V.S. PALANIVEL  versus P. SRIRAM, CS, LIQUIDATOR, ETC.
[2024] 8 S.C.R. 1263, Supreme Court of India, 2024
Outcome: Case Partly allowed (Granted)
Segment: Issues
[2024] 8 S.C.R. 1263 : 2024 INSC 659
V.S. Palanivel  
v. 
P. Sriram, CS, Liquidator, Etc.
(Civil Appeal Nos. 9059-9061 of 2022)
28 August 2024
[Hima Kohli* and Ahsanuddin Amanullah, JJ.]
Issue for Consideration
(i) Whether the Tribunal was right in accepting the view taken by the 
Adjudicating Authority that Covid-19 lockdown was a valid reason 
for extension of time to deposit the balance sale consideration; 
(ii) Whether the appellant was justified in alleging that the subject 
property was under-valued; (iii) Whether it was incumbent for the 
Liquidator to constitute a Stakeholders’ Consultation Committee; 
(iv) Whether Liquidator had violated Regulation 33 of the IBBI 
Regulations, 2016; (v) What is the import of the order of attachment 
issued by the Income Tax Authorities in respect of the auctioned 
property.
Headnotes†
Insolvency and Bankruptcy Code, 2016 – Insolvency and 
Bankruptcy Board of India (Liquidation Process) Regulations, 
2016 – Regulation 47A – Whether the Tribunal was right in 
accepting the view taken by the Adjudicating Authority that 
Covid-19 lockdown was a valid reason for extension of time 
to deposit the balance sale consideration:
Held: The Notice for sale of assets issued by the Liquidator for 
conducting the e-auction of the land and building owned by the 
Corporate Debtor that declared the reserve price of the subject 
property as ₹29,55,96,375/- – The e-auction of the subject property 
took place on 23.12.2019 – Going by the Notice for sale
issued 
by the Liquidator, the period of 90 days available to the Auction 
Purchaser to deposit the balance sale consideration, if reckoned 
from 24.12.2019, the date when the Liquidator informed that it was 
the successful bidder, would have expired on 23.03.2020 – However, 
the Letter of Intent issued by the Liquidator on 24.12.2019, was 
received by the Auction Purchaser on 26.12.2019 – The period 
of 90 days reckoned from 26.12.2019 would have expired on 
* Author
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25.03.2020 – Admittedly, the balance sale consideration was not 
paid by the Auction Purchaser within the aforesaid timeline – The 
said amount was deposited by the Auction Purchaser through 
RTGS only on 24.08.2020 – The Supreme Court in a Sou Motu 
writ petition took cognizance of the situation arising out of the 
challenge faced by the country on account of Covid-19 virus and 
extended limitation w.e.f 15.03.2020 – The Auction Purchaser 
has also invoked Regulation 47A of the IBBI Regulations, 2016 – 
The submission made on behalf of the appellant that the word 
‘Litigants’ used in the order dated 23.03.2020 passed in the Suo 
Moto Writ Petition ought to be given a narrow interpretation so 
as to exclude a party like the Auction Purchaser herein as stricto 
sensu, cannot be accepted – The appellant cannot be heard to 
state that when the entire country was engulfed by the Covid-19 
pandemic and a countrywide lockdown was imposed on 25.03.2020 
that was extended from time to time, the Auction Purchaser 
ought to have deposited the balance sale consideration within 
the stipulated 90 days – In such a situation, a lenient view would 
have to be taken by the Court – In the present case, as noticed, 
the period of 90 days for depositing the balance sale consideration 
had expired just after the crucial date, i.e., 23.03.2020 –  
There is no merit in the submission made by the appellant 
that the Tribunal ought not to have
accepted the view taken 
by the Adjudicating Authority that Covid-19 lockdown was a  
valid reason for extension of time to deposit the balance sale 
consideration. [Paras 32.2, 32.3, 32.5, 32.6, 32.12]
Insolvency and Bankruptcy Code, 2016 – Insolvency and 
Bankruptcy Board of India (Liquidation Process) Regulations, 
2016 – Whether the appellant was justified in alleging that the 
subject property was under-valued:
Held: If the appellant was so confident that the subject property 
would have fetched a much higher price, nothing precluded him 
from identifying a bidder who was willing to offer a better price – 
In fact, such a suggestion was made by the Liquidator in his 
reply dated 15.11.2019 to the objection taken by the appellant 
to the estimated value of the subject property in his letter dated 
08.11.2019 – Again, the Liquidator wrote a letter dated 27.11.2019 
to the appellant suggesting that ask eligible parties willing to 
offer a better price to participate in the auction process – The 
appellant did not follow up after that – Therefore, the appellant
[2024] 8 S.C.R. 
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V.S. Palanivel v. P. Sriram, CS, Liquidator, Etc.
cannot be permitted to argue that since the tax value of the 
subject property was estimated by the Registered Valuers at above  
₹48 crores, the Liquidator ought not to have fixed the reserve price 
at ₹39,41,28,500/- for the simple reason that though the reports 
of the Registered Valuers mentioned the tax value of the subject 
property at a little above ₹48 crores, but the liquidation value in 
both the reports was much lower and the Liquidator arrived at the 
average of the two estimated liquidation values to fix the reserve 
price of the subject property. [Paras 33.5, 33.6] 
Insolvency and Bankruptcy Code, 2016 – Insolvency and 
Bankruptcy Board of India (Liquidation Process) Regulations, 
2016 – Regulation 31A – Whether it was incumbent for 
the Liquidator to constitute a Stakeholders’ Consultation 
Committee:
Held: By virtue of the Notification dated 28.04.2022, an Explanation 
was appended at the foot of Regulation 31A which clarifies that the 
requirement of constituting a Stakeholders’ Consultation Committee 
shall apply only to those liquidation processes that were to commence 
on/after the date of commencement of the IBBI Regulation, 
2016 – In the present case, the liquidation process in respect of 
the company had commenced on 17.07.2019 and therefore, the 
submission made by the appellant that the Liquidator has breached 
Regulation 31A of the IBBI Regulations, 2016 by not constituting 
a
Stakeholders’ Consultation Committee, is devoid of merits –  
That apart, the record reveals, that the Liquidator had sent a 
reply on 15.11.2019 to a written objection taken by the appellant 
on the Valuation reports submitted by the Registered Valuers on 
08.11.2019, wherein, it was stated that neither he nor the other 
ex-Directors of the company had responded to the Liquidator’s 
suggestion for calling a meeting of the CoC – Despite this, 
neither the appellant nor the other ex-Directors of the company 
took any step to depute a person from amongst them to be 
a part of the Stakeholders’ Consultation Committee  – In view 
of the aforesaid facts, the objection taken by the appellant 
that the Liquidator has breached Regulation 31A, does not 
hold any water –Nor is the Court inclined to examine the 
submission made at the instance of the appellant that in the 
absence of any explanation appended to Regulation 31A as it  
stood before 25.07.2019, it was incumbent for the Liquidator to have 
constituted a Stakeholders’ Consultation Committee. [Para 34.3]
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Insolvency and Bankruptcy Code, 2016 – S. 35 – Insolvency and 
Bankruptcy Board of India (Liquidation Process) Regulations, 
2016 – Regulation 33, Schedule I, Rule 12 – National Company 
Law Tribunal Rules, 2016 – R.11 – Whether Liquidator had 
violated Regulation 33 of the IBBI Regulations, 2016:
Held: Schedule I under Regulation 33 lays down the manner in 
which the assets of the Corporate Debtor are to be sold by the 
Liquidator – Rule 12 under Schedule I, would have to be treated 
as mandatory in character for the reason that it contemplates a 
consequence in the event of non-payment of the balance sale 
consideration by the highest bidder within the stipulated timeline 
of 90 days, which is cancellation of the sale by the Liquidator – To 
that extent, there is substance in the submission made on behalf 
of the appellant that since the second proviso under Rule  12 
contemplates a consequence of cancellation of the auction on 
non-payment of the balance sale consideration within 90 days, 
the Liquidator was not empowered to extend the timeline – In the 
present case, records reveal that when the Auction Purchaser had 
approached the Liquidator seeking extension of time to deposit the 
balance sale consideration – The Liquidator had rightly expressed 
his inability to do so and indicated that such a power vests only in 
the Adjudicating Authority – On receiving the aforesaid response, 
the Auction Purchaser did take
steps to move the Adjudicating 
Authority for seeking extension of time for making the payments – It 
is a matter of record that the said application was allowed by the 
Adjudicating Authority on 05.05.2020 and time was granted to the 
Auction Purchaser to pay the balance sale consideration on the 
Central Government/State Government lifting the lockdown – The 
said order was passed by the Adjudicating Authority in exercise of 
its inherent powers under Rule 11 of the NCLT Rules, 2016 – In 
the facts of the present case, the Adjudicating Authority exercised 
statutory powers under Section 35 of the IBC read with its inherent 
powers under Rule 11 of the NCLT Rules, 2016 for extending the 
time to deposit the balance sale consideration on sufficient cause 
being shown, i.e., in view of the countrywide lockdown due to the 
Covid-19 pandemic – This latitude that was given in the aforesaid 
extraordinary circumstances to meet the ends of justice, cannot 
be faulted. [Paras 35.1, 35.11, 35.14, 35.16]
Insolvency and Bankruptcy Code, 2016 – Insolvency and 
Bankruptcy Board of India (Liquidation Process) Regulations, 
2016 – Schedule I, Rule 12 and Rule 13 – What is the import of
[2024] 8 S.C.R. 
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V.S. Palanivel v. P. Sriram, CS, Liquidator, Etc.
the order of attachment issued by the Income Tax Authorities 
in respect of the auctioned property: 
Held: Rule 12 is held to be mandatory in character because non-
payment within the timeline has consequences attached to it – 
However, in contrast thereto, there are no adverse consequences 
spelt out in Rule 13 for it to be treated as mandatory – The said 
Rule lays down the procedure for completion of the sale and 
would have to be treated as directory since some procedural steps 
have been set out for purposes of completion of the sale process, 
but nothing beyond that – This Court is therefore not inclined to 
accept the submissions made by the respondents that none of the 
activities as contemplated in Rule 12 could have been completed 
unless and until the attachment order passed by the Income Tax 
Authorities was lifted or that the Liquidator was not in a position 
to complete the sale under Rule13 on that count – On an overall 
conspectus of the facts of the present case which brings out the 
glaring default on the part of the Auction Purchaser in making 
deposit of the balance sale consideration even after permission 
was granted by the Adjudicating Authority on 10.02.2020 to lift the 
attachment order, the only question that needs to be answered 
is as to whether this Court should proceed to set aside the 
auction and as a sequence thereto, declare as null and void, the 
sale certificate
issued by the Liquidator in favour of the Auction 
Purchaser, as has been pleaded by the appellant – The Subject 
land is now an operational hospital – Huge amounts have been 
pumped into the project by the Auction Purchaser – In contrast, 
the appellant has not been a vigilant litigant – He has dragged 
his feet at every stage – It took 19 months for the appellant to 
prefer an appeal before the Tribunal against the order passed by 
the Adjudicating Authority – Also, it is a well settled legal position 
that once auction is confirmed, it ought to be interfered with on 
fairly limited grounds – In the given facts, the sale deed cannot 
be declared void. [Paras 36.9, 36.12, 36.14]
Case Law Cited
Sharifud-din v. Abdul Gani Lone [1980] 1 SCR 1177 : (1980) 1 SCC 
403; Vidarbha Industries Power Limited v. Axis Bank Limited [2022] 
12 SCR 139 : (2022) 8 SCC 352; C.N. Paramasivan and Another 
v. Sunrise Plaza through Partner and Others [2013] 4 SCR 1 : 
(2013) 9 SCC 460; State of Bihar v. Bihar Rajya Bhumi Vikas 
Bank Samiti [2018] 7 SCR 1147 : (2018) 9 SCC 472 – relied on.
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GPR Power Solutions Pvt. Ltd. v. Supriyo Chaudhuri (2021) 17 
SCC 312; Sagufa Ahmed v. Upper Assam Polywood Products Pvt. 
Ltd, [2020] 9 SCR 472 : (2021) 2 SCC 317; Standard Surfa Chem 
India Private Limited v. Kishore Gopal Somani, 2022 SCC Online 
NCLAT 305; Prakash Chandra Kapoor v. Vijay Kumar Iyer, 2021 
SCC Online NCLAT 622; Union Bank of India v. Rajat Infrastructure 
Private Limited and Others, 2020 SCC Online SC 1491; Pioneer 
Urban Land and Infrastructure Limited and Another v. Union of 
India and Others [2019] 10 SCR 381 : (2019) 8 SCC 416; Prakash 
Chandra Kapoor and Another v. Vijay Kumar Iyer and Another, 2021 
SCC Online NCLAT 622; Swiss Ribbons (P) Ltd. and Another v. 
Union of India and Another [2019] 3 SCR 535 : (2019) 4 SCC 17; 
Yashowanta Narayan Dixit v. Orient Insurance Company Limited 
(2022) 15 SCC 569; Union Bank of India v. Rajat Infrastructure 
Private Limited and Other [2023] 14 SCR 666 : (2023) 10 SCC 
232; Bombay Mercantile CIVIL APPEAL NOS. 9059-9061 OF 2022 
Page 23 of 57 Corporative Bank Limited v. U.P. Gun House and 
Others (2024) 3 SCC 517; R.K. Industries (Unit-II) LLP v. H.R. 
Commercials Private Limited and Others [2022] 12 SCR 667 : 
(2024) 4 SCC 166; Arun Kumar Jagatramka v. Jindal Steel and 
Power Limited [2021] 3 SCR 114 : (Refer Para 81) (2021) 7 SCC 
474; Valji Khimji and Co. v. Hindustan Nitro Product (Gujarat) Ltd. 
(Official Liquidator) [2008] 12 SCR 1 : (2008) 9 SCC 299; Celir
LLP v. Bafna Motors (Mumbai) Private Limited and others [2023] 
13 SCR 53 : (2024) 2 SCC 1; K. Kumara Gupta v. Sri Markendaya 
and Sri Omkareswara Swamy Temple and Others [2022] 8 SCR 
968 : (2022) 5 SCC 710 – referred to.
List of Acts
Insolvency and Bankruptcy Code, 2016; Insolvency and Bankruptcy 
Board of India (Liquidation Process) Regulations, 2016; National 
Company Law Tribunal Rules, 2016.
List of Keywords
Covid-19 Pandemic; Lockdown; Auction; E-Auction; Sale 
consideration; Regulation 47A of IBBI Regulations, 2016; Under-
valuation of Property; Stakeholders Consultation Committee; 
Regulation 33 of IBBI Regulations, 2016; Mandatory; Directory; 
Rule  12 of Schedule I of IBBI Regulations, 2016; Rule 13 of 
Schedule  I of IBBI Regulations, 2016; Attachment order by 
Income Tax Authorities; Vigilant litigant; Extension of time; Auction 
Purchaser; Public Auction.
