| The appellant, a scheme proponent during the liquidation of the CD, challenged the order of the AA, directing it to deposit a bank guarantee amount of Rs. 2 crore into the liquidation estate. Schemes had been invited for sale of the CD as a going concern under Regulation 2B of the IBBI (Liquidation Process) Regulations, and the appellant and another entity submitted competing schemes. The CoC evaluated both and approved the appellant's scheme, while the liquidator expressed a preference for the rival scheme and moved the AA to approve either. By order dated 13.03.2020 the AA approved neither and remanded the matter to the CoC for de novo consideration. The CD was eventually sold as a going concern to the rival proponent. The NCLAT held that the earnest money deposit is furnished for submitting a scheme, that the appellant's scheme was submitted but not accepted, and that once the scheme was not accepted it was for the proponent to decide whether to continue in the process; a scheme proponent undertakes only to submit a scheme of its own design and not one to the satisfaction of the CoC or the AA. Observing that the withdrawal of the earlier challenge merely restored the position obtaining after the remand order, so that the appellant was left where its scheme stood unaccepted, the NCLAT held that no legal obligation could be created against it thereafter. It further observed that participants in a resolution or liquidation process do so to secure a commercial advantage rather than as charity, that time is invariably critical in commerce while the legal process may take its own course, and that a proponent who becomes impatient cannot be sentenced to a forced stay in the race; a withdrawal impelled by commercial acumen deserves to be respected rather than punished. Holding that the liquidator had not demonstrated how or why the appellant was liable in law to pay the earnest money amount and that the claim was wholly unsustainable, the NCLAT allowed the appeal and set aside the impugned order, observing that the question was not whether the appellant had been justly set ex parte but one of fundamental liability in law. |
