Full Judgment Text
Reportable
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO 2545/2023
[ARISING OUT OF SLP(C) NO.14896/2018]
AUTHORISED OFFICER
STATE BANK OF INDIA …APPELLANT
VERSUS
C. NATARAJAN & ANR. …RESPONDENTS
J U D G M E N T
DIPANKAR DATTA, J.
Leave granted.
2. The Authorized Officer (for brevity “the
Authorized Officer”, hereafter) of the State Bank of
Signature Not Verified
India, Stressed Asset Management Branch,
Digitally signed by
Neetu Khajuria
Date: 2023.04.28
15:31:08 IST
Reason:
Coimbatore, Tamil Nadu (for brevity “the Bank”,
1
hereafter) has impugned the judgment and order
th
dated 27 March, 2018 of the Madras High Court
allowing a writ petition (W.P. No.4519 of 2018)
instituted by the contesting respondent herein.
3. The facts leading to institution of the writ
petition, as recorded in the impugned judgment
and order, are noticed hereunder:
a. Default was committed by M/s Stallion
Knitwear India Private Limited (for brevity
“Stallion”, hereafter) in discharging its debts
to the Bank. Consequent upon classification of
its account as non-performing asset, the
Authorized Officer had taken possession of the
secured asset (being the plant and machinery
of Stallion) as a measure under section 13(4)
of the Securitization and Reconstruction of
Financial Assets and Enforcement of Security
Interest Act, 2002 (for brevity “the SARFAESI
Act”, hereafter). Thereafter, e-auction notice
nd
dated 22 August, 2007 was issued by the
Authorized Officer putting up the plant and
2
machinery of Stallion for sale. The contesting
respondent had participated in the e-auction
th
held on 15 September, 2017 by depositing
requisite earnest money. Having quoted a sum
of Rs. 1,23,00,000/-, which exceeded the
reserve price by Rs. 1,00,000/-, he was
declared the highest bidder. Inclusive of the
earnest money deposit, the petitioner paid Rs.
30,75,000/- towards 25% of the sale price by
th
RTGS on 15 September, 2017 itself, and was
under advice to pay the balance 75% thereof,
th
i.e., Rs. 92,25,000/-, on or before 29
September, 2017.
b. The contesting respondent failed to
arrange requisite funds and by a request letter
th
dated 27 September, 2017, sought for
extension of time to pay the balance of
amount within 25 days. Acceding to such
request, the Authorized Officer, on the
following day, extended the time for payment
rd
till 23 October, 2017. Two weeks prior to the
3
extended last date for making payment of the
balance amount, the contesting respondent
th
received summons dated 10 October, 2017
from the Debt Recovery Tribunal, Coimbatore
(for brevity “the DRT”, hereafter), intimating
him that Stallion having filed an application
under section 17 of the SARFAESI Act had
applied for interim relief, which was set down
th
for hearing on 6 November, 2017. Having
learnt of pendency of proceedings before the
DRT, the contesting respondent met the
Authorized Officer who assured the contesting
respondent of appropriate care to be taken to
contest such proceedings. Hearing such
assurance and while referring to the summons
received from the DRT, the contesting
th
respondent by his letter dated 20 October,
2017 prayed for further extension of time by
15 days to pay the balance amount. The
request of the contesting respondent was
rejected by the Authorized Officer by his letter
st
dated 21 October, 2017 and the contesting
4
respondent was advised to make payment of
rd
the balance amount on or before 23 October,
2017. Since the contesting respondent did not
pay the balance amount of the sale price by
rd
23 October, 2017, the Authorized Officer sent
th
a letter dated 24 October, 2017 to the
contesting respondent informing him that the
th
e-auction sale held on 15 September, 2017,
which was concluded in his favour, stands
cancelled and that the amount of Rs.
30,75,000/- paid by him forfeited.
c. The contesting respondent, seeking to
intervene in the proceedings before the DRT,
had applied for advancement of the date of
hearing of the application under section 17. He
also applied for extension of time to deposit
the balance amount till the disposal of the
interim application filed before the DRT by
Stallion. DRT advanced the hearing date from
th st
6 November, 2017 to 31 October, 2017. An
st
order dated 31 October, 2017 was also
5
passed directing the Authorized Officer to
maintain status quo and while calling for
th
counter-affidavits, the case was posted to 28
November, 2017.
d. The order of status quo passed by the DRT
was challenged by the Authorized Officer in an
appeal carried before the Debts Recovery
Appellate Tribunal, Chennai (for brevity “the
th
DRAT”, hereafter). On 12 December, 2017,
the DRAT permitted the Authorized Officer to
proceed with fresh auction without, however,
vacating the order of status quo passed
earlier.
e. Availing the liberty granted by the DRAT,
the Authorized Officer issued fresh e-auction
th th
notice dated 15 December, 2017, fixing 5
January, 2018 as the date of auction. The
contesting respondent having come to learn of
such notice filed an interim application before
the DRT seeking stay of the auction; however,
rd
by an order dated 3 January, 2018, the DRT
6
dismissed the application relying on the
th
interim order of the DRAT dated 12
December, 2017 but granted liberty to the
contesting respondent to participate in the e-
th
auction proposed to be held on 5 January,
2018. The auction, however, could not be held
th
on 5 January 2018 for want of adequate
number of bidders.
4. It was, at this stage, that the contesting
respondent invoked the writ jurisdiction of the
High Court seeking refund of the forfeited amount
of Rs. 30,75,000/-, by challenging the letter dated
th
24 October, 2017 of the Authorized Officer.
5. During the pendency of the writ proceedings
before the High Court, the secured asset was once
again put up for sale by auction and was sold for
1,23,00,000/-.
6. The High Court, upon hearing the parties, was
of the view that the Authorized Officer having sold
the secured assets for the very same value of Rs.
1,23,00,000/- to another auction purchaser, which
7
was the same amount quoted by the contesting
respondent, the Bank “should not be permitted to
enrich by forfeiting the amount from the writ
petitioner and simultaneously appropriate the sale
proceeds from the highest bidder in the auction
sale notice dated 15.12.2017”. Consequently, the
High Court directed refund of the amount of Rs.
30,75,000/- within 4 weeks with interest @ 9% per
annum on the amount to be refunded till refund is
effected.
7. Appearing in support of the appeal, counsel for
the Authorized Officer contended that the High
Court committed gross error in ordering a refund
of Rs. 30,75,000/- to the contesting respondent.
According to him, the contesting respondent by his
th
letter dated 27 September, 2017 had prayed for
extension of 25 days’ time to deposit the balance
amount of sale price and upon grant of such
rd
prayer, time was allowed till 23 October, 2017;
however, the contesting respondent did not make
payment within the extended date by raising the
8
bogey of pendency of proceedings before the DRT,
at the instance of Stallion. He further contended
st
that prior to 31 October, 2017, no order of stay
passed by the DRT was subsisting and there was
absolutely no reason for the contesting
respondent, if he was genuinely interested in
closing the deal, to deposit the balance amount of
sale price while at the same time reserving his
right to claim the entire amount deposited, if the
sale did not fructify. It was also contended that the
contesting respondent had applied for extension of
time to deposit the balance amount before the
DRT, but no order was passed on his application
and the Authorized Officer, perceiving that the
contesting respondent was seeking to delay
matters, rightly proceeded to forfeit the amount of
Rs. 30,75,000/. He, accordingly, submitted that the
impugned judgment and order of the High Court is
unsustainable in law and, hence, deserves to be
set aside.
9
8. Per contra, counsel for the contesting
respondent sought to impress upon us that the
order directing refund was passed on a concession
made by counsel for the first respondent before
the High Court, i.e., the Authorized Officer; hence,
the appeal was not maintainable. In the
alternative, he contended that the Bank having
sold the secured asset through a subsequent
auction which fetched Rs. 1,23,00,000/-, i.e., the
same price at which the contesting respondent
intended to purchase the immovable property, it
cannot be the case of the Authorized Officer or, for
that matter, the Bank that the latter has suffered
any financial loss. He further contended that
although not assigned as a specific ground for
interference, a bare reading of the impugned
judgment and order would reveal that the direction
for refund was made bearing in mind such
circumstance that the Bank did not suffer any loss.
He also contended that there has to be an overall
consideration of the facts and circumstances
obtaining in the case which led the contesting
10
respondent to reasonably believe that pendency of
proceedings before the DRT at the instance of
Stallion would result in the entire sale price, if
deposited, being blocked. In such view of the
matter, the Authorized Officer without proper
consideration of the entire facts and
circumstances proceeded to forfeit the amount
deposited. Since, there has been patent
arbitrariness on the part of the Authorized Officer
in not acceding to the request of the contesting
respondent to extend the time further, the High
Court was justified in its interference with the
order of forfeiture and rightly directed refund. It
was, thus, prayed that the appeal be dismissed.
9. We have heard counsel for the parties and
perused the materials on record.
10. At the outset, we reject the contention of the
contesting respondent that the High Court, based
on concession of counsel for the Authorized
Officer, proceeded to pass the order for refund.
After referring to the applicable statutory
11
provisions, the said counsel submitted before the
Court that the interest of the Authorized Officer
should be taken care of. Such a submission does
not, in our considered view, amount to any
concession rendering the appeal not maintainable.
11. Two legal questions now arise for
consideration:
(i) Whether the power of forfeiture was
exercised by the Authorized Officer in an
arbitrary manner?
(ii) Whether the High Court was justified in its
interference with the forfeiture order on
the ground assigned in the impugned
judgment and order?
12. Sale of a secured asset, which is an
immovable property, is regulated by rule 9 of the
Security Interest (Enforcement) Rules, 2002 (for
brevity “the Rules”, hereafter). Sub-rules (2), (3),
(4) and (5) thereof are relevant for answering the
first question. The same read as under:
12
“(2) The sale shall be confirmed in favour of
the purchaser who has offered the highest
sale price in his bid or tender or quotation or
offer to the authorised officer and shall be
subject to confirmation by the secured
creditor:
Provided that no sale under this rule shall
be confirmed, if the amount offered by sale
price is less than the reserve price, specified
under sub-rule (5) of rule 8:
Provided further that if the authorised
officer fails to obtain a price higher than the
reserve price, he may, with the consent of the
borrower and the secured creditor effect the
sale at such price.
(3) On every sale of immovable property, the
purchaser shall immediately, i.e., on the same
day or not later than next working day, as the
case may be, pay a deposit of twenty-five per
cent of the amount of the sale price, which is
inclusive of earnest money deposited, if any,
to the authorised officer conducting the sale
and in default of such deposit, the property
shall be sold again.
(4) The balance amount of purchase price
payable shall be paid by the purchaser to the
authorised officer on or before the fifteenth
day of confirmation of sale of the immovable
property or such extended period as may be
agreed upon in writing between the purchaser
and the secured creditor, in any case not
exceeding three months.
(5) In default of payment within the period
mentioned in sub-rule (4), the deposit shall be
forfeited [to the secured creditor] and the
property shall be resold and the defaulting
purchaser shall forfeit all claim to the property
or to any part of the sum for which it may be
subsequently sold.”
13
13. Bare perusal of the aforesaid provisions
reveals an ordainment in sub-rule (4) that on
mutual agreement, the time for making deposit of
the balance amount of sale price can be extended
for a period not exceeding ninety days; but,
extension beyond ninety days is not permissible on
any count. Since grant of extension for
intermittent periods so that the duration of such
periods taken together does not exceed ninety
days would suggest some element of discretion
being reserved unto the authorized officer of a
secured creditor under sub-rule (5) of rule 9.
However, there can be no gainsaying that such
discretion has to be exercised reasonably and not
on whims or caprice; at the same time, no auction
purchaser can claim extension as a matter of right
and that too beyond the statutorily prescribed
period. Whether or not a case for extension does
exist would depend upon the peculiar facts of each
case and no strait-jacket formula can ever be laid
down therefor. If, however, circumstances are
shown to exist where a bidder is faced with such a
14
grave disability that he has no other option but to
seek extension of time on genuine grounds so as
not to exceed the stipulated period of ninety days
and the prayer is rejected without due
consideration of all facts and circumstances,
refusal of the prayer for extension could afford a
ground for a judicial review of the decision-making
process on valid ground(s). One such exceptional
circumstance led to the decision in Alisha Khan
1
vs Indian Bank (Allahabad Bank) , where this
Court intervened and granted relief because, due
to COVID complications, the appellant had failed to
pay the balance amount.
14. Sub-rule (5) of rule 9 does envisage forfeiture,
should there be a default in payment of the
balance amount of purchase price within the
period mentioned in sub-rule (4). The power of
forfeiture is, therefore, statutorily conferred. It
may also be noted in this connection that the
express power conferred on a secured creditor by
sub-rule (5) of rule 9 of the Rules to forfeit the
1
2021 SCC OnLine SC 3340
15
initial deposit made by the bidder in case he
commits any default in paying installments of the
sale price to the secured creditor has been held by
this Court in Agarwal Tracom Private Ltd vs
2
Punjab National Bank and Ors. to be an action
which is part of the measures specified in section
13(4) of the SARFAESI Act and, therefore,
amenable to challenge on valid ground(s) in an
application under section 17(1) thereof.
15. Before we take our discussion forward, it is
necessary to