for which, an application would have to be
moved before the Adjudicating Authority after it resumed functioning partially. For
purposes of clarification, it may be noted that Adjudicating Authority had issued a
notification that it would hear only urgent matters between 16th March, 2020 and 27th
March, 2020. On 22nd March, 2020, the Adjudicating Authority announced closure in
the light of the lockdown and it was clarified that liquidation matters would not be
considered as urgent. The Auction Purchaser filed an application24 before the
Adjudicating Authority seeking extension of time. Vide order dated 5th May, 2020, the
Adjudicating Authority allowed the said application and granted extension of time to the
Auction Purchaser to deposit the balance sale consideration. It is submitted that the
Appellant did not take any steps to prefer an appeal against the aforesaid order within
the period prescribed in Section 61 of the IBC. Instead, after the entire sale transaction
was completed, the Appellant filed an application for review, which was dismissed by

23-01-2025 (Page 8 of 35) www.manupatra.com VAISH ASSOCIATES

the Adjudicating Authority. After waiting for 15 months, the Appellant filed an appeal on
27th October, 2021. Even at that stage, the Appellant did not seek any interim orders
before the Adjudicating Authority or the Tribunal. As a result, the Auction Purchaser
proceeded to construct a 200-bed Mother and child hospital at the auctioned property
after demolishing the existing building on which a sum of ' 1,70,00,000/- (Rupees One
crore and seventy lakhs only) has been invested. The said hospital is now complete and
fully functional and is stated to cater to the needs of seven surrounding districts in the
area.
16. Coming next to the submission made on behalf of the Appellant that the order of
attachment issued by the Income Tax authorities in respect of the auctioned property is
not a relevant consideration when it came to depositing the balance sale consideration
by the Auction Purchaser within 90 days, learned Senior Counsel for the Auction
Purchaser sought to urge that sale of properties that are the subject matter of Income
Tax attachment orders, must be treated on a different footing. Such sale transactions
cannot be completed because of the bar placed under the Income Tax Act, 196125. A
specific reference in this regard has been made to Sections 222 and 281 read with Rule
48 Part-III, Schedule 2 of the IT Act. Several decisions of the Adjudicating Authority26
have been cited by the learned Senior Counsel to canvass that in such circumstances,
the Liquidator has no option but to approach the Adjudicating Authority for appropriate
directions. Even in the present case, the Liquidator had to move an application before
the Adjudicating Authority for appropriate directions. The said application was allowed
on 10th February, 2020. However, the order passed on 10th February, 2020 was
received by the Liquidator only on 14th May, 2020. Due to several hindrances on
account of the COVID-19 situation, the actual attachment of the subject property was
lifted only on 27th August, 2020. Just a few days before that, the Auction Purchaser
deposited the balance sale consideration on 24th August, 2020 and the sale transaction
was finally completed on 28th August, 2020.
1 7 . Countering the submission made on behalf of the Appellant that Clause 12 of
Schedule I under Regulation 33 of the IBBI Regulations, 2016 requires the successful
bidder to pay the balance sale consideration within 90 days from the date of the
demand which timeline could not be extended, learned Senior Counsel for the Auction
Purchaser argued that the time limit fixed Under Rule 12 of Schedule I has to be read in
conjunction with Rule 13 of the IBBI Regulations, 2016 and in cases of attachment, the
full amount has to be paid simultaneously with the completion and execution of the Sale
Deed. In the present case, the said steps could be taken only after the attachment was
lifted by the Income Tax authorities.
18. Learned Senior Counsel relied on Pioneer Urban Land and Infrastructure Limited
and Anr. v. Union of India and Ors. MANU/SC/1071/2019 : 2019:INSC:889 : (2019) 8
SCC 416 and Prakash Chandra Kapoor and Anr. v. Vijay Kumar Iyer and Anr.
MANU/NL/0250/2021, to contend that the model timeline for the liquidation process
contemplated under Regulation 47 of the IBBI Regulations, 2016 for completing the
liquidation process, are only directory in nature.
19. Learned Senior Counsel for the Auction Purchaser concluded by highlighting the
conduct of the Appellant and stated that he had repeatedly failed to pay the monies
due; he attempted to stall the auction process; he refused to remove the bar operating
from the subject premises and police assistance had to be taken to take over physical
possession of the subject property. Therefore, concurrent findings returned by the
Adjudicating Authority and the Tribunal being well reasoned, do not deserve

23-01-2025 (Page 9 of 35) www.manupatra.com VAISH ASSOCIATES

interference. Lastly, learned Counsel submitted that without prejudice to the above
submission, in the event this Court is of the opinion that the provisions of Rule 12 of
Schedule I of the IBBI Regulations, 2016 are mandatory and the Adjudicating Authority
was not empowered to extend the timelines for paying the balance sale consideration,
then this Court may exercise its powers Under Article 142 of the Constitution of India to
do complete justice but the auction sale may not be set aside.
E. ARGUMENTS ADVANCED ON BEHALF OF THE RESPONDENT NO.1 - LIQUIDATOR
2 0 . Mr. C.U. Singh, Senior Advocate appearing on behalf of the Respondent No.1 -
Liquidator supported the arguments advanced by learned Senior Counsel for the Auction
Purchaser. He submitted that the Appellant has made unfounded allegations regarding
valuation of the subject property at ' 39,41,28,500/- (Rupees Thirty nine crore forty one
lakh twenty eight thousand and five hundred only). The said allegations were responded
to by the Liquidator, vide letter dated 15th November, 2019 clearly stating inter alia that
the reserve price was based on the average liquidation value arrived at by the registered
Valuers. Contradicting the claim of the Appellant that the subject property ought to have
been valued at ' 1,00,00,00,000/- (Rupees One hundred crore only), it was submitted
that no bidder had stepped forward to participate in the auction even with the reserve
price of ' 39,41,00,000/- (Rupees Thirty nine crore and forty one lakh only). Reference
was made to Regulation 33 read with para 4A of the Schedule I to the IBBI Regulations,
2016 to state that the second auction was conducted on 23rd December, 2019 with a
permissible reduction of 25% in the reserve price that was set at ' 29,95,96,375/-
(Rupees Twenty nine crore ninety five lakh ninety six thousand three hundred and
seventy five only). This fact was duly intimated to the Appellant who too could have
made efforts to get a better bid for the subject property, but he didn't take any such
step.
21. Refuting the submission made by the other side that the auction was conducted by
the Liquidator without constituting a Stakeholders' Consultation Committee, learned
Counsel submitted that there was no such requirement at the relevant point in time,
which position has been clarified in the Explanation appended to Section 31A, that was
inserted in the Regulations, vide Notification dated 25th July, 2019. In the present case,
the liquidation process had commenced earlier to issuance of the said Notification.
Further, the Tribunal has clarified that the amendment to Rule 12 of Schedule I under
Regulation 33 of the IBBI Regulations, 2016 made by virtue of the same Notification
would apply to pending liquidation process27. Learned Senior Counsel submitted that in
any event, such an objection was taken by the Appellant for the first time in the recall
application filed by him on 25th September, 2020 by which date, the entire process of
sale stood concluded. It was submitted that the Appellant is estopped from taking such
an objection for the reason that despite repeated requests made to him by the
Liquidator to nominate a person in the Stakeholders' Consultation Committee, he had
not done so.
22. Learned Senior Counsel for the Liquidator submitted that the COVID-19 pandemic
had caused an extraordinary disruption leading to a nationwide lockdown from 20th
March, 2020 onwards. The Auction Purchaser had moved an application for extension of
time to deposit the balance sale consideration, which was duly allowed by the
Adjudicating Authority, vide order dated 5th May, 2020, extending the time until the
lifting of the lockdown by the Centre/State Government. The balance sale consideration
was deposited by the Auction Purchaser on 24th August, 2020. On receiving the said
amount, the Liquidator had settled the outstanding claim of the Income Tax Department