[2024] 8 S.C.R. 
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V.S. Palanivel v. P. Sriram, CS, Liquidator, Etc.
Case Arising From
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 9059-9061 of 
2022
From the Judgment and Order dated 16.09.2022 of the National 
Company Law Appellate Tribunal, Chennai in CAAT (CH) (I) Nos. 336, 
339 and 343 of 2021
Appearances for Parties
P Chidambaram, Sr. Adv., B Ragunath, Prassana Venkat, Mrs. NC 
Kavitha, Sriram P., Advs. for the Appellant.
C. U. Singh, Arvind Datar, Sr. Advs., K. V. Vijayakumar, K V Sriwas 
Narayanan, K V Vibu Prasad, Sathiyanarayanan, V Balachandran, 
Siddharth Naidu, Prithvi Raj JS, M/s. KSN & Co., Advs. for the 
Respondents.
Judgment / Order of the Supreme Court
Judgment
Hima Kohli, J.
A.	
BACKDROP
1.	
The appellant - V.S. Palanivel (shareholder/former Managing Director 
of M/s Sri Lakshmi Hotel Private Limited) has filed the present appeals 
against the judgment and order dated 16th September, 2022, passed 
by the National Company Law Appellate Tribunal, Chennai Bench1 
in three Company Appeals2 preferred by him. The details of the said 
Company Appeals are (i) Company Appeal No. 336 of 2021 (subject 
matter of Civil Appeal No. 9059 of 2022) filed against the common 
judgment dated 17th November, 2021 passed by the National Company 
Law Tribunal, Chennai Bench3 rejecting an application4 moved by the 
appellant praying inter alia that directions be issued to the Liquidator, 
Sri Lakshmi Hotel Private Limited to stall all proceedings in respect 
of the
e-auction conducted by him on 23rd December, 2019, to work 
1	
In short ‘Tribunal’
2	
Company Appeal (AT) (CH) (Ins} No. 336 of 2021; Company Appeal (AT) (CH) (Ins) No. 339 of 2021 and 
Company Appeal (AT) (CH) (Ins) No. 343 of 2022
3	
In short ‘Adjudicating Authority’
4	
MA No. 120 of 2020
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on an alternative manner of dividing the property put to auction and 
sell only a part of the land and for grant of sufficient time to make 
payment to the financial creditor. (ii) Company Appeal No. 339 of 
2021 (subject matter of Civil Appeal No. 9060 of 2022) arose from the 
common order dated 17th November, 2021 passed by the Adjudicating 
Authority on an Interim Application5 seeking recall of its order dated 
05th May, 2020 passed on an application6 filed by the appellant. 
(iii) Company Appeal No. 343 of 2021 (subject matter of Civil Appeal 
No. 9061 of 2022) filed by the appellant on 27th October, 2021 under 
Section 61 of the Insolvency and Bankruptcy Code, 20167 against 
order dated 05th May, 2020 passed by the Adjudicating Authority 
allowing an application moved by the successful bidder, M/s KMC 
Speciality Hospitals (India) Limited8 for extension of time to deposit 
the balance sale consideration after the Central/State lockdown was 
lifted. All the aforesaid appeals were dismissed by the Tribunal under 
the impugned judgment and order dated 16th September, 2022.
2.	
It may be noted at the outset that Civil Appeal No. 9059 of 2022 
does not survive inasmuch as the auction proceedings have already 
been concluded and upon the Auction Purchaser depositing the 
sale amount, the Liquidator has executed a Sale Deed in its favour. 
Therefore, the scope of the present judgment is confined to Civil 
Appeals No. 9060 and
9061 of 2022.
B.	
SEQUENCE OF EVENTS 
3.	
The facts of the case lie in a narrow compass. Sri Lakshmi Hotels 
Private Limited,9 a family held concern having four shareholders 
namely, the appellant herein, his wife, his son and his daughter-in- law 
purchased an immovable property10 at Tiruchirappalli measuring 
67,533 sq. ft. The company started running a hotel and a bar from 
the said premises. In the year 2006, the company took a loan from 
a financial creditor to the tune of ₹1,57,25,000/- (Rupees One crore 
fifty seven lakh twenty five thousand only). When disputes arose 
between the company and the financial creditor, the latter invoked 
5	
IA SR No. 944 of 2020 on 25th September, 2020
6	
IA 335 of 2020 in MA/689/2019 in CP/1140/IB/2018
7	
In short ‘IBC’
8	
In short ‘Auction Purchaser’
9	
In short ‘company/Corporate Debtor’
10	
situated at Old No. 3A, New No. 27, Alexandria Road, Cantonment, Tiruchirappalli-620001
[2024] 8 S.C.R. 
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V.S. Palanivel v. P. Sriram, CS, Liquidator, Etc.
the arbitration clause governing the parties. The Arbitral Tribunal 
passed an award on 27th December, 2014, for a sum of ₹2,21,08,244/- 
(Rupees Two crore twenty one lakh eight thousand two hundred and 
forty four only) in favour of the financial creditor along with interest 
at the rate of 24 % per annum from the date of claim petition till the 
date of realisation. The company challenged the said award11 under 
Section 34 of the Arbitration and Conciliation Act, 1996, but the said 
petition was dismissed by the High Court of Madras vide order dated 
16th November, 2017.11 
4.	
On non-payment of the amounts awarded under the Arbitral Award, 
the financial creditor filed an application12 under Section 7 of the IBC 
before the Adjudicating Authority for initiating corporate insolvency 
resolution process against the company. The said petition was 
admitted on 28th February, 2019 and the respondent No. 2 was 
appointed as an Interim Resolution Professional.13 Later on, he was 
confirmed as a Resolution Professional and finally, as a Liquidator. As 
per the records, no resolution plan for revival of the Corporate Debtor 
was received and the Committee of Creditors14 recommended that the 
company be liquidated. The said recommendations were accepted 
by the Adjudicating Authority, vide order dated 17th July, 2019. 
5.	
Pursuant to the above, the Liquidator engaged two Registered 
Valuers to give an
estimate of the valuation of the subject property. 
The Valuers submitted their Reports as follows: 
S. 
No.
Name of the Valuer
Tax Value
Liquidation Value
1.
Ms. Vijayalakshmi
Rs.48,03,00,000
Rs.40,82,57,000
2.
Mr. R.S. Babu Rajendran
Rs.48,48,00,000
Rs.38,00,00,000
Average Liquidation  
Value for the purpose of 
E- auction Upset Price
Rs.39,41,28,500
Based on the above Reports, the Liquidator arrived at the average 
value of the subject property, i.e., ₹39,41,28,500/- (Rupees Thirty 
nine crore forty one lakh twenty eight thousand five hundred only) 
11	
Original Petition No.137 of 2015
12	
CP/1140/(IB)/CB/2018
13	
In short ‘IRP’
14	
In short ‘CoC’
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and scheduled an auction on 25th November, 2019, with a reserve 
price set at the above figure. Vide letter dated 08th November, 2019, 
the appellant objected to fixation of the reserve price. The Liquidator 
replied to the said communication and turned down his objections. He 
also requested the appellant to nominate a person in the Stakeholders 
Committee, which the appellant failed to do. 
6.	
When the Liquidator did not receive any bid in the first auction, he 
published a notice scheduling a second auction on 23rd December, 
2019. This time, the reserve price was reduced by 25% i.e. it came 
down from ₹39,41,28,500/- (Rupees Thirty nine crore forty one lakh 
twenty eight thousand five hundred only) to ₹29,55,96,375/- (Rupees 
Twenty nine crore, fifty five lakh ninety six thousand three hundred 
and seventy five only). M/s KMC Speciality Hospitals (India) Limited 
was the sole bidder in the second auction process and on depositing 
an earnest amount of ₹2,95,59,698/- (Rupees Two crore ninety five 
lakh fifty nine thousand six hundred and ninety eight only), it emerged 
as the successful bidder.
7.	
In terms of Rule 12 of Schedule-I under Regulation 33 of the 
Insolvency and Bankruptcy Board of India (Liquidation Process) 
Regulations, 2016,15 the successful bidder was required to pay the 
balance sale consideration within 90 days from the date of demand. 
The Liquidator despatched a letter dated 24th December, 2019 to
the Auction Purchaser demanding the balance sale amount. Though 
arguments were initially advanced on behalf of the appellant that the 
period of 90 days for paying the balance amount ought to be reckoned 
from 24th December, 2019 and not from 26th December, 2019, the 
date on which the Auction Purchaser received the communication 
from the Liquidator, later on the said plea was not seriously pressed. 
If one takes the outer limit for calculating the period of 90 days for the 
Auction Purchaser to pay the balance sale consideration reckoned 
from 26th December, 2019, the date when the Auction Purchaser 
received the letter despatched by the Liquidator, the said period 
would have expired on 25th March, 2020. It is not in dispute that the 
balance sale consideration was not paid by the Auction Purchaser 
within the period of 90 days. The said amount was paid only on 24th 
August, 2020. 
15	
IBBI Regulations, 2016
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V.S. Palanivel v. P. Sriram, CS, Liquidator, Etc.
8.	
The appellant filed a Miscellaneous Application4 before the 
Adjudicating Authority for setting aside the auction proceedings. The 
said application was dismissed by the Adjudicating Authority, vide 
common order dated 17th November, 2021. In the meantime, due to 
the onset of the Covid-19 pandemic, Government of India imposed 
a countrywide lockdown on 25th March, 2020. On 22nd April, 2020, 
the Auction Purchaser moved an application6 before the Adjudicating 
Authority for extension of time for making payment of the balance 
sale consideration. Besides taking the plea of the onset of Covid 19 
pandemic, one of the grounds taken by the Auction Purchaser for 
extension of time was that the Income Tax Authority had passed an 
order attaching the auctioned property. The said application was 
allowed by the Adjudicating Authority3, vide order dated 05th May, 2020 
and the time granted for depositing the balance sale consideration 
was deferred till the lockdown was lifted by the Central Government/
State Government, respectively. 
9.	
Dissatisfied with the aforesaid order, the appellant filed a Company 
Appeal,16 after 19 months, on 27th October, 2021. Well before that, 
the Auction Purchaser paid the balance sale consideration in respect 
of the auctioned property on 24th August, 2020 and a Sale Deed was 
executed by the Liquidator in favour of the Auction Purchaser on 28th 
August, 2020. One month
after completion of the sale transaction, 
the appellant filed an application on 25th September, 2020,5 seeking 
recall of the order dated 05th May, 2020, passed by the Adjudicating 
Authority and challenging the execution of the Sale Deed. By virtue 
of the common order dated 17th November, 2021, the Adjudicating 
Authority dismissed both the applications filed by the appellant, one 
for stalling the e-auction that was conducted on 23rd December, 20194 
and the other for setting aside the Sale Deed dated 28th August, 2020. 
The said orders were carried in appeal by the appellant before the 
Tribunal. Vide common judgment and order dated 16th September, 
2022, the Tribunal dismissed the appeals filed by the appellant, 
giving rise to the present appeals. 
C.	
ARGUMENTS ADVANCED ON BEHALF OF THE APPELLANT
10.	 Mr. P. Chidambaram, learned Senior advocate appearing for the 
appellant submitted that the Tribunal failed to appreciate that the 
16	
Company Appeal (AT) (INS) No. 334 of 2021
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auction conducted by the Liquidator was in violation of the provisions 
of the IBBI Regulations, 2016 particularly, Regulation 31A that requires 
a Liquidator to constitute a Stakeholders’ Consultation Committee 
and Regulation 33 that prescribes the mode of sale of the assets 
of the Corporate Debtor through an auction in the manner specified 
in Schedule I. Relying on the decision in C.N. Paramasivam and 
Another v. Sunrise Plaza through Partner and Others,17 it has 
been contended that Schedule I, Rule 12 of the IBBI Regulations, 
2016 is mandatory and any non-compliance thereof should result in 
cancellation of the sale. The decision in Sharif-ud-din v. Abdul Gani 
Lone18 was cited by learned counsel to make a point that when the 
rule provides a consequence for failure to comply, then it ought to be 
treated as mandatory and not directory in character. It was argued 
that having regard to the mandatory character of the regulations, the 
Tribunal has erred in failing to appreciate that the Auction Purchaser 
could neither have sought extension of time to deposit the balance 
sale consideration nor could such an indulgence have been granted to 
it. Dovetailed to the above, is the submission that the Liquidator was 
selective in applying the amended provisions of the IBBI Regulations, 
2016, based on a Circular dated 26th August, 2019. 
11.	 The second submission made by learned senior counsel appearing 
for the appellant
was that the Tribunal ought not to have concurred 
with the Adjudicating Authority to hold that the extension granted to 
the Auction Purchaser to deposit the balance sale consideration on 
account of the Covid-19 lockdown, was valid. It was submitted that 
since banks were functioning during that time, the Auction Purchaser 
had all the opportunity to deposit the balance sale consideration. 
Therefore, it had no defence for not making the payment on time. 
It was further submitted that the order passed by the this Court and 
relied on by the Auction Purchaser in GPR Power Solutions Pvt. Ltd. 
v. Supriyo Chaudhuri,19 as also the order dated 02nd March, 2020 
and the order dated 12th May, 2020 passed in Civil Appeal No. 1902 
of 2020,20 could not have enured to its benefit for the reason that the 
said orders applied to filing of petitions, applications, suits, appeals 
17	
[2013] 4 SCR 1 : (2013) 9 SCC 460
18	
[1980] 1 SCR 1177 : (1980) 1 SCC 403
19	
(2021) 17 SCC 312
20	
Union Bank of India v. Rajat Infrastructure Pvt. Ltd. and Others
[2024] 8 S.C.R. 
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V.S. Palanivel v. P. Sriram, CS, Liquidator, Etc.
or other proceedings within the prescribed period of limitation. Citing 
the decision in Sagufa Ahmed v. Upper Assam Polywood Products 
Pvt. Ltd.21 learned senior counsel submitted that the order passed by 
this Court on 23rd March, 2020 in Suo Moto Writ Petition (Civil) No. 
3/2020, was only intended for the benefit of vigilant litigants who were 
prevented from initiating proceedings within the period of limitation 
due to the pandemic and the lockdown. The Auction Purchaser was 
not a litigant before the Court and could not have availed of the said 
order. The Auction Purchaser was neither required to approach the 
Adjudicating Authority, nor to file any petition before the Tribunal for 
remitting the balance sale consideration. 
12.	 It was next canvassed on behalf of the appellant that the order of 
attachment by the Income Tax Authorities in respect of the auctioned 
property is an irrelevant consideration insofar as it relates to deposit 
of the balance sale consideration by the Auction Purchaser within 
90 days. Alluding to the terms and conditions of the auction, learned 
counsel argued that the e-auction was conducted on an ‘As Is Where 
Is’ basis and clause 12 of the said Notice of auction clearly stated 
that the sale would be subject to the IBC and the IBBI Regulations, 
2016. Therefore, the Auction Purchaser cannot be heard to state that 
it was unaware of the Income Tax attachment order.
