Holding

The Supreme Court held that the extension of time granted due to the Covid‑19 lockdown was valid, the liquidator complied with the IBBI Regulations, the auction sale stands, and the auction purchaser must pay an additional amount of ₹5 crore with interest.

Summary

The appellant, a former managing director of Sri Lakshmi Hotel Private Ltd., challenged the e‑auction of the company's property, alleging that the reserve price was under‑valued, that the liquidator failed to form a Stakeholders’ Consultation Committee, and that the liquidator violated Regulation 33 by not cancelling the sale when the balance consideration was not paid within 90 days. The liquidator had fixed a reserve price based on the average liquidation values of two registered valuers, reduced it by 25% for a second auction, and the successful bidder (the auction purchaser) paid the balance only on 24 August 2020 after obtaining an extension from the Adjudicating Authority due to the COVID‑19 lockdown and an income‑tax attachment. The Supreme Court examined whether the extension was valid, whether the regulations were mandatory or directory, and the effect of the tax attachment. It held that the Tribunal was correct to accept the Adjudicating Authority’s view that the lockdown justified the extension, that the liquidator did not breach Regulation 31A, and that Rule 12 of Schedule I is mandatory but the extension was lawfully granted. The court declined to set aside the auction, instead ordering the auction purchaser to pay an additional ₹5 crore with interest. The appeals were partly allowed.

Issues considered

Whether the Tribunal was right in accepting the view that Covid‑19 lockdown was a valid reason for extending the time to deposit the balance sale consideration
Whether the appellant was justified in alleging that the subject property was under‑valued
Whether the liquidator was required to constitute a Stakeholders’ Consultation Committee under Regulation 31A
Whether the liquidator violated Regulation 33 of the IBBI Regulations, 2016 by not cancelling the sale after the 90‑day deadline
What is the effect of the income‑tax attachment order on the completion of the sale

Legislation cited

Arbitration and Conciliation Act, 1996s. 34
Income Tax Act, 1961s. 222, s. 281, s. Rule 48 Part III Schedule 2
Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016s. Regulation 31A, s. Regulation 33, s. Regulation 47A, s. Schedule I Rule 12, s. Schedule I Rule 13
Insolvency and Bankruptcy Code, 2016s. 35, s. 61
National Company Law Tribunal Rules, 2016s. Rule 11

Subjects

Covid-19 PandemicLockdownAuctionE‑AuctionSale considerationRegulation 47A of IBBI Regulations, 2016Under‑valuation of PropertyStakeholders Consultation CommitteeRegulation 33 of IBBI Regulations, 2016MandatoryDirectoryRule 12 of Schedule I of IBBI Regulations, 2016Rule 13 of Schedule I of IBBI Regulations, 2016Attachment order by Income Tax AuthoritiesVigilant litigantExtension of timeAuction PurchaserPublic Auction

Judgment

[2024] 8 S.C.R. 1263 : 2024 INSC 659

V.S. Palanivel
v.
P. Sriram, CS, Liquidator, Etc.
(Civil Appeal Nos. 9059-9061 of 2022)
28 August 2024
[Hima Kohli* and Ahsanuddin Amanullah, JJ.]

Issue for Consideration
(i) Whether the Tribunal was right in accepting 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;
(ii) Whether the appellant was justified in alleging that the subject
property was under-valued; (iii) Whether it was incumbent for the
Liquidator to constitute a Stakeholders’ Consultation Committee;
(iv) Whether Liquidator had violated Regulation 33 of the IBBI
Regulations, 2016; (v) What is the import of the order of attachment
issued by the Income Tax Authorities in respect of the auctioned
property.

Headnotes†
Insolvency and Bankruptcy Code, 2016 – Insolvency and
Bankruptcy Board of India (Liquidation Process) Regulations,
2016 – Regulation 47A – Whether the Tribunal was right in
accepting 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:
Held: 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/- – The e-auction of the subject property
took place on 23.12.2019 – 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 24.12.2019, the date when the Liquidator informed that it was
the successful bidder, would have expired on 23.03.2020 – However,
the Letter of Intent issued by the Liquidator on 24.12.2019, was
received by the Auction Purchaser on 26.12.2019 – The period
of 90 days reckoned from 26.12.2019 would have expired on

* Author
1264 [2024] 8 S.C.R.

