Legal Review and Analysis of Ms Shri Karshni Alloys Private Limited vs Ramakrishnan Sadasivan 2025 INSC 1411
Case Synopsis
M/s. Shri Karshni Alloys Private Limited vs Ramakrishnan Sadasivan (2025 INSC 1411)
The Supreme Court upholds the forfeiture of a purchaser's deposit in a liquidation sale for failing to meet payment deadlines, emphasizing the NCLT's authority to impose strict conditions to ensure timely resolution under the IBC.
Sanctity of Timelines in Liquidation: Supreme Court Upholds Forfeiture for Breach of NCLT's Conditional Extension.
1. Heading of the Judgment
Case Name: M/s. Shri Karshni Alloys Private Limited vs Ramakrishnan Sadasivan
Citation: 2025 INSC 1411
Court: Supreme Court of India
Judges: Hon'ble Mr. Justice Sanjay Kumar, Hon'ble Mr. Justice Alok Aradhe
Date of Judgment: December 10, 2025
2. Related Laws and Sections
Insolvency and Bankruptcy Code, 2016 (IBC):
Section 62: Appeal to the Supreme Court.Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016:
Regulation 33(2)(c): Private sale of asset at a price higher than the reserve price of a failed auction.
Regulation 33(2)(d): Private sale with the prior permission of the Adjudicating Authority (NCLT).National Company Law Tribunal Rules, 2016:
Rule 15: Power of the Tribunal to extend time.Other Laws Referenced:
Indian Contract Act, 1872: Section 74 (Compensation for breach of contract).
Constitution of India: Article 226 (Power of High Courts to issue certain writs).
3. Judgment Details
A. Facts of the Case
The appellant, M/s. Shri Karshni Alloys Private Limited, made an offer of ₹105.21 crores to purchase the Raichur plant of M/s. Surana Industries Limited (in liquidation) as a going concern. Its offer was accepted by the Stakeholders Consultation Committee (SCC). The NCLT approved the sale on March 22, 2022, directing payment within 15 days. The appellant failed to pay and sought an extension. The NCLT, on June 29, 2022, granted a final extension with a strict timeline (payments by June 30 and July 31, 2022) and an express condition that deviation would result in "forfeiture of the entire amount paid." The appellant paid an additional ₹1.5 crores but failed to complete the payment by July 31, 2022. The liquidator, acting on the NCLT's order, forfeited the total sum of ₹37.80 crores paid by the appellant. The appellant's subsequent applications and appeals before the NCLT and NCLAT were dismissed. The appellant also filed a writ petition before the Madras High Court, which was dismissed for non-maintainability.
B. Issues Before the Supreme Court
Whether the forfeiture of ₹37.80 crores paid by the appellant was legally valid.
Whether the sale was governed by Regulation 33(2)(c) of the Liquidation Regulations (making it akin to a contract) or by Regulation 33(2)(d) (a court-supervised process).
Whether the appellant's conduct (including seeking parallel remedies and suppressing facts) disentitled it to relief.
C. Ratio Decidendi (Court's Reasoning)
The Supreme Court dismissed the appeal and upheld the forfeiture, reasoning as follows:
Nature of Sale under Regulation 33(2)(d): The Court held the sale was not under Regulation 33(2)(c) but under Regulation 33(2)(d), as the auction process had conclusively failed, and the liquidator sought prior NCLT approval for a private sale. Thus, the process was entirely under the supervision of the Adjudicating Authority (NCLT), not a simple contract between parties.
NCLT's Power to Impose Conditions under Rule 15: The Court affirmed the NCLT's authority under Rule 15 of the NCLT Rules to extend time "upon such terms as the justice of the case may require." Imposing a forfeiture clause for non-compliance was a valid exercise of this power to ensure timely conclusion of the liquidation, aligning with the IBC's objective of expedition.
Appellant's Conduct and Estoppel: The Court condemned the appellant's conduct:
It accepted and acted upon the NCLT's June 29 order by making further payments, thus approbating it.