Having bid for 
the subject property and agreed to the condition that the balance sale 
amount had to be deposited within 90 days, the Auction Purchaser 
was under an obligation to comply with the terms of the auction and 
on failure to do so, the Liquidator ought to have cancelled the sale 
instead of accommodating the Auction Purchaser. 
13.	 Lastly, learned counsel submitted that even assuming that the last 
date for making the payment towards the balance sale consideration 
was 25th March, 2020, as was urged by the other side, the period 
of limitation would have recommenced on 23rd July, 2020, since 
the Liquidator had moved an application22 seeking exclusion of the 
period between 23rd March, 2020 and 23rd July, 2020. In view of the 
above, there was no justification for the Auction Purchaser to have 
made the payment on 24th August, 2020 i.e. after a period of one 
month reckoned from the date when the exclusion period had ended. 
21	
[2020] 9 SCR 472 : (2021) 2 SCC 317
22	
lA No. 202 of 2021 in CP/1140/IB/20181.
1276
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D.	
ARGUMENTS ADVANCED BY LEARNED SENIOR COUNSEL 
FOR THE AUCTION PURCHASER
14.	 Rebutting the submissions made by learned counsel for the appellant, 
Mr. Arvind Datar, Senior Advocate appearing for the Auction 
Purchaser submitted that the time to complete all actions under 
the IBC stood extended from 15th March, 2020 onwards in view of 
the Covid-19 circulars and orders passed by this Court in the Suo 
Motu Writ Petition23 initiated by this Court read in conjunction with 
Regulation 47A of IBBI Regulations, 2016. Therefore, there was no 
default on the part of the Auction Purchaser in making payment of the 
balance sale consideration at a later date. Referring to the decision 
of this Court in GPR Power Solutions Private Limited (supra) 
learned senior counsel submitted that the extension orders were 
applied by this Court even to submissions of claims by creditors to 
the resolution professionals. For this reason, it would be erroneous 
to state that extension could apply only to litigants before courts and 
Tribunals, as sought to be urged by the other side. The decisions 
in Standard Surfa Chem India Private Limited v. Kishore Gopal 
Somani24 and Prakash Chandra Kapoor v. Vijay Kumar Iyer 25 were 
cited by learned counsel to argue that timelines prescribed under the 
IBBI Regulations, 2016 are directory and not mandatory in character. 
Learned counsel submitted that reliance placed by the appellant on 
C.N.
Paramasivam (supra) to contend that the timeline of 90 days 
is absolute, is misplaced for the reason that the provisions governing 
the Debt Recovery Tribunal26 and the Adjudicating Authority are not 
pari materia. Learned senior counsel submitted that unlike DRT’s, 
Adjudicating Authority has special inherent powers under Rule 11 
of the National Company Law Tribunal Rules, 2016.27 Furthermore, 
even in cases initiated under the Securitization and Reconstruction 
of Financial Assets and Enforcement of Security Interest Act,28 this 
Court had granted extension to an Auction Purchaser to deposit 
the balance sale consideration in view of the Covid-19 lockdown 
23	
Suo Motu Writ Petition (C) No.3 of 2020 in ‘Cognizance for Extension of Limitation, In Re’, reported as 
(2020) 19 SCC 10
24	
2022 SCC Online NCLAT 305 
25	
2021 SCC Online NCLAT 622
26	
For short ‘DRT’
27	
For short ‘NCLT Rules, 2016’
28	
For short ‘SARFAESI Act’
[2024] 8 S.C.R. 
1277
V.S. Palanivel v. P. Sriram, CS, Liquidator, Etc.
situation. For this, learned senior counsel referred to the order dated 
12th May, 202029 passed by this Court in Union Bank of India v. 
Rajat Infrastructure Private Limited and Others.30 Similarly, he 
submitted that the Sagufa Ahmed case (supra) referred to on behalf 
of the appellant, cannot apply to the facts of the instant case for the 
reason that in the captioned case, the timeline for filing an appeal 
before the Tribunal had expired before 15th March, 2020, which was 
not so here as the timeline for the Auction Purchaser to deposit 
the balance sale consideration had expired after declaration of the 
COVID-19 lockdown by the Government of India on 22nd March, 2020. 
15.	 Learned senior counsel clarified that the Auction Purchaser had 
applied to the Liquidator on 28th February, 2020, for extension of 
time to deposit the balance sale consideration after the Income Tax 
attachment orders were lifted. The Liquidator responded to the said 
communication only on 02nd April, 2020 stating that he did not have 
the powers to extend the time and for which, an application would 
have to be moved before the Adjudicating Authority after it resumed 
functioning partially. For purposes of clarification, it may be noted that 
Adjudicating Authority had issued a notification that it would hear only 
urgent matters between 16th March, 2020 and 27th March, 2020. On 
22nd March, 2020, the Adjudicating Authority
announced closure in 
the light of the lockdown and it was clarified that liquidation matters 
would not be considered as urgent. The Auction Purchaser filed an 
application31 before the Adjudicating Authority seeking extension 
of time. Vide order dated 5th May, 2020, the Adjudicating Authority 
allowed the said application and granted extension of time to the 
Auction Purchaser to deposit the balance sale consideration. It is 
submitted that the appellant did not take any steps to prefer an appeal 
against the aforesaid order within the period prescribed in Section 61 
of the IBC. Instead, after the entire sale transaction was completed, 
the appellant filed an application for review, which was dismissed by 
the Adjudicating Authority. After waiting for 15 months, the appellant 
filed an appeal on 27th October, 2021. Even at that stage, the appellant 
did not seek any interim orders before the Adjudicating Authority or the 
Tribunal. As a result, the Auction Purchaser proceeded to construct 
29	
Order dated 12th May, 2020 passed in Civil Appeal No.1902 of 2020
30	
2020 SCC Online SC 1491
31	
IA No. 335/IB/2020 in MA No.689 of 2019 in CP No./1140/IB/CB/2018
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a 200-bed Mother and child hospital at the auctioned property after 
demolishing the existing building on which a sum of ₹1,70,00,000/- 
(Rupees One crore and seventy lakhs only) has been invested. The 
said hospital is now complete and fully functional and is stated to 
cater to the needs of seven surrounding districts in the area. 
16.	 Coming next to the submission made on behalf of the appellant 
that the order of attachment issued by the Income Tax authorities in 
respect of the auctioned property is not a relevant consideration when 
it came to depositing the balance sale consideration by the Auction 
Purchaser within 90 days, learned senior counsel for the Auction 
Purchaser sought to urge that sale of properties that are the subject 
matter of Income Tax attachment orders, must be treated on a different 
footing. Such sale transactions cannot be completed because of the 
bar placed under the Income Tax Act, 1961.32 A specific reference 
in this regard has been made to Sections 222 and 281 read with 
Rule 48 Part-III, Schedule 2 of the IT Act. Several decisions of the 
Adjudicating Authority33 have been cited by the learned senior counsel 
to canvass that in such circumstances, the Liquidator has no option 
but to approach the Adjudicating Authority for appropriate directions. 
Even in the present case, the Liquidator had to move an application 
before the Adjudicating Authority for appropriate directions. The said
application was allowed on 10th February, 2020. However, the order 
passed on 10th February, 2020 was received by the Liquidator only 
on 14th May, 2020. Due to several hindrances on account of the 
COVID-19 situation, the actual attachment of the subject property 
was lifted only on 27th August, 2020. Just a few days before that, 
the Auction Purchaser deposited the balance sale consideration on 
24th August, 2020 and the sale transaction was finally completed on 
28th August, 2020. 
17.	 Countering the submission made on behalf of the appellant that 
Clause 12 of Schedule I under Regulation 33 of the IBBI Regulations, 
2016 requires the successful bidder to pay the balance sale 
consideration within 90 days from the date of the demand which 
32	
For short ‘IT Act’
33	
BMM Ispat Ltd. v. Ramdas Ispat, 2019 SCC Online NCLT 21322, Allahabad Bank v. Biotor, 2019 
SCC Online NCLT 26716, Sanjay Kr. Agarwal v. Tax Recovery Officer, 2019 SCC Online NCLT 
28888, Abhudaya Coop. Bank v. Shivkripa, 2020 SCC Online NCLT, 11935, UBI v. Guruashish 
Construction, 2020 SCC Online NCLT 14829, Ashok Kr. Dewan v. AC of IT, 2021 SCC Online 4368, 
Mauritius Commercial Bank v. Varun Corporation, 2021 SCC Online NCLT 6814, Milind Kasodekar 
v. P. Mahajan, 2021 SCC Online NCLT 11616.
[2024] 8 S.C.R. 
1279
V.S. Palanivel v. P. Sriram, CS, Liquidator, Etc.
timeline could not be extended, learned senior counsel for the 
Auction Purchaser argued that the time limit fixed under Rule 12 of 
Schedule I has to be read in conjunction with Rule 13 of the IBBI 
Regulations, 2016 and in cases of attachment, the full amount has 
to be paid simultaneously with the completion and execution of the 
Sale Deed. In the present case, the said steps could be taken only 
after the attachment was lifted by the Income Tax authorities. 
18.	 Learned senior counsel relied on Pioneer Urban Land and 
Infrastructure Limited and Another v. Union of India and Others34 
and Prakash Chandra Kapoor and Another v. Vijay Kumar Iyer 
and Another,35 to contend that the model timeline for the liquidation 
process contemplated under Regulation 47 of the IBBI Regulations, 
2016 for completing the liquidation process, are only directory in 
nature. 
19.	 Learned senior counsel for the Auction Purchaser concluded by 
highlighting the conduct of the appellant and stated that he had 
repeatedly failed to pay the monies due; he attempted to stall the 
auction process; he refused to remove the bar operating from the 
subject premises and police assistance had to be taken to take over 
physical possession of the subject property. Therefore, concurrent 
findings returned by the Adjudicating Authority and the Tribunal being 
well reasoned, do not deserve interference. Lastly, learned counsel 
submitted
that without prejudice to the above submission, in the event 
this Court is of the opinion that the provisions of Rule 12 of Schedule 
I of the IBBI Regulations, 2016 are mandatory and the Adjudicating 
Authority was not empowered to extend the timelines for paying the 
balance sale consideration, then this Court may exercise its powers 
under Article 142 of the Constitution of India to do complete justice 
but the auction sale may not be set aside. 
E.	
ARGUMENTS ADVANCED ON BEHALF OF THE RESPONDENT 
NO.1- LIQUIDATOR
20.	 Mr. C.U. Singh, Senior Advocate appearing on behalf of the 
respondent No.1 - Liquidator supported the arguments advanced by 
learned senior counsel for the Auction Purchaser. He submitted that 
the appellant has made unfounded allegations regarding valuation 
34	
[2019] 10 SCR 381 : (2019) 8 SCC 416 
35	
2021 SCC Online NCLAT 622
1280
[2024] 8 S.C.R.
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of the subject property at ₹39,41,28,500/- (Rupees Thirty nine crore 
forty one lakh twenty eight thousand and five hundred only). The said 
allegations were responded to by the Liquidator, vide letter dated 15th 
November, 2019 clearly stating inter alia that the reserve price was 
based on the average liquidation value arrived at by the registered 
Valuers. Contradicting the claim of the appellant that the subject 
property ought to have been valued at ₹1,00,00,00,000/- (Rupees 
One hundred crore only), it was submitted that no bidder had stepped 
forward to participate in the auction even with the reserve price of 
₹39,41,00,000/- (Rupees Thirty nine crore and forty one lakh only). 
Reference was made to Regulation 33 read with para 4A of the 
Schedule I to the IBBI Regulations, 2016 to state that the second 
auction was conducted on 23rd December, 2019 with a permissible 
reduction of 25% in the reserve price that was set at ₹29,95,96,375/- 
(Rupees Twenty nine crore ninety five lakh ninety six thousand three 
hundred and seventy five only). This fact was duly intimated to the 
appellant who too could have made efforts to get a better bid for the 
subject property, but he didn’t take any such step. 
21.	 Refuting the submission made by the other side that the auction 
was conducted by the Liquidator without constituting a Stakeholders’ 
Consultation Committee, learned counsel submitted that there was 
no such
requirement at the relevant point in time, which position 
has been clarified in the Explanation appended to Section 31A, that 
was inserted in the Regulations, vide Notification dated 25th July, 
2019. In the present case, the liquidation process had commenced 
earlier to issuance of the said Notification. Further, the Tribunal 
has clarified that the amendment to Rule 12 of Schedule I under 
Regulation 33 of the IBBI Regulations, 2016 made by virtue of the 
same Notification would apply to pending liquidation process.36 
Learned senior counsel submitted that in any event, such an 
objection was taken by the appellant for the first time in the recall 
application filed by him on 25th September, 2020 by which date, the 
entire process of sale stood concluded. It was submitted that the 
appellant is estopped from taking such an objection for the reason 
that despite repeated requests made to him by the Liquidator to 
nominate a person in the Stakeholders’ Consultation Committee, 
he had not done so. 
36	
Reliance has been placed In the matter of Sundaresh Bhat, 2021 SCC Online NCLAT 624
[2024] 8 S.C.R. 
1281
V.S. Palanivel v. P. Sriram, CS, Liquidator, Etc.
22.	 Learned senior counsel for the Liquidator submitted that the 
COVID-19 pandemic had caused an extraordinary disruption 
leading to a nationwide lockdown from 20th March, 2020 onwards. 
The Auction Purchaser had moved an application for extension 
of time to deposit the balance sale consideration, which was duly 
allowed by the Adjudicating Authority, vide order dated 5th May, 2020, 
extending the time until the lifting of the lockdown by the Centre/
State Government. The balance sale consideration was deposited 
by the Auction Purchaser on 24th August, 2020. On receiving the 
said amount, the Liquidator had settled the outstanding claim of 
the Income Tax Department on 27th August, 2020 whereafter, the 
Income Tax attachment was lifted and the Liquidator executed and 
registered the Sale Deed in favour of the Auction Purchaser on 
28th August, 2020. It was pointed out that the appellant decided to 
challenge the order dated 5th May, 2020 passed by the Adjudicating 
Authority, 14 months after the Sale Deed was executed and registered 
in favour of the Auction Purchaser, which shows his non-seriousness. 
Further, learned counsel cited the decision in Pioneer Urban Land 
and Infrastructure Limited and Another v. Union of India and 
Others,37 wherein it has been held that the timeline prescribed 
in Sections 7(5), 9(5) and 10 (4) of the IBC are directory and not 
mandatory in character. 