23-01-2025 (Page 10 of 35) www.manupatra.com VAISH ASSOCIATES

on 27th August, 2020 whereafter, the Income Tax attachment was lifted and the
Liquidator executed and registered the Sale Deed in favour of the Auction Purchaser on
28th August, 2020. It was pointed out that the Appellant decided to challenge the order
dated 5th May, 2020 passed by the Adjudicating Authority, 14 months after the Sale
Deed was executed and registered in favour of the Auction Purchaser, which shows his
non-seriousness. Further, learned Counsel cited the decision in Pioneer Urban Land and
Infrastructure Limited and Anr. v. Union of India and Ors. MANU/SC/1071/2019 :
(2019) 8 SCC 216, wherein it has been held that the timeline prescribed in Sections
7(5), 9(5) and 10(4) of the IBC are directory and not mandatory in character.
23. Learned Counsel for the Liquidator supported the submissions made on behalf of
the Auction Purchaser on the aspect of extension of the period of limitation and
submitted that the expressions "litigation" and "litigant" appearing in the Suo Moto Writ
petition must be given the widest import so as to cover all proceedings, including
liquidation proceedings. In the absence of any explicit bar, the said order would also
apply to the auction process conducted in liquidation proceedings carried out under the
IBC more so, when the Liquidator has been held to be a quasi judicial authority by this
Court in Swiss Ribbons (P) Ltd. and Anr. v. Union of India and Anr.
MANU/SC/0079/2019 : 2019:INSC:95 : (2019) 4 SCC 17. Reliance has also been
placed on GPR Power Solutions Pvt. Ltd. (supra) to urge that exclusion of time on
account of the COVID-19 pandemic was allowed even in cases where claims were to be
filed before the resolution professionals.
F. REJOINDER ARGUMENTS ON BEHALF OF THE Appellant
24. In his rejoinder arguments, learned Counsel for the Appellant sought to distinguish
the judgments of this Court relied on by the other side including in the case of
Yashowanta Narayan Dixit v. Orient Insurance Co. Limited MANU/SCOR/47476/2020 :
(2022) 15 SCC 569 and the orders passed on 2nd March, 2020 and 12th May, 2020 in
Civil Appeal No. 1902 of 2020. Relying on the decision in Union Bank of India v. Rajat
Infrastructure Private Limited and Ors. MANU/SC/1077/2023 : 2023:INSC:869 : (2023)
10 SCC 232, learned Counsel submitted that this Court had noted that Under Rule 9(4)
of the Security Interest (Enforcement) Rules, 200228, the balance of the purchase price
payable had to be paid in the said case on or before the fifteenth day of the
confirmation of sale and even if a liberal construction is given to the said Sub-rule, and
the orders passed by the Court from time to time, the time to deposit the balance
amount with interest could extend only upto 30th April, 2022 and no further extension
of time could have been granted thereafter. This Court has also observed that Article
142 of the Constitution of India cannot be used to depart from the substantive law. It
was submitted that even if the Auction Purchaser was permitted to take the benefit of
the order dated 17th November, 2021 passed by the Adjudicating Authority, it could
take the last date for deposit upto 23rd July, 2020 whereas, the Auction Purchaser did
not deposit the balance sale consideration till 24th August, 2020.
2 5 . Coming next to the submission made by learned Senior Counsel for the
Respondents that model timelines for the liquidation process under Regulation 47 of the
IBBI Regulations, 2016 are directory in character and not mandatory, learned Senior
Counsel for the Appellant submitted that the decisions cited by the Respondents to
substantiate the said submission, are distinguishable on facts. It was contended that
this Court has itself held in Pioneer Urban Land and Infrastructure Limited (supra) that
the timelines mentioned in Sections 7(5), 9(5) and 10(4) of the IBC are directory in
nature because they do not provide for any consequence if the period so mentioned is
exceeded. However, the word used in Rule 12 of Schedule I under Regulation 33 of the
23-01-2025 (Page 11 of 35) www.manupatra.com VAISH ASSOCIATES
IBBI Regulations, 2016 is "shall". The second proviso Under Rule 12 provides for a
consequence that in the event the amount is not paid within 90 days, the sale shall be
cancelled. The decision in the case of Prakash Chandra Kapoor (supra) is also sought to
be distinguished on the same grounds. Learned Senior Counsel submitted that in all the
Rules under Schedule I, except for Rule 11, the word "shall" has been used and it has
been held in Vidarbha Industries Power Limited v. Axis Bank Limited
MANU/SC/0874/2022 : 2022:INSC:710 : (2022) 8 SCC 352, that if one provision uses
the word "may", and another provision uses the word "shall", then wherever the word
"shall" has been used, will have to be treated as mandatory. Applying the said principle
to the instant case, it was mandatory for the Auction Purchaser to have deposited the
balance sale consideration in respect of the auctioned property within 90 days and at
the outer date, on or before 23rd of July, 2020 when the period of the lockdown had
come to an end.
2 6 . As for the submission made by the Auction Purchaser that the Income Tax
attachment was lifted only on 27th August, 2020 and therefore, there was no occasion
for it to have paid the balance sale consideration before the attachment was lifted,
learned Senior Counsel for the Appellant submitted that the Adjudicating Authority had
passed an order on 10th February, 2020, directing the Income Tax Department to lift
the attachment and the said order having been pronounced in open court, ought to have
been in the knowledge of the Respondents who cannot take a plea that the said order
was communicated to them much later and therefore, they were oblivious thereto. It
was further argued that the amount attached by the Income Tax Department was
actually paid on 3rd August, 2020, from out of the earnest money deposited by the
Auction Purchaser. While the Income Tax Department passed an order lifting the
attachment in respect of the subject property only on 27th August, 2020, the Auction
Purchaser did not wait until then to pay the balance amount. The balance sale
consideration was deposited by the Auction Purchaser through RTGS on 24th August,
2020, which was three days before the date the Income Tax Department passed the
order on 27th August, 2020. That being the position, the balance amount could have
easily been paid by the Auction Purchaser in a similar manner (through RTGS) on or
before 25th March, 2020, on the expiry of the period of 90 days, which it miserably
failed to do.
27. Refuting the plea taken by the Auction Purchaser that Under Section 281 of the IT
Act, a sale shall be treated as void against any claim by the Income Tax Department
which was a reason offered by it not to have paid the balance amount, learned Counsel
for the Appellant submitted that such a plea is baseless inasmuch as the Auction
Purchaser could have paid the balance amount by obtaining prior permission from the
assessing officer. The Income Tax attachment did not stand in the way of payment of
the balance sale consideration. A distinction was sought to be drawn between the
expression 'payment of sale consideration' and 'execution of sale deed'. The attention of
the Court was also drawn to the letter dated 9th December, 2019 issued by the
Liquidator to the Auction Purchaser in response to its communication dated 9th
December, 2019 well before the date of auction, seeking a clarification. The Liquidator
had clearly stated that the subject property was being sold under the IBC and the
Income Tax Department could not have a priority in claim. In any case, the income tax
dues were limited to a sum of ' 2,44,00,000/- crores (Rupees Two crore and forty four
lakhs only) and the said amount could have been deposited with the Income Tax
Department from out of the sale proceeds. It was on the basis of the aforesaid
clarification furnished by the Liquidator that the Auction Purchaser had participated in
the auction process and once having succeeded in the bid, it was under an obligation to
deposit the balance sale consideration within 90 days from the date of the auction.
23-01-2025 (Page 12 of 35) www.manupatra.com VAISH ASSOCIATES
28. Questioning the stand taken by the Respondents that Regulation 31A that requires
constitution of a Stakeholders' Consultation Committee by the Liquidator to advise on
matters specified in the said Regulation, including sale of assets under Regulation 32,
manner of sale, reserved price, amount of earnest money deposit, etc., was amended
w.e.f. 25th July, 2019 and the Explanation in Regulation 31A made the said Regulation
prospective, learned Senior Counsel for the Appellant argued that the Liquidator could
not have had the foresight to know that such an Explanation would be appended to
Regulation 31A much later, vide Notification dated 28th April, 2022. In other words, as
the said Regulation stood in the year 2019, it was incumbent for the Liquidator to have
constituted the Stakeholders' Consultation Committee and the explanation now offered,
is a sheer afterthought.
29. Another argument advanced is that if it is assumed that the Auction Purchaser could
take refuge of the order dated 23rd March, 2020 passed by this Court in the Suo Moto
Writ Petition on account of the lockdown due to the Covid-19 pandemic read with
Regulation 47A of the IBBI Regulations, 2016, in the light of the order dated 17th
November, 2021 passed by the Adjudicating Authority, the last date for making the
deposit by the Auction Purchaser could be extended upto 23rd July, 2020 and not
beyond that.
30. Learned Senior Counsel concluded by vehemently contesting the submission made
by the other side that the Appellant's conduct showed that he was obstructing the
liquidation process. He sought to distinguish the judgment in Bombay Mercantile
Corporative Bank Limited v. U.P. Gun House and Ors. MANU/SC/0066/2024 :
2024:INSC:62 : (2024) 3 SCC 517 cited by the other side on facts and submitted that
vide order dated 5th December, 2023, that this Court had passed in the present
Appeals, the Auction Purchaser was restrained from creating any third-party rights. It
was argued that had the sale been cancelled Under Rule 12, second proviso to Schedule
I under Regulation 33 of the IBBI Regulations, 2016 and the subject property put to
auction once again, there was a strong possibility that the same would have fetched a
much higher amount. But due to the casual manner in which the Respondents have
conducted themselves, the Appellant and the shareholders have lost the valuable
property and suffered a huge loss. Without prejudice to the submission made above,
learned Counsel submitted that should the Court be inclined to accept the pleas taken
by the Respondents in opposition to the appeals, then it would only be fair to direct the
Auction Purchaser to compensate the Appellant for the loss of the value of the property
which was assessed by the registered Valuers in the year 2019, at ' 48,00,00,000/-
(Rupees Forty eight crores only).
G. DISCUSSION AND ANALYSIS
31. This Court has given its thoughtful consideration to the arguments advanced by
learned Counsel for the parties, perused the records and the judgments cited on both
sides. We shall now deal with the contentions raised by learned Counsel for the
Appellant ad seriatim.
32. COVID-19 PANDEMIC AND ITS IMPACT ON LIMITATION
32.1. The ball was set rolling on the Notice for sale of assets issued by the Liquidator
for conducting the e-auction of the land and building owned by the Corporate Debtor
that declared the reserve price of the subject property as ' 29,55,96,375/- (Rupees
Twenty nine crore fifty five lakh ninety six thousand three hundred and seventy five
only). The intending bidders were required to deposit 10 per cent of the reserve price as

23-01-2025 (Page 13 of 35) www.manupatra.com VAISH ASSOCIATES

earnest money amount which came to ' 2,95,59,638/- (Rupees Two crore ninety five
lakh fifty nine thousand six hundred and thirty eight only). Some of the relevant terms
and conditions of the e-auction are extracted below:
1 . E-Auction will be conducted on "AS IS WHERE IS", "AS IS WHAT IS" and
"WHATEVER THERE IS BASIS" through approved service provider M/s. E-
Procurement Technologies Limited (Auction Tiger).
2 . The intending bidders, prior to submitting their bid, should make their
independent inquiries and inspect the property at their own expenses and
satisfy themselves. ....
xxxx
8 . The EMD of the Successful Bidder shall be retained towards part sale
consideration and The EMD of unsuccessful bidders shall be refunded. The EMD
shall not bear any interest. The Liquidator will issue a Letter of Intent (LOD) to
the Success Bidder and the Successful Bidder shall have to deposit the balance
amount (Successful Bid Amount-Ex Amount) within 90 on issuance of the LOI
by the Liquidator Provided that payments made after thirty days shall attract
interest at the rate of 12%. Default in deposit of the balance amount by the
successful bidder within the time limit as mentioned in the LOI would entail
forfeiture of the 10% of the amount deposited (EMD) by the Successful Bidder.
xxxxx
10. The Liquidator has the absolute right to accept or reject any or all offer(s)
or adjourn/postpone/cancel the e-Auction or withdraw any property or portion
thereof from the auction proceeding at any stage without assigning any reason
thereof.
xxxxx
12. The sale shall be subject to provisions of Insolvency and bankruptcy code
2016 and regulations made thereunder.
xxxxx
32.2. The e-auction of the subject property took place on 23rd December, 2019. Going
by the Notice for sale issued by the Liquidator, the period of 90 days available to the
Auction Purchaser to deposit the balance sale consideration, if reckoned from 24th
December, 2019, the date when the Liquidator informed that it was the successful
bidder, would have expired on 23rd March, 2020. However, the Letter of Intent 29 issued
by the Liquidator on 24th December, 2019, was received by the Auction Purchaser on
26th December, 2019. The period of 90 days reckoned from 26th December, 2019
would have expired on 25th March, 2020. Admittedly, the balance sale consideration
was not paid by the Auction Purchaser within the aforesaid timeline. The said amount
was deposited by the Auction Purchaser through RTGS only on 24th August, 2020.
32.3. For explaining the delay in depositing the balance sale consideration, the Auction
Purchaser has sought to take shelter of the order dated 23rd March, 2020, passed by
this Court in the Suo Moto Writ Petition wherein it was directed as under:
Order