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25.03.2020 – 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 24.08.2020 – The Supreme Court in a Sou Motu
writ petition took cognizance of the situation arising out of the
challenge faced by the country on account of Covid-19 virus and
extended limitation w.e.f 15.03.2020 – The Auction Purchaser
has also invoked Regulation 47A of the IBBI Regulations, 2016 –
The submission made on behalf of the appellant that the word
‘Litigants’ used in the order dated 23.03.2020 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, cannot be accepted – 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 25.03.2020
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 – In the present case, as noticed,
the period of 90 days for depositing the balance sale consideration
had expired just after the crucial date, i.e., 23.03.2020 –
There is 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. [Paras 32.2, 32.3, 32.5, 32.6, 32.12]
Insolvency and Bankruptcy Code, 2016 – Insolvency and
Bankruptcy Board of India (Liquidation Process) Regulations,
2016 – Whether the appellant was justified in alleging that the
subject property was under-valued:
Held: 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 15.11.2019 to the objection taken by the appellant
to the estimated value of the subject property in his letter dated
08.11.2019 – Again, the Liquidator wrote a letter dated 27.11.2019
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 – Therefore, the appellant
[2024] 8 S.C.R. 1265

V.S. Palanivel v. P. Sriram, CS, Liquidator, Etc.

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/- 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. [Paras 33.5, 33.6]
Insolvency and Bankruptcy Code, 2016 – Insolvency and
Bankruptcy Board of India (Liquidation Process) Regulations,
2016 – Regulation 31A – Whether it was incumbent for
the Liquidator to constitute a Stakeholders’ Consultation
Committee:
Held: By virtue of the Notification dated 28.04.2022, 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 17.07.2019 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 –
That apart, the record reveals, that the Liquidator had sent a
reply on 15.11.2019 to a written objection taken by the appellant
on the Valuation reports submitted by the Registered Valuers on
08.11.2019, 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 25.07.2019, it was incumbent for the Liquidator to have
constituted a Stakeholders’ Consultation Committee. [Para 34.3]
1266 [2024] 8 S.C.R.

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Insolvency and Bankruptcy Code, 2016 – S. 35 – Insolvency and
Bankruptcy Board of India (Liquidation Process) Regulations,
2016 – Regulation 33, Schedule I, Rule 12 – National Company
Law Tribunal Rules, 2016 – R.11 – Whether Liquidator had
violated Regulation 33 of the IBBI Regulations, 2016:
Held: Schedule I under Regulation 33 lays down the manner in
which the assets of the Corporate Debtor are to be sold by the
Liquidator – Rule 12 under Schedule I, 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 – 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 05.05.2020 and time was granted to the
Auction Purchaser to pay the balance sale consideration on the
Central Government/State Government lifting the lockdown – The
said order was passed by the Adjudicating Authority in exercise of
its inherent powers under Rule 11 of the NCLT Rules, 2016 – 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. [Paras 35.1, 35.11, 35.14, 35.16]
Insolvency and Bankruptcy Code, 2016 – Insolvency and
Bankruptcy Board of India (Liquidation Process) Regulations,
2016 – Schedule I, Rule 12 and Rule 13 – What is the import of
[2024] 8 S.C.R. 1267

V.S. Palanivel v. P. Sriram, CS, Liquidator, Etc.

the order of attachment issued by the Income Tax Authorities
in respect of the auctioned property:
Held: Rule 12 is held 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 – This Court is 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 Rule13 on that count – On an overall
conspectus of the facts of the present case which brings out the
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 10.02.2020 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 – The Subject
land is now an operational hospital – Huge amounts have been
pumped into the project by the Auction Purchaser – In contrast,
the appellant has not been a vigilant litigant – He has dragged
his feet at every stage – It took 19 months for the appellant to
prefer an appeal before the Tribunal against the order passed by
the Adjudicating Authority – Also, it is a well settled legal position
that once auction is confirmed, it ought to be interfered with on
fairly limited grounds – In the given facts, the sale deed cannot
be declared void. [Paras 36.9, 36.12, 36.14]

Case Law Cited
Sharifud-din v. Abdul Gani Lone [1980] 1 SCR 1177 : (1980) 1 SCC
403; Vidarbha Industries Power Limited v. Axis Bank Limited [2022]
12 SCR 139 : (2022) 8 SCC 352; C.N. Paramasivan and Another
v. Sunrise Plaza through Partner and Others [2013] 4 SCR 1 :
(2013) 9 SCC 460; State of Bihar v. Bihar Rajya Bhumi Vikas
Bank Samiti [2018] 7 SCR 1147 : (2018) 9 SCC 472 – relied on.
1268 [2024] 8 S.C.R.

