M/S ASJ Finsolutions Pvt. Ltd. v. Vikram Bajaj, 2026 INSC 1062 (28 September 2026)
What the case was about
This case tested the limits of bidder accountability in insolvency auctions. When a successful buyer walks away without paying the balance price, can it still reclaim the sums it initially deposited? The Supreme Court held that if the e-auction notice clearly warns that the entire amount deposited—including both the earnest money deposit and any part of the balance sale consideration—will be forfeited automatically upon default, the bidder cannot later invoke the absence of an express forfeiture rule in the Liquidation Process Regulations to demand a refund. The dispute arose after a company that won a liquidation auction under the Insolvency and Bankruptcy Code, 2016 failed to clear the remaining payment and then sued to recover its upfront money. The ruling makes clear that auction notices create enforceable consequences of their own, independent of the fine print in subordinate regulations, and that bidders who ignore those terms do so at their own financial peril.
The key facts
The property in question was Lot No. 5 at Village Nangal Khurd, Sonepat, Haryana, offered with a reserve price of ₹25.56 crore. The appellant, M/S ASJ Finsolutions Pvt. Ltd., emerged as the successful bidder in an e-auction held on 15 November 2021. It deposited ₹2.55 crore as earnest money and, as the liquidator required, paid an additional ₹3.84 crore—bringing the total initial deposit to ₹6.39 crore (para 21). The terms required the remaining balance to be paid within 30 days, extendable to 90 days with interest. The appellant admittedly failed to pay the balance consideration within either deadline (para 11).
To explain the default, the appellant pointed to a pending civil dispute over a sale deed affecting part of the property and an order passed by the Punjab and Haryana High Court in a third-party writ petition. These encumbrances, however, had been specifically disclosed in the auction notice, and the sale was conducted on an explicit “as is where is” basis. The appellant’s later attempts to secure prior title deeds through proceedings before the National Company Law Tribunal (NCLT) and the High Court were dismissed. While the litigation dragged on, the property was re-auctioned for ₹31.10 crore. The NCLT had initially directed a refund of the forfeited deposit, but the National Company Law Appellate Tribunal (NCLAT) reversed that decision and upheld the forfeiture, prompting the present appeal.
The questions before the Court
A bench of Justices J.B. Pardiwala and K. Vinod Chandran had to decide several connected questions:
- Whether the e-auction notice could validly provide for automatic forfeiture of the entire deposited amount even though the Insolvency and Bankruptcy Board (Liquidation Process) Regulations, 2016 do not contain an express forfeiture clause.
- Whether the so-called “Triple Test”—looking for a hidden agenda, lack of genuine financial capacity, or prevention by extraneous reasons—entitled the appellant to a refund.
- Whether the pre-existing title disputes and the third-party High Court order amounted to a bona fide excuse for non-payment.
- Whether the 10% ceiling on earnest money under Schedule I of the Liquidation Process Regulations also capped the amount that could be forfeited.
- Whether the appellant had been discriminatorily denied extensions allegedly granted to other bidders.
What the Court decided and why
The Supreme Court dismissed the appeal and upheld the NCLAT’s order, leaving the appellant with no claim to its ₹6.39 crore deposit.
On the first question, the Court noted that Schedule I of the Liquidation Process Regulations only stipulates that the earnest money deposit “should not be more than 10%” of the reserve price; it does not expressly provide for forfeiture if the balance sale consideration is not paid (para 11). Yet the e-auction notice itself contained an explicit clause stating that “the entire amount paid by the applicant/bidder including the Earnest Money Deposit can be forfeited” if the successful bidder fails to pay the balance as required (para 21). The appellant had accepted these terms “with open eyes” and deposited the money “without any protest” (para 11). Once a bidder deposits the initial sums—partly as earnest money and partly as a slice of the balance consideration—it amounts to an undertaking to pay the rest, and failure triggers automatic forfeiture under the notice’s terms (para 11). The absence of a statutory forfeiture provision in the regulations, the Court held, “falls flat in the wake of the specific condition in the auction notice” (para 12).
The Court next rejected the plea based on the “Triple Test.” It observed that the mere failure to pay the balance had forced a fresh auction, and that proof of financial capacity must rest on substantive material rather than “mere assertions” or emails promising payment (para 16). Because the auction was held on an “as is where is” basis and the title disputes had been specifically disclosed beforehand, the appellant could not raise them later as a pre-condition to avoid payment. Indeed, the Court emphasized that the appellant having never sought verification of title deeds at the time of bidding or deposit, could not manufacture such a requirement later to escape payment (para 12). The Court described the reliance on post-auction litigation as an “afterthought” to avoid liability, and held that on these facts there was “no application of the Triple Test” (para 16).
As for the 10% cap in Schedule I, the Court clarified that this limit governs only the quantum of earnest money that may be demanded at the outset, not the extent of deposits liable to be forfeited under the contractual terms of the auction notice. Since the appellant had voluntarily paid ₹6.39 crores under a notice that transparently threatened forfeiture of the “entire amount paid,” there was no ground to order a refund (paras 21–22). The Court also found that the claim of discriminatory treatment had been raised too late and was unsupported by material on record.
Why it matters
The judgment reinforces a straightforward but crucial message for participants in insolvency auctions: the e-auction notice is a binding contract, and its penalty clauses are enforceable even where subordinate regulations do not replicate them in identical words. By treating the 10% earnest-money cap in Schedule I as a ceiling on what can be collected upfront, rather than a statutory lid on damages for default, the Court has preserved the liquidator’s ability to demand substantial initial deposits and to deter non-serious bids.
Equally important, the ruling protects the integrity of time-bound liquidation proceedings. A bidder who knowingly purchases property “as is where is” cannot resurrect disclosed title disputes as an excuse for non-payment, nor can it use peripheral litigation to stall the process and then reclaim its stake. For the insolvency ecosystem, the decision prevents defaulting bidders from weaponizing procedural disputes to extract refunds while leaving the corporate debtor’s estate in limbo. In essence, the Court has affirmed that in the high-stakes market for distressed assets, the terms of sale mean exactly what they say—and the cost of default is the full deposit voluntarily placed on the table.