What happens when we fail a CAT exam in VIT?

No one usually fails in the CAT exam. If you get less than 25. Always try to be at least among the average scorers in CAT. 

This sometimes depends on the teacher. As some who set paper such that the highest score won't cross 36-37. And some who are generous in giving marks, like 40-42 to all the students. 

In the case of the latter, the average becomes very high. Just remember to score at least 40% as it is the passing marks.

Keep in mind that there are FAT and DA's which will help you in covering the gap, if you somehow get less than 25 in CAT.