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GPR Power Solutions Pvt. Ltd. v. Supriyo Chaudhuri (2021) 17
SCC 312; Sagufa Ahmed v. Upper Assam Polywood Products Pvt.
Ltd, [2020] 9 SCR 472 : (2021) 2 SCC 317; Standard Surfa Chem
India Private Limited v. Kishore Gopal Somani, 2022 SCC Online
NCLAT 305; Prakash Chandra Kapoor v. Vijay Kumar Iyer, 2021
SCC Online NCLAT 622; Union Bank of India v. Rajat Infrastructure
Private Limited and Others, 2020 SCC Online SC 1491; Pioneer
Urban Land and Infrastructure Limited and Another v. Union of
India and Others [2019] 10 SCR 381 : (2019) 8 SCC 416; Prakash
Chandra Kapoor and Another v. Vijay Kumar Iyer and Another, 2021
SCC Online NCLAT 622; Swiss Ribbons (P) Ltd. and Another v.
Union of India and Another [2019] 3 SCR 535 : (2019) 4 SCC 17;
Yashowanta Narayan Dixit v. Orient Insurance Company Limited
(2022) 15 SCC 569; Union Bank of India v. Rajat Infrastructure
Private Limited and Other [2023] 14 SCR 666 : (2023) 10 SCC
232; Bombay Mercantile CIVIL APPEAL NOS. 9059-9061 OF 2022
Page 23 of 57 Corporative Bank Limited v. U.P. Gun House and
Others (2024) 3 SCC 517; R.K. Industries (Unit-II) LLP v. H.R.
Commercials Private Limited and Others [2022] 12 SCR 667 :
(2024) 4 SCC 166; Arun Kumar Jagatramka v. Jindal Steel and
Power Limited [2021] 3 SCR 114 : (Refer Para 81) (2021) 7 SCC
474; Valji Khimji and Co. v. Hindustan Nitro Product (Gujarat) Ltd.
(Official Liquidator) [2008] 12 SCR 1 : (2008) 9 SCC 299; Celir
LLP v. Bafna Motors (Mumbai) Private Limited and others [2023]
13 SCR 53 : (2024) 2 SCC 1; K. Kumara Gupta v. Sri Markendaya
and Sri Omkareswara Swamy Temple and Others [2022] 8 SCR
968 : (2022) 5 SCC 710 – referred to.

List of Acts
Insolvency and Bankruptcy Code, 2016; Insolvency and Bankruptcy
Board of India (Liquidation Process) Regulations, 2016; National
Company Law Tribunal Rules, 2016.

List of Keywords
Covid-19 Pandemic; Lockdown; Auction; E-Auction; Sale
consideration; Regulation 47A of IBBI Regulations, 2016; Under-
valuation of Property; Stakeholders Consultation Committee;
Regulation 33 of IBBI Regulations, 2016; Mandatory; Directory;
Rule 12 of Schedule I of IBBI Regulations, 2016; Rule 13 of
Schedule I of IBBI Regulations, 2016; Attachment order by
Income Tax Authorities; Vigilant litigant; Extension of time; Auction
Purchaser; Public Auction.
[2024] 8 S.C.R. 1269

V.S. Palanivel v. P. Sriram, CS, Liquidator, Etc.

Case Arising From
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 9059-9061 of
2022
From the Judgment and Order dated 16.09.2022 of the National
Company Law Appellate Tribunal, Chennai in CAAT (CH) (I) Nos. 336,
339 and 343 of 2021
Appearances for Parties
P Chidambaram, Sr. Adv., B Ragunath, Prassana Venkat, Mrs. NC
Kavitha, Sriram P., Advs. for the Appellant.
C. U. Singh, Arvind Datar, Sr. Advs., K. V. Vijayakumar, K V Sriwas
Narayanan, K V Vibu Prasad, Sathiyanarayanan, V Balachandran,
Siddharth Naidu, Prithvi Raj JS, M/s. KSN & Co., Advs. for the
Respondents.
Judgment / Order of the Supreme Court

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

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
1270 [2024] 8 S.C.R.