23.	 Learned
counsel for the Liquidator supported the submissions made 
on behalf of the Auction Purchaser on the aspect of extension of the 
period of limitation and submitted that the expressions “litigation” and 
“litigant” appearing in the Suo Moto Writ petition must be given the 
widest import so as to cover all proceedings, including liquidation 
proceedings. In the absence of any explicit bar, the said order would 
also apply to the auction process conducted in liquidation proceedings 
carried out under the IBC more so, when the Liquidator has been 
held to be a quasi judicial authority by this Court in Swiss Ribbons 
(P) Ltd. and Another v. Union of India and Another.38 Reliance 
has also been placed on GPR Power Solutions Pvt. Ltd. (supra) 
to urge that exclusion of time on account of the COVID-19 pandemic 
was allowed even in cases where claims were to be filed before the 
resolution professionals. 
37	
[2019] 10 SCR 381 : (2019) 8 SCC 416
38	
[2019] 3 SCR 535 : (2019) 4 SCC 17
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F.	
REJOINDER ARGUMENTS ON BEHALF OF THE APPELLANT
24.	 In his rejoinder arguments, learned counsel for the appellant 
sought to distinguish the judgments of this Court relied on by 
the other side including in the case of Yashowanta Narayan 
Dixit v. Orient Insurance Company Limited39 and the orders 
passed on 2nd March, 2020 and 12th May, 2020 in Civil Appeal No. 
1902  of  2020. Relying on the decision in Union Bank of India 
v. Rajat Infrastructure Private Limited and Others,40 learned 
counsel submitted that this Court had noted that under Rule 9 (4) 
of the Security Interest (Enforcement) Rules, 2002,41 the balance 
of the purchase price payable had to be paid in the said case on 
or before the fifteenth day of the confirmation of sale and even if 
a liberal construction is given to the said sub-Rule, and the orders 
passed by the Court from time to time, the time to deposit the balance 
amount with interest could extend only upto 30th April, 2022 and no 
further extension of time could have been granted thereafter. This 
Court has also observed that Article 142 of the Constitution of India 
cannot be used to depart from the substantive law. It was submitted 
that even if the Auction Purchaser was permitted to take the benefit 
of the order dated 17th November, 2021 passed by the Adjudicating 
Authority, it could take the last date for deposit upto 23rd July, 2020 
whereas, the Auction Purchaser did not deposit the
balance sale 
consideration till 24th August, 2020. 
25.	 Coming next to the submission made by learned senior counsel for 
the respondents that model timelines for the liquidation process under 
Regulation 47 of the IBBI Regulations, 2016 are directory in character 
and not mandatory, learned senior counsel for the appellant submitted 
that the decisions cited by the respondents to substantiate the said 
submission, are distinguishable on facts. It was contended that this 
Court has itself held in Pioneer Urban Land and Infrastructure 
Limited (supra) that the timelines mentioned in Sections 7(5), 9(5) 
and 10(4) of the IBC are directory in nature because they do not 
provide for any consequence if the period so mentioned is exceeded. 
However, the word used in Rule 12 of Schedule I under Regulation 33 
of the IBBI Regulations, 2016 is “shall”. The second proviso under 
39	
(2022) 15 SCC 569
40	
[2023] 14 SCR 666 : (2023) 10 SCC 232
41	
For short ‘SIE Rules, 2002’
[2024] 8 S.C.R. 
1283
V.S. Palanivel v. P. Sriram, CS, Liquidator, Etc.
Rule 12 provides for a consequence that in the event the amount is 
not paid within 90 days, the sale shall be cancelled. The decision in 
the case of Prakash Chandra Kapoor (supra) is also sought to be 
distinguished on the same grounds. Learned senior counsel submitted 
that in all the Rules under Schedule I, except for Rule 11, the word 
“shall” has been used and it has been held in Vidarbha Industries 
Power Limited v. Axis Bank Limited,42 that if one provision uses 
the word “may”, and another provision uses the word “shall”, then 
wherever the word “shall” has been used, will have to be treated 
as mandatory. Applying the said principle to the instant case, it was 
mandatory for the Auction Purchaser to have deposited the balance 
sale consideration in respect of the auctioned property within 90 
days and at the outer date, on or before 23rd of July, 2020 when the 
period of the lockdown had come to an end. 
26.	 As for the submission made by the Auction Purchaser that the 
Income Tax attachment was lifted only on 27th August, 2020 and 
therefore, there was no occasion for it to have paid the balance 
sale consideration before the attachment was lifted, learned senior 
counsel for the appellant submitted that the Adjudicating Authority 
had passed an order on 10th February, 2020, directing the Income 
Tax Department to lift the attachment and the said order having been 
pronounced in open court,
ought to have been in the knowledge of 
the respondents who cannot take a plea that the said order was 
communicated to them much later and therefore, they were oblivious 
thereto. It was further argued that the amount attached by the Income 
Tax Department was actually paid on 3rd August, 2020, from out 
of the earnest money deposited by the Auction Purchaser. While 
the Income Tax Department passed an order lifting the attachment 
in respect of the subject property only on 27th August, 2020, the 
Auction Purchaser did not wait until then to pay the balance amount. 
The balance sale consideration was deposited by the Auction 
Purchaser through RTGS on 24th August, 2020, which was three days 
before the date the Income Tax Department passed the order on 
27th August, 2020. That being the position, the balance amount could 
have easily been paid by the Auction Purchaser in a similar manner 
(through RTGS) on or before 25th March, 2020, on the expiry of the 
period of 90 days, which it miserably failed to do. 
42	
[2022] 12 SCR 139 : (2022) 8 SCC 352
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[2024] 8 S.C.R.
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27.	 Refuting the plea taken by the Auction Purchaser that under 
Section 281 of the IT Act, a sale shall be treated as void against 
any claim by the Income Tax Department which was a reason 
offered by it not to have paid the balance amount, learned counsel 
for the appellant submitted that such a plea is baseless inasmuch 
as the Auction Purchaser could have paid the balance amount by 
obtaining prior permission from the assessing officer. The Income 
Tax attachment did not stand in the way of payment of the balance 
sale consideration. A distinction was sought to be drawn between 
the expression ‘payment of sale consideration’ and ‘execution of sale 
deed’. The attention of the Court was also drawn to the letter dated 9th 
December, 2019 issued by the Liquidator to the Auction Purchaser in 
response to its communication dated 9th December, 2019 well before 
the date of auction, seeking a clarification. The Liquidator had clearly 
stated that the subject property was being sold under the IBC and 
the Income Tax Department could not have a priority in claim. In any 
case, the income tax dues were limited to a sum of ₹2,44,00,000/- 
crores (Rupees Two crore and forty four lakhs only) and the said 
amount could have been deposited with the Income Tax Department 
from out of the sale proceeds. It was on the basis of the aforesaid 
clarification furnished by the Liquidator that the Auction Purchaser 
had participated in the
auction process and once having succeeded 
in the bid, it was under an obligation to deposit the balance sale 
consideration within 90 days from the date of the auction. 
28.	 Questioning the stand taken by the respondents that Regulation 31A 
that requires constitution of a Stakeholders’ Consultation Committee 
by the Liquidator to advise on matters specified in the said Regulation, 
including sale of assets under Regulation 32, manner of sale, reserved 
price, amount of earnest money deposit, etc., was amended w.e.f. 
25th July, 2019 and the Explanation in Regulation 31A made the said 
Regulation prospective, learned senior counsel for the appellant 
argued that the Liquidator could not have had the foresight to know 
that such an Explanation would be appended to Regulation 31A 
much later, vide Notification dated 28th April, 2022. In other words, 
as the said Regulation stood in the year 2019, it was incumbent for 
the Liquidator to have constituted the Stakeholders’ Consultation 
Committee and the explanation now offered, is a sheer afterthought. 
29.	 Another argument advanced is that if it is assumed that the Auction 
Purchaser could take refuge of the order dated 23rd March, 2020
[2024] 8 S.C.R. 
1285
V.S. Palanivel v. P. Sriram, CS, Liquidator, Etc.
passed by this Court in the Suo Moto Writ Petition on account of 
the lockdown due to the Covid-19 pandemic read with Regulation 
47A of the IBBI Regulations, 2016, in the light of the order dated 
17th November, 2021 passed by the Adjudicating Authority, the last 
date for making the deposit by the Auction Purchaser could be 
extended upto 23rd July, 2020 and not beyond that.
30.	 Learned senior counsel concluded by vehemently contesting the 
submission made by the other side that the appellant’s conduct 
showed that he was obstructing the liquidation process. He sought to 
distinguish the judgment in Bombay Mercantile Corporative Bank 
Limited v. U.P. Gun House and Others43 cited by the other side on 
facts and submitted that vide order dated 5th December, 2023, that 
this Court had passed in the present Appeals, the Auction Purchaser 
was restrained from creating any third-party rights. It was argued 
that had the sale been cancelled under Rule 12, second proviso 
to Schedule I under Regulation 33 of the IBBI Regulations, 2016 
and the subject property put to auction once again, there was a 
strong possibility that the same would have fetched a much higher 
amount. But due to the casual manner in which the respondents have 
conducted themselves, the appellant and the shareholders have lost 
the valuable property and suffered a huge loss. Without prejudice to 
the submission made above, learned
counsel submitted that should 
the Court be inclined to accept the pleas taken by the respondents 
in opposition to the appeals, then it would only be fair to direct the 
Auction Purchaser to compensate the appellant for the loss of the 
value of the property which was assessed by the registered Valuers 
in the year 2019, at ₹48,00,00,000/- (Rupees Forty eight crores only). 
G.	
DISCUSSION AND ANALYSIS
31.	 This Court has given its thoughtful consideration to the arguments 
advanced by learned counsel for the parties, perused the records 
and the judgments cited on both sides. We shall now deal with the 
contentions raised by learned counsel for the appellant ad seriatim.
32.	 COVID-19 PANDEMIC AND ITS IMPACT ON LIMITATION
32.1	 The ball was set rolling on the Notice for sale of assets issued 
by the Liquidator for conducting the e-auction of the land 
43	
(2024) 3 SCC 517
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[2024] 8 S.C.R.
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and building owned by the Corporate Debtor that declared 
the reserve price of the subject property as ₹29,55,96,375/- 
(Rupees Twenty nine crore fifty five lakh ninety six thousand 
three hundred and seventy five only). The intending bidders 
were required to deposit 10 per cent of the reserve price as 
earnest money amount which came to ₹2,95,59,638/- (Rupees 
Two crore ninety five lakh fifty nine thousand six hundred and 
thirty eight only). Some of the relevant terms and conditions 
of the e-auction are extracted below: 
“1.	 E-Auction will be conducted on “AS IS WHERE 
IS”, “AS IS WHAT IS” and “WHATEVER THERE 
IS BASIS” through approved service provider M/S 
E-Procurement Technologies Limited (Auction 
Tiger). 
2.	
The intending bidders, prior to submitting their 
bid, should make their independent inquiries and 
inspect the property at their own expenses and 
satisfy themselves. ….
xxxx
8.	
The EMD of the Successful Bidder shall be 
retained towards part sale consideration and The 
EMD of unsuccessful bidders shall be refunded. 
The EMD shall not bear any interest. The 
Liquidator will issue a Letter of Intent (LOD) to the 
Succes Bidder and the Successful Bidder shall 
have to deposit the balance amount (Successful 
Bid Amount-Ex Amount) within 90 on issuance of 
the LOI by the Liquidator Provided that payments 
made after thirty days shall attract interest at the 
rate of 12%. Default in deposit of the balance
amount by the successful bidder within the time 
limit as mentioned in the LOI would entail forfeiture 
of the 10% of the amount deposited (EMD) by the 
Successful Bidder.
xxxxx
10.	 The Liquidator has the absolute right to accept 
or reject any or all offer(s) or adjourn/postpone/
[2024] 8 S.C.R. 
1287
V.S. Palanivel v. P. Sriram, CS, Liquidator, Etc.
cancel the e-Auction or withdraw any property or 
portion thereof from the auction proceeding at 
any stage without assigning any reason thereof.
xxxxx
12.	 The sale shall be subject to provisions of Insolvency 
and bankruptcy code 2016 and regulations made 
thereunder.
xxxxx”
32.2	 The e-auction of the subject property took place on 23rd 
December, 2019. Going by the Notice for sale issued by the 
Liquidator, the period of 90 days available to the Auction 
Purchaser to deposit the balance sale consideration, if reckoned 
from 24th December, 2019, the date when the Liquidator 
informed that it was the successful bidder, would have expired 
on 23rd March, 2020. However, the Letter of Intent44 issued 
by the Liquidator on 24th December, 2019, was received by 
the Auction Purchaser on 26th December, 2019. The period 
of 90 days reckoned from 26th December, 2019 would have 
expired on 25th March, 2020. Admittedly, the balance sale 
consideration was not paid by the Auction Purchaser within 
the aforesaid timeline. The said amount was deposited by the 
Auction Purchaser through RTGS only on 24th August, 2020. 
32.3	 For explaining the delay in depositing the balance sale 
consideration, the Auction Purchaser has sought to take shelter 
of the order dated 23rd March, 2020, passed by this Court in 
the Suo Moto Writ Petition wherein it was directed as under:
Order
“1. This Court has taken suo motu cognizance
of the 
situation arising out of the challenge faced by the 
country on account of Covm-19 virus and resultant 
difficulties that may be faced by litigants across the 
country in filing their petitions/applications/suits/
appeals/all other proceedings within the period 
of limitation prescribed under the general law of 
44	
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limitation or under special laws (both Central and/
or State). 
2. To obviate such difficulties and to ensure that 
lawyers/litigants do not have to come physically to 
file such proceedings in respective courts/tribunals 
d across the country including this Court, it is 
hereby ordered that a period of limitation in all such 
proceedings, irrespective of the limitation prescribed 
under the general law or special laws whether 
condonable or not shall stand extended w.e.f. 15-3-
2020 till further order(s) to be passed by this Court 
in present proceedings. 
3. We are exercising this power under Article 142 
read with Article 141 of the Constitution of India and 
declare that this order is a binding order within the 
meaning of Article 141 on all courts/tribunals and 
authorities. 
4. This order may be brought to the notice of all the 
High Courts for being communicated to all subordinate 
courts/tribunals within their respective jurisdiction….”
32.4	 For the sake of completion, we may note that the aforesaid 
Suo Moto Writ Petition was disposed of vide order dated 08th 
March, 2021. The operative para of the said order is extracted 
below:
“1. … We are of the opinion that the order dated  
23-3-2020 has served its purpose and in view of 
the changing scenario relating to the pandemic, the 
extension of limitation should come to an end.
2. We have considered the suggestions of the learned 
Attorney General for India
regarding the future 
course of action. We deem it appropriate to issue 
the following directions:
2.1. In computing the period of limitation for any suit, 
appeal, application or proceeding, the period from  
15-3-2020 till 14-3-2021 shall stand excluded. 
Consequently, the balance period of limitation
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V.S. Palanivel v. P. Sriram, CS, Liquidator, Etc.
remaining as on 15-3-2020, if any, shall become 
available with effect from 15-3-2021.
