INTRODUCTION
The Supreme Court of India, in M/s. Shri Karshni Alloys Private Limited v. Ramakrishnan Sadasivan, Civil Appeal Nos. 3625–3628 of 2025, reported as 2025 INSC 1411, delivered an important judgment on 10 December 2025. The decision was rendered by a Division Bench comprising Justice Sanjay Kumar and Justice Alok Aradhe.
The Judgment revisits fundamental principles governing liquidation sales under the Insolvency and Bankruptcy Code, 2016 (IBC), particularly the sanctity of timelines, the scope of the adjudicating authority’s powers and the permissibility of forfeiture when a successful bidder defaults. It also draws a clear distinction between contractual principles under general law and court-supervised insolvency processes.
BRIEF FACTS
The corporate insolvency resolution process of M/s. Surana Industries Limited culminated in liquidation, with the Respondent appointed as liquidator. Multiple attempts to sell the Company’s Raichur Plant through auctions failed, after which the Stakeholders’ Consultation Committee approved a private sale.
The Appellant offered to purchase the Raichur asset as a going concern for ₹105.21 crores and deposited 10% of the consideration as a commitment advance. The National Company Law Tribunal (NCLT) approved the sale and directed payment of the balance within 15 days. However, the Appellant sought extensions due to alleged market difficulties.
Although extensions were granted, the NCLT imposed a clear condition that any failure to adhere to the revised timelines would result in forfeiture of the amounts already paid. The Appellant defaulted yet again. Consequently, the liquidator forfeited ₹37.80 crores deposited by the Appellant and proceeded with a fresh auction.
The Appellant challenged the forfeiture before the NCLT and the National Company Law Appellate Tribunal (NCLAT). A split verdict emerged at the NCLAT, but the majority view upheld the forfeiture. Aggrieved, the Appellant approached the Supreme Court.
ISSUES OF LAW
The principal legal issues before the Supreme Court were:
1) Whether the private sale of liquidation assets was governed by contractual principles under the Indian Contract Act, 1872, particularly Section 74.
2) Whether the NCLT had the jurisdiction to impose a condition of complete forfeiture while granting an extension of time.
3) Whether forfeiture was unjustified in the absence of demonstrable loss to stakeholders, especially when the asset was later sold at a higher value.
4) Whether a bidder who accepts and acts upon an extension order can subsequently challenge its conditions.
ANALYSIS OF THE JUDGMENT
The Supreme Court affirmed that the sale in question squarely fell under Regulation 33(2)(d) of the Liquidation Process Regulations, which requires prior approval of the Adjudicating Authority. The Court rejected the Appellant’s attempt to characterise the transaction as a private contract governed by the Indian Contract Act. It emphasised that liquidation sales under the IBC are judicially supervised processes and not ordinary commercial contracts.
A crucial aspect of the Judgment is the Court’s reliance on Rule 15 of the NCLT Rules, 2016, which empowers the Tribunal to extend timelines on such terms as justice may require. The Forfeiture Clause was held to be a legitimate and proportionate condition, imposed to preserve the efficiency and credibility of the insolvency framework. The Court underlined that time is the backbone of the IBC and repeated indulgence to defaulting bidders would undermine the statute’s objectives.
The Court also rejected the argument that forfeiture was impermissible because stakeholders ultimately did not suffer loss. It clarified that forfeiture in insolvency proceedings is not contingent upon proof of actual loss, especially when the defaulting party has acted contrary to its commitments and caused delay in the liquidation process.
Equally significant is the Court’s disapproval of the Appellant’s conduct. The Appellant had accepted the extension order, made further payments under it, and yet attempted to assail the same order while simultaneously pursuing parallel remedies. The Court applied the doctrine against approbation and reprobation, holding that a party cannot accept the benefits of an order and later challenge its burdens.
By distinguishing contractual forfeiture from court-imposed consequences in insolvency proceedings, the Supreme Court decisively limited the application of Section 74 of the Contract Act in IBC-driven sales.
CONCLUSION
The Judgment in M/s. Shri Karshni Alloys Private Limited v. Ramakrishnan Sadasivan reinforces the Supreme Court’s consistent stance that discipline, certainty and adherence to timelines are non-negotiable under the IBC. The ruling affirms the wide discretionary powers of the NCLT to impose conditions while extending time and underscores that insolvency proceedings cannot be derailed by repeated defaults and strategic litigation.
For bidders in liquidation sales, the message is unambiguous: commitments made before insolvency forums carry binding force, and failure to honour them may result in severe financial consequences without recourse to traditional contractual defences. The decision thus strengthens the integrity and predictability of India’s insolvency regime.
SARTHAK KALRA
Senior Legal Associate
The Indian Lawyer & Allied Services
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