Judicially-Imposed Forfeiture in IBC Liquidation Sales Is Not a Contractual Penalty: A Commentary on M/s Shri Karshni Alloys Pvt. Ltd. v. Ramakrishnan Sadasivan, 2025 INSC 1411

1. Introduction

The Supreme Court’s decision in M/s Shri Karshni Alloys Private Limited v. Ramakrishnan Sadasivan (2025 INSC 1411, non-reportable) addresses a recurring and practically important issue in insolvency law:

• What is the legal nature of a liquidation sale supervised by the National Company Law Tribunal (NCLT)?
• Can a bidder who defaults on payment in such a sale invoke the Indian Contract Act, 1872, especially Section 74 (penalty / liquidated damages), to reclaim forfeited monies?
• How far can the NCLT go in attaching stringent conditions (including complete forfeiture) while granting extensions of time in insolvency proceedings?

The judgment arises from the liquidation of M/s Surana Industries Limited, where M/s Shri Karshni Alloys Pvt. Ltd. (the appellant) made a private offer to purchase the Raichur plant as a going concern, failed to comply with payment timelines, obtained an extension from the NCLT on strict terms including a forfeiture clause, defaulted again, and subsequently challenged the forfeiture of a substantial sum (₹37.80 crores).

The Supreme Court upholds the forfeiture, clearly demarcating:

• The distinction between a contractual sale and a court-supervised sale under the IBC;
• The reach of Section 74 of the Indian Contract Act, 1872 in IBC liquidation sales;
• The power of the NCLT under Rule 15 of the NCLT Rules, 2016 to grant extensions subject to stringent conditions; and
• The importance of party conduct, particularly suppression of facts and “approbate and reprobate” behaviour, in denying equitable relief.

This commentary examines the judgment’s factual matrix, legal reasoning, use of precedent, and its broader impact on insolvency and contract jurisprudence.

2. Factual and Procedural Background

2.1 Corporate Debtor and Liquidation

• Corporate Debtor: M/s Surana Industries Limited
• CIRP Initiation: 02.01.2018
• Liquidation Commencement: 12.10.2018 (order of NCLT, Chennai)
• Liquidator: Ramakrishnan Sadasivan (respondent)

The company owned major plants at:

• Gummidipoondi (Tamil Nadu)
• Raichur (Karnataka)

While the Gummidipoondi assets were sold, the Raichur plant remained unsold despite multiple auction attempts.

2.2 Attempts to Sell the Raichur Assets

Event	Details
2018–2021	13 auctions for Raichur plant, all unsuccessful (last on 30.06.2021).
28.07.2021	Last auction attempt (reserve price ₹105 crores) – no bids.
31.07.2021	Stakeholders Consultation Committee (SCC) decides to sell at scrap value of about ₹50 crores, effectively treating the auction process as exhausted.

2.3 Offer by Shri Karshni Alloys (Appellant)

• Date of Offer: 09.09.2021
• Nature of Offer: Private offer to purchase the Raichur plant as a going concern.
• Offered Consideration: ₹105.21 crores
• Funding Structure:
  • ₹40 crores via equity infusion by appellant and associates;
  • ₹65.21 crores via unsecured debt.
• Commitment Advance: 10% of sale consideration, i.e., ₹10.5210 crores, deposited upfront.
• Key Commitment: Balance to be paid within 15 days of NCLT approval of the sale.

The SCC in its 9th meeting (15.09.2021) considered the offer and consented to the sale, directing the liquidator to proceed in accordance with the IBC.

2.4 NCLT Approval of Private Sale

• Application by Liquidator: IA No. 997/CHE/2021 in TCP/95/IB/2017 (filed 22.09.2021)
• Relief Sought: Approval of private sale of Raichur plant to the appellant.
• NCLT Order: 22.03.2022 – sale approved; appellant directed to pay full sale consideration within 15 days of receipt of order.

This order mirrored the appellant’s own undertaking in its offer of 09.09.2021.

2.5 Request for Extension and NCLT’s Conditional Order (29.06.2022)

Due to delay between filing (22.09.2021) and approval (22.03.2022), the appellant claimed that changed market conditions made immediate payment difficult.