2.2. In cases where the limitation would have expired 
during the period between 15-3-2020 till 14-3-2021, 
notwithstanding the actual balance period of limitation 
remaining, all persons shall have a limitation period 
of 90 days from 15-3-2021. In the event the actual 
balance period of limitation remaining, with effect 
from 15-3-2021, is greater than 90 days, that longer 
period shall apply.
2.3. The period from 15-3-2020 till 14-3-2021 shall 
also stand excluded in computing the periods 
prescribed under Sections 23(4) and 29-A of the 
Arbitration and Conciliation Act, 1996, Section 12-A of 
the Commercial Courts Act, 2015 and provisos (b) and 
(c) of Section 138 of the Negotiable Instruments Act, 
1881 and any other laws, which prescribe period(s) 
of limitation for instituting proceedings, outer limits 
(within which the court or tribunal can condone delay) 
and termination of proceedings.
2.4. The Government of India shall amend the 
guidelines for containment zones, to state:
‘Regulated movement will be allowed for medical 
emergencies, provision of essential goods and 
services, and other necessary functions, such as, 
time-bound applications, including for legal purposes, 
and educational and job-related requirements.’
3. The suo motu writ petition is disposed of 
accordingly.”
32.5	 The Auction Purchaser
has also invoked Regulation 47A of 
the IBBI Regulations, 2016, that was inserted on 20th April, 
2020 and made effective from 17th April, 2020.45 Regulation 
47A provides for exclusion of the period of lockdown and 
reads as under:
45	
Vide Notification No. IBBI/2020- 21/GN/REG059 dated 20.04.2020
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“Exclusion of period of lockdown
47A. Subject to the provisions of the Code, the period 
of lockdown imposed by the Central Government in 
the wake of Covid-19 outbreak shall not be counted 
for the purposes of computation of the time-line for 
any task that could not be completed due to such 
lockdown, in relation to any liquidation process.”
32.6	 It is evident from a perusal of Regulation 47A, that the benefit 
of the said regulation was made available not only for initiation 
of any litigation, but also for computation of the timeline for 
completing any task in connection with a liquidation process 
that could not be completed on account of declaration of the 
lockdown. We are not inclined to accept the submission made 
on behalf of the appellant that the word ‘Litigants’ used in the 
order dated 23rd March, 2020 passed in the Suo Moto Writ 
Petition ought to be given a narrow interpretation so as to 
exclude a party like the Auction Purchaser herein as stricto 
sensu, it was not a litigant who was required to file any petition/
application/suit/appeal or other proceeding before any Court/
Tribunal/Authority within the period of limitation prescribed 
under a general law of limitation or under the special laws. 
It must be emphasised that a judgment can neither be read 
like a Statute nor can the expressions used in a judgment be 
assigned a narrow meaning or curtailed. In the larger contextual 
background of the
Covid-19 breakout, a liberal interpretation 
would have to be adopted and the Auction Purchaser would 
be entitled to the benefit of the order dated 23rd March, 2020 
read with Regulation 47A of the IBBI Regulations, 2016. The 
appellant cannot be heard to state that when the entire country 
was engulfed by the Covid-19 pandemic and a countrywide 
lockdown was imposed on 25th March, 2020 that was extended 
from time to time, the Auction Purchaser ought to have 
deposited the balance sale consideration within the stipulated 
90 days. In such a situation, a lenient view would have to be 
taken by the Court.
32.7	 The factual matrix of the case also needs to be kept in mind. 
The Covid-19 pandemic had broken out in the month of 
March, 2020. A curfew was clamped by the Central Government 
on 22nd March, 2020, restricting the movement of the public.
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V.S. Palanivel v. P. Sriram, CS, Liquidator, Etc.
The Adjudicating Authority had issued a notification that only 
urgent matters would be taken up between 16th March, 2020 
and 27th March, 2020. Before completion of the aforesaid 
period, the Central Government had declared a nationwide 
lockdown for 21 days till 14th April, 2020, which period was 
subsequently extended till 03rd May, 2020. In this backdrop, 
came the order of this Court on 23rd March, 2020 extending 
the period of limitation w.e.f. 15th March, 2020 till further orders, 
which order was extended from time to time. The Governing 
Board of the Insolvency and Bankruptcy Board of India also 
decided on 17th April, 2020 to amend the IBBI Regulations, 2016 
due to nationwide lockdown and incorporated Regulation 47A. 
32.8	 On 28th February, 2020, the Auction Purchaser approached 
the Liquidator for seeking extension of time to deposit the 
balance sale consideration. It was stated that the balance 
sale consideration would be paid on the date of registration of 
the subject property and a request was made not to levy any 
interest. On 02nd April, 2020, the Liquidator informed the Auction 
Purchaser that he was not empowered to relax the timelines 
for depositing the balance sale consideration and it ought to 
approach the Adjudicating Authority for appropriate relief. In 
view of the aforesaid response received from the Liquidator, the 
Auction Purchaser filed an application before the
Adjudicating 
Authority on 22nd April 2020,46 seeking extension of the time for 
making payment of the balance sale consideration on various 
grounds that included a plea that there was an income tax 
attachment order in respect of the subject property and the 
Covid-19 pandemic had caused a lot of disruption. It was this 
application that was allowed by the Adjudicating Authority vide 
order dated 05th May, 2020 granting the Auction Purchaser 
time to pay the balance sale consideration until the Central 
Government/State Government lifted the lockdown.
32.9	
In GPR Power Solutions (supra),a case cited by learned 
counsel for the Auction Purchaser, the appellant therein was 
a creditor of the Corporate Debtor who filed a belated claim 
under Regulation 7of the IBBI Regulations, 2016 which was 
rejected by the Resolution Professional on the ground of delay. 
46	
MA/335/2020 in MA/689/2019 in CP/1140/2018
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The said delay was neither condoned by the Adjudicating 
Authority nor by the Tribunal. Both the orders were overturned 
by this Court in the light of the orders passed in the Suo Moto 
Writ Petition. We decline to draw a distinction between the 
appellant in the captioned case and the Auction Purchaser 
herein on a plea that the Auction Purchaser was not required 
to file any petition/application/suit/appeal or other proceeding 
that was circumscribed by period of limitation. The spirit 
of the order passed in the Suo Moto Writ Petition was to 
overcome the challenges thrown by the lockdown clamped 
down on account of the Covid-19 pandemic. In our opinion, 
such an order would also extend to any action required to 
be taken in respect of a liquidation process, as contemplated 
in Regulation 47A of the IBBI Regulations, 2016. 
32.10	 The decision in Sagufa Ahmed (supra) relied on by learned 
counsel for the appellant to urge that the Auction Purchaser 
cannot claim the benefit of the order passed by this Court 
on 23rd March, 2020, is distinguishable on facts. In the said 
case, the statutory period of 45 days available to the appellant 
therein to prefer an appeal against an order passed by the 
Adjudicating Authority had expired on 02nd February, 2020 
and the additional period of 45 days that could have 
been condoned by the Tribunal by virtue of the proviso to 
Section 421(3) of the Companies Act, 2013 had expired on
18th March, 2020 whereas the appeal was actually preferred 
on 20th July, 2020. Noting that the lockdown was imposed 
on 24th March, 2020 and there was no impediment for the 
appellant in the aforesaid case to have filed the appeal before 
18th March, 2020, this Court had refused to permit the party 
to take refuge of the order dated 23rd March, 2020, passed 
in the Suo Moto Writ Petition and had opined that the said 
order was intended to benefit those who were vigilant about 
their rights. 
32.11	 The decision in Rajat Infrastructure Private Limited (supra) 
alluded to by learned senior counsel for the appellant is also 
based on its own peculiar facts where successive applications 
were moved by the applicant – Auction Purchaser therein for 
extension of time to pay the balance sale price of the subject 
property. Despite a long rope given by the Court by granting
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V.S. Palanivel v. P. Sriram, CS, Liquidator, Etc.
enlargement of time, the applicant kept on dragging its feet 
and committing defaults. In view of the aforesaid conduct, 
the Court referred to sub-rule (4) and (6) of Rule 9 of the 
Securitisation and Reconstruction of Financial Assets and 
Enforcement of Security Interest (Enforcement) Rules 200247 
that prescribes time of sale, issue of sale certificate and delivery 
of possession and observed that even if a liberal construction 
is given to the said sub–rules, in view of successive orders 
passed by the Court on applications moved by the applicant – 
Auction Purchasers, it was not permissible to extend the 
timeline under the substantive statutory provisions dealing 
with the subject. The facts of the present case being on a 
different footing, the appellant cannot take advantage of the 
aforesaid decision.
32.12	 In the present case, as noticed above, the period of 90 days 
for depositing the balance sale consideration had expired 
just after the crucial date, i.e., 23rd March, 2020. We do not 
find any merit in the submission made by the appellant that 
the Tribunal ought not to have accepted the view taken by 
the Adjudicating Authority that Covid-19 lockdown was a 
valid reason for extension of time to deposit the balance 
sale consideration.
33.	 ALLEGATIONS REGARDING UNDER-VALUATION OF THE 
SUBJECT PROPERTY
33.1	 The contention of the learned senior counsel for the 
appellant is that the
Liquidator ought not to have auctioned 
the subject property by fixing a reserve price below the 
valuation submitted by the Registered valuers. To consider 
the said submission, it is necessary to examine the scheme 
of the IBBI Regulation, 2016 that applies to the Corporate 
Insolvency Resolution Process. Chapter VI of the Regulations 
titled ‘Realisation of Assets’ includes a list of regulations 
relating to sale of assets (Regulation 32), sale of a Corporate 
debtor as a going concern (Regulation 32A), mode of sale 
(Regulation 33), preparation of an asset memorandum 
(Regulation 34), valuation of assets or businesses intended 
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to be sold (Regulation 35), preparation of the Asset Sale 
Report (Regulation 36), realization of security interest 
by secured creditor (Regulation 37), assignment of not 
readily realizable assets (Regulation 37A), distribution of 
unsold assets (Regulation 38), recovery of monies due 
(Regulation  39) and realization of uncalled capital/unpaid 
capital contribution (Regulation 40). It can be seen that all the 
aforesaid regulations that fall under Chapter VI, are primarily 
concerned with realization of assets and the Liquidator has 
been tasked with several duties related to the said realization. 
33.2	 Regulation 33 stipulates that a Liquidator shall ordinarily sell 
the assets of the Corporate Debtor through an auction in the 
manner specified in Schedule I. Regulation 35 permits the 
Liquidator to appoint two Registered valuers to determine 
the realizable value of the assets or businesses listed in 
Regulation 32. On the Registered Valuers conducting a 
physical verification of the assets of the Corporate Debtor and 
submitting the estimate of the realizable value of the asset/
business, the average of the two estimates received are to be 
taken as the value of the asset/business. It was in the light of 
the said Regulations that the Liquidator herein had engaged 
two Registered Valuers to give an estimate of the valuation 
of the subject property and the average of the two estimates 
was fixed by him at
₹39,41,28,500/- (Rupees Thirty nine crore 
forty one lakh twenty eight thousand five hundred only) for 
purposes of conducting the e-auction.
33.3	 The objection taken by the appellant to the Liquidator slashing 
the reserve price by 25 per cent and bringing it down to 
₹29,55,96,375/- (Rupees Twenty nine crore, fifty five lakhs 
ninety six thousand three hundred seventy five only), is 
answered in Rule 4A of Schedule I under Regulation 33 of 
the IBBI Regulations, 2016, that states as follows:
“(4A) Where an auction fails at the reserve price, 
the liquidator may reduce the reserve price by up 
to twenty- five percent of such value to conduct 
subsequent auction.”
32.4	 Admittedly, in the first round of the Notice for sale through 
e-auction published by the Liquidator on 25th November, 2019,
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V.S. Palanivel v. P. Sriram, CS, Liquidator, Etc.
he did not receive any bid. As a result, the Liquidator reduced 
the reserve price of the subject property by 25 per cent to 
conduct a second auction on 23rd December, 2019 wherein the 
Auction Purchaser was declared as the successful bidder. In 
our view, the Liquidator cannot be faulted for having exercised 
the discretion vested in him under Rule 4A of Schedule I when 
the auction scheduled earlier, did not bear any positive result. 
In fact, Rule 4B empowers the Liquidator to reduce the reserve 
price fixed under Rule 4A for subsequent auctions with a rider 
that the price shall not be reduced to more than 10 per cent at 
a time. The said eventuality did not arise in the present case 
since the Auction Purchaser was declared as the successful 
bidder in the second round of auction. 
32.5	 If the appellant was so confident that the subject property 
would have fetched a much higher price, nothing precluded 
him from identifying a bidder who was willing to offer a 
better price. In fact, such a suggestion was made by the 
Liquidator in his reply dated 15th November, 2019 to the 
objection taken by the appellant to the estimated value of 
the subject property in his letter dated 8th November, 2019. 
The Liquidator had stated that “If you are confident enough 
that the property may fetch for more than Rs. 100.00 Crores 
you are at liberty to bring the proposed buyers and ask them 
to participate in the
bidding process.” Again, the Liquidator 
wrote a letter dated 27th November, 2019 to the appellant 
suggesting that ask eligible parties willing to offer a better 
price to participate in the auction process. The appellant did 
not follow up after that.
32.6	 Therefore, the appellant cannot be permitted to argue that 
since the tax value of the subject property was estimated by the 
Registered Valuers at above ₹48 crores, the Liquidator ought 
not to have fixed the reserve price at ₹39,41,28,500/- (Rupees 
Thirty nine crore forty one lakh twenty eight thousand five 
hundred only) for the simple reason that though the reports of 
the Registered Valuers mentioned the tax value of the subject 
property at a little above ₹48 crores, but the liquidation value 
in both the reports was much lower and the Liquidator arrived 
at the average of the two estimated liquidation values to fix 
the reserve price of the subject property.
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34.	 NON-CONSTITUTION OF A STAKEHOLDERS CONSULTATION 
COMMITTEE AND ITS EFFECT
34.1	 It has been argued that the Liquidator has violated Regulation 
31A of the IBBI Regulations, 2016 that requires him to constitute 
a Stakeholders’ Consultation Committee. For purposes of 
ready-reference, Regulation 31A is reproduced below:
“31A. Stakeholders’ consultation committee.