23-01-2025 (Page 14 of 35) www.manupatra.com VAISH ASSOCIATES

 "1. This Court has taken suo motu cognizance of the situation arising out of the
challenge faced by the country on account of Covm-19(sic Covid) virus and
resultant difficulties that may be faced by litigants across the country in filing
their petitions/applications/suits/appeals/all other proceedings within the
period of limitation prescribed under the general law of limitation or under
special laws (both Central and/or State).
2. To obviate such difficulties and to ensure that lawyers/litigants do not have
to come physically to file such proceedings in respective courts/tribunals d
across the country including this Court, it is hereby ordered that a period of
limitation in all such proceedings, irrespective of the limitation prescribed under
the general law or special laws whether condonable or not shall stand extended
w.e.f. 15-3-2020 till further order(s) to be passed by this Court in present
proceedings.
3. We are exercising this power Under Article 142 read with Article 141 of the
Constitution of India and declare that this order is a binding order within the
meaning of Article 141 on all courts/tribunals and authorities.
4 . This order may be brought to the notice of all the High Courts for being
communicated to all subordinate courts/tribunals within their respective
jurisdiction....
32.4. For the sake of completion, we may note that the aforesaid Suo Moto Writ
Petition was disposed of vide order dated 08th March, 2021. The operative para of the
said order is extracted below:
1 . ... We are of the opinion that the order dated 23-3-2020 has served its
purpose and in view of the changing scenario relating to the pandemic, the
extension of limitation should come to an end.
2 . We have considered the suggestions of the learned Attorney General for
India regarding the future course of action. We deem it appropriate to issue the
following directions:
2.1. In computing the period of limitation for any suit, appeal, application or
proceeding, the period from 15-3-2020 till 14-3-2021 shall stand excluded.
Consequently, the balance period of limitation remaining as on 15-3-2020, if
any, shall become available with effect from 15-3-2021.
2.2. In cases where the limitation would have expired during the period
between 15-3-2020 till 14-3-2021, notwithstanding the actual balance period of
limitation remaining, all persons shall have a limitation period of 90 days from
15-3-2021. In the event the actual balance period of limitation remaining, with
effect from 15-3-2021, is greater than 90 days, that longer period shall apply.
2.3. The period from 15-3-2020 till 14-3-2021 shall also stand excluded in
computing the periods prescribed Under Sections 23(4) and 29-A of the
Arbitration and Conciliation Act, 1996, Section 12-A of the Commercial Courts
Act, 2015 and provisos (b) and (c) of Section 138 of the Negotiable
Instruments Act, 1881 and any other laws, which prescribe period(s) of
limitation for instituting proceedings, outer limits (within which the court or
tribunal can condone delay) and termination of proceedings.

23-01-2025 (Page 15 of 35) www.manupatra.com VAISH ASSOCIATES

 2.4. The Government of India shall amend the guidelines for containment
zones, to state:
'Regulated movement will be allowed for medical emergencies,
provision of essential goods and services, and other necessary
functions, such as, time-bound applications, including for legal
purposes, and educational and job-related requirements.'
3. The suo motu writ petition is disposed of accordingly.
32.5. The Auction Purchaser has also invoked Regulation 47A of the IBBI Regulations,
2016, that was inserted on 20th April, 2020 and made effective from 17th April, 202030.
Regulation 47A provides for exclusion of the period of lockdown and reads as under :
Exclusion of period of lockdown
47A. Subject to the provisions of the Code, the period of lockdown imposed by
the Central Government in the wake of Covid-19 outbreak shall not be counted
for the purposes of computation of the time-line for any task that could not be
completed due to such lockdown, in relation to any liquidation process.
32.6. It is evident from a perusal of Regulation 47A, that the benefit of the said
regulation was made available not only for initiation of any litigation, but also for
computation of the timeline for completing any task in connection with a liquidation
process that could not be completed on account of declaration of the lockdown. We are
not inclined to accept the submission made on behalf of the Appellant that the word
'Litigants' used in the order dated 23rd March, 2020 passed in the Suo Moto Writ
Petition ought to be given a narrow interpretation so as to exclude a party like the
Auction Purchaser herein as stricto sensu, it was not a litigant who was required to file
any petition/application/suit/appeal or other proceeding before any
Court/Tribunal/Authority within the period of limitation prescribed under a general law
of limitation or under the special laws. It must be emphasised that a judgment can
neither be read like a Statute nor can the expressions used in a judgment be assigned a
narrow meaning or curtailed. In the larger contextual background of the Covid-19
breakout, a liberal interpretation would have to be adopted and the Auction Purchaser
would be entitled to the benefit of the order dated 23rd March, 2020 read with
Regulation 47A of the IBBI Regulations, 2016. The Appellant cannot be heard to state
that when the entire country was engulfed by the Covid-19 pandemic and a countrywide
lockdown was imposed on 25th March, 2020 that was extended from time to time, the
Auction Purchaser ought to have deposited the balance sale consideration within the
stipulated 90 days. In such a situation, a lenient view would have to be taken by the
Court.
32.7. The factual matrix of the case also needs to be kept in mind. The Covid-19
pandemic had broken out in the month of March, 2020. A curfew was clamped by the
Central Government on 22nd March, 2020, restricting the movement of the public. The
Adjudicating Authority had issued a notification that only urgent matters would be taken
up between 16th March, 2020 and 27th March, 2020. Before completion of the aforesaid
period, the Central Government had declared a nationwide lockdown for 21 days till
14th April, 2020, which period was subsequently extended till 03rd May, 2020. In this
backdrop, came the order of this Court on 23rd March, 2020 extending the period of
limitation w.e.f. 15th March, 2020 till further orders, which order was extended from
time to time. The Governing Board of the Insolvency and Bankruptcy Board of India also

23-01-2025 (Page 16 of 35) www.manupatra.com VAISH ASSOCIATES

decided on 17th April, 2020 to amend the IBBI Regulations, 2016 due to nationwide
lockdown and incorporated Regulation 47A.
32.8. On 28th February, 2020, the Auction Purchaser approached the Liquidator for
seeking extension of time to deposit the balance sale consideration. It was stated that
the balance sale consideration would be paid on the date of registration of the subject
property and a request was made not to levy any interest. On 02nd April, 2020, the
Liquidator informed the Auction Purchaser that he was not empowered to relax the
timelines for depositing the balance sale consideration and it ought to approach the
Adjudicating Authority for appropriate relief. In view of the aforesaid response received
from the Liquidator, the Auction Purchaser filed an application before the Adjudicating
Authority on 22nd April 202031, seeking extension of the time for making payment of
the balance sale consideration on various grounds that included a plea that there was an
income tax attachment order in respect of the subject property and the Covid-19
pandemic had caused a lot of disruption. It was this application that was allowed by the
Adjudicating Authority vide order dated 05th May, 2020 granting the Auction Purchaser
time to pay the balance sale consideration until the Central Government/State
Government lifted the lockdown.
32.9. In GPR Power Solutions (supra), a case cited by learned Counsel for the Auction
Purchaser, the Appellant therein was a creditor of the Corporate Debtor who filed a
belated claim under Regulation 7of the IBBI Regulations, 2016 which was rejected by
the Resolution Professional on the ground of delay. The said delay was neither
condoned by the Adjudicating Authority nor by the Tribunal. Both the orders were
overturned by this Court in the light of the orders passed in the Suo Moto Writ Petition.
We decline to draw a distinction between the Appellant in the captioned case and the
Auction Purchaser herein on a plea that the Auction Purchaser was not required to file
any petition/application/ suit/appeal or other proceeding that was circumscribed by
period of limitation. The spirit of the order passed in the Suo Moto Writ Petition was to
overcome the challenges thrown by the lockdown clamped down on account of the
Covid-19 pandemic. In our opinion, such an order would also extend to any action
required to be taken in respect of a liquidation process, as contemplated in Regulation
47A of the IBBI Regulations, 2016.
32.10. The decision in Sagufa Ahmed (supra) relied on by learned Counsel for the
Appellant to urge that the Auction Purchaser cannot claim the benefit of the order
passed by this Court on 23rd March, 2020, is distinguishable on facts. In the said case,
the statutory period of 45 days available to the Appellant therein to prefer an appeal
against an order passed by the Adjudicating Authority had expired on 02nd February,
2020 and the additional period of 45 days that could have been condoned by the
Tribunal by virtue of the proviso to Section 421(3) of the Companies Act, 2013 had
expired on 18th March, 2020 whereas the appeal was actually preferred on 20th July,
2020. Noting that the lockdown was imposed on 24th March, 2020 and there was no
impediment for the Appellant in the aforesaid case to have filed the appeal before 18th
March, 2020, this Court had refused to permit the party to take refuge of the order
dated 23rd March, 2020, passed in the Suo Moto Writ Petition and had opined that the
said order was intended to benefit those who were vigilant about their rights.
32.11. The decision in Rajat Infrastructure Private Limited (supra) alluded to by
learned Senior Counsel for the Appellant is also based on its own peculiar facts where
successive applications were moved by the applicant - Auction Purchaser therein for
extension of time to pay the balance sale price of the subject property. Despite a long
rope given by the Court by granting enlargement of time, the applicant kept on dragging
23-01-2025 (Page 17 of 35) www.manupatra.com VAISH ASSOCIATES
its feet and committing defaults. In view of the aforesaid conduct, the Court referred to
Sub-rule (4) and (6) of Rule 9 of the Securitisation and Reconstruction of Financial
Assets and Enforcement of Security Interest (Enforcement) Rules 200232 that prescribes
time of sale, issue of sale certificate and delivery of possession and observed that even
if a liberal construction is given to the said sub-rules, in view of successive orders
passed by the Court on applications moved by the applicant - Auction Purchasers, it was
not permissible to extend the timeline under the substantive statutory provisions
dealing with the subject. The facts of the present case being on a different footing, the
Appellant cannot take advantage of the aforesaid decision.
32.12 In the present case, as noticed above, the period of 90 days for depositing the
balance sale consideration had expired just after the crucial date, i.e., 23rd March,
2020. We do not find any merit in the submission made by the Appellant that the
Tribunal ought not to have accepted the view taken by the Adjudicating Authority that
Covid-19 lockdown was a valid reason for extension of time to deposit the balance sale
consideration.
33. ALLEGATIONS REGARDING UNDER-VALUATION OF THE SUBJECT PROPERTY
33.1. The contention of the learned Senior Counsel for the Appellant is that the
Liquidator ought not to have auctioned the subject property by fixing a reserve price
below the valuation submitted by the Registered valuers. To consider the said
submission, it is necessary to examine the scheme of the IBBI Regulation, 2016 that
applies to the Corporate Insolvency Resolution Process. Chapter VI of the Regulations
titled 'Realisation of Assets' includes a list of regulations relating to sale of assets
(Regulation 32), sale of a Corporate debtor as a going concern (Regulation 32A), mode
of sale (Regulation 33), preparation of an asset memorandum (Regulation 34),
valuation of assets or businesses intended to be sold (Regulation 35), preparation of
the Asset Sale Report (Regulation 36), realization of security interest by secured
creditor (Regulation 37), assignment of not readily realizable assets (Regulation 37A),
distribution of unsold assets (Regulation 38), recovery of monies due (Regulation 39)
and realization of uncalled capital/unpaid capital contribution (Regulation 40). It can be
seen that all the aforesaid regulations that fall under Chapter VI, are primarily
concerned with realization of assets and the Liquidator has been tasked with several
duties related to the said realization.
33.2. Regulation 33 stipulates that a Liquidator shall ordinarily sell the assets of the
Corporate Debtor through an auction in the manner specified in Schedule I. Regulation
35 permits the Liquidator to appoint two Registered valuers to determine the realizable
value of the assets or businesses listed in Regulation 32. On the Registered Valuers
conducting a physical verification of the assets of the Corporate Debtor and submitting
the estimate of the realizable value of the asset/business, the average of the two
estimates received are to be taken as the value of the asset/business. It was in the light
of the said Regulations that the Liquidator herein had engaged two Registered Valuers
to give an estimate of the valuation of the subject property and the average of the two
estimates was fixed by him at ' 39,41,28,500/- (Rupees Thirty nine crore forty one lakh
twenty eight thousand five hundred only) for purposes of conducting the e-auction.
33.3. The objection taken by the Appellant to the Liquidator slashing the reserve price
by 25 per cent and bringing it down to ' 29,55,96,375/- (Rupees Twenty nine crore, fifty
five lakhs ninety six thousand three hundred seventy five only), is answered in Rule 4A
of Schedule I under Regulation 33 of the IBBI Regulations, 2016, that states as follows:

23-01-2025 (Page 18 of 35) www.manupatra.com VAISH ASSOCIATES

 (4A) Where an auction fails at the reserve price, the liquidator may reduce the
reserve price by up to twenty-five percent of such value to conduct subsequent
auction.
33.4. Admittedly, in the first round of the Notice for sale through e-auction published
by the Liquidator on 25th November, 2019, he did not receive any bid. As a result, the
Liquidator reduced the reserve price of the subject property by 25 per cent to conduct a
second auction on 23rd December, 2019 wherein the Auction Purchaser was declared as
the successful bidder. In our view, the Liquidator cannot be faulted for having exercised
the discretion vested in him Under Rule 4A of Schedule I when the auction scheduled
earlier, did not bear any positive result. In fact, Rule 4B empowers the Liquidator to
reduce the reserve price fixed Under Rule 4A for subsequent auctions with a rider that
the price shall not be reduced to more than 10 per cent at a time. The said eventuality
did not arise in the present case since the Auction Purchaser was declared as the
successful bidder in the second round of auction.
33.5. If the Appellant was so confident that the subject property would have fetched a
much higher price, nothing precluded him from identifying a bidder who was willing to
offer a better price. In fact, such a suggestion was made by the Liquidator in his reply
dated 15th November, 2019 to the objection taken by the Appellant to the estimated
value of the subject property in his letter dated 8th November, 2019. The Liquidator had
stated that "If you are confident enough that the property may fetch for more than Rs.
100.00 Crores you are at liberty to bring the proposed buyers and ask them to
participate in the bidding process." Again, the Liquidator wrote a letter dated 27th
November, 2019 to the Appellant suggesting that ask eligible parties willing to offer a
better price to participate in the auction process. The Appellant did not follow up after
that.
33.6. Therefore, the Appellant cannot be permitted to argue that since the tax value of
the subject property was estimated by the Registered Valuers at above ' 48 crores, the
Liquidator ought not to have fixed the reserve price at ' 39,41,28,500/- (Rupees Thirty
nine crore forty one lakh twenty eight thousand five hundred only) for the simple
reason that though the reports of the Registered Valuers mentioned the tax value of the
subject property at a little above ' 48 crores, but the liquidation value in both the
reports was much lower and the Liquidator arrived at the average of the two estimated
liquidation values to fix the reserve price of the subject property.
34. NON-CONSTITUTION OF A STAKEHOLDERS CONSULTATION COMMITTEE AND ITS
EFFECT
34.1. It has been argued that the Liquidator has violated Regulation 31A of the IBBI
Regulations, 2016 that requires him to constitute a Stakeholders' Consultation
Committee. For purposes of ready-reference, Regulation 31A is reproduced below:
31A. Stakeholders' consultation committee.
(1) The liquidator shall constitute a consultation committee within sixty days
from the liquidation commencement date, based on the list of stakeholders
prepared under regulation 31, to advise him on matters relating to-
(a) appointment of professionals and their remuneration under
regulation 7;
(b) sale under regulation 32, including manner of sale, pre-bid
23-01-2025 (Page 19 of 35) www.manupatra.com VAISH ASSOCIATES
 qualifications, reserve price, amount of earnest money deposit, and
marketing strategy: Provided that the decision(s) taken by the
liquidator prior to the constitution of consultation committee shall be
placed before the consultation committee for information in its first
meeting.
xxxxx
(5) Subject to the provisions of the Code and these regulations, representatives
in the consultation committee shall have access to all relevant records and
information as may be required to provide advice to the liquidator Under Sub-
regulation (1).
xxxxx
(8) The liquidator shall place the recommendation of committee of creditors
made under subregulation (1) of regulation 39C of the Insolvency and
Bankruptcy Board of India (Insolvency Resolution Process for Corporate
Persons) Regulations, 2016, before the consultation committee for its
information.
(9) The consultation committee shall advise the liquidator, by a vote of not less
than sixty-six percent of the representatives of the consultation committee,
present and voting.
(10) The advice of the consultation committee shall not be binding on the
liquidator: Provided that where the liquidator takes a decision different from the
advice given by the consultation committee, he shall record the reasons for the
same in writing.
34.2. Regulation 31A that was inserted on the amendment of the IBBI Regulations,
2016 by virtue of the Notification33 dated 25th July, 2019, requires a Liquidator to
constitute a Stakeholders' Consultation Committee within a period of sixty days from the
date of commencement of the liquidation process. The Stakeholders' Consultation
Committee is to be drawn from the list of stakeholders on a category-wise basis, as
prescribed under Regulation 31. The purpose of constituting a Stakeholders'
Consultation Committee is to advice the Liquidator on matters relating to appointment
of professionals and their remuneration as also in relation to sale of assets under
Regulation 32. However, it was observed by this Court in R.K. Industries (Unit-II) LLP v.
H.R. Commercials Private Limited and Ors. MANU/SC/1069/2022 : (2024) 4 SCC 166,
that the advice offered by the Stakeholders' Consultation Committee is not binding on
the Liquidator. The safeguard provided in the Regulation is that if the Liquidator arrives
at a decision which is at variance with the advice given by the Stakeholders'
Consultation Committee, he must record in writing reasons for doing so and mention it
in the next progress report. We may usefully extract the following para of the captioned
case:
55. On a conjoint reading of the aforesaid provisions of IBC and the Liquidation
Regulations, it is evident that the liquidator is authorised to sell the immovable
and movable property of the corporate debtor in liquidation through a public
auction or a private contract, either collectively, or in a piecemeal manner. The
underlying object of the statute is to protect and preserve the assets of the
corporate debtor in liquidation and proceed to sell them at the best possible
price. Towards this object, the provisions of IBC have empowered the liquidator
23-01-2025 (Page 20 of 35) www.manupatra.com VAISH ASSOCIATES
 to go in for a public auction or a private contract as a mode of sale. Besides
reporting the progress made, the liquidator can also apply to the adjudicating
authority (NCLT) for appropriate orders and directions considered necessary for
liquidation of the corporate debtor. The liquidator is permitted to consult the
stakeholders who are entitled to distribution of the sale proceeds. However, the
proviso to Section 35(2) IBC makes it clear that the opinion of the stakeholders
would not be binding on the liquidator. Regulation 8 of the Liquidation
Regulations refers to the consultative process with the stakeholders, as
specified in Section 35(2) IBC and states that they shall extend all necessary
assistance and cooperation to the liquidator for completing the liquidation
process. Regulation 31-A has introduced a stakeholders' Consultation
Committee that may advise the liquidator regarding sale of the assets of the
corporate debtor and must be furnished all relevant information to provide such
advice. Though the advice offered is not binding on the liquidator, he must give
reason in writing for acting against such advice.
34.3. By virtue of the Notification dated 28th April, 2022, an Explanation was appended
at the foot of Regulation 31A which clarifies that the requirement of constituting a
Stakeholders' Consultation Committee shall apply only to those liquidation processes
that were to commence on/after the date of commencement of the IBBI Regulation,
2016. In the present case, the liquidation process in respect of the company had
commenced on 17th July, 2019 and therefore, the submission made by the Appellant
that the Liquidator has breached Regulation 31A of the IBBI Regulations, 2016 by not
constituting a Stakeholders' Consultation Committee, is devoid of merits. Even
otherwise, the Appellant cannot have a grouse on this count because the record reveals
that the Liquidator had sent a reply on 15th November, 2019 to a written objection
taken by the Appellant on the Valuation reports submitted by the Registered Valuers on
08th November, 2019, wherein, it was stated that neither he nor the other ex-Directors
of the company had responded to the Liquidator's suggestion for calling a meeting of
the CoC. Despite this, neither the Appellant nor the other ex-Directors of the company
took any step to depute a person from amongst them to be a part of the Stakeholders'
Consultation Committee. In view of the aforesaid facts, the objection taken by the
Appellant that the Liquidator has breached Regulation 31A, does not hold any water.
Nor is the Court inclined to examine the submission made at the instance of the
Appellant that in the absence of any explanation appended to Regulation 31A as it stood
before 25th July, 2019, it was incumbent for the Liquidator to have constituted a
Stakeholders' Consultation Committee in view of his own conduct noticed above.
Further, such an objection was taken for the first time at the stage the Appellant filed a
recall application before Adjudicating Authority on 25th September, 2020 by which time
the entire sale transaction was over.
35. ALLEGATION OF VIOLTION OF REGULATION 33 OF THE IBBI REGULATIONS, 2016
AND ITS EFFECT
35.1. The Appellant has raised serious objections regarding violation of Regulation 33
of the IBBI Regulation, 2016 by the Liquidator. Regulation 33 that deals with the mode
of sale of assets has already been extracted above. Schedule I under Regulation 33 lays
down the manner in which the assets of the Corporate Debtor are to be sold by the
Liquidator. Schedule I is sub-divided into two segments, the first part deals with sale of
an asset through auction and the manner in which such a sale shall be conducted by the
Liquidator and the second part deals with private sales. The relevant clauses of
Schedule I for purposes of the present discussion are as follows:

23-01-2025 (Page 21 of 35) www.manupatra.com VAISH ASSOCIATES

 "SCHEDULE I
MODE OF SALE
(Under Regulation 33 of the Insolvency and Bankruptcy Board of India
(Liquidation Process) Regulations, 2016)
1. AUCTION
(1) Where an asset is to be sold through auction, a liquidator shall do
so the in the manner specified herein.
xxxxx
(3) The liquidator shall prepare terms and conditions of sale, including
reserve price, earnest money deposit as well as pre-bid qualifications,
if any.
xxxxx
(6) The liquidator shall provide all assistance necessary for the conduct
of due diligence by interested buyers.
xxxxx
(12) On the close of the auction, the highest bidder shall be
invited to provide balance sale consideration within ninety
days of the date of such demand:
Provided that payments made after thirty days shall
attract interest at the rate of 12%.
Provided further that the sale shall be cancelled if the
payment is not received within ninety days.
(13) On payment of the full amount, the sale shall stand
completed, the liquidator shall execute certificate of sale or
sale deed to transfer such assets and the assets shall be
delivered to him in the manner specified in the terms of sale.
(emphasis added)
35.2. Originally, Rule 12 read as follows :
(12) On the close of the auction, the highest bidder shall be invited to provide
balance sale consideration within fifteen days of the date when he is invited to
provide the balance sale consideration. On payment of the full amount, the sale
shall stand completed, the liquidator shall execute certificate of sale or sale
deed to transfer such assets and the assets shall be delivered to him in the
manner specified in the terms of sale.
Vide notification dated 25th July, 201934, two Rules were carved out from Rule 12, i.e.,
Rule 12 and Rule 13 that have been extracted above.
35.3. It is the submission of learned Senior Counsel for the Appellant that Rule 12,
Schedule I as above, is mandatory and non-adherence to the timelines set down in the
said rule would result in cancellation of the sale. It has been argued that the period of
23-01-2025 (Page 22 of 35) www.manupatra.com VAISH ASSOCIATES
90 days available to the Auction Purchaser to provide the balance sale consideration had
expired on 25th March, 2020. The first proviso to Rule 12 stipulates that if the payment
is made after 30 days, then the successful bidder would have to pay interest on the
amount payable at the rate of 12 per cent. The second proviso to Rule 12 stipulates the
outer limit for payment and states that if the payment is not received within 90 days,
then the sale shall stand cancelled.
35.4. To test the argument advanced by learned Counsel for the Appellant that the
word used in Rule 12 of Schedule I is "shall" and not "may" and therefore, the
prescriptions laid down in Rule 12 ought to be treated as mandatory and not directory
in character, we may usefully refer to the observations made in Sharif-ud-din (supra)
where a distinction was drawn between a mandatory rule and a directory rule in the
following words:
"9. The difference between a mandatory rule and a directory rule is
that while the former must be strictly observed, in the case of the
latter substantial compliance may be sufficient to achieve the object
regarding which the rule is enacted. Certain broad propositions which can
be deduced from several decisions of courts regarding the rules of construction
that should be followed in determining whether a provision of law is directory
or mandatory may be summarised thus: The fact that the statute uses the
word "shall" while laying down a duty is not conclusive on the
question whether it is a mandatory or directory provision. In order to
find out the true character of the legislation, the court has to ascertain
the object which the provision of law in question has to subserve and
its design and the context in which it is enacted. If the object of a law is
to be defeated by non-compliance with it, it has to be regarded as mandatory.
But when a provision of law relates to the performance of any public duty and
the invalidation of any act done in disregard of that provision causes serious
prejudice to those for whose benefit it is enacted and at the same time who
have no control over the performance of the duty, such provision should be
treated as a directory one. Where, however, a provision of law prescribes that a
certain act has to be done in a particular manner by a person in order to
acquire a right and it is coupled with another provision which confers an
immunity on another when such act is not done in that manner, the former has
to be regarded as a mandatory one. A procedural rule ordinarily should not
be construed as mandatory if the defect in the act done in pursuance
of it can be cured by permitting appropriate rectification to be carried
out at a subsequent stage unless by according such permission to
rectify the error later on, another rule would be contravened.
Whenever a statute prescribes that a particular act is to be done in a
particular manner and also lays down that failure to comply with the
said requirement leads to a specific consequence, it would be difficult
to hold that the requirement is not mandatory and the specified
consequence should not follow."
(emphasis added)
35.5. This Court was called upon to interpret the expression "may" used in Section 7(5)
(a) of the IBC vis-a-via the expression "shall" deployed in Section 9(5)(a), in Vidarbha
Industries Power Limited (supra), and it was held thus:
63. The meaning and intention of Section 7(5)(a) IBC is to be ascertained from
the phraseology of the provision in the context of the nature and design of the
23-01-2025 (Page 23 of 35) www.manupatra.com VAISH ASSOCIATES
 IBC. This Court would have to consider the effect of the provision being
construed as directory or discretionary.
64. Ordinarily the word "may" is directory. The expression "may
admit" confers discretion to admit. In contrast, the use of the word
"shall" postulates a mandatory requirement. The use of the word
"shall" raises a presumption that a provision is imperative. However, it
is well settled that the prima facie presumption about the provision
being imperative may be rebutted by other considerations such as the
scope of the enactment and the consequences flowing from the
construction.
65. It is well settled that the first and foremost principle of interpretation of a
statute is the rule of literal interpretation, as held by this Court in Lalita
Kumari v. State of U.P. [ MANU/SC/1166/2013 : 2013:INSC:748 : (2014) 2
SCC 1, para 14 : (2014) 1 SCC (Cri) 524] If Section 7(5)(a) IBC is construed
literally the provision must be held to confer a discretion on the adjudicating
authority (NCLT).
xxxx
74. Sub-section (5) of Section 9 IBC provides that the adjudicating authority (NCLT)
shall, within 14 days of the receipt of an application of an operational creditor Under
Sub-section (2) of Section 9, admit the application and communicate the decision to the
operational creditor and the corporate debtor, provided, the conditions stipulated in
clauses (a) to (e) of Section 9(5)(i) IBC are satisfied. The adjudicating authority (NCLT)
must reject the application of the operational creditor in the circumstances specified in
clauses (a) to (e) of Section 9(5)(ii) IBC.
75. Significantly, the legislature has in its wisdom used the word "may" in
Section 7(5)(a) IBC in respect of an application for CIRP initiated by a
financial creditor against a corporate debtor but has used the expression
"shall" in the otherwise almost identical provision of Section 9(5) IBC relating
to the initiation of CIRP by an operational creditor.
76. The fact that the legislature used "may" in Section 7(5)(a) IBC but a
different word, that is, "shall" in the otherwise almost identical provision of
Section 9(5)(a) shows that "may" and "shall" in the two provisions are
intended to convey a different meaning. It is apparent that the legislature
intended Section 9(5)(a) IBC to be mandatory and Section 7(5)(a) IBC to be
discretionary. An application of an operational creditor for initiation of CIRP Under
Section 9(2) IBC is mandatorily required to be admitted if the application is complete in
all respects and in compliance of the requisites of the IBC and the rules and regulations
thereunder, there is no payment of the unpaid operational debt, if notices for payment
or the invoice have been delivered to the corporate debtor by the operational creditor
and no notice of dispute has been received by the operational creditor. The IBC does
not countenance dishonesty or deliberate failure to repay the dues of an operational
creditor."
(emphasis added)
35.6. In C.N. Paramasivan (supra), one of the questions that fell for consideration
before this court was whether the phrase "as far as possible" used in Recovery of Debts
due to Banks and Financial Institutions Act, 199335 that contemplates certain provisions
23-01-2025 (Page 24 of 35) www.manupatra.com VAISH ASSOCIATES
of the Income Tax Act to apply with the modification to the amount due under the Debt
Recovery Act instead of the Income Tax Act, referring the Rule 57 of the Income Tax
Rules which mandates deposit of 25 per cent of the purchase amount of an immovable
property by a purchaser and contemplates the consequence of resale in such a default
of deposit, this Court held thus:
27. There is nothing in the provisions of Section 29 of the RDDB Act or the
scheme of the Rules under the Income Tax Act to suggest that a discretion
wider than what is explained above was meant to be conferred upon the
Recovery Officer Under Section 29 of the RDDB Act or Rule 57 of the Income
Tax Rules which reads as under:
"57. Deposit by purchaser and resale in default.-(1) On every
sale of immovable property, the person declared to be the purchaser
shall pay, immediately after such declaration, a deposit of twenty-five
per cent on the amount of his purchase money, to the officer
conducting the sale; and, in default of such deposit, the property shall
forthwith be resold.
(2) The full amount of purchase money payable shall be paid by the
purchaser to the Tax Recovery Officer on or before the fifteenth day
from the date of the sale of the property."
It is clear from a plain reading of the above that the provision
is mandatory in character. The use of the word "shall" is both
textually and contextually indicative of the making of the
deposit of the amount being a mandatory requirement.
28. The provisions of Rules 57 and 58 of the Income Tax Rules have their
equivalent in Order 21 Rules 84, 85 and 86 Code of Civil Procedure which are
pari materia in language, sweep and effect and have been held to be mandatory
by this Court in Manilal Mohanlal Shah v. Sardar Sayed Ahmed Sayed
Mahmad [ MANU/SC/0005/1954 : 1954:INSC:44 : AIR 1954 SC 349] in the
following words: (AIR pp. 351-52, paras 8-9 & 11)
8. The provision regarding the deposit of 25 per cent by the purchaser
other than the decree-holder is mandatory as the language of the rule
suggests. The full amount of the purchase money must be paid within
fifteen days from the date of the sale but the decree-holder is entitled
to the advantage of a set- off. The provision for payment is, however,
mandatory ... (Rule 85). If the payment is not made within the period
of fifteen days, the court has the discretion to forfeit the deposit, and
there the discretion ends but the obligation of the court to resell the
property is imperative. A further consequence of non-payment is that
the defaulting purchaser forfeits all claim to the property ... (Rule 86).
9. ... These provisions leave no doubt that unless the deposit
and the payment are made as required by the mandatory
provisions of the Rules, there is no sale in the eye of the law in
favour of the defaulting purchaser and no right to own and
possess the property accrues to him.
***