• SCC Meeting: 13.04.2022 – time extended till 30.05.2022 with 12% interest from 15.04.2022, but no agreement to longer extension.
• Application by Appellant: IA No. (IBC)/512(CHE)/2022 (filed 25.04.2022), seeking extension till 31.05.2022.

By the time of the NCLT’s order dated 29.06.2022:

• The appellant had already paid: ₹36.30 crores.

NCLT’s Order dated 29.06.2022:

1. Appellant to pay, on or before 30.06.2022:
   • ₹34.60 crores (50% of the remaining sale consideration) + 12% interest from 15.04.2022 till date of payment.
2. Appellant to pay, on or before 31.07.2022:
   • Remaining ₹34.60 crores + 12% interest from 15.04.2022 till date of payment.
3. Strict compliance directed; any deviation would result in forfeiture of the entire amount already paid by the appellant.

The appellant did not meet these timelines. It made an additional payment of ₹1.50 crores, bringing the total paid to ₹37.80 crores, but still fell far short of complete payment by 31.07.2022.

2.6 Forfeiture and NCLT’s Subsequent Order (10.08.2022)

• SCC Meeting: 01.08.2022 – decided to enforce forfeiture of all payments (₹37.80 crores) and to commence a fresh auction.
• Liquidator’s Letter: 02.08.2022 – formally intimated forfeiture, citing the NCLT’s order dated 29.06.2022.
• Application by Appellant: IA No. 952/2022 – challenged the letter dated 02.08.2022, sought:
  • quashing of forfeiture communication;
  • further extension of time;
  • waiver of interest.
• NCLT’s Order: 10.08.2022 – dismissed the application; held that forfeiture was automatic once timelines in 29.06.2022 order were breached, and that the appellant had not challenged the 29.06.2022 order itself.

2.7 Parallel Litigation: NCLAT Appeals and High Court Writ

• NCLAT Appeals:
  • CA (AT) (CH) (Ins) No. 443/2022 – against NCLT order dated 29.06.2022 (filed 13.08.2022).
  • CA (AT) (CH) (Ins) No. 438/2022 – against NCLT order dated 10.08.2022 (filed 31.08.2022).
• High Court Writ:
  • W.P. No. 24262/2022 (filed 05.09.2022, Madras High Court).
  • Prayers: quash NCLT order dated 29.06.2022 and liquidator’s actions; seek further extension or refund of entire amount with interest.
  • Key aspect: The appellant did not disclose that it had already filed an appeal before the NCLAT against the order dated 29.06.2022.
  • Statement before High Court: That the appellant could not file appeal against the 29.06.2022 order due to limitation under IBC – a statement inconsistent with the actual filing on 13.08.2022.
  • High Court Order (24.11.2022): dismissed the writ as not maintainable due to availability of an alternative statutory remedy and presence of factual disputes; noted the non-exhaustion of appeal remedy.

2.8 Subsequent Sale of Raichur Plant

After the appellant’s default and forfeiture:

• Fresh e-auction notice issued: 12.08.2022.
• Sale: The Raichur plant was sold to M/s Texcon Steels Limited for ₹145.38 crores on 30.08.2022.

This later higher sale value became central to the appellant’s argument that no loss was ultimately caused to stakeholders and hence forfeiture was unjust.

2.9 Split Decision in NCLAT

On 20.10.2023, the NCLAT bench delivered a split verdict:

• Member (Judicial) – dismissed both appeals entirely.
• Member (Technical) – partly allowed the appeals; held that only 10% of the sale consideration (₹10.5210 crores) could be forfeited in terms of Clause 9 of the appellant’s offer, and directed refund of the balance from ₹37.80 crores.

Due to this divergence, the Chairperson referred the matter to a third Member (Technical), who on 31.05.2024 agreed with the Member (Judicial). Consequently, the appeals before NCLAT stood dismissed by majority.

2.10 Supreme Court Appeal

The appellant approached the Supreme Court under Section 62 of the Insolvency and Bankruptcy Code, 2016, challenging the majority view of the NCLAT and seeking relief against the forfeiture.

