Shri Karshni Alloys Private Limited Vs Ramakrishnan Sadasivan (Supreme Court of India)
SC Upholds Full Forfeiture of ₹37.80 Cr: Buyer Backtracked on Timelines, Suppressed Facts & Cannot Invoke Contract Act in IBC Sal
Supreme Court dismissed the buyer’s appeal challenging the forfeiture of ₹37.80 crore paid towards purchase of the Raichur plant in liquidation proceedings.
The Court noted that after 13 failed auctions and a planned scrap sale, the appellant suddenly offered ₹105.21 crore in Sept 2021, promising to pay the balance within 15 days of NCLT approval. NCLT approved the sale on 22.03.2022, but the appellant failed to honour its own commitment. The Stakeholders Consultation Committee (SCC) granted a limited extension till 30.05.2022 with 12% interest. When the appellant sought further extension, NCLT on 29.06.2022 granted time till 30.06.2022 and 31.07.2022, expressly warning that any deviation would lead to forfeiture of the entire amount paid.
The buyer again defaulted, paying only an additional ₹1.50 crore. SCC resolved to enforce forfeiture, and the liquidator communicated the same. NCLT dismissed the appellant’s challenge, and NCLAT (majority) upheld full forfeiture. Supreme Court affirmed the majority view.
The Court held that the transaction was a private sale under Regulation 33(2)(d) (requiring NCLT approval), not a contractual transaction under Regulation 33(2)(c). Therefore, the appellant could not rely on Section 74 of the Contract Act—this was not a bilateral contract but a court-supervised sale. The forfeiture clause was lawfully inserted by the NCLT under Rule 15 of the NCLT Rules, and the appellant accepted and acted upon it, making further payments after the extension order.
The Supreme Court also reproached the appellant for lack of bona fides—not disclosing to the High Court that an NCLAT appeal was already filed, obtaining interim orders while suppressing material facts, and attempting to “approbate and reprobate” by acting under the NCLT order while simultaneously challenging it.
On economic impact, the Court rejected the argument that stakeholders suffered no loss because the asset was later sold for ₹145.38 crore. The financial creditors still took a major haircut, and the appellant’s failure had prolonged liquidation.
Finding no legal or equitable basis to interfere, the Supreme Court dismissed the appeals, restoring the forfeiture in full.
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
Company Appeal (AT)(CH)(Ins) No. 443 of 2022 was filed by M/s. Shri Karshni Alloys Private Limited before the National Company Law Appellate Tribunal, Chennai Bench1, assailing the order dated 29.06.2022 passed by the National Company Law Tribunal, Chennai Bench2, in I.A. No. (IBC)/512 (CHE)/2021 in TCP/95/2017. Company Appeal (AT)(CH)(Ins) No. 438 of 2022 was also filed by it before the NCLAT against the order dated 10.08.2022 passed by the NCLT in l.A. No. 952/2022 in TCP/95/2017. Both the appeals were heard by a bench composed of two Members and they delivered separate judgments on 20.10.2023. However, the Member (Judicial) disagreed with the judgment authored by the Member (Technical). The Member (Technical) had partly allowed the appeals while the Member (Judicial) was inclined to dismiss them in their entirety. Owing to their difference in opinion, the Chairperson of the NCLAT referred the matter to another Member (Technical). By judgment dated 31.05.2024, the third Member agreed with the view taken by the Member (Judicial) and, in consequence, the appeals stood dismissed.