It filed a writ petition suppressing the fact that it had already filed an appeal before the NCLAT against the same order, constituting an abuse of process and lack of bona fides.Inapplicability of Indian Contract Act, 1872: The Court rejected the appellant's reliance on Section 74 of the Indian Contract Act, ruling that the forfeiture was not a penalty under a private contract but a condition imposed by the Tribunal in a statutory process.
No Unjust Enrichment: The argument that the later sale of the asset for a higher price (₹145.38 crores) negated any loss was dismissed. The Court emphasized that the forfeiture was a consequence of breaching the NCLT's order, not a claim for damages. The financial creditors still suffered a haircut.
4. Core Principle and Analysis of the Judgment
Title: The Primacy of Timelines and Tribunal Authority in IBC Liquidation Sales
Main Issue Addressed
The core legal issue was determining the character of a liquidation sale under the IBC and the extent of the Adjudicating Authority's power to enforce its orders with strict conditions, including forfeiture of payments for non-compliance.
Analysis and Reasoning
This judgment provides an in-depth analysis of the quasi-judicial nature of the liquidation process under the IBC. The Supreme Court drew a clear demarcation between a private commercial contract and a court-supervised statutory sale. By categorizing the transaction under Regulation 33(2)(d), the Court placed it firmly within the administrative control of the NCLT.
The Court's reasoning underscores two fundamental pillars of the IBC regime
Expedition and Finality: Citing Kridhan Infrastructure, the Court reaffirmed that time is of the essence in insolvency proceedings. Allowing a purchaser to repeatedly default and seek indefinite extensions undermines the very objective of the Code. The forfeiture clause was thus seen not as a punitive measure but as a necessary procedural deterrent to secure timely compliance and prevent the liquidation process from lapsing into limbo.
Sanctity of Tribunal Orders: The judgment elevates the status of NCLT orders in liquidation sales. Once a party seeks and accepts the benefit of an extension order from the Tribunal, it must bear the burden of its conditions. The principle of "approbate and reprobate" was applied to prevent the appellant from challenging the very order it had partially complied with. This establishes that participants in IBC processes must act with consistency and utmost good faith.
The Court's severe censure of the appellant's litigation conduct—filing parallel proceedings and suppressing material facts—serves as a stern warning. It establishes that such abuse of process is an independent and sufficient ground for denying relief, irrespective of the merits.
Supreme Court's Directive
The judgment directs all stakeholders in the IBC process, particularly prospective buyers in liquidation, to:
Recognize that timelines and conditions set by the Adjudicating Authority are sacrosanct.
Understand that liquidation sales under the NCLT's permission are statutory processes, not ordinary contracts, and are subject to the Tribunal's overarching control.
Engage in litigation with transparency and clean hands; attempting to circumvent statutory appeal mechanisms or mislead courts will be fatal to their case.
5. Final Outcome
The Supreme Court dismissed the appeals. It upheld the majority opinion of the NCLAT, thereby confirming the validity of the NCLT's order dated June 29, 2022, and the consequent forfeiture of the appellant's payment of ₹37.80 crores.
6. MCQs Based on the Judgment
Question 1: In Shri Karshni Alloys vs. Ramakrishnan Sadasivan (2025 INSC 1411), the Supreme Court held that the sale of the liquidation asset was governed primarily by?
(a) Regulation 33(2)(a) of the Liquidation Regulations.
(b) Regulation 33(2)(c) of the Liquidation Regulations, making it a private contract.
(c) Regulation 33(2)(d) of the Liquidation Regulations, requiring prior NCLT approval.
(d) The Indian Contract Act, 1872.
Answer: (c) Regulation 33(2)(d) of the Liquidation Regulations, requiring prior NCLT approval.
Question 2: The Supreme Court rejected the appellant's challenge to the forfeiture clause in the NCLT's order primarily because?
(a) The appellant had independently agreed to the forfeiture terms in its initial offer.
(b) The forfeiture was justified as a penalty under Section 74 of the Indian Contract Act.
(c) The appellant had accepted and acted upon the extension order, and the clause was a valid term imposed by the NCLT under its statutory powers.
(d) The liquidator had suffered actual losses due to the appellant's delay.