---

3. Summary of the Supreme Court’s Judgment

The Supreme Court (Sanjay Kumar, J., with Alok Aradhe, J. concurring) dismissed the appeals, with the following key holdings:

1. Characterisation of the sale: The sale of the Raichur plant to the appellant was a private sale under Regulation 33(2)(d) of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016, requiring prior permission of the NCLT, and not under Regulation 33(2)(c) (private sale at a price higher than the reserve price of a failed auction).
2. Nature of forfeiture: The forfeiture of ₹37.80 crores flowed from a judicial order of the NCLT passed under Rule 15 of the NCLT Rules, 2016 while granting an extension of time – it was not a contractual penalty clause. Therefore, Section 74 of the Indian Contract Act, 1872 does not apply.
3. Power of NCLT: While granting extension, the NCLT had full authority under Rule 15 to impose a stringent condition of complete forfeiture of the amounts already paid in the event of non-compliance with extended timelines. This was justified in light of the objective of expeditious completion of insolvency processes.
4. Time is of the essence under IBC: Relying on Kridhan Infrastructure Pvt. Ltd. v. Venkatesan Sankaranarayan, the Court reiterated that delay cannot be permitted to frustrate the objectives of the IBC.
5. Conduct of the appellant: The appellant:
   • Had itself sought extension and accepted the NCLT’s conditions;
   • Acted on the order by making further payments (₹1.50 crores);
   • Simultaneously filed a writ petition before the High Court while suppressing the fact that it had already filed an appeal before the NCLAT;
   Hence it could not approbate and reprobate, and its conduct disentitled it from relief.
6. No relevance of “no loss” argument: The subsequent resale of assets at a higher price (₹145.38 crores versus the appellant’s ₹105.21 crores) does not negate the legitimacy of forfeiture. Creditors still faced substantial haircuts; the stakeholder hardship and need for finality in liquidation prevailed.
7. Final result: The appeals were held to be without merit on both facts and law, and were dismissed. Each party was directed to bear its own costs.

---

4. Detailed Analysis

4.1 Characterising the Sale: Regulation 33(2)(c) vs. 33(2)(d)

A central plank of the appellant’s case was that the sale should be treated as one falling under Regulation 33(2)(c) of the Liquidation Regulations, which allows the liquidator to undertake a private sale when:

“the asset is sold at a price higher than the reserve price of a failed auction”.

If so characterised, the appellant sought to argue that the transaction was essentially contractual, governed by the Indian Contract Act, and that only the earnest deposit/ commitment advance (10%) could be forfeited, as per clause 9 of its offer.

The Court rejected this and held that the sale clearly fell under Regulation 33(2)(d), which covers a private sale when:

“the prior permission of the Adjudicating Authority has been obtained for such sale.”

The Court’s reasoning:

• The last auction in relation to the Raichur plant was held on 28.07.2021 with a reserve of ₹105 crores and failed.
• On 31.07.2021, the SCC decided to move to scrap sale at around ₹50 crores. Thus, the auction process had conclusively ended.
• The appellant’s offer dated 09.09.2021 was a fresh private proposal to buy the plant as a going concern, made after the auctions and after the SCC opted for a different disposal route.
• The SCC, in its 9th meeting on 15.09.2021, directed the liquidator to proceed under the IBC and the liquidator did, in fact, file an IA before the NCLT seeking permission for this private sale.

Therefore:

• The sale was not merely an “improved bid” over the last auction reserve;
• It was a standalone private sale structured through the NCLT, necessitating prior adjudicating authority approval under Regulation 33(2)(d).

This characterisation is crucial: it converts what could have been argued as a private contract between two commercial parties into a court-supervised disposal of assets in the context of statutory liquidation.

4.2 Nature of the Forfeiture: Judicial Condition vs. Contractual Penalty

The appellant relied on Section 74 of the Indian Contract Act, 1872, which deals with compensation for breach of contract where a sum is named as penalty or liquidated damages. The argument was essentially:

• That forfeiture beyond 10% (the commitment advance) would amount to an unlawful penalty;
• That as ultimately no loss was suffered (since the asset was later sold for a higher sum), forfeiture of ₹37.80 crores was unjust and disproportionate.

The Supreme Court decisively held that Section 74 has no application to the facts for a more fundamental reason: this was not a case of a contractual forfeiture clause at all.