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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 Limited,9 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

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
[2024] 8 S.C.R. 1271

V.S. Palanivel v. P. Sriram, CS, Liquidator, Etc.

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 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, 2017.11
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 Professional.13 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:

S. Name of the Valuer Tax Value Liquidation Value
No.
1. Ms. Vijayalakshmi Rs.48,03,00,000 Rs.40,82,57,000
2. Mr. R.S. Babu Rajendran Rs.48,48,00,000 Rs.38,00,00,000
Average Liquidation Rs.39,41,28,500
Value for the purpose of
E- auction Upset Price

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)

11 Original Petition No.137 of 2015
12 CP/1140/(IB)/CB/2018
13 In short ‘IRP’
14 In short ‘CoC’
1272 [2024] 8 S.C.R.

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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, 2016,15 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 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.

15 IBBI Regulations, 2016
[2024] 8 S.C.R. 1273

V.S. Palanivel v. P. Sriram, CS, Liquidator, Etc.

8. The appellant filed a Miscellaneous Application 4 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
Appeal,16 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, 2020,5 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

16 Company Appeal (AT) (INS) No. 334 of 2021
1274 [2024] 8 S.C.R.

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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
Another v. Sunrise Plaza through Partner and Others,17 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
Lone18 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
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,19 as also the order dated 02nd March, 2020
and the order dated 12th May, 2020 passed in Civil Appeal No. 1902
of 2020,20 could not have enured to its benefit for the reason that the
said orders applied to filing of petitions, applications, suits, appeals

17 [2013] 4 SCR 1 : (2013) 9 SCC 460
18 [1980] 1 SCR 1177 : (1980) 1 SCC 403
19 (2021) 17 SCC 312
20 Union Bank of India v. Rajat Infrastructure Pvt. Ltd. and Others
[2024] 8 S.C.R. 1275

V.S. Palanivel v. P. Sriram, CS, Liquidator, Etc.

or other proceedings within the prescribed period of limitation. Citing
the decision in Sagufa Ahmed v. Upper Assam Polywood Products
Pvt. Ltd.21 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 application22 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.

21 [2020] 9 SCR 472 : (2021) 2 SCC 317
22 lA No. 202 of 2021 in CP/1140/IB/20181.
1276 [2024] 8 S.C.R.

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D. ARGUMENTS ADVANCED BY LEARNED SENIOR COUNSEL
FOR THE AUCTION PURCHASER
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 Petition23 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
Somani24 and Prakash Chandra Kapoor v. Vijay Kumar Iyer 25 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 Tribunal26 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, 2016.27 Furthermore,
even in cases initiated under the Securitization and Reconstruction
of Financial Assets and Enforcement of Security Interest Act,28 this
Court had granted extension to an Auction Purchaser to deposit
the balance sale consideration in view of the Covid-19 lockdown

23 Suo Motu Writ Petition (C) No.3 of 2020 in ‘Cognizance for Extension of Limitation, In Re’, reported as
(2020) 19 SCC 10
24 2022 SCC Online NCLAT 305
25 2021 SCC Online NCLAT 622
26 For short ‘DRT’
27 For short ‘NCLT Rules, 2016’
28 For short ‘SARFAESI Act’
[2024] 8 S.C.R. 1277

V.S. Palanivel v. P. Sriram, CS, Liquidator, Etc.

situation. For this, learned senior counsel referred to the order dated
12th May, 202029 passed by this Court in Union Bank of India v.
Rajat Infrastructure Private Limited and Others.30 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.
15. 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
application31 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
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

29 Order dated 12th May, 2020 passed in Civil Appeal No.1902 of 2020
30 2020 SCC Online SC 1491
31 IA No. 335/IB/2020 in MA No.689 of 2019 in CP No./1140/IB/CB/2018
1278 [2024] 8 S.C.R.