23-01-2025 (Page 25 of 35) www.manupatra.com VAISH ASSOCIATES

 11. Having examined the language of the relevant Rules and
the judicial decisions bearing upon the subject we are of the
opinion that the provisions of the Rules requiring the deposit of
25% of the purchase money immediately on the person being
declared as a purchaser and the payment of the balance within
15 days of the sale are mandatory and upon non-compliance
with these provisions there is no sale at all. The Rules do not
contemplate that there can be any sale in favour of a purchaser without
depositing 25% of the purchase money in the first instance and the
balance within 15 days. When there is no sale within the contemplation
of these Rules, there can be no question of material irregularity in the
conduct of the sale. Non-payment of the price on the part of the
defaulting purchaser renders the sale proceedings as a
complete nullity. The very fact that the court is bound to resell the
property in the event of a default shows that the previous proceedings
for sale are completely wiped out as if they do not exist in the eye of
the law. We hold, therefore, that in the circumstances of the present
case there was no sale and the purchasers acquired no rights at all.
29. Relying on Manilal Mohanlal case [ MANU/SC/0005/1954 :
1954:INSC:44 : AIR 1954 SC 349] Rules 84, 85 and 86 of Order 21 were also
held to be mandatory in Sardara Singh v. Sardara Singh
[ MANU/SC/0488/1990 : (1990) 4 SCC 90]. Similarly inBalram v. Ilam
Singh [ MANU/SC/0716/1996 : 1996:INSC:926 : (1996) 5 SCC 705] this
Court reiterated the legal position in the following words: (SCC p. 711, para 7)
7. ... it was clearly held [in Manilal Mohanlal [ MANU/SC/0005/1954
: 1954:INSC:44 : AIR 1954 SC 349] ] that Rule 85 being mandatory,
its non-compliance renders the sale proceedings a complete nullity
requiring the executing court to proceed Under Rule 86 and property
has to be resold unless the judgment-debtor satisfies the decree by
making the payment before the resale. The argument that the executing
court has inherent power to extend time on the ground of its own
mistake was also expressly rejected.
30. We may also refer to the decisions of this Court in Rao Mahmood Ahmad
Khan v. Ranbir Singh [ MANU/SC/0437/1995 : 1995:INSC:126 : 1995 Supp
(4) SCC275], Gangabai Gopaldas Mohata v. Fulchand
[ MANU/SC/0425/1997 : 1996:INSC:1521 : (1997) 10 SCC 387],Himadri
Coke & Petro Ltd. v. Soneko Developers (P) Ltd.[(2005) 12 SCC 364] and
Shilpa Shares and Securities v. National Coop. Bank Ltd.
[ MANU/SC/7612/2007 : 2007:INSC:510 : (2007) 12 SCC 165], wherein the
same position has been taken.
31. In the light of the above we see no reason to hold that Rules 57
and 58 of the Income Tax Rules are anything but mandatory in nature,
so that a breach of the requirements under those Rules will render the
auction non est in the eye of the law."
(emphasis added)
35.7 In State of Bihar v. Bihar Rajya Bhumi Vikas Bank Samiti MANU/SC/0826/2018 :
2018:INSC:648 : (2018) 9 SCC 472, referring to Section 34(5) of the Arbitration and
Conciliation Act, 1996, this Court has held that the absence of any consequences for
23-01-2025 (Page 26 of 35) www.manupatra.com VAISH ASSOCIATES
infraction of a procedural provision implies that such a provision ought to be interpreted
to be directory and not mandatory. Following are the observations made in the
captioned decision :
19. It will thus be seen that Section 34(5) does not deal with the power of the
Court to condone the non-compliance thereof. It is imperative to note that the
provision is procedural, the object behind which is to dispose of applications
Under Section 34 expeditiously. One must remember the wise observation
contained in Kailash [Kailash v. Nanhku, MANU/SC/0264/2005 :
2005:INSC:186 : (2005) 4 SCC 480], where the object of such a provision is
only to expedite the hearing and not to scuttle the same. All rules of procedure
are the handmaids of justice and if, in advancing the cause of justice, it is made
clear that such provision should be construed as directory, then so be it.
xxxx
21. Section 80, though a procedural provision, has been held to be
mandatory as it is conceived in public interest, the public purpose
underlying it being the advancement of justice by giving the
Government the opportunity to scrutinise and take immediate action
to settle a just claim without driving the person who has issued a
notice having to institute a suit involving considerable expenditure
and delay. This is to be contrasted with Section 34(5), also a
procedural provision, the infraction of which leads to no consequence.
To construe such a provision as being mandatory would defeat the
advancement of justice as it would provide the consequence of
dismissing an application filed without adhering to the requirements
of Section 34(5), thereby scuttling the process of justice by burying
the element of fairness."
(emphasis added)
35.8. It can be discerned from the aforesaid discussion that when the law prescribes
that a certain act has to be done in a particular manner for a party to acquire a right,
then it ought to be treated as mandatory in character more so, when the Statute
prescribes a consequence for failure to comply with the requirements laid down.
35.9. The words "may" and "shall" used in different provisions of Schedule I of the
IBBI Regulations, 2016 go to show that the legislature intended to ascribe different
meanings to the said words depending on the steps required to be taken by the
Liquidator for the sale of the assets of a Corporate Debtor. A perusal of the Rules under
Schedule I demonstrate that a play in the joints has been given to the Liquidator only in
particular circumstances relating to the sale of an asset through auction. Wherever the
underlying intention is to maximize realization from the sale of assets, discretion has
been vested in the Liquidator to sell the asset through auction in the best interest of the
creditors, but not otherwise. For the rest of the steps towards sale of an asset, the
mandate of the Statute is in the affirmative. In other words, a particular step if
prescribed, is necessarily required to be taken by the Liquidator in the manner
prescribed in the Rules under Schedule I. He is not left with any discretion to condone
the delay.
35.10. When broken down, Rule 12 states that (a) the highest bidder in an auction
shall be called upon to provide the balance sale consideration within 90 days from the
date of such a demand; (b) any payments made after 30 days from such a demand shall
23-01-2025 (Page 27 of 35) www.manupatra.com VAISH ASSOCIATES
attract interest at the rate of 12 per cent; (c) if the payment is not received within the
period of 90 days, the sale shall be cancelled. The word 'shall' has been used thrice in
Rule 12. Coming next to Rule 13, the same states that (a) the sale shall stand
completed on the payment of the full amount; (b) the Liquidator shall execute a sale
certificate/sale deed to transfer such an asset(s); (c) the asset(s) shall be delivered in
the manner prescribed in terms of the sale. The word "shall" has again been used thrice
in Rule 13. It is noticed that except for Rules 4A, 4B, 8 and Rule 11A where the word
"may" has been used and it vests a discretion in the Liquidator to reduce the reserve
price more than once and conduct multiple rounds of auctions with the purpose of
maximizing realization from the sale of assets in the best interest of the creditors, in the
remaining Rules, the word "shall" features prominently and without an exception. But
that is not to say that wherever the word "shall" has been used in the Rules under
Schedule I, it attains a mandatory nature. The Rule could still be construed as purely
procedural if its infraction does not entail any serious or prejudicial consequence. Much
will depend on the connotation and the textual context of the Rule.
35.11. In view of the analysis undertaken above, Rule 12 would have to be treated as
mandatory in character for the reason that it contemplates a consequence in the event
of non-payment of the balance sale consideration by the highest bidder within the
stipulated timeline of 90 days, which is cancellation of the sale by the Liquidator. To
that extent, there is substance in the submission made on behalf of the Appellant that
since the second proviso Under Rule 12 contemplates a consequence of cancellation of
the auction on non- payment of the balance sale consideration within 90 days, the
Liquidator was not empowered to extend the timeline.
35.12. Reliance placed by learned Counsel for the Liquidator on the decision in Pioneer
Urban Land and Infrastructure Limited and Anr. v. Union of India and Ors.
MANU/SC/1071/2019 : 2019:INSC:889 : (2019) 8 SCC 416 to contend that the
timeline prescribed under Schedule 1 of the IBBI Regulations 2016 are directory and not
mandatory in character, is misplaced. The said decision holds that timelines available to
operational creditors under the IBC are directory and not mandatory because no
consequence is provided if the period is not extended or after the extension expires and
it is in this context that the following observations have been made:
58. This Court, while dealing with timelines provided qua operational creditors,
in Surendra Trading Co. [Surendra Trading Co. v. Juggilal Kamlapat Jute Mills
Co. Ltd., MANU/SC/1248/2017 : 2017:INSC:957 : (2017) 16 SCC 143 :
(2018) 2 SCC (Civ) 730], held that the timelines contained in the provisos to
Sections 7(5), 9(5) and 10(4) of the Code are all directory and not mandatory.
This is for the obvious reason that no consequence is provided if the periods so
mentioned are exceeded. Though this decision is not in the context of the 14-
day period provided by Section 7(4), we are of the view that this judgment
would apply squarely on all fours so that the period of 14 days given to NCLT
for decision Under Section 7(4) would be directory. We are conscious of the
fact that Under Section 64(1) of the Code, NCLT President or the Chairperson of
Nclat may, after taking into account reasons by NCLT or Nclat for exceeding the
period mentioned by statute, extend the period of 14 days by a period not
exceeding 10 days. We may note that even this provision is directory, in that no
consequence is provided either if the period is not extended, or after the
extension expires. This is also for the good reason that an act of the court
cannot harm the litigant before it. Unfortunately, both NCLT and Nclat do not
have sufficient members to deal with the flood of applications and appeals that
is before them. The time taken in the queue by applicants who knock at their
23-01-2025 (Page 28 of 35) www.manupatra.com VAISH ASSOCIATES
 doors cannot, for no fault of theirs, be put against them.
35.13. Nor can the decisions of the Tribunal in Standard Surfa Chem India Private
Limited (supra) and Prakash Chandra Kapoor (supra) referred to by learned Senior
Counsel for the Liquidator, be read in favour of the Respondents. A sweeping
