Supreme Court of India· 28 September 2026
Can a forfeiture clause in an e-auction notice cover the entire amount deposited, including EMD, once the successful bidder defaults on the balance sale consideration?
M/S ASJ FINSOLUTIONS PVT. LTD v. VIKRAM BAJAJ
2026 INSC 1062 · Civil Appeal No.13023 of 2025
Coram: Justice J. B. Pardiwala · Justice K. Vinod Chandran
Answer
A forfeiture clause in an e-auction notice can cover the entire amount deposited, including EMD, once the successful bidder defaults on the balance sale consideration.
Yes. A forfeiture clause in an e-auction notice for a liquidation sale can validly cover the entire amount deposited, including the Earnest Money Deposit, once the successful bidder fails to pay the balance sale consideration within the stipulated time; this operates independently of Schedule I's cap on the amount of EMD, which governs only how much EMD may be charged, not the auction notice's own forfeiture terms.
Headnote
Insolvency and Bankruptcy Board (Liquidation Process) Regulations, 2016 — Schedule I — Forfeiture of EMD — e-Auction of liquidation assets — Triple Test —
Liquidation Process Regulations, 2016 — Schedule I — Forfeiture clause in e-auction notice —
Held: A forfeiture clause in an e-auction notice can validly cover the entire amount deposited, including EMD, once the successful bidder defaults on the balance sale consideration. Schedule I's cap of 10% on EMD does not displace the auction notice's own forfeiture terms. (¶11, 21, 22)
Triple Test — Proof of financial capacity —
Held further: Proof of a bidder's financial capacity to pay the balance sale consideration lies in material produced substantiating that capacity, not in repeated assurances or mere assertions to pay. Triple Test not satisfied; forfeiture upheld and appeal dismissed. (¶13, 16, 23)
Headnote
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Paragraph 11That the appellant who was the successful bidder did not pay the balance sale consideration within the initial 30 days or with 12% interest within 90 days, is admitted. What remains is only the consideration as to whether the refusal was bona fide, especially in the circumstances as pointed out by the appellant. We see from Schedule I of the Liquidation Process Regulations that there is a stipulation that EMD should not be more than 10%; brought in on 30.09.2021 and there is no forfeiture expressly provided, in the event of failure to pay the balance sale consideration. As pointed out by the learned Counsel for the respondent, the terms are explicit in the Tender Notice and the appellant, with open eyes, bid in auction as also deposited the amounts demanded without any protest. Having deposited 10% of the reserve price, along with a portion of the balance sale consideration, which itself is an undertaking to pay the balance amounts within a period of 30 days or 90 days with interest, brings in the consequences of forfeiture, on failure; which is automatic.
Paragraph 21In this context, we also have to observe that hence the payment was made of Rs.6.39 crores without demur and the e-auction notice specifically contained the following clause: The entire amount paid by the applicant/bidder including the Earnest Money Deposit can be forfeited at any time, upon the occurrence of any of the following events; I. xxx xxx xxx xxx II. xxx xxx xxx xxx III. If the bidder(S) is/ are identified as the Successful Bidder(S) and fails to pay balance sale consideration as per terms of the sale. IV. xxx xxx xxx xxx
Paragraph 22The appellant having paid the money voluntarily and the terms and conditions stipulated in the e-auction notice having provided for the entire amount paid by a successful bidder, including EMD to be forfeited, if he fails to pay the balance sale consideration as per the terms of the sale, there is no reason to order refund. We find no reason to interfere with the impugned order.
Acts & Sections
Schedule I Insolvency and Bankruptcy Board (Liquidation Process) Regulations, 2016One judgment a day. That's the whole habit.
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