Key points from the Court’s reasoning:

1. The forfeiture did not emanate from any agreed term between the appellant and the liquidator/stakeholders. It flowed from the NCLT’s judicial order dated 29.06.2022, which:
   • Granted extension under Rule 15 of the NCLT Rules, and
   • Conditioned this extension upon complete forfeiture of all amounts paid in case of default.
2. The sale process was under the “supervision of the Adjudicating Authority”. The liquidator did not act merely as a contracting party but as an officer conducting a judicially overseen process.
3. Having applied for extension and benefited from it, and having accepted and acted upon the terms by making further payments, the appellant was bound by the judicially imposed condition and could not later challenge it as though it were a contractual stipulation.
4. The NCLT’s condition was an exercise of its discretionary power to regulate timelines and consequences in liquidation proceedings, not a term of commercial bargain.

Therefore, the entire analytical framework of penalty vs. reasonable compensation under Section 74 was held to be inapposite. The forfeiture was a consequence of disobedience to a judicial order in insolvency proceedings, not breach of a contractual promise alone.

4.3 Scope of Rule 15, NCLT Rules, and the Centrality of Time under the IBC

Rule 15 of the NCLT Rules, 2016 authorises the NCLT to enlarge or abridge the time appointed by the rules or fixed by an order, upon such terms as justice requires. The Supreme Court held:

• By entertaining the appellant’s IA (IBC)/512(CHE)/2022 and granting an extension, the NCLT was clearly exercising its powers under Rule 15.
• In doing so, it was fully empowered to attach conditions to the extension, including the condition of total forfeiture upon non-compliance.
• The fact that the first tranche had to be paid the very next day (by 30.06.2022) was reasonable, as the appellant itself had earlier sought time only till 31.05.2022 and would be expected to have arranged funds by then.

The Court relied on its earlier decision in Kridhan Infrastructure Pvt. Ltd. v. Venkatesan Sankaranarayan (2021) 6 SCC 94 to reiterate that:

“Time is a crucial facet of the scheme under the IBC and to allow such proceedings to lapse into indefinite delay would plainly defeat the very object of the statute.”

Accordingly:

• The NCLT’s insistence on strict adherence to extended deadlines was in line with the legislative policy of speed and finality in resolution and liquidation;
• Imposing a strong deterrent (total forfeiture) was viewed as a legitimate judicial tool to prevent speculative or dilatory conduct by bidders.

4.4 The Appellant’s Conduct: Appropriation, Reprobation, and Abuse of Process

A major factor in the Court’s refusal to grant relief was the appellant’s conduct, which the Court characterised as lacking bona fides and amounting to abuse of process.

(a) Approbatation and Reprobation

The doctrine of “approbate and reprobate” prevents a party from:

• Accepting benefits under an order or transaction; and
• Simultaneously challenging the burdens it imposes, when the party has made a conscious election.

Here:

• The appellant invoked the NCLT’s jurisdiction to extend time.
• It accepted the extension order dated 29.06.2022, including the forfeiture condition.
• It acted under that order by making two additional payments totalling ₹1.50 crores after 29.06.2022.
• Only after defaulting and facing forfeiture did it attempt to challenge the condition itself.

The Supreme Court held that this was impermissible: the appellant could not blow hot and cold by simultaneously relying on and attacking the same order.

(b) Suppression before the High Court

A particularly adverse aspect of the appellant’s conduct was its representation before the Madras High Court:

• It had already filed an appeal before the NCLAT against the 29.06.2022 order on 13.08.2022.
• Despite this, in the writ petition filed on 05.09.2022, it did not disclose that appeal.
• Its senior counsel wrongly stated that appeal remedy against the 29.06.2022 order was not available owing to limitation.
• On this basis, it obtained an interim order (29.09.2022) from the High Court.
• Even by the date of dismissal of the writ (24.11.2022), the High Court was not informed of the existing NCLAT appeal.

The Supreme Court described this as “clandestine” and as an “abuse of process,” holding that such conduct itself was sufficient to non-suit the appellant, quite apart from the merits.