(1) The liquidator shall constitute a consultation 
committee within sixty days from the liquidation 
commencement date, based on the list of stakeholders 
prepared under regulation 31, to advise him on 
matters relating to- 
(a) appointment of professionals and their remuneration 
under regulation 7; 
(b) sale under regulation 32, including manner of 
sale, pre-bid qualifications, reserve price, amount 
of earnest money deposit, and marketing strategy: 
Provided that the decision(s) taken by the liquidator 
prior to the constitution of consultation committee 
shall be placed before the consultation committee 
for information in its first meeting.
xxxxx
(5) Subject to the provisions of the Code and these 
regulations, representatives in the consultation 
committee shall have access to all relevant records 
and information as may be required to provide advice 
to the liquidator under sub-regulation (1).
xxxxx
(8) The liquidator shall place the recommendation of 
committee of creditors made under subregulation (1) 
of regulation 39C of the Insolvency and
Bankruptcy 
Board of India (Insolvency Resolution Process for 
Corporate Persons) Regulations, 2016, before the 
consultation committee for its information.
(9) The consultation committee shall advise the 
liquidator, by a vote of not less than sixty-six percent
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V.S. Palanivel v. P. Sriram, CS, Liquidator, Etc.
of the representatives of the consultation committee, 
present and voting. 
(10) The advice of the consultation committee shall 
not be binding on the liquidator: Provided that where 
the liquidator takes a decision different from the advice 
given by the consultation committee, he shall record 
the reasons for the same in writing.
34.2	 Regulation 31A that was inserted on the amendment of the 
IBBI Regulations, 2016 by virtue of the Notification48 dated 25th 
July, 2019, requires a Liquidator to constitute a Stakeholders’ 
Consultation Committee within a period of sixty days from 
the date of commencement of the liquidation process. 
The Stakeholders’ Consultation Committee is to be drawn 
from the list of stakeholders on a category-wise basis, as 
prescribed under Regulation 31. The purpose of constituting 
a Stakeholders’ Consultation Committee is to advice the 
Liquidator on matters relating to appointment of professionals 
and their renumeration as also in relation to sale of assets 
under Regulation 32. However, it was observed by this 
Court in R.K. Industries (Unit-II) LLP v. H.R. Commercials 
Private Limited and Others,49 that the advice offered by the 
Stakeholders’ Consultation Committee is not binding on the 
Liquidator. The safeguard provided in the Regulation is that if 
the Liquidator arrives at a decision which is at variance with 
the advice given by the Stakeholders’ Consultation
Committee, 
he must record in writing reasons for doing so and mention 
it in the next progress report. We may usefully extract the 
following para of the captioned case: 
“55. On a conjoint reading of the aforesaid provisions 
of IBC and the Liquidation Regulations, it is evident 
that the liquidator is authorised to sell the immovable 
and movable property of the corporate debtor in 
liquidation through a public auction or a private 
contract, either collectively, or in a piecemeal manner. 
The underlying object of the statute is to protect 
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[2022] 12 SCR 667 : (2024) 4 SCC 166
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and preserve the assets of the corporate debtor 
in liquidation and proceed to sell them at the best 
possible price. Towards this object, the provisions 
of IBC have empowered the liquidator to go in for a 
public auction or a private contract as a mode of sale. 
Besides reporting the progress made, the liquidator 
can also apply to the adjudicating authority (NCLT) 
for appropriate orders and directions considered 
necessary for liquidation of the corporate debtor. The 
liquidator is permitted to consult the stakeholders 
who are entitled to distribution of the sale proceeds. 
However, the proviso to Section 35(2) IBC makes 
it clear that the opinion of the stakeholders would 
not be binding on the liquidator. Regulation 8 of the 
Liquidation Regulations refers to the consultative 
process with the stakeholders, as specified in 
Section 35(2) IBC and states that they shall extend 
all necessary assistance and cooperation to the 
liquidator for completing the liquidation process. 
Regulation 31-A has introduced a stakeholders’ 
Consultation Committee that may advise the liquidator 
regarding sale of the assets of the corporate debtor 
and must be furnished all relevant information to 
provide such advice. Though the advice offered is 
not binding on the liquidator, he must give reason in 
writing for acting against such advice.”
34.3	 By virtue of the Notification dated 28th April, 2022, an Explanation 
was appended at the
foot of Regulation 31A which clarifies that 
the requirement of constituting a Stakeholders’ Consultation 
Committee shall apply only to those liquidation processes that 
were to commence on/after the date of commencement of the 
IBBI Regulation, 2016. In the present case, the liquidation 
process in respect of the company had commenced on 
17th July, 2019 and therefore, the submission made by the 
appellant that the Liquidator has breached Regulation 31A of 
the IBBI Regulations, 2016 by not constituting a Stakeholders’ 
Consultation Committee, is devoid of merits. Even otherwise, 
the appellant cannot have a grouse on this count because 
the record reveals that the Liquidator had sent a reply on 15th
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V.S. Palanivel v. P. Sriram, CS, Liquidator, Etc.
November, 2019 to a written objection taken by the appellant 
on the Valuation reports submitted by the Registered Valuers 
on 08th November, 2019, wherein, it was stated that neither he 
nor the other ex-Directors of the company had responded to 
the Liquidator’s suggestion for calling a meeting of the CoC. 
Despite this, neither the appellant nor the other ex-Directors of 
the company took any step to depute a person from amongst 
them to be a part of the Stakeholders’ Consultation Committee. 
In view of the aforesaid facts, the objection taken by the 
appellant that the Liquidator has breached Regulation 31A, 
does not hold any water. Nor is the Court inclined to examine 
the submission made at the instance of the appellant that in 
the absence of any explanation appended to Regulation 31A 
as it stood before 25th July, 2019, it was incumbent for the 
Liquidator to have constituted a Stakeholders’ Consultation 
Committee in view of his own conduct noticed above. Further, 
such an objection was taken for the first time at the stage 
the appellant filed a recall application before Adjudicating 
Authority on 25th September, 2020 by which time the entire 
sale transaction was over.
35.	 ALLEGATION OF VIOLTION OF REGULATION 33 OF THE IBBI 
REGULATIONS, 2016 AND ITS EFFECT 
35.1	 The appellant has raised serious objections regarding 
violation of Regulation 33 of the IBBI Regulation, 2016 by the
Liquidator. Regulation 33 that deals with the mode of sale of 
assets has already been extracted above. Schedule I under 
Regulation 33 lays down the manner in which the assets of the 
Corporate Debtor are to be sold by the Liquidator. Schedule I is 
sub-divided into two segments, the first part deals with sale 
of an asset through auction and the manner in which such a 
sale shall be conducted by the Liquidator and the second part 
deals with private sales. The relevant clauses of Schedule I 
for purposes of the present discussion are as follows:
“SCHEDULE I
MODE OF SALE
(Under Regulation 33 of the Insolvency and 
Bankruptcy Board of India (Liquidation Process) 
Regulations, 2016)
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1.	
AUCTION
(1) Where an asset is to be sold through auction, 
a liquidator shall do so the in the manner specified 
herein.
xxxxx
(3) The liquidator shall prepare terms and conditions 
of sale, including reserve price, earnest money deposit 
as well as pre-bid qualifications, if any.
xxxxx
(6) The liquidator shall provide all assistance 
necessary for the conduct of due diligence by 
interested buyers.
xxxxx 
(12) On the close of the auction, the highest 
bidder shall be invited to provide balance sale 
consideration within ninety days of the date of 
such demand: 
Provided that payments made after thirty days 
shall attract interest at the rate of 12%.
Provided further that the sale shall be cancelled 
if the payment is not received within ninety days. 
(13) On payment of the full amount, the sale shall 
stand completed, the liquidator shall execute 
certificate of sale or sale deed to transfer such 
assets and the assets shall be delivered to him 
in the manner specified in the terms of sale.
(emphasis added)
35.2	 Originally, Rule 12 read as follows :
“(12) On the close of the auction, the highest bidder 
shall be invited to provide balance sale consideration 
within fifteen days of the date when he is invited to 
provide the balance sale consideration. On payment 
of the full amount, the sale shall stand completed, 
the liquidator shall execute certificate of sale or sale
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V.S. Palanivel v. P. Sriram, CS, Liquidator, Etc.
deed to transfer such assets and the assets shall 
be delivered to him in the manner specified in the 
terms of sale.”
Vide notification dated 25th July, 2019,50 two Rules were carved 
out from Rule 12, i.e., Rule 12 and Rule 13 that have been 
extracted above.
35.3	 It is the submission of learned senior counsel for the appellant 
that Rule 12, Schedule I as above, is mandatory and non-
adherence to the timelines set down in the said rule would result 
in cancellation of the sale. It has been argued that the period 
of 90 days available to the Auction Purchaser to provide the 
balance sale consideration had expired on 25th March, 2020. 
The first proviso to Rule 12 stipulates that if the payment is 
made after 30 days, then the successful bidder would have to 
pay interest on the amount payable at the rate of 12 per cent. 
The second proviso to Rule 12 stipulates the outer limit for 
payment and states that if the payment is not received within 
90 days, then the sale shall stand cancelled. 
35.4	 To test the argument advanced by learned counsel for the 
appellant that the word used in Rule 12 of Schedule I is “shall” 
and not “may” and therefore, the prescriptions laid down in 
Rule 12 ought to be treated as mandatory and not directory in 
character, we may usefully refer to the observations made in 
Sharif-ud-din (supra) where a distinction was drawn between 
a mandatory rule and a directory rule in
the following words:
“9. The difference between a mandatory rule and 
a directory rule is that while the former must 
be strictly observed, in the case of the latter 
substantial compliance may be sufficient to 
achieve the object regarding which the rule is 
enacted. Certain broad propositions which can be 
deduced from several decisions of courts regarding 
the rules of construction that should be followed in 
determining whether a provision of law is directory 
or mandatory may be summarised thus: The fact 
that the statute uses the word “shall” while 
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laying down a duty is not conclusive on the 
question whether it is a mandatory or directory 
provision. In order to find out the true character 
of the legislation, the court has to ascertain the 
object which the provision of law in question 
has to subserve and its design and the context 
in which it is enacted. If the object of a law is to 
be defeated by non-compliance with it, it has to be 
regarded as mandatory. But when a provision of 
law relates to the performance of any public duty 
and the invalidation of any act done in disregard of 
that provision causes serious prejudice to those for 
whose benefit it is enacted and at the same time who 
have no control over the performance of the duty, 
such provision should be treated as a directory one. 
Where, however, a provision of law prescribes that a 
certain act has to be done in a particular manner by 
a person in order to acquire a right and it is coupled 
with another provision which confers an immunity on 
another when such act is not done in that manner, 
the former has to be regarded as a mandatory 
one. A procedural rule ordinarily should not be 
construed as mandatory if the defect in the act 
done in pursuance of it can be cured by permitting 
appropriate rectification to be carried out at a 
subsequent stage unless by according such 
permission to rectify the error later on, another 
rule would be contravened. Whenever a statute 
prescribes that a
particular act is to be done in a 
particular manner and also lays down that failure 
to comply with the said requirement leads to a 
specific consequence, it would be difficult to 
hold that the requirement is not mandatory and 
the specified consequence should not follow.”
(emphasis added)
35.5	 This Court was called upon to interpret the expression “may” 
used in Section 7(5)(a) of the IBC vis-a-via the expression 
“shall” deployed in Section 9(5)(a), in Vidarbha Industries 
Power Limited (supra), and it was held thus:
[2024] 8 S.C.R. 
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V.S. Palanivel v. P. Sriram, CS, Liquidator, Etc.
“63. The meaning and intention of Section 7(5)(a) 
IBC is to be ascertained from the phraseology of 
the provision in the context of the nature and design 
of the IBC. This Court would have to consider the 
effect of the provision being construed as directory 
or discretionary.
64. Ordinarily the word “may” is directory. The 
expression “may admit” confers discretion to 
admit. In contrast, the use of the word “shall” 
postulates a mandatory requirement. The use 
of the word “shall” raises a presumption that 
a provision is imperative. However, it is well 
settled that the prima facie presumption about 
the provision being imperative may be rebutted 
by other considerations such as the scope of the 
enactment and the consequences flowing from 
the construction.
65. It is well settled that the first and foremost 
principle of interpretation of a statute is the rule of 
literal interpretation, as held by this Court in Lalita 
Kumari v. State of U.P. [(2014) 2 SCC 1, para 14 : 
(2014) 1 SCC (Cri) 524] If Section 7(5)(a) IBC is 
construed literally the provision must be held to confer 
a discretion on the adjudicating authority (NCLT).
xxxx
74. Sub-section (5) of Section 9 IBC provides that 
the adjudicating authority (NCLT) shall, within 14 
days of the receipt of an application of an operational 
creditor under sub-section (2) of Section 9, admit 
the application and communicate the decision to 
the
operational creditor and the corporate debtor, 
provided, the conditions stipulated in clauses (a) to (e) 
of Section 9(5)(i) IBC are satisfied. The adjudicating 
authority (NCLT) must reject the application of the 
operational creditor in the circumstances specified in 
clauses (a) to (e) of Section 9(5)(ii) IBC.
75. Significantly, the legislature has in its wisdom 
used the word “may” in Section 7(5)(a) IBC in
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respect of an application for CIRP initiated by a 
financial creditor against a corporate debtor but 
has used the expression “shall” in the otherwise 
almost identical provision of Section 9(5) IBC 
relating to the initiation of CIRP by an operational 
creditor.
76. The fact that the legislature used “may” in 
Section 7(5)(a) IBC but a different word, that is, 
“shall” in the otherwise almost identical provision 
of Section 9(5)(a) shows that “may” and “shall” 
in the two provisions are intended to convey a 
different meaning. It is apparent that the legislature 
intended Section 9(5)(a) IBC to be mandatory 
and Section 7(5)(a) IBC to be discretionary. An 
application of an operational creditor for initiation of 
CIRP under Section 9(2) IBC is mandatorily required 
to be admitted if the application is complete in all 
respects and in compliance of the requisites of the 
IBC and the rules and regulations thereunder, there is 
no payment of the unpaid operational debt, if notices 
for payment or the invoice have been delivered to 
the corporate debtor by the operational creditor 
and no notice of dispute has been received by the 
operational creditor. The IBC does not countenance 
dishonesty or deliberate failure to repay the dues of 
an operational creditor.”
(emphasis added)
35.6	 In C.N. Paramasivan (supra), one of the questions that fell 
for consideration before this court was whether the phrase 
“as far as possible”
used in Recovery of Debts due to Banks 
and Financial Institutions Act, 199351 that contemplates certain 
provisions of the Income Tax Act to apply with the modification 
to the amount due under the Debt Recovery Act instead of the 
Income Tax Act, referring the Rule 57 of the Income Tax Rules 
which mandates deposit of 25 per cent of the purchase amount 
of an immovable property by a purchaser and contemplates 
51	
In short Debt Recovery Act, 1993
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V.S. Palanivel v. P. Sriram, CS, Liquidator, Etc.
the consequence of resale in such a default of deposit, this 
Court held thus:
“27. There is nothing in the provisions of Section 29 
of the RDDB Act or the scheme of the Rules under 
the Income Tax Act to suggest that a discretion 
wider than what is explained above was meant to be 
conferred upon the Recovery Officer under Section 
29 of the RDDB Act or Rule 57 of the Income Tax 
Rules which reads as under:
“57.Deposit by purchaser and resale in 
default.—(1) On every sale of immovable 
property, the person declared to be the purchaser 
shall pay, immediately after such declaration, a 
deposit of twenty-five per cent on the amount of 
his purchase money, to the officer conducting 
the sale; and, in default of such deposit, the 
property shall forthwith be resold.
