EMD Forfeiture Upheld as Successful Bidder Failed to Pay Balance in IBC Liquidation Auction, Triple Test Not Met: Supreme Court in ASJ Finsolutions v. Vikram Bajaj [2026 INSC 1062]

In M/s ASJ Finsolutions Pvt. Ltd. v. Vikram Bajaj (2026 INSC 1062), the Supreme Court held that where the e-auction notice in a liquidation under the Insolvency and Bankruptcy Code, 2016 expressly provides for forfeiture of the EMD and all other amounts deposited if the successful bidder fails to pay the balance sale consideration, forfeiture is a necessary consequence of the bidder's default, even though Schedule I of the Liquidation Process Regulations, 2016 does not itself provide for forfeiture (paras 11–12, 16, 22). A Bench of Justice J.B. Pardiwala and Justice K. Vinod Chandran (author) agreed with the NCLAT that the bidder had wilfully defaulted, rejected the reliance on the Triple Test and the plea of discrimination, and dismissed the appeal (paras 15–18, 22–23).

Status: NCLAT order reversing the NCLT and affirming forfeiture of EMD upheld; appeal dismissed (paras 1, 22–23).

Headnote: Forfeiture of EMD in IBC Liquidation Auction

Insolvency and Bankruptcy Code, 2016 – Liquidation – E-auction – Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 – Schedule I – Earnest Money Deposit – Forfeiture clause in e-auction notice – Failure to pay balance sale consideration – "As is where is" sale – Triple Test – Wilful default – Plea of discrimination.

Held: (i) Though Schedule I of the Liquidation Process Regulations caps EMD at 10% and does not expressly provide for forfeiture, a bidder who bids with open eyes on explicit tender terms and deposits the amounts demanded undertakes to pay the balance in time, and forfeiture on failure is automatic (para 11).

(ii) A request for prior title deeds made just before the last date of payment, in an "as is where is" sale whose notice flagged the missing sale deeds, cannot justify non-payment (paras 12, 16).

(iii) On cancellation of the bid for non-payment, forfeiture under the auction clause follows, and the Triple Test does not absolve the bidder on these facts (paras 15–16).

(iv) Financial capacity must be shown by material, not repeated assurances of willingness to pay; the order obtained by a third party was an afterthought used as an excuse (paras 16–17).

(v) The plea of discrimination, raised late and without producing the orders relied on, could not be entertained (para 18).

(vi) Having paid Rs. 6.39 crore voluntarily under an auction notice that provided for forfeiture of the entire amount paid, the bidder is not entitled to a refund (paras 20–22).

(paras 11–22)

Case Details: ASJ Finsolutions v. Vikram Bajaj (2026 INSC 1062)

Final Outcome: Appeal dismissed; NCLAT's order affirming forfeiture of EMD and other amounts deposited upheld.

Case: M/s ASJ Finsolutions Pvt. Ltd. v. Vikram Bajaj

Neutral Citation: 2026 INSC 1062

Case No.: Civil Appeal No. 13023 of 2025

Court: Supreme Court of India (Civil Appellate Jurisdiction) – Non-Reportable

Date of Decision: 28 September 2026

Bench: Justice J.B. Pardiwala and Justice K. Vinod Chandran (author)

Relevant Acts & Sections: Insolvency and Bankruptcy Code, 2016 – Section 9; Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 – Schedule I; Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (referred to in argument)

Impugned Order: National Company Law Appellate Tribunal – order reversing the NCLT's direction to refund the EMD and affirming forfeiture (paras 1, 7); the date of the NCLAT order is not stated in the judgment

Counsel: Ms. Meenakshi Arora, Senior Advocate, for the appellant; Mr. Abhishek Anand, Advocate, for the respondent-Resolution Professional (para 2)

Source: Supreme Court of India (official website)

Key Holdings of the Supreme Court

• Failure to pay the balance within 30 days, or within 90 days with 12% interest, was admitted; the only question was whether the refusal was bona fide (para 11).
• The absence of a forfeiture provision in the Regulations does not help when the auction notice explicitly makes forfeiture an inevitable consequence of non-payment (paras 11–12).
• A bidder in an "as is where is" sale, warned about missing sale deeds, cannot later demand prior deeds as a reason not to pay (para 12).
• On cancellation of the bid, forfeiture is a necessary consequence, and the Triple Test does not absolve the bidder on these facts (para 16).
• Proof of financial capacity needs material, not mere assertions of willingness to pay (para 16).
• The higher price fetched in the re-auction reflects the property's inherent value and is not a set-off against the forfeiture (para 16).