4.5 The “No Loss” Argument and the Later Higher Sale

The appellant argued that:

• The Raichur assets were eventually sold to another buyer for ₹145.38 crores, higher than the appellant’s offer of ₹105.21 crores;
• Therefore, creditors suffered no loss but, on the contrary, benefitted from a higher realisation;
• In such circumstances, retention of ₹37.80 crores as forfeited amount amounted to a windfall and unjust enrichment.

The Court rejected this contention on several grounds:

1. Even at ₹145.38 crores, the outstanding dues of financial creditors were not fully recovered; they still had to suffer substantial haircuts. Hence, there was no “surplus” or net gain in absolute terms.
2. The relevant loss is not only about eventual sale proceeds but also about:
   • Delay in liquidation;
   • Uncertainty created in the process;
   • Freezing of the asset and capital during a period when the defaulting bidder occupied the field without fulfilling its obligations.
3. Most critically, the forfeiture was not measured as a “compensation for loss” in the contractual sense but as a consequence of disobedience to a time-bound judicial order. Hence, comparing forfeiture with net “loss” or “gain” is conceptually misplaced.
4. The forfeited amount had already been distributed among stakeholders in accordance with law. Requiring a refund at this stage would disturb the finality and settled expectations of multiple parties.

The Court thus treated the “no loss” argument as legally irrelevant in the context of a judicially imposed forfeiture in insolvency.

4.6 Distribution of Forfeited Amount and Finality Concerns

The liquidator had, by the time of Supreme Court hearing, distributed the forfeited amount among stakeholders as per applicable priority. The Court noted this as a strong practical reason not to “turn back the clock.”

This reinforces a broader insolvency law theme:

• Once funds are distributed in accordance with a judicial process, courts are reluctant to reopen that distribution, especially at the instance of a party whose own defaults and conduct led to the situation.
• This finality is essential for the certainty and credibility of the IBC regime.

---

5. Precedents, Statutory Provisions and their Role

5.1 Kridhan Infrastructure Pvt. Ltd. v. Venkatesan Sankaranarayan, (2021) 6 SCC 94

The Supreme Court cites Kridhan Infrastructure for the principle that time is of the essence in IBC proceedings. In that decision, the Court emphasised:

• IBC is designed as a time-bound framework for resolution and, where necessary, liquidation;
• Delays defeat the very purpose of value maximisation and balancing stakeholder interests;
• Courts and tribunals must be cautious in granting extensions and must prevent proceedings from lapsing into open-ended delay.

In the present case, this precedent:

• Supports the NCLT’s insistence on strict deadlines in its order dated 29.06.2022;
• Justifies the attachment of serious consequences (forfeiture) to breach of timelines;
• Underscores that judicial discretion in IBC processes must be exercised in a manner that resists dilatory tactics.

5.2 Insolvency and Bankruptcy Code, 2016 and Liquidation Regulations

• Section 62, IBC – Provides the mechanism for appeals to the Supreme Court from NCLAT orders on questions of law. The appellant approached the Supreme Court through this route. The Court’s interference was therefore limited to legal, not factual, issues.
• IBBI (Liquidation Process) Regulations, 2016 – Regulation 33(2):
  • Reg. 33(2)(c): allows a private sale if “the asset is sold at a price higher than the reserve price of a failed auction.”
  • Reg. 33(2)(d): allows a private sale with “prior permission of the Adjudicating Authority.”

The Court’s explicit classification of the present sale under Reg. 33(2)(d) delineates:

• Liquidator’s autonomy in some circumstances (such as 33(2)(c)); versus
• NCLT-supervised private sales in others (33(2)(d)), attaching a different legal character to the transaction.

5.3 NCLT Rules, 2016 – Rule 15

Rule 15 empowers the NCLT to extend or shorten the time prescribed by its own orders or by rules, “upon such terms if any, as the justice of the case may require.”

The Supreme Court:

• Recognised the extension of time in the order dated 29.06.2022 as an exercise of this Rule 15 power;
• Held that the forfeiture condition was one such “term” that justice of the case warranted;
• Affirmed that such conditions, even if stringent, are within the NCLT’s powers in the IBC context.