(2) The full amount of purchase money payable 
shall be paid by the purchaser to the Tax 
Recovery Officer on or before the fifteenth day 
from the date of the sale of the property.”
It is clear from a plain reading of the above 
that the provision is mandatory in character. 
The use of the word “shall” is both textually 
and contextually indicative of the making of 
the deposit of the amount being a mandatory 
requirement.
28. The provisions of Rules 57 and 58 of the Income 
Tax Rules have their equivalent in Order 21 Rules 84, 
85 and 86 CPC which are pari materia in language, 
sweep and effect and have been held to be mandatory 
by this
Court in Manilal Mohanlal Shah v. Sardar 
Sayed Ahmed Sayed Mahmad [AIR 1954 SC 349] in 
the following words: (AIR pp. 351-52, paras 8-9 & 11)
“8. The provision regarding the deposit of 25 per 
cent by the purchaser other than the decree-
holder is mandatory as the language of the
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rule suggests. The full amount of the purchase 
money must be paid within fifteen days from the 
date of the sale but the decree-holder is entitled 
to the advantage of a set-off. The provision for 
payment is, however, mandatory … (Rule 85). 
If the payment is not made within the period 
of fifteen days, the court has the discretion 
to forfeit the deposit, and there the discretion 
ends but the obligation of the court to resell the 
property is imperative. A further consequence 
of non-payment is that the defaulting purchaser 
forfeits all claim to the property … (Rule 86).
9. … These provisions leave no doubt that 
unless the deposit and the payment are made 
as required by the mandatory provisions of 
the Rules, there is no sale in the eye of the 
law in favour of the defaulting purchaser and 
no right to own and possess the property 
accrues to him.
***
11. Having examined the language of the 
relevant Rules and the judicial decisions 
bearing upon the subject we are of the 
opinion that the provisions of the Rules 
requiring the deposit of 25% of the purchase 
money immediately on the person being 
declared as a purchaser and the payment 
of the balance within 15 days of the sale are 
mandatory and upon non-compliance with 
these provisions there is no sale at all. The 
Rules do not contemplate that there can be any 
sale in favour of a purchaser without depositing 
25% of the purchase money in the first instance 
and
the balance within 15 days. When there is 
no sale within the contemplation of these Rules, 
there can be no question of material irregularity 
in the conduct of the sale. Non-payment of the 
price on the part of the defaulting purchaser 
renders the sale proceedings as a complete
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V.S. Palanivel v. P. Sriram, CS, Liquidator, Etc.
nullity. The very fact that the court is bound 
to resell the property in the event of a default 
shows that the previous proceedings for sale are 
completely wiped out as if they do not exist in 
the eye of the law. We hold, therefore, that in the 
circumstances of the present case there was no 
sale and the purchasers acquired no rights at all.”
29. Relying on Manilal Mohanlal case [AIR 1954 SC 
349] Rules 84, 85 and 86 of Order 21 were also held 
to be mandatory in Sardara Singh v. Sardara Singh 
[(1990) 4 SCC 90]. Similarly in Balram v. Ilam Singh  
[(1996) 5 SCC 705] this Court reiterated the legal 
position in the following words: (SCC p. 711, para 7)
“7. … it was clearly held [in Manilal Mohanlal 
[AIR 1954 SC 349] ] that Rule 85 being 
mandatory, its non-compliance renders the 
sale proceedings a complete nullity requiring 
the executing court to proceed under Rule 
86 and property has to be resold unless the 
judgment-debtor satisfies the decree by making 
the payment before the resale. The argument 
that the executing court has inherent power to 
extend time on the ground of its own mistake 
was also expressly rejected.”
30. We may also refer to the decisions of this Court 
in Rao Mahmood Ahmad Khan v. Ranbir Singh  
[1995 Supp (4) SCC 275], Gangabai Gopaldas 
Mohata v. Fulchand [(1997) 10 SCC 387], Himadri 
Coke & Petro Ltd. v. Soneko Developers (P) 
Ltd. [(2005) 12 SCC 364] and Shilpa Shares
and 
Securities v. National Coop. Bank Ltd. [(2007) 12 
SCC 165], wherein the same position has been taken.
31. In the light of the above we see no reason to 
hold that Rules 57 and 58 of the Income Tax Rules 
are anything but mandatory in nature, so that a 
breach of the requirements under those Rules will 
render the auction non est in the eye of the law.”
(emphasis added)
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35.7	 In State of Bihar v. Bihar Rajya Bhumi Vikas Bank Samiti,52 
referring to Section 34(5) of the Arbitration and Conciliation 
Act, 1996, this Court has held that the absence of any 
consequences for infraction of a procedural provision implies 
that such a provision ought to be interpreted to be directory 
and not mandatory. Following are the observations made in 
the captioned decision :
“19. It will thus be seen that Section 34(5) does 
not deal with the power of the Court to condone 
the non-compliance thereof. It is imperative to note 
that the provision is procedural, the object behind 
which is to dispose of applications under Section 
34 expeditiously. One must remember the wise 
observation contained in Kailash [Kailash v. Nanhku, 
(2005) 4 SCC 480], where the object of such a 
provision is only to expedite the hearing and not 
to scuttle the same. All rules of procedure are the 
handmaids of justice and if, in advancing the cause 
of justice, it is made clear that such provision should 
be construed as directory, then so be it.
xxxx
21. Section 80, though a procedural provision, has 
been held to be mandatory as it is conceived in 
public interest, the public purpose underlying it 
being the advancement of justice by giving the 
Government the opportunity to scrutinise and take 
immediate action to settle a just claim without 
driving the person who has issued a notice 
having to institute a suit involving
considerable 
expenditure and delay. This is to be contrasted 
with Section 34(5), also a procedural provision, 
the infraction of which leads to no consequence. 
To construe such a provision as being mandatory 
would defeat the advancement of justice as it 
would provide the consequence of dismissing 
an application filed without adhering to the 
52	
[2018] 7 SCR 1147 : (2018) 9 SCC 472
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V.S. Palanivel v. P. Sriram, CS, Liquidator, Etc.
requirements of Section 34(5), thereby scuttling 
the process of justice by burying the element of 
fairness.”
(emphasis added)
35.8	 It can be discerned from the aforesaid discussion that when 
the law prescribes that a certain act has to be done in a 
particular manner for a party to acquire a right, then it ought 
to be treated as mandatory in character more so, when the 
Statute prescribes a consequence for failure to comply with 
the requirements laid down. 
35.9	 The words “may” and “shall” used in different provisions of 
Schedule I of the IBBI Regulations, 2016 go to show that the 
legislature intended to ascribe different meanings to the said 
words depending on the steps required to be taken by the 
Liquidator for the sale of the assets of a Corporate Debtor. A 
perusal of the Rules under Schedule I demonstrate that a play 
in the joints has been given to the Liquidator only in particular 
circumstances relating to the sale of an asset through auction. 
Wherever the underlying intention is to maximize realization 
from the sale of assets, discretion has been vested in the 
Liquidator to sell the asset through auction in the best interest 
of the creditors, but not otherwise. For the rest of the steps 
towards sale of an asset, the mandate of the Statute is in 
the affirmative. In other words, a particular step if prescribed, 
is necessarily required to be taken by the Liquidator in the 
manner
prescribed in the Rules under Schedule I. He is not 
left with any discretion to condone the delay. 
35.10	 When broken down, Rule 12 states that (a) the highest bidder 
in an auction shall be called upon to provide the balance 
sale consideration within 90 days from the date of such a 
demand; (b) any payments made after 30 days from such a 
demand shall attract interest at the rate of 12 per cent; (c) 
if the payment is not received within the period of 90 days, 
the sale shall be cancelled. The word ‘shall’ has been used 
thrice in Rule 12. Coming next to Rule 13, the same states 
that (a) the sale shall stand completed on the payment of the 
full amount; (b) the Liquidator shall execute a sale certificate/
sale deed to transfer such an asset(s); (c) the asset(s) shall 
be delivered in the manner prescribed in terms of the sale.
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The word “shall” has again been used thrice in Rule 13. It is 
noticed that except for Rules 4A, 4B, 8 and Rule 11A where 
the word “may” has been used and it vests a discretion in 
the Liquidator to reduce the reserve price more than once 
and conduct multiple rounds of auctions with the purpose 
of maximizing realization from the sale of assets in the best 
interest of the creditors, in the remaining Rules, the word 
“shall” features prominently and without an exception. But 
that is not to say that wherever the word “shall” has been 
used in the Rules under Schedule I, it attains a mandatory 
nature. The Rule could still be construed as purely procedural 
if its infraction does not entail any serious or prejudicial 
consequence. Much will depend on the connotation and the 
textual context of the Rule.
35.11	 In view of the analysis undertaken above, Rule 12 would have 
to be treated as mandatory in character for the reason that 
it contemplates a consequence in the event of non-payment 
of the balance sale consideration by the highest bidder within 
the stipulated timeline of 90 days, which is cancellation of the 
sale by the Liquidator. To that extent, there is substance in 
the submission made on behalf of the appellant that since the 
second proviso under Rule 12 contemplates a consequence 
of cancellation of the auction on non-payment of the balance 
sale consideration within 90 days, the Liquidator was not
empowered to extend the timeline.
35.12	 Reliance placed by learned counsel for the Liquidator on the 
decision in Pioneer Urban Land and Infrastructure Limited 
and Another v. Union of India and Others53 to contend 
that the timeline prescribed under Schedule 1 of the IBBI 
Regulations 2016 are directory and not mandatory in character, 
is misplaced. The said decision holds that timelines available 
to operational creditors under the IBC are directory and not 
mandatory because no consequence is provided if the period 
is not extended or after the extension expires and it is in this 
context that the following observations have been made:
“58. This Court, while dealing with timelines provided 
qua operational creditors, in Surendra Trading Co. 
53	
[2019] 10 SCR 381 : (2019) 8 SCC 416
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V.S. Palanivel v. P. Sriram, CS, Liquidator, Etc.
[Surendra Trading Co. v. Juggilal Kamlapat Jute 
Mills Co. Ltd., (2017) 16 SCC 143 : (2018) 2 SCC 
(Civ) 730], held that the timelines contained in the 
provisos to Sections 7(5), 9(5) and 10(4) of the Code 
are all directory and not mandatory. This is for the 
obvious reason that no consequence is provided if 
the periods so mentioned are exceeded. Though this 
decision is not in the context of the 14-day period 
provided by Section 7(4), we are of the view that this 
judgment would apply squarely on all fours so that the 
period of 14 days given to NCLT for decision under 
Section 7(4) would be directory. We are conscious of 
the fact that under Section 64(1) of the Code, NCLT 
President or the Chairperson of Nclat may, after taking 
into account reasons by NCLT or Nclat for exceeding 
the period mentioned by statute, extend the period 
of 14 days by a period not exceeding 10 days. We 
may note that even this provision is directory, in that 
no consequence is provided either if the period is not 
extended, or after the extension expires. This is also 
for the good reason that an act of the court cannot 
harm the litigant before it. Unfortunately, both NCLT 
and Nclat do not have sufficient members to deal with 
the flood of applications and appeals that is before 
them. The time taken in the queue by applicants who 
knock at their doors cannot, for no fault of theirs, be 
put against them.”
35.13	 Nor
can the decisions of the Tribunal in Standard Surfa 
Chem India Private Limited (supra) and Prakash Chandra 
Kapoor (supra) referred to by learned senior counsel for the 
Liquidator, be read in favour of the respondents. A sweeping 
observation that all the timelines prescribed in Regulation 47 
are directory, is impermissible. The consequences of non-
compliance of the specific rule would have to be individually 
examined to decide as to whether the said rule has a directory 
flavour or is mandatory in character.
35.14	 In the present case, records reveal that when the Auction 
Purchaser had approached the Liquidator seeking extension 
of time to deposit the balance sale consideration. The 
Liquidator had rightly expressed his inability to do so and
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indicated that such a power vests only in the Adjudicating 
Authority. On receiving the aforesaid response, the Auction 
Purchaser did take steps to move the Adjudicating Authority 
for seeking extension of time for making the payments. It is 
a matter of record that the said application was allowed by 
the Adjudicating Authority on 5th May, 2020 and time was 
granted to the Auction Purchaser to pay the balance sale 
consideration on the Central Government/State Government 
lifting the lockdown. The aforesaid order dated 5th May, 2020, 
was passed by the Adjudicating Authority in exercise of its 
inherent powers under Rule 11 of the NCLT Rules, 2016 
which states as follows : 
“Rule 11 of NCLT Rules, 2016
Inherent Powers - Nothing in these rules shall be 
deemed to limit or otherwise affect the inherent 
powers of the Tribunal to make such orders as may 
be necessary for meeting the ends of justice or to 
prevent abuse of the process of the Tribunal.”
35.15	 The aforesaid Rule is not to be read in isolation but in 
conjunction with Section 35 of the IBC that deals with the 
powers and duties of the Liquidator and states that the 
Liquidator shall have the powers and duties specified in 
clauses (a) to (o) of sub-section 1 including the power to sell 
an immovable/movable property of the Corporate Debtor in 
liquation by public auction/private sale as per clause (f), subject 
to the directions of the NCLT. Pertinently, it
has been observed 
in Arun Kumar Jagatramka v. Jindal Steel and Power 
Limited 54 that “the Liquidator exercises several functions 
which are quasi-judicial in nature and character. Section 
35(1) itself enunciated that the powers and duties which are 
entrusted to the Liquidator are “subject to the directions of 
the Adjudicating Authority”. The Liquidator, in other words, 
exercises functions which have been made amenable to the 
jurisdiction of NCLT, acting as the Adjudicating Authority…..”. 
35.16	 In the facts of the present case, the Adjudicating Authority 
exercised statutory powers under Section 35 of the IBC read 
54	
[2021] 3 SCR 114 : (2021) 7 SCC 474 (Refer Para 81)
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V.S. Palanivel v. P. Sriram, CS, Liquidator, Etc.
with its inherent powers under Rule 11 of the NCLT Rules, 
2016 for extending the time to deposit the balance sale 
consideration on sufficient cause being shown, i.e., in view 
of the countrywide lockdown due to the Covid-19 pandemic. 
This latitude that was given in the aforesaid extraordinary 
circumstances to meet the ends of justice, cannot be faulted.
