The Supreme Court of India dismissed the appeals filed by M/s Shri Karshni Alloys Private Limited challenging the National Company Law Appellate Tribunal (NCLAT) majority decisions in the liquidation proceedings of M/s Surana Industries Limited. The bench of Justices Sanjay Kumar and Alok Aradhe upheld the forfeiture of amounts paid by the appellant for the purchase of assets at Raichur, Karnataka.
Background
The corporate insolvency resolution process (CIRP) against Surana Industries was initiated in January 2018, with liquidation commencing in October 2018. The company owned assets in Gummidipoondi, Tamil Nadu, and Raichur, Karnataka. While the Gummidipoondi assets were sold, the Raichur assets faced multiple unsuccessful auctions.
In September 2021, Shri Karshni Alloys offered ₹105.21 crores to buy the Raichur assets as a going concern, proposing a mix of ₹40 crores equity and ₹65.21 crores unsecured debt. A 10% commitment advance of ₹10.5210 crores was deposited. The liquidator sought NCLT approval for the private sale, which was granted in March 2022 with a strict payment timeline.
Dispute
Despite extensions provided by the Stakeholders Consultation Committee (SCC), the appellant failed to pay the full amount by the stipulated deadlines. Consequently, the liquidator forfeited the ₹37.80 crores paid by the appellant and initiated a fresh auction. The appellant challenged this forfeiture before the NCLT, NCLAT, and the Madras High Court, arguing the eventual resale price exceeded their offer, so stakeholders suffered no loss.
NCLAT Proceedings
The NCLAT bench initially delivered a split verdict: the Technical Member partially allowed the appeal, while the Judicial Member dismissed it. A third Technical Member concurred with the Judicial Member, forming the majority, thereby dismissing the appellant’s appeals.
Supreme Court Analysis
The Supreme Court emphasized:
- The sale was under Regulation 33(2)(d) of the Liquidation Regulations, requiring prior NCLT approval, not Regulation 33(2)(c).
- The forfeiture clause in the NCLT order dated 29 June 2022 was valid, exercising powers under Rule 15 of the NCLT Rules to ensure timely liquidation.
- The appellant acted inconsistently by accepting partial payments while challenging the same order (approbate-reprobate).
- The transaction was part of a statutory liquidation process, not a private contract governed by Section 74 of the Indian Contract Act.
The Court observed that delays in payment could compromise the objective of the Insolvency and Bankruptcy Code (IBC), which prioritizes time-bound resolution. The appellant’s failure to pay in accordance with timelines justified forfeiture, regardless of the eventual higher resale price.
Conclusion
The Supreme Court upheld the NCLAT majority decisions, dismissing Shri Karshni Alloys’ appeals. The forfeited amounts were distributed among stakeholders as per law. Each party bears its own costs.
Key Takeaways:
- Liquidators and NCLT have wide powers to impose timelines and conditional extensions in liquidation sales.
- Failure to comply with such timelines can result in lawful forfeiture, even if eventual asset resale exceeds the original offer.
- Attempts to challenge liquidation orders via writ petitions without exhausting statutory remedies can be dismissed as abuse of process.