5.4 Indian Contract Act, 1872 – Section 74 (Inapplicability)

Though no specific cases under Section 74 are cited by name in the judgment, it is clear that the appellant sought to rely on the general doctrine of penalty and liquidated damages (e.g., jurisprudence like Fateh Chand, Kailash Nath, etc.). The Court, however, did not need to engage with that line of precedent in depth because:

• It held the relationship not to be governed by pure contract law, but by statutory and judicial processes under the IBC;
• The forfeiture clause was judicially imposed, not contractually stipulated between parties.

The upshot is a clear message: Section 74 and its case law are of limited relevance to forfeiture clauses that arise from judicial orders in insolvency proceedings rather than from contractual bargains.

---

6. Complex Concepts Simplified

6.1 Corporate Insolvency Resolution and Liquidation

• When a company is unable to pay its debts, the IBC provides for:
  1. Corporate Insolvency Resolution Process (CIRP) – time-bound attempt to rescue the company by finding a resolution plan; and
  2. Liquidation – if resolution fails, the company’s assets are sold and proceeds distributed to creditors according to a statutory priority.
• The liquidator is the person appointed to manage the sale of assets and distribution of proceeds.

6.2 Stakeholders’ Consultation Committee (SCC)

• The SCC is a committee of major stakeholders (primarily secured financial creditors) that advises the liquidator on significant decisions.
• Its views are not binding but carry persuasive force; liquidator and NCLT consider its decisions while approving sales, timelines, etc.

6.3 Private Sale under Regulation 33

• Public auction: Open bidding with advertised reserve prices.
• Private sale: Direct sale by negotiation, permitted in limited circumstances under Regulation 33(2).
• Key conditions where private sale is allowed:
  • Perishable assets;
  • Assets likely to deteriorate quickly;
  • Sale price higher than reserve of failed auction (33(2)(c));
  • Sale approved in advance by NCLT (33(2)(d)).

6.4 Forfeiture

• Contractual forfeiture: A contract term that allows a party (e.g., seller) to keep a sum paid (often earnest money) if the buyer defaults.
• Judicially-imposed forfeiture: A consequence stipulated by a court/tribunal in its order (e.g., while granting extension of time), breach of which leads to loss of monies paid or other adverse consequences.
• The present case deals with judicially-imposed forfeiture, not contractual forfeiture.

6.5 Section 74 – Penalty and Liquidated Damages

• Section 74 deals with situations where a contract names a sum payable in case of breach, or contains a “penalty” clause.
• The courts then award “reasonable compensation” not exceeding the sum named, typically having regard to actual or anticipated loss.
• It is a doctrine aimed at preventing excessive or punitive enforcement of stipulated sums.
• In this case, Section 74 was held inapplicable because the forfeiture arose from a NCLT order and not from privately negotiated contract terms.

6.6 Approbatation and Reprobation

• This legal principle prevents a person from:
  • Accepting and deriving benefit from a decision, and then
  • Repudiating or challenging the same decision when it ceases to be convenient.
• In practice: If you ask the court for a favour (e.g., extension of time) and accept it along with a condition (e.g., forfeiture on default), you cannot later challenge that condition after having taken the benefit of the extension.

6.7 “Haircut”

• In insolvency, a “haircut” refers to the amount of debt that creditors must write off (i.e., not recover) as part of resolution or liquidation.
• Example: If a bank is owed ₹100 crores and receives only ₹40 crores from liquidation, it has taken a 60% haircut.
• In this case, even after sale at ₹145.38 crores, creditors still suffered substantial haircuts, reinforcing that there was no true “surplus” that would make the forfeiture unfair.

6.8 Abuse of Process

• A party is said to “abuse the process” when it misuses legal procedures to gain advantage, for example by:
  • Suppressing material facts;
  • Initiating parallel proceedings for the same relief without disclosure;
  • Forum shopping or misleading courts.
• The appellant’s failure to disclose the NCLAT appeal while filing a writ petition before the High Court was held to be such an abuse.

---

7. Impact and Future Implications

7.1 For Bidders in IBC Liquidation Processes

• Bidders must recognise that once they participate in a court-supervised sale, guidelines of the IBC and orders of the NCLT will prevail over general contract law principles, especially regarding forfeiture and timelines.
• Requests for extension of time are not benign: courts can and will attach strict and potentially draconian conditions to such relief.
• Once such conditions are accepted and acted upon, it will be very difficult to later argue that they are unfair or contrary to Section 74 or other contractual doctrines.
• The decision incentivises serious and well-funded bidders and discourages speculative offers and time-buying tactics.