36.	 IMPACT OF THE ATTACHMENT ORDER BY THE INCOME TAX 
AUTHORITIES ON THE SALE OF THE AUCTIONED PROPERTY 
36.1	 All things even, having held that there was sufficient reason 
to grant extension of time to the Auction Purchaser to deposit 
the balance sale consideration in terms of orders passed 
by this Court in the Suo Moto Writ Petition read with the 
provisions of Regulation 47A of the IBBI Regulations, 2016, 
and having regard to the view expressed above that the 
Adjudicating Authority was empowered in law to extend the 
time on sufficient cause being shown, the matter ought to 
have rested there. But there is something more to be said in 
this case that revolves around the arguments advanced by 
learned counsel for the appellant regarding the import of the 
order of attachment issued by the Income Tax Authorities in 
respect of the auctioned property and its effect. 
36.2	 It has been strenuously argued by learned senior counsel for 
the appellant that the attachment order could not be used as 
an excuse by the Auction Purchaser for belatedly
depositing 
the balance sale consideration. The terms and conditions of 
the Notice of Sale as extracted in this judgement go to show 
that the Liquidator had declared that e-auction of the subject 
property was being conducted on an “AS IS WHERE IS”, “AS 
IS WHAT IS” and “WHATEVER THERE IS” basis. It was further 
clarified that the intending bidders must undertake their own 
independent inquiries, inspect the subject property and satisfy 
themselves before submitting their bids.
36.3	 The fact that the Auction Purchaser was aware of the income 
tax attachment order in respect of the subject property is 
borne out from the correspondence exchanged by it with the 
Liquidator, that forms a part of the records. On certain queries 
being raised by the Auction Purchaser, the Liquidator had 
replied, vide letter dated 9th December, 2019 and stated that :
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“if the property is sold under IBC, income tax will 
not have any priority claim and the property can be 
registered with NCLT order, apart from this the Income 
tax dues are very less hence it can also be paid out 
of the proceeds and no objection can be taken.” 
In a subsequent letter dated 17th December, 2019 
addressed by the Auction Purchaser to the Liquidator, 
which was well before the date the auction was scheduled, 
among other issues raised, one of the requests made to the 
Liquidator was to ensure that the income tax attachment/
prohibitory order on the subject property is lifted by the 
Income Tax Department. In his reply dated 19th December, 
2019 to the aforesaid letter, the Liquidator had informed 
the Auction Purchaser that:
“3. As regards to the Income Tax attachment/
prohibitory order passed. I would like to clarify that 
Income tax already filed claim before me and shall be 
paid in order of priority as provided under Insolvency 
& Bankruptcy Code 2016 and the registration of 
property on successful bidding has no relevance to 
the same. In case of any objection from the SRO 
the same shall be brought before the Tribunal and 
suitable order shall be obtained by the Liquidator so 
as to proceed with the registration.”
36.4	 It can be seen from the two clarifications given by the Liquidator 
to the Auction Purchaser that registration of the subject property 
in favour of the successful bidder was not to be
linked with the 
income tax attachment order for the reason that the Income Tax 
Department had already lodged a claim before the Liquidator 
and payment was to be released to the Department in the 
order of priority, as stipulated under the IBC. Despite that, the 
Auction Purchaser did not proceed further. 
36.5	 In the light of the Notice for sale and the replies furnished to 
the Auction Purchaser well before the bidding process had 
commenced, we are of the considered view that it was for the 
Auction Purchaser as an intending bidder to have conducted a 
due diligence at its own end, gather all the relevant information 
pertaining to the subject property which included the status
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V.S. Palanivel v. P. Sriram, CS, Liquidator, Etc.
of the property and the liabilities attached to it, weigh all the 
pros and cons and only thereafter participate in the auction 
process. After having participated in the e-auction with its eyes 
wide open, the Auction Purchaser cannot be heard to state 
that payment of the balance sale consideration was linked 
with the lifting of the attachment order passed by the Income 
Tax Department when it knew all along that the auction was 
being conducted on an “AS IS WHERE IS”, “AS IS WHAT IS” 
and “WHATEVER THERE IS” basis. 
36.6	 To fortify the submission that the sale transaction could not 
have been completed on account of the embargo placed 
under the IT Act, learned counsel for the Auction Purchaser 
has referred to Sections 222 and 281 of the IT Act read with 
Rule 48 Part III, Schedule 2 of the IT Act. Section 222 of 
the IT Act, empowers the Tax Recovery Officer to draw up 
a statement specifying the amount of arrears due from an 
assessee who has defaulted in payment of tax and thereafter 
proceed to recover the said arrears by attaching and selling 
the assessee’s movable/immovable properties. Section 281 
of the IT Act declares that if an assessee creates a charge or 
parts with the possession of any of his assets, such charge/
transfer would be treated as void against a claim in respect 
of tax payable by the assessee. However, the second proviso 
to Section 281 clarifies that such a
charge/transfer will not be 
void if it is made with the previous permission of the assessing 
officer. As for Rule 48 falling under Part III Schedule 2 of the 
IT Act, it contemplates attachment of an immovable property 
of the defaulter, prohibiting the defaulter from transferring/
charging the property and prohibiting all other persons from 
taking benefit from such a transfer/charge. 
36.7	 The sequence of the events as unravelled from the records 
reveal that the Income Tax Department had already filed a claim 
before the Liquidator who had in turn moved the Adjudicating 
Authority for appropriate directions relating to the subject 
property that was under the attachment order passed by the 
Income Tax Authorities. The said application was disposed of 
by the Adjudicating Authority vide order dated 10th February, 
2020 wherein, directions were issued to lift the attachment order 
subject to the conditions that may be specified in an Escrow
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account where the sale consideration would be deposited 
by the Liquidator. The said order passed in open Court was 
duly conveyed by the Liquidator to the Auction Purchaser, 
though it is the stand of the latter that a physical copy of the 
said order passed on 10th February, 2020, was received by it 
much later, in the month of May, 2020. The escrow account55 
was created on 3rd August, 2020 and the entire tax arrears 
amounting to ₹2,44,01,603/- (Rupees Two crore forty four lakhs 
one thousand six hundred and three only) were deposited in 
the escrow account on 24th August, 2020, though the income 
tax department lifted the attachment order three days later, 
on 27th August, 2020. This was duly conveyed to the office 
of the Sub-Registrar at Trichy on the same date. The second 
proviso to Section 281 of the IT Act did provide a window to 
the Auction Purchaser to approach the assessing officer for 
prior permission to transfer the subject property. But that option 
was exercised when the Liquidator moved an application for 
appropriate permission before the Adjudicating Authority which 
was granted on 10th February, 2020 under intimation to the 
Auction Purchaser. 
36.8	 The contention of the learned counsel for the Auction 
Purchaser is that Rule 13, Schedule I of the IBBI Regulation, 
2016 must be read in conjunction with Rule 12 and only on 
payment of the full amount, could the sale transaction be 
treated to have
been completed in all respects. Since the 
full amount could not be paid till the attachment order was 
lifted, the Liquidator could not have executed a certificate 
for sale/sale deed to transfer the subject property in favour 
of the Auction Purchaser. 
36.9	 We are afraid, such an assumption does not stand to reason. 
Rule 12 is not interlinked with Rule 13. Both the Rules cover 
different situations. The first proviso to Rule 12 gives a leeway 
to the successful bidder to make payment of the balance sale 
consideration after thirty days subject to paying interest at 
the rate of 12%. However, the second proviso to Rule 12 is 
unequivocal and declares that the sale itself will be treated as 
55	
Escrow Account No. 50200050623451
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V.S. Palanivel v. P. Sriram, CS, Liquidator, Etc.
cancelled if the payment is not received within the outer limit 
of 90 days. It is only on completion of the steps contemplated 
in Rule12 that Rule 13 can come in. Reference to Rule 13 that 
starts with the expression “on payment of the full amount” would 
naturally be understood to mean on payment of the full amount 
within the period prescribed in Rule 12. We have already held 
Rule 12 to be mandatory in character because non-payment 
within the timeline has consequences attached to it. However, 
in contrast thereto, there are no adverse consequences spelt 
out in Rule 13 for it to be treated as mandatory. The said 
Rule lays down the procedure for completion of the sale and 
would have to be treated as directory since some procedural 
steps have been set out for purposes of completion of the 
sale process, but nothing beyond that. We are therefore not 
inclined to accept the submissions made by the respondents 
that none of the activities as contemplated in Rule 12 could 
have been completed unless and until the attachment order 
passed by the Income Tax Authorities was lifted or that the 
Liquidator was not in a position to complete the sale under 
Rule13 on that count.
36.10	 In any event, the Liquidator had taken timely steps to move 
the Adjudicating Authority for appropriate permission which 
was obtained as long back as on 10th February, 2020, i.e. 
about a month and a half before the
nationwide lockdown was 
declared. Moreover, the Auction Purchaser was well aware of 
the fact that the entire tax arrears amounted to ₹2,44,01,603/- 
(Rupees Two crore forty four lakh one thousand six hundred 
and three only), which could have easily been paid out of the 
earnest money of ₹2,95,59,638/- (Rupees Two crore ninety 
five lakh fifty nine thousand six hundred and thirty eight only) 
deposited by it, still leaving some surplus funds. The Liquidator 
had also taken steps to apprise the Auction Purchaser of the 
said position and the order of priority that was to be given 
to the claim of the Income Tax Department. Yet the Auction 
Purchaser did not deposit the balance sale consideration. In 
view of the above, the plea taken by the Auction Purchaser 
that the income tax attachment order was a serious and an 
insurmountable impediment in completion of the sale and the 
subject property could not have been validly transferred in its 
favour by the Liquidator, is rather tenuous and not persuasive
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36.11	 The anxiety of the Auction Purchaser was adequately 
addressed on the Adjudicating Authority passing an order 
on 10th February, 2020, lifting the attachment order. This 
order was communicated by the Liquidator to the Auction 
Purchaser well in time. Mere not receipt of a copy of the said 
order cannot be a ground for the Auction Purchaser to have 
delayed deposit of the entire balance sale consideration. 
The spectre of Covid-19 was nowhere on the horizon at that 
time. It spiralled only in the last week of March, 2020. If the 
Auction Purchaser was serious, it could have easily deposited 
at least some amount out of the balance sale consideration of 
₹26,60,36,677/- (Rupees Twenty six crore sixty lakh thirty six 
thousand six hundred and seventy seven only) much earlier, 
but it elected not to deposit a penny till the end of August, 
2020. When the first proviso to Rule 12, Schedule I of the 
IBBI Regulations, 2016 permits payment of sale consideration 
after expiry of 30 days from the date of demand subject to 
payment of interest @ 12% p.a., there was no question of 
the Auction Purchaser going scot free, when its conduct has 
not been blemishless. 
36.12	 On an overall conspectus of the facts of the present case 
which brings out the glaring default on the part of the Auction 
Purchaser in making deposit of the balance sale consideration 
even after permission was granted by the Adjudicating Authority 
on 10th
February, 2020 to lift the attachment order, the only 
question that needs to be answered is as to whether this Court 
should proceed to set aside the auction and as a sequence 
thereto, declare as null and void, the sale certificate issued 
by the Liquidator in favour of the Auction Purchaser, as has 
been pleaded by the appellant.
36.13	 In our opinion, such an order would be too harsh. Much water 
has flown under the bridge by now. The subject land has been 
utilized by the Auction Purchaser to build a 200-bed Mother 
and Child hospital which is operational. Huge amounts have 
been pumped into the project by the Auction Purchaser. The 
hospital is fully functional providing medical facilities to seven 
surrounding districts. In contrast, the appellant has not been 
a vigilant litigant. His conduct shows that he has dragged his
[2024] 8 S.C.R. 
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V.S. Palanivel v. P. Sriram, CS, Liquidator, Etc.
feet at every stage. Records reveal that belated applications 
have been filed by him for seeking recall of the orders passed 
by the Adjudicating Authority granting extension of time to 
the Auction Purchaser. For reasons best known to him, it 
took 19 months for the appellant to prefer an appeal before 
the Tribunal against the order passed by the Adjudicating 
Authority, as provided for in the IBC. Furthermore, the appellant 
resisted handing over possession of the subject property to 
the respondents thereby causing more delay.
36.14	 This Court must underscore the well settled legal position 
that once an auction is confirmed, it ought to be interfered 
with on fairly limited grounds. (Refer: Valji Khimji and 
Co. v. Hindustan Nitro Product (Gujarat) Ltd. (Official 
Liquidator)56 and Celir LLP v. Bafna Motors (Mumbai) 
Private Limited and others57). Repeated interferences in 
public auction also results in causing uncertainty and frustrates 
the very purpose of holding auctions. (Refer : K. Kumara 
Gupta v. Sri Markendaya and Sri Omkareswara Swamy 
Temple and others58). Unless there are some serious flaws 
in the conduct of the auction as for example perpetration of 
a fraud/collusion, grave irregularities that go to the root of 
such an auction, courts must ordinarily refrain from setting 
them aside keeping in mind the domino effect such an order 
would have. Given the facts noted above, we shall
refrain 
from cancelling the sale or declaring the Sale Deed as void. 
Instead, it is deemed appropriate to balance the equities by 
directing the Auction Purchaser to pay an additional amount 
in respect of the subject property.
CONCLUSION
36.15	 For arriving at a just and fair figure, we propose to take into 
consideration the estimated value of the subject property in 
terms of the Reports submitted by the Registered Valuers 
appointed by the Liquidator. Based on their Reports, the 
Liquidator had fixed ₹39,41,28,800/- (Rupees Thirty nine 
56	
[2008] 12 SCR 1 : (2008) 9 SCC 299
57	
[2023] 13 SCR 53 : (2024) 2 SCC 1
58	
[2022] 8 SCR 968 : (2022) 5 SCC 710
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crore forty one lakh twenty eight thousand and eight hundred 
only) as the average liquidation value of the subject property 
for the purpose of e-auction. This figure was brought down 
by 25% in the second round of auction which came to 
₹29,55,96,375/- (Rupees Twenty nine crore fifty five lakh 
ninety six thousand three hundred and seventy five only). 
The difference in the two figures mentioned above comes 
to ₹10,00,00,000/- (Rupees Ten crore only) approximately. 
Keeping in mind the fact that the Auction Purchaser managed 
to retain the balance sale consideration for over six months 
reckoned from 10th February, 2020 and about five months 
reckoned from 25th March, 2020, we deem it appropriate 
to direct it to deposit 50% of the differential figure, i.e., an 
additional sum of ₹5,00,00,000/- (Rupees Five crore only) 
with the Liquidator along interest @ 9 % p.a. reckoned 
from 26th March, 2020 till date of actual payment. The said 
amount shall be deposited by the Auction Purchaser with 
the Liquidator within eight weeks from today. Thereafter, the 
Liquidator shall disburse the amount received in terms of the 
orders passed/may be passed by the Adjudicating Authority, 
as contemplated under the IBC.
36.16	 The appeals are partly allowed on the above terms. Parties 
shall bear their own expenses.
Result of the case: Appeals Partly allowed.
†Headnotes prepared by: Ankit Gyan