Forfeiture of auction payments exceeding EMD is invalid unjust enrichment if subsequent sale realizes identical value.

The Corporate Debtor, Turning Point Estates Pvt. Ltd., was ordered into liquidation on 09.02.2023

In the 9th e-auction held on 19.04.2024, the Appellant was declared the Successful Auction Purchaser for a bid of ₹81 crore

The Appellant deposited 25% of the bid amount (₹20.25 crore), comprising ₹4.05 crore as Earnest Money Deposit (EMD) and ₹16.2 crore as balance

Subsequently, the Appellant discovered an undisclosed excise department encumbrance on the assets, leading Union Bank of India to withhold the loan for the remaining 75%

On 14.09.2024, the Liquidator cancelled the sale and forfeited the entire 25% deposit due to non-payment of the balance within the mandatory 90-day window

The Adjudicating Authority (AA) rejected the Appellant’s challenge to this forfeiture

During the pendency of the dispute, the Liquidator conducted an 11th auction on 02.05.2025, selling the assets to a third party for the same price of ₹81 crore

1. Whether the Liquidator’s cancellation of the 9th e-auction due to non-payment within stipulated timelines was lawful under the IBBI (Liquidation Process) Regulations, 2016

2. Whether the forfeiture of the entire 25% deposit (including the amount exceeding the EMD) was justified given the subsequent sale of the assets at the same price

3. Whether the retention of the deposited amount by the Liquidator constitutes unjust enrichment

The court applied Schedule I, Rules 12 and 13 of the IBBI (Liquidation Process) Regulations, 2016, which mandate the cancellation of a sale if the balance consideration is not received within 90 days

It relied on V.S. Palanivel v. Sri. Lakshmi Hotels (P) Sriram (2025), which established that the timeline in Rule 12 is mandatory and leaves no discretion to the Liquidator to condone delays

Furthermore, the court invoked the principle of restitution and the doctrine against "unjust enrichment" as articulated in Delhi Development Authority v. Corporation Bank (2025)

It also referenced Viney Kumar Sharma v. The Improvement Trust (2026) regarding the duty of public authorities to disclose encumbrances in auction notices

The Tribunal affirmed that under the mandatory framework of the Liquidation Regulations, the Appellant's failure to pay the 75% balance within 90 days necessitated the cancellation of the auction

Despite the Appellant's difficulties with bank disbursement due to the excise lien, the Liquidator was bound by the statutory timelines

Regarding forfeiture, the Tribunal held that while the EMD (₹4.05 crore) was rightly forfeited per Clause 11 of the Process Memorandum for breach of payment terms, the forfeiture of the additional 20% (₹16.2 crore) was unsustainable

The Tribunal reasoned that since the Liquidator subsequently realized the full ₹81 crore from a new purchaser, retaining the Appellant's additional deposit would result in unjust enrichment

The court noted that the Appellant was not entirely at fault as the bank’s refusal was tied to a charge that the AA eventually ordered to be deleted

However, it set aside the forfeiture of the remaining ₹16.20 crore

The Liquidator was directed to refund ₹16.20 crore to the Appellant within 30 days, failing which the amount would carry interest at 9% per annum