Brief Facts of the Case

In the liquidation of a corporate debtor admitted under Section 9 of the IBC, Lot No. 5, land at Village Nangal Khurd, Sonepat, Haryana with a reserve price of Rs. 25.56 crore, was put to e-auction by notice dated 25.10.2021 on an "as is where is" basis. A Note in the notice said a civil suit was pending about the sale deed of part of the land (para 3).

The appellant bid at the reserve price in the auction of 15.11.2021 and, as asked by the Liquidator, deposited Rs. 6.39 crore (25% of the bid), comprising Rs. 2.55 crore EMD and Rs. 3.84 crore towards the balance. The balance was due by 14.12.2021, or by 14.02.2022 with 12% interest. On 15.12.2021 it emailed that it would pay Rs. 19.17 crore with interest by 14.02.2022 (paras 4, 20).

Citing a High Court order obtained by M/s Agarwal Trading Company, which restrained execution of a sale deed until 14.02.2022, the appellant did not pay and instead sought the prior title deeds before the NCLT on 11.02.2022. That application was rejected, as were the appeal and its later challenge; Agarwal Trading Company withdrew its own NCLT application (paras 5–6).

The property was re-auctioned for Rs. 31.10 crore. The appellant then sought annulment of the forfeiture and refund of the EMD; the NCLT allowed it applying the Triple Test, but the NCLAT reversed that order (paras 6–7).

Issues Before the Supreme Court

1. Whether the EMD and other deposits could be forfeited when Schedule I of the Liquidation Process Regulations does not expressly provide for forfeiture (paras 8, 11–12).
2. Whether the appellant's failure to pay was bona fide under the Triple Test (paras 11, 13–17).
3. Whether the appellant was discriminated against, or at least entitled to have forfeiture limited to 10% of the reserve price (paras 8, 18–22).

Court's Findings and Reasoning

Appellant's case (para 8): It argued that Schedule I contains no forfeiture stipulation and caps EMD at 10%, that other bidders got extensions beyond 90 days, that the NCLT rightly applied the Triple Test, and, relying on Authorised Officer, Central Bank of India v. Shanmugavelu, that forfeiture needs a statutory basis; alternatively, forfeiture should be limited to 10% of the reserve price.

Resolution Professional's case (paras 9–10): The appellant bid with open eyes knowing about the sale-deed dispute, deposited 25% without protest, and could have sought refund with interest had it paid and then faced difficulty; a later purchaser had taken over without difficulty.

Forfeiture follows from the auction terms (paras 11–12): Though Schedule I does not expressly provide for forfeiture, the explicit tender terms, accepted by bidding and depositing without protest, amount to an undertaking to pay the balance in time, so forfeiture on failure is automatic. The late demand for prior deeds, in an "as is where is" sale that flagged missing deeds, could not justify non-payment.

NCLT's Triple Test approach rejected (paras 13–16): The NCLT had found no hidden agenda, financial capacity from the email assurances, and an extraneous reason in the Agarwal Trading Company order. The Supreme Court agreed with the NCLAT that the appellant had wilfully defaulted; on cancellation, forfeiture was a necessary consequence, and financial capacity required material, not assertions.

Extraneous reason an afterthought (para 17): Agarwal Trading Company merely filed and later withdrew an application; the plea was only an excuse to scuttle the auction and escape liability.

Discrimination and the 10% cap (paras 18–22): The discrimination plea came too late and the orders were not produced in time. The EMD itself was only Rs. 2.55 crore, i.e. 10% of the reserve price, and the auction notice provided for forfeiture of the entire amount paid, including EMD, on failure to pay the balance; with Rs. 6.39 crore paid voluntarily, there was no reason to order a refund.

Final Outcome and Directions

• No reason found to interfere with the NCLAT's order; forfeiture of the amounts deposited stands (para 22).
• Appeal dismissed; pending applications rejected (paras 23–24).

Legal Principle Laid Down

In an IBC liquidation auction, where the e-auction notice expressly provides that the entire amount paid, including the EMD, may be forfeited if the successful bidder fails to pay the balance sale consideration, a bidder who accepted those terms and deposited without protest cannot escape forfeiture on default merely because the Liquidation Process Regulations do not themselves provide for it; post-bid demands for title documents in an "as is where is" sale, bare assurances of willingness to pay, and late pleas of discrimination do not satisfy the Triple Test.