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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, 1961.32 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 Authority33 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.
17. 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

32 For short ‘IT Act’
33 BMM Ispat Ltd. v. Ramdas Ispat, 2019 SCC Online NCLT 21322, Allahabad Bank v. Biotor, 2019
SCC Online NCLT 26716, Sanjay Kr. Agarwal v. Tax Recovery Officer, 2019 SCC Online NCLT
28888, Abhudaya Coop. Bank v. Shivkripa, 2020 SCC Online NCLT, 11935, UBI v. Guruashish
Construction, 2020 SCC Online NCLT 14829, Ashok Kr. Dewan v. AC of IT, 2021 SCC Online 4368,
Mauritius Commercial Bank v. Varun Corporation, 2021 SCC Online NCLT 6814, Milind Kasodekar
v. P. Mahajan, 2021 SCC Online NCLT 11616.
[2024] 8 S.C.R. 1279

V.S. Palanivel v. P. Sriram, CS, Liquidator, Etc.

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 Another v. Union of India and Others34
and Prakash Chandra Kapoor and Another v. Vijay Kumar Iyer
and Another,35 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 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
20. 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

34 [2019] 10 SCR 381 : (2019) 8 SCC 416
35 2021 SCC Online NCLAT 622
1280 [2024] 8 S.C.R.

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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 process.36
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.

36 Reliance has been placed In the matter of Sundaresh Bhat, 2021 SCC Online NCLAT 624
[2024] 8 S.C.R. 1281

V.S. Palanivel v. P. Sriram, CS, Liquidator, Etc.

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 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 Another v. Union of India and
Others,37 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 Another v. Union of India and Another.38 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.

37 [2019] 10 SCR 381 : (2019) 8 SCC 416
38 [2019] 3 SCR 535 : (2019) 4 SCC 17
1282 [2024] 8 S.C.R.

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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 Company Limited 39 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 Others,40 learned
counsel submitted that this Court had noted that under Rule 9 (4)
of the Security Interest (Enforcement) Rules, 2002,41 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.
25. 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 IBBI Regulations, 2016 is “shall”. The second proviso under

39 (2022) 15 SCC 569
40 [2023] 14 SCR 666 : (2023) 10 SCC 232
41 For short ‘SIE Rules, 2002’
[2024] 8 S.C.R. 1283

V.S. Palanivel v. P. Sriram, CS, Liquidator, Etc.

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,42 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.
26. 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.

42 [2022] 12 SCR 139 : (2022) 8 SCC 352
1284 [2024] 8 S.C.R.

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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.
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
[2024] 8 S.C.R. 1285

V.S. Palanivel v. P. Sriram, CS, Liquidator, Etc.

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 Others43 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

43 (2024) 3 SCC 517
1286 [2024] 8 S.C.R.

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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
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
Succes 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/
[2024] 8 S.C.R. 1287

V.S. Palanivel v. P. Sriram, CS, Liquidator, Etc.

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 Intent44 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
“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 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

44 In short ‘LOI’
1288 [2024] 8 S.C.R.

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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
[2024] 8 S.C.R. 1289

V.S. Palanivel v. P. Sriram, CS, Liquidator, Etc.

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.
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, 2020.45 Regulation
47A provides for exclusion of the period of lockdown and
reads as under:

45 Vide Notification No. IBBI/2020- 21/GN/REG059 dated 20.04.2020
1290 [2024] 8 S.C.R.

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“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.
[2024] 8 S.C.R. 1291

V.S. Palanivel v. P. Sriram, CS, Liquidator, Etc.

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
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 2020,46 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.

46 MA/335/2020 in MA/689/2019 in CP/1140/2018
1292 [2024] 8 S.C.R.

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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
[2024] 8 S.C.R. 1293

V.S. Palanivel v. P. Sriram, CS, Liquidator, Etc.

enlargement of time, the applicant kept on dragging 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 200247
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

47 SARFAESI Rules, 2002
1294 [2024] 8 S.C.R.

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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:
“(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.”
32.4 Admittedly, in the first round of the Notice for sale through
e-auction published by the Liquidator on 25th November, 2019,
[2024] 8 S.C.R. 1295

V.S. Palanivel v. P. Sriram, CS, Liquidator, Etc.

