M/S. SHRI KARSHNI ALLOYS PRIVATE LIMITED V. RAMAKRISHNAN SADASIVAN 2025 INSC 1411:

DATE: 10/12/2025

COURT: Supreme Court of India

BENCH: Justice Sanjay Kumar and Justice Alok Aradhe

FACTS:

M/s. Shri Karshni Alloys Private Limited (the appellant) appealed against the dismissal of its challenges to orders by the National Company Law Tribunal (NCLT) regarding the forfeiture of payments made toward purchasing assets of M/s. Surana Industries Limited (under liquidation). The corporate debtor's liquidation began in October 2018, with Ramakrishnan Sadasivan as liquidator. After multiple failed auctions for the Raichur plant, the Stakeholders Consultation Committee (SCC) decided to sell it as scrap for about Rs.50 crores. On September 9, 2021, the appellant offered Rs.105.21 crores to buy it as a going concern, depositing Rs.10.521 crores as advance. The SCC approved, and the liquidator sought NCLT approval, which was granted on March 22, 2022, requiring full payment within 15 days. Due to delays, the appellant sought extensions; the SCC extended to May 30, 2022, with interest. The NCLT, on June 29, 2022, granted further extension to July 31, 2022, in staggered payments with 12% interest, stipulating forfeiture of all paid amounts (then Rs.37.80 crores) for non-compliance.

The appellant failed to meet the deadlines, leading to forfeiture by the liquidator on August 2, 2022. The appellant challenged this via an application dismissed by the NCLT on August 10, 2022. It filed appeals before the National Company Law Appellate Tribunal (NCLAT), resulting in a split verdict on October 20, 2023: the Judicial Member dismissed them, while the Technical Member partly allowed, limiting forfeiture to 10%. Referred to a third Technical Member, who agreed with dismissal on May 31, 2024. Meanwhile, the appellant filed a writ petition in the Madras High Court suppressing its NCLAT appeal, which was dismissed on November 24, 2022. The assets were resold for Rs.145.38 crores. Aggrieved, the appellant appealed to the Supreme Court under Section 62 of the Insolvency and Bankruptcy Code (IBC).

ISSUES:

The primary issues were whether the NCLT's forfeiture clause in its June 29, 2022, order was valid under the IBC and Liquidation Regulations, or if it constituted an unenforceable penalty under Section 74 of the Indian Contract Act, 1872; whether the sale was a private contract or governed solely by IBC processes; the applicability of Regulation 33(2)(c) or (d) of the Liquidation Regulations; the impact of the appellant's failure to comply with timelines despite extensions; and whether the appellant's conduct, including suppressing facts in parallel proceedings, disentitled it from relief.

JUDGEMENT WITH REASONING:

The Supreme Court dismissed the appeals, upholding the NCLAT's majority decision to dismiss the appellant's challenges. It affirmed the forfeiture of Rs.37.80 crores paid by the appellant, ruling that the NCLT's conditions were valid under IBC rules, and no refund or relief was warranted given the appellant's non-compliance and conduct.

The Court reasoned that the sale fell under Regulation 33(2)(d) of the Liquidation Regulations, requiring NCLT approval for private sales, rather than Regulation 33(2)(c) as claimed by the appellant, since prior auctions had failed and the SCC had shifted to scrap sale before the appellant's offer. The appellant's initial commitment to pay within 15 days of NCLT approval (March 22, 2022) was breached, leading to extensions under Rule 15 of the NCLT Rules, which empowered the NCLT to impose terms like forfeiture for justice and expeditious resolution under the IBC. The Court emphasized that time is critical in IBC proceedings, as delays defeat the statute's object, and the forfeiture was not a contractual penalty but a rational condition to enforce compliance. The appellant accepted and acted upon the June 29, 2022, order by making partial payments (Rs.1.50 crores post-order), thus estopping it from challenging the forfeiture clause through approbation and reprobation. Arguments under Section 74 of the Contract Act were rejected, as this was not a mere contract but an NCLT-supervised process, and no loss to stakeholders from resale at a higher price (Rs.145.38 crores) altered the validity of the forfeiture, given ongoing creditor haircuts.

Furthermore, the appellant's conduct was a key disentitling factor: it filed an NCLAT appeal against the June 29, 2022, order on August 13, 2022, but deliberately kept it defective until December 2022, while suppressing this in a writ petition filed on September 5, 2022, before the Madras High Court, securing interim relief through subterfuge. The High Court dismissed the writ on maintainability grounds, noting factual disputes unsuitable for Article 226. The Supreme Court viewed this as abuse of process, warranting denial of relief on bonafides alone. Post-writ dismissal, the liquidator distributed the forfeited amount per law, making reversal inequitable. On merits and facts, including the appellant's repeated defaults despite leniency, the Court found no interference warranted with the NCLAT's majority view, prioritizing IBC's timely resolution over the appellant's claims.

ANALYSIS:

In the case of M/s. Shri Karshni Alloys Private Limited v. Ramakrishnan Sadasivan, the Supreme Court reinforced the primacy of expeditious resolution under the Insolvency and Bankruptcy Code (IBC), emphasizing that liquidation processes must not be derailed by delays or non-compliance. The Court's dismissal of the appeals upheld the NCLT's forfeiture clause as a valid exercise of discretion under Rule 15 of the NCLT Rules, distinguishing it from a contractual penalty under Section 74 of the Indian Contract Act, 1872. By classifying the sale as a private transaction under Regulation 33(2)(d) of the Liquidation Regulations, requiring NCLT approval the judgment clarified that such sales are inherently supervised by the adjudicating authority, not governed solely by private contract principles. The appellant's breach of payment timelines, despite extensions and partial payments, triggered automatic forfeiture, illustrating the doctrine of approbation and reprobation: parties cannot benefit from an order while simultaneously challenging its conditions. This ruling underscores the IBC's objective to maximize asset value for creditors, as evidenced by the subsequent resale at a higher price, without necessitating proof of actual loss for enforcing forfeiture.

The decision also highlights the judiciary's intolerance for procedural abuse, disentitling the appellant from equitable relief due to its suppression of facts in parallel proceedings before the Madras High Court. This sets a precedent that litigants' conduct, including filing defective appeals and securing interim relief through subterfuge, can independently bar remedies, promoting integrity in insolvency litigation. Broader implications include strengthening stakeholder confidence in liquidation processes by prioritizing timely compliance and deterring dilatory tactics, which could otherwise prolong creditor haircuts. However, it raises questions about the balance between flexibility in extensions and stringent penalties, potentially discouraging genuine buyers facing market volatilities. Overall, the judgement aligns with the IBC's ethos of time-bound resolution, ensuring that liquidation assets are not held hostage to protracted disputes, thereby fostering a more efficient insolvency ecosystem in India.