observation that all the timelines prescribed in Regulation 47 are directory, is
impermissible. The consequences of non-compliance of the specific rule would have to
be individually examined to decide as to whether the said rule has a directory flavour or
is mandatory in character.
35.14. In the present case, records reveal that when the Auction Purchaser had
approached the Liquidator seeking extension of time to deposit the balance sale
consideration. The Liquidator had rightly expressed his inability to do so and indicated
that such a power vests only in the Adjudicating Authority. On receiving the aforesaid
response, the Auction Purchaser did take steps to move the Adjudicating Authority for
seeking extension of time for making the payments. It is a matter of record that the said
application was allowed by the Adjudicating Authority on 5th May, 2020 and time was
granted to the Auction Purchaser to pay the balance sale consideration on the Central
Government/State Government lifting the lockdown. The aforesaid order dated 5th May,
2020, was passed by the Adjudicating Authority in exercise of its inherent powers Under
Rule 11 of the NCLT Rules, 2016 which states as follows :
Rule 11 of NCLT Rules, 2016
Inherent Powers - Nothing in these rules shall be deemed to limit or otherwise
affect the inherent powers of the Tribunal to make such orders as may be
necessary for meeting the ends of justice or to prevent abuse of the process of
the Tribunal.
35.15. The aforesaid Rule is not to be read in isolation but in conjunction with Section
35 of the IBC that deals with the powers and duties of the Liquidator and states that the
Liquidator shall have the powers and duties specified in clauses (a) to (o) of sub-
section 1 including the power to sell an immovable/movable property of the Corporate
Debtor in liquation by public auction/private sale as per clause (f), subject to the
directions of the NCLT. Pertinently, it has been observed in Arun Kumar Jagatramka v.
Jindal Steel and Power Limited36 that "the Liquidator exercises several functions which
are quasi-judicial in nature and character. Section 35(1) itself enunciated that the
powers and duties which are entrusted to the Liquidator are "subject to the directions of
the Adjudicating Authority". The Liquidator, in other words, exercises functions which
have been made amenable to the jurisdiction of NCLT, acting as the Adjudicating
Authority.....".
35.16. In the facts of the present case, the Adjudicating Authority exercised statutory
powers Under Section 35 of the IBC read with its inherent powers Under Rule 11 of the
NCLT Rules, 2016 for extending the time to deposit the balance sale consideration on
sufficient cause being shown, i.e., in view of the countrywide lockdown due to the
Covid- 19 pandemic. This latitude that was given in the aforesaid extraordinary
circumstances to meet the ends of justice, cannot be faulted.
36. IMPACT OF THE ATTACHMENT ORDER BY THE INCOME TAX AUTHORITIES ON THE
SALE OF THE AUCTIONED PROPERTY
36.1. All things even, having held that there was sufficient reason to grant extension of
time to the Auction Purchaser to deposit the balance sale consideration in terms of
23-01-2025 (Page 29 of 35) www.manupatra.com VAISH ASSOCIATES
orders passed by this Court in the Suo Moto Writ Petition read with the provisions of
Regulation 47A of the IBBI Regulations, 2016, and having regard to the view expressed
above that the Adjudicating Authority was empowered in law to extend the time on
sufficient cause being shown, the matter ought to have rested there. But there is
something more to be said in this case that revolves around the arguments advanced by
learned Counsel for the Appellant regarding the import of the order of attachment
issued by the Income Tax Authorities in respect of the auctioned property and its effect.
36.2. It has been strenuously argued by learned Senior Counsel for the Appellant that
the attachment order could not be used as an excuse by the Auction Purchaser for
belatedly depositing the balance sale consideration. The terms and conditions of the
Notice of Sale as extracted in this judgment go to show that the Liquidator had declared
that e-auction of the subject property was being conducted on an "AS IS WHERE IS",
"AS IS WHAT IS" and "WHATEVER THERE IS" basis. It was further clarified that the
intending bidders must undertake their own independent inquiries, inspect the subject
property and satisfy themselves before submitting their bids.
36.3. The fact that the Auction Purchaser was aware of the income tax attachment order
in respect of the subject property is borne out from the correspondence exchanged by it
with the Liquidator, that forms a part of the records. On certain queries being raised by
the Auction Purchaser, the Liquidator had replied, vide letter dated 9th December, 2019
and stated that :
if the property is sold under IBC, income tax will not have any priority claim
and the property can be registered with NCLT order, apart from this the Income
tax dues are very less hence it can also be paid out of the proceeds and no
objection can be taken.
In a subsequent letter dated 17th December, 2019 addressed by the Auction Purchaser
to the Liquidator, which was well before the date the auction was scheduled, among
other issues raised, one of the requests made to the Liquidator was to ensure that the
income tax attachment/prohibitory order on the subject property is lifted by the Income
Tax Department. In his reply dated 19th December, 2019 to the aforesaid letter, the
Liquidator had informed the Auction Purchaser that:
3. As regards to the Income Tax attachment/prohibitory order passed. I would
like to clarify that Income tax already filed claim before me and shall be paid in
order of priority as provided under Insolvency & Bankruptcy Code 2016 and the
registration of property on successful bidding has no relevance to the same. In
case of any objection from the SRO the same shall be brought before the
Tribunal and suitable order shall be obtained by the Liquidator so as to proceed
with the registration.
36.4. It can be seen from the two clarifications given by the Liquidator to the Auction
Purchaser that registration of the subject property in favour of the successful bidder was
not to be linked with the income tax attachment order for the reason that the Income
Tax Department had already lodged a claim before the Liquidator and payment was to
be released to the Department in the order of priority, as stipulated under the IBC.
Despite that, the Auction Purchaser did not proceed further.
36.5. In the light of the Notice for sale and the replies furnished to the Auction
Purchaser well before the bidding process had commenced, we are of the considered
view that it was for the Auction Purchaser as an intending bidder to have conducted a
due diligence at its own end, gather all the relevant information pertaining to the
23-01-2025 (Page 30 of 35) www.manupatra.com VAISH ASSOCIATES
subject property which included the status of the property and the liabilities attached to
it, weigh all the pros and cons and only thereafter participate in the auction process.
After having participated in the e-auction with its eyes wide open, the Auction Purchaser
cannot be heard to state that payment of the balance sale consideration was linked with
the lifting of the attachment order passed by the Income Tax Department when it knew
all along that the auction was being conducted on an "AS IS WHERE IS", "AS IS WHAT
IS" and "WHATEVER THERE IS" basis.
36.6. To fortify the submission that the sale transaction could not have been completed
on account of the embargo placed under the IT Act, learned Counsel for the Auction
Purchaser has referred to Sections 222 and 281 of the IT Act read with Rule 48 Part III,
Schedule 2 of the IT Act. Section 222 of the IT Act, empowers the Tax Recovery Officer
to draw up a statement specifying the amount of arrears due from an Assessee who has
defaulted in payment of tax and thereafter proceed to recover the said arrears by
attaching and selling the Assessee's movable/immovable properties. Section 281 of the
IT Act declares that if an Assessee creates a charge or parts with the possession of any
of his assets, such charge/transfer would be treated as void against a claim in respect
of tax payable by the Assessee. However, the second proviso to Section 281 clarifies
that such a charge/transfer will not be void if it is made with the previous permission of
the assessing officer. As for Rule 48 falling under Part III Schedule 2 of the IT Act, it
contemplates attachment of an immovable property of the defaulter, prohibiting the
defaulter from transferring/charging the property and prohibiting all other persons from
taking benefit from such a transfer/charge.
36.7. The sequence of the events as unravelled from the records reveal that the Income
Tax Department had already filed a claim before the Liquidator who had in turn moved
the Adjudicating Authority for appropriate directions relating to the subject property that
was under the attachment order passed by the Income Tax Authorities. The said
application was disposed of by the Adjudicating Authority vide order dated 10th
February, 2020 wherein, directions were issued to lift the attachment order subject to
the conditions that may be specified in an Escrow account where the sale consideration
would be deposited by the Liquidator. The said order passed in open Court was duly
conveyed by the Liquidator to the Auction Purchaser, though it is the stand of the latter
that a physical copy of the said order passed on 10th February, 2020, was received by it
much later, in the month of May, 2020. The escrow account 37 was created on 3rd
August, 2020 and the entire tax arrears amounting to ' 2,44,01,603/- (Rupees Two crore
forty four lakhs one thousand six hundred and three only) were deposited in the escrow
account on 24th August, 2020, though the income tax department lifted the attachment
order three days later, on 27th August, 2020. This was duly conveyed to the office of
the Sub-Registrar at Trichy on the same date. The second proviso to Section 281 of the
IT Act did provide a window to the Auction Purchaser to approach the assessing officer
for prior permission to transfer the subject property. But that option was exercised
when the Liquidator moved an application for appropriate permission before the
Adjudicating Authority which was granted on 10th February, 2020 under intimation to
the Auction Purchaser.
36.8. The contention of the learned Counsel for the Auction Purchaser is that Rule 13,
Schedule I of the IBBI Regulation, 2016 must be read in conjunction with Rule 12 and
only on payment of the full amount, could the sale transaction be treated to have been
completed in all respects. Since the full amount could not be paid till the attachment
order was lifted, the Liquidator could not have executed a certificate for sale/sale deed
to transfer the subject property in favour of the Auction Purchaser.