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.
32.5 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.
32.6 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.
1296 [2024] 8 S.C.R.

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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 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
[2024] 8 S.C.R. 1297

V.S. Palanivel v. P. Sriram, CS, Liquidator, Etc.

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 Notification48 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 renumeration 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 Others,49 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

48 No. IBBI/2019-20/GN/REG047
49 [2022] 12 SCR 667 : (2024) 4 SCC 166
1298 [2024] 8 S.C.R.

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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 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
[2024] 8 S.C.R. 1299

V.S. Palanivel v. P. Sriram, CS, Liquidator, Etc.

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:
“SCHEDULE I
MODE OF SALE
(Under Regulation 33 of the Insolvency and
Bankruptcy Board of India (Liquidation Process)
Regulations, 2016)
1300 [2024] 8 S.C.R.

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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
[2024] 8 S.C.R. 1301

V.S. Palanivel v. P. Sriram, CS, Liquidator, Etc.

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, 2019,50 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 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

50 Notification No.IBBI/2019-20/GN/REG.047
1302 [2024] 8 S.C.R.

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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:
[2024] 8 S.C.R. 1303

V.S. Palanivel v. P. Sriram, CS, Liquidator, Etc.

“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 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. [(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
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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, 199351 that contemplates certain
provisions 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

51 In short Debt Recovery Act, 1993
[2024] 8 S.C.R. 1305

V.S. Palanivel v. P. Sriram, CS, Liquidator, Etc.

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 CPC 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 [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
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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.
***
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
[2024] 8 S.C.R. 1307

V.S. Palanivel v. P. Sriram, CS, Liquidator, Etc.

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 [AIR 1954 SC
349] Rules 84, 85 and 86 of Order 21 were also held
to be mandatory in Sardara Singh v. Sardara Singh
[(1990) 4 SCC 90]. Similarly in Balram v. Ilam Singh
[(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
[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
[1995 Supp (4) SCC 275], Gangabai Gopaldas
Mohata v. Fulchand [(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. [(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)
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35.7 In State of Bihar v. Bihar Rajya Bhumi Vikas Bank Samiti,52
referring to Section 34(5) of the Arbitration and Conciliation
Act, 1996, this Court has held that the absence of any
consequences for 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,
(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

52 [2018] 7 SCR 1147 : (2018) 9 SCC 472
[2024] 8 S.C.R. 1309

V.S. Palanivel v. P. Sriram, CS, Liquidator, Etc.

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 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.
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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 Another v. Union of India and Others53 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.

53 [2019] 10 SCR 381 : (2019) 8 SCC 416
[2024] 8 S.C.R. 1311

V.S. Palanivel v. P. Sriram, CS, Liquidator, Etc.

[Surendra Trading Co. v. Juggilal Kamlapat Jute
Mills Co. Ltd., (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 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
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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
Limited 54 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

54 [2021] 3 SCR 114 : (2021) 7 SCC 474 (Refer Para 81)
[2024] 8 S.C.R. 1313

V.S. Palanivel v. P. Sriram, CS, Liquidator, Etc.

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 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 judgement 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 :
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“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 17 th 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 subject property which included the status
[2024] 8 S.C.R. 1315

V.S. Palanivel v. P. Sriram, CS, Liquidator, Etc.

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
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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 account55
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.
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

55 Escrow Account No. 50200050623451
[2024] 8 S.C.R. 1317

V.S. Palanivel v. P. Sriram, CS, Liquidator, Etc.

cancelled if the payment is not received within the outer limit
of 90 days. It is only on completion of the steps contemplated
in Rule12 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
Rule13 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
1318 [2024] 8 S.C.R.

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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 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
[2024] 8 S.C.R. 1319

V.S. Palanivel v. P. Sriram, CS, Liquidator, Etc.

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)56 and Celir LLP v. Bafna Motors (Mumbai)
Private Limited and others57). 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 others58). 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

56 [2008] 12 SCR 1 : (2008) 9 SCC 299
57 [2023] 13 SCR 53 : (2024) 2 SCC 1
58 [2022] 8 SCR 968 : (2022) 5 SCC 710
1320 [2024] 8 S.C.R.

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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. 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.

Result of the case: Appeals Partly allowed.

†
Headnotes prepared by: Ankit Gyan