7.2 For Liquidators and NCLT

• Liquidators can be more confident in structuring private sales under Regulation 33(2)(d), knowing that:
  • The NCLT can impose strong conditions for compliance;
  • Forfeiture of even large sums is legally defensible where bidders default on judicially fixed timelines.
• NCLT’s power under Rule 15 to grant extensions “upon such terms as justice requires” is affirmed to be broad, including the imposition of complete forfeiture as a consequence.
• The judgment supports a firm, time-bound approach by NCLT benches in overseeing liquidation sales, consistent with the IBC’s objective of speedy resolution.

7.3 For the Law on Section 74 and IBC

• The judgment reinforces a trend in IBC jurisprudence: general contract law yields to the special regime of the IBC whenever insolvency processes and tribunal orders are at stake.
• It delineates a clear category of cases where Section 74 simply does not apply – namely, when the alleged “penalty” or forfeiture arises directly from a judicial order in an insolvency proceeding rather than a term of the parties’ contract.
• That said, in cases where the NCLT does not impose forfeiture but the contract between the liquidator and bidder contains such a clause, Section 74 analysis may still be relevant. This judgment does not completely exclude Section 74 from all IBC-related commercial arrangements; it limits it in the context of judicially dictated conditions.

7.4 Procedural Discipline and Litigation Strategy

• Parties are warned against:
  • Filing parallel proceedings (appeals and writs) regarding the same order;
  • Suppressing one proceeding in another forum;
  • Misstating facts regarding limitation or availability of remedies.
• Courts may treat such conduct as a ground by itself to refuse relief, irrespective of substantive claims.
• This judgment therefore promotes procedural discipline and discourages tactical manoeuvres that undermine the integrity of the IBC framework.

7.5 Balancing Fairness and Deterrence

• From a policy standpoint, the judgment leans strongly towards deterrence of defaulting bidders and speedy completion of liquidation, potentially at the cost of individual bidder equity where large sums are forfeited.
• It signals that in IBC matters, systemic efficiency and creditor recovery expectations may legitimately override arguments about “no actual loss” or “disproportion” advanced by bidders.
• Future litigants may still test the outer boundaries of this principle in extreme cases where NCLT conditions appear arbitrary or manifestly unconscionable, but this judgment sets a high bar for judicial interference.

---

8. Conclusion

The Supreme Court’s decision in M/s Shri Karshni Alloys Pvt. Ltd. v. Ramakrishnan Sadasivan crystallises several important legal propositions in the context of IBC liquidation sales:

1. Nature of IBC sales: Sales conducted in liquidation, especially under Regulation 33(2)(d), are court-supervised statutory processes, not merely commercial contracts. The NCLT’s orders defining their terms are the primary source of legal rights and obligations.
2. Section 74’s limited role: Where forfeiture arises from an NCLT order that conditions an extension of time in insolvency proceedings, Section 74 of the Contract Act is inapplicable. Party attempts to recast such forfeiture as “penalty” under contract law will fail.
3. Power of NCLT under Rule 15: The NCLT may grant extensions but is equally empowered to impose stringent consequences, including total forfeiture, in line with the time-bound mandate of the IBC.
4. Importance of conduct: Parties who:
   • seek and benefit from judicial orders,
   • default on those orders, and
   • then challenge the very conditions they accepted, or suppress parallel proceedings
   will find little sympathy in appellate forums. The doctrines of approbate and reprobate and abuse of process are potent tools against such behaviour.
5. Finality and stakeholder confidence: The Court’s refusal to disturb the forfeiture, especially after distribution to creditors and sale of the asset to a third party, strengthens the finality and predictability of outcomes under the IBC, bolstering stakeholder confidence in the regime.

In sum, this judgment sends a clear signal: bidders in IBC liquidation processes must treat their obligations – especially those arising from tribunal orders – with utmost seriousness. The law will not allow them to treat insolvency forums as arenas for speculative entry and costless exit. The IBC’s core mandate of swift, efficient, and predictable resolution and liquidation remains the decisive touchstone against which such disputes will be adjudged.