23-01-2025 (Page 31 of 35) www.manupatra.com VAISH ASSOCIATES

36.9. We are afraid, such an assumption does not stand to reason. Rule 12 is not
interlinked with Rule 13. Both the Rules cover different situations. The first proviso to
Rule 12 gives a leeway to the successful bidder to make payment of the balance sale
consideration after thirty days subject to paying interest at the rate of 12%. However,
the second proviso to Rule 12 is unequivocal and declares that the sale itself will be
treated as cancelled if the payment is not received within the outer limit of 90 days. It is
only on completion of the steps contemplated in Rule 12 that Rule 13 can come in.
Reference to Rule 13 that starts with the expression "on payment of the full amount"
would naturally be understood to mean on payment of the full amount within the period
prescribed in Rule 12. We have already held Rule 12 to be mandatory in character
because non-payment within the timeline has consequences attached to it. However, in
contrast thereto, there are no adverse consequences spelt out in Rule 13 for it to be
treated as mandatory. The said Rule lays down the procedure for completion of the sale
and would have to be treated as directory since some procedural steps have been set
out for purposes of completion of the sale process, but nothing beyond that. We are
therefore not inclined to accept the submissions made by the Respondents that none of
the activities as contemplated in Rule 12 could have been completed unless and until
the attachment order passed by the Income Tax Authorities was lifted or that the
Liquidator was not in a position to complete the sale Under Rule 13 on that count.
36.10. In any event, the Liquidator had taken timely steps to move the Adjudicating
Authority for appropriate permission which was obtained as long back as on 10th
February, 2020, i.e. about a month and a half before the nationwide lockdown was
declared. Moreover, the Auction Purchaser was well aware of the fact that the entire tax
arrears amounted to ' 2,44,01,603/- (Rupees Two crore forty four lakh one thousand six
hundred and three only), which could have easily been paid out of the earnest money of
' 2,95,59,638/- (Rupees Two crore ninety five lakh fifty nine thousand six hundred and
thirty eight only) deposited by it, still leaving some surplus funds. The Liquidator had
also taken steps to apprise the Auction Purchaser of the said position and the order of
priority that was to be given to the claim of the Income Tax Department. Yet the Auction
Purchaser did not deposit the balance sale consideration. In view of the above, the plea
taken by the Auction Purchaser that the income tax attachment order was a serious and
an insurmountable impediment in completion of the sale and the subject property could
not have been validly transferred in its favour by the Liquidator, is rather tenuous and
not persuasive.
36.11. The anxiety of the Auction Purchaser was adequately addressed on the
Adjudicating Authority passing an order on 10th February, 2020, lifting the attachment
order. This order was communicated by the Liquidator to the Auction Purchaser well in
time. Mere not receipt of a copy of the said order cannot be a ground for the Auction
Purchaser to have delayed deposit of the entire balance sale consideration. The spectre
of Covid-19 was nowhere on the horizon at that time. It spiralled only in the last week
of March, 2020. If the Auction Purchaser was serious, it could have easily deposited at
least some amount out of the balance sale consideration of ' 26,60,36,677/- (Rupees
Twenty six crore sixty lakh thirty six thousand six hundred and seventy seven only)
much earlier, but it elected not to deposit a penny till the end of August, 2020. When
the first proviso to Rule 12, Schedule I of the IBBI Regulations, 2016 permits payment
of sale consideration after expiry of 30 days from the date of demand subject to
payment of interest @ 12% p.a., there was no question of the Auction Purchaser going
scot free, when its conduct has not been blemishless.
36.12. On an overall conspectus of the facts of the present case which brings out the

23-01-2025 (Page 32 of 35) www.manupatra.com VAISH ASSOCIATES

glaring default on the part of the Auction Purchaser in making deposit of the balance
sale consideration even after permission was granted by the Adjudicating Authority on
10th February, 2020 to lift the attachment order, the only question that needs to be
answered is as to whether this Court should proceed to set aside the auction and as a
sequence thereto, declare as null and void, the sale certificate issued by the Liquidator
in favour of the Auction Purchaser, as has been pleaded by the Appellant.
36.13. In our opinion, such an order would be too harsh. Much water has flown under
the bridge by now. The subject land has been utilized by the Auction Purchaser to build
a 200-bed Mother and Child hospital which is operational. Huge amounts have been
pumped into the project by the Auction Purchaser. The hospital is fully functional
providing medical facilities to seven surrounding districts. In contrast, the Appellant has
not been a vigilant litigant. His conduct shows that he has dragged his feet at every
stage. Records reveal that belated applications have been filed by him for seeking recall
of the orders passed by the Adjudicating Authority granting extension of time to the
Auction Purchaser. For reasons best known to him, it took 19 months for the Appellant
to prefer an appeal before the Tribunal against the order passed by the Adjudicating
Authority, as provided for in the IBC. Furthermore, the Appellant resisted handing over
possession of the subject property to the Respondents thereby causing more delay.
36.14. This Court must underscore the well settled legal position that once an auction
is confirmed, it ought to be interfered with on fairly limited grounds. (Refer: Valji
Khimji and Co. v. Hindustan Nitro Product (Gujarat) Ltd. (Official Liquidator)
MANU/SC/3408/2008 : 2008:INSC:925 : (2008) 9 SCC 299 and Celir LLP v. Bafna
Motors (Mumbai) Private Limited and Ors. MANU/SC/1042/2023 : 2023:INSC:838 :
(2024) 2 SCC 1). Repeated interferences in public auction also results in causing
uncertainty and frustrates the very purpose of holding auctions. (Refer : K. Kumara
Gupta v. Sri Markendaya and Sri Omkareswara Swamy Temple and Ors.
MANU/SC/0213/2022 : 2022:INSC:207 : (2022) 5 SCC 710). Unless there are some
serious flaws in the conduct of the auction as for example perpetration of a
fraud/collusion, grave irregularities that go to the root of such an auction, courts must
ordinarily refrain from setting them aside keeping in mind the domino effect such an
order would have. Given the facts noted above, we shall refrain from cancelling the sale
or declaring the Sale Deed as void. Instead, it is deemed appropriate to balance the
equities by directing the Auction Purchaser to pay an additional amount in respect of the
subject property.
CONCLUSION
36.15. For arriving at a just and fair figure, we propose to take into consideration the
estimated value of the subject property in terms of the Reports submitted by the
Registered Valuers appointed by the Liquidator. Based on their Reports, the Liquidator
had fixed ' 39,41,28,800/- (Rupees Thirty nine crore forty one lakh twenty eight
thousand and eight hundred only) as the average liquidation value of the subject
property for the purpose of e-auction. This figure was brought down by 25% in the
second round of auction which came to ' 29,55,96,375/- (Rupees Twenty nine crore fifty
five lakh ninety six thousand three hundred and seventy five only). The difference in the
two figures mentioned above comes to ' 10,00,00,000/- (Rupees Ten crore only)
approximately. Keeping in mind the fact that the Auction Purchaser managed to retain
the balance sale consideration for over six months reckoned from 10th February, 2020
and about five months reckoned from 25th March, 2020, we deem it appropriate to
direct it to deposit 50% of the differential figure, i.e., an additional sum of '
5,00,00,000/- (Rupees Five crore only) with the Liquidator along interest @ 9 % p.a.
23-01-2025 (Page 33 of 35) www.manupatra.com VAISH ASSOCIATES
reckoned from 26th March, 2020 till date of actual payment. The said amount shall be
deposited by the Auction Purchaser with the Liquidator within eight weeks from today.
Thereafter, the Liquidator shall disburse the amount received in terms of the orders
passed/may be passed by the Adjudicating Authority, as contemplated under the IBC.
36.16. The appeals are partly allowed on the above terms. Parties shall bear their own
expenses.

1 In short 'Tribunal'
2 Company Appeal (AT) (CH) (Ins} No. 336 of 2021; Company Appeal (AT) (CH) (Ins)
No. 339 of 2021 and Company Appeal (AT) (CH) (Ins) No. 343 of 2022
3 In short 'Adjudicating Authority'
4 MA No. 120 of 2020
5 IA SR No. 944 of 2020 on 25th September, 2020
6 IA 335 of 2020 in MA/689/2019 in CP/1140/IB/2018
7 In short 'IBC'
8 In short 'Auction Purchaser'
9 In short 'company/Corporate Debtor'
10 situated at Old No. 3A, New No. 27, Alexandria Road, Cantonment, Tiruchirappalli-
620001
11 Original Petition No.137 of 2015
12 CP/1140/(IB)/CB/2018
13 In short 'IRP'
14 In short 'CoC'
15 IBBI Regulations, 2016
16 Company Appeal (AT) (INS) No. 334 of 2021
17 Union Bank of India v. Rajat Infrastructure Pvt. Ltd. and Ors.
18 lA No. 202 of 2021 in CP/1140/IB/20181.
19 Suo Motu Writ Petition (C) No.3 of 2020 in 'Cognizance for Extension of Limitation, In
Re', reported as MANU/SC/0505/2020 : (2020) 19 SCC 10
20 For short 'DRT'
21 For short 'NCLT Rules, 2016'
22 For short 'SARFAESI Act'
23 Order dated 12th May, 2020 passed in Civil Appeal No.1902 of 2020
24 IA No. 335/IB/2020 in MA No.689 of 2019 in CP No./1140/IB/CB/2018
25 For short 'IT Act'
26 BMM Ispat Ltd. v. Ramdas Ispat, MANU/NC/11526/2019, Allahabad Bank v. Biotor,
MANU/ND/8807/2019, Sanjay Kr. Agarwal v. Tax Recovery Officer,
MANU/SB/5403/2022, Abhudaya Coop. Bank v. Shivkripa,2020 SCC Online NCLT,
11935, UBI v. Guruashish Construction, MANU/ND/1679/2020, Ashok Kr. Dewan v. AC
of IT, 2021 SCC Online 4368, Mauritius Commercial Bank v. Varun Corporation,
MANU/IH/0059/2021, Milind Kasodekar v. P. Mahajan, MANU/ND/3042/2021.
27 Reliance has been placed In the matter of Sundaresh Bhat MANU/NL/0402/2021
28 For short 'SIE Rules, 2002'

23-01-2025 (Page 34 of 35) www.manupatra.com VAISH ASSOCIATES

29 In short 'LOI'
30 Vide Notification No. IBBI/2020- 21/GN/REG059 dated 20.04.2020
31 MA/335/2020 in MA/689/2019 in CP/1140/2018
32 SARFAESI Rules, 2002
33 No. IBBI/2019-20/GN/REG047 : MANU/NMIC/0485/2019
34 Notification No. IBBI/2019-20/GN/REG.047 : MANU/NMIC/0485/2019
35 In short Debt Recovery Act, 1993
36 (Refer Para 81) MANU/SC/0182/2021 : 2021:INSC:187 : (2021) 7 SCC 474
37 Escrow Account No. 50200050623451

© Manupatra Information Solutions Pvt. Ltd.

23-01-2025 (Page 35 of 35) www.manupatra.com VAISH ASSOCIATES