Precedents Relied Upon

• Authorised Officer, Central Bank of India v. Shanmugavelu, (2024) 6 SCC 641 – Relied upon by the appellant – forfeiture under the SARFAESI framework as a statutory imprimatur. Referred to at para 8.
• Westcoast Infraprojects Private Limited v. Mr. Ram Chandra Dallaram Choudhary, Company Appeal (AT) (Ins) No. 1258 of 2022 (approved in Civil Appeal No. 4087 of 2023) – Relied upon by the respondent – forfeiture of EMD and other deposits under the e-auction clause upheld. Discussed at para 19.
• Potens Transmission & Power Pvt Ltd v. Apex Buildsys Ltd (In Liquidation), Company Appeal (AT) (Ins) No. 1543 of 2023 (affirmed in Civil Appeal No. 4116 of 2022, as stated in the judgment) – Relied upon by the respondent. Referred to at para 19.

Important Paragraphs of the Judgment

Verbatim extracts from the judgment. For the full text, refer to the judgment PDF below.

Para 11: "Having deposited 10% of the reserve price, along with a portion of the balance sale consideration, which itself is an undertaking to pay the balance amounts within a period of 30 days or 90 days with interest, brings in the consequences of forfeiture, on failure; which is automatic."

Para 12: "The appellant having not sought for verification of title deeds before the bid was made or the EMD was deposited, cannot project it as a requirement to resile from payment of the balance sale consideration."

Para 16: "Looking at the specific clause threatening forfeiture on failure of payment of balance sale consideration, on cancellation, forfeiture is a necessary consequence and there is no application of the Triple Test, on facts herein, to absolve the appellant from such forfeiture."

Para 16: "The proof of financial capacity, is not in the repeated communications agreeing to pay the money, but should be insofar as materials produced substantiating the capacity and not mere assertions made."

Para 17: "The extraneous consideration pointed out by the appellant is just an afterthought."

Para 22: "We find no reason to interfere with the impugned order."

Practical Impact of the Ruling

• For bidders in IBC auctions: Read the forfeiture clause and verify title before bidding; a default after winning can cost the EMD and every other amount deposited (paras 12, 21–22).
• For liquidators: A clearly worded forfeiture clause in the e-auction notice is enforceable even though the Regulations do not themselves provide for forfeiture (paras 11–12).
• For NCLT and NCLAT: The Triple Test cannot be satisfied by email assurances of payment or by excuses that surface just before the deadline (paras 16–17).
• For insolvency practitioners: Pleas of discrimination must be raised at the first opportunity and supported by orders placed on record (para 18).

FAQs on Forfeiture of EMD in IBC Liquidation

1. What did the Supreme Court decide in ASJ Finsolutions v. Vikram Bajaj?

It upheld the NCLAT's order affirming forfeiture of the amounts deposited by the successful bidder who failed to pay the balance sale consideration, and dismissed the appeal (paras 15, 22–23).

2. Can EMD be forfeited if the Liquidation Regulations do not provide for it?

Yes, where the e-auction notice expressly provides for forfeiture and the bidder accepted those terms by bidding and depositing without protest (paras 11–12, 21–22).

3. Why did the Triple Test not help the bidder?

The Court found wilful default, no material proving financial capacity, and the third-party order to be an afterthought used as an excuse (paras 15–17).

4. Could the bidder demand title deeds before paying the balance?

No. The sale was on an "as is where is" basis, the notice flagged the missing deeds, and no verification was sought before bidding (para 12).

5. Was forfeiture limited to 10% of the reserve price?

No. The EMD was itself 10%, but the auction notice allowed forfeiture of the entire amount paid, including EMD, and the bidder had paid Rs. 6.39 crore voluntarily (paras 20–22).

Keywords: 2026 INSC 1062, ASJ Finsolutions v. Vikram Bajaj, forfeiture of EMD, IBC liquidation auction, Liquidation Process Regulations 2016 Schedule I, e-auction notice forfeiture clause, balance sale consideration, Triple Test, as is where is, NCLAT, NCLT, wilful default, Justice K. Vinod Chandran, Supreme Court non-reportable judgment

Related on LegalTaxGuru

• More Corporate Law Supreme Court Non-Reportable judgments
• Corporate Law articles

Download Judgment PDF – ASJ Finsolutions v. Vikram Bajaj

Judgment PDF: 2026 INSC 1062 – M/s ASJ Finsolutions Pvt. Ltd. v. Vikram Bajaj (Civil Appeal No. 13023 of 2025) – Download Judgment PDF

Source: Supreme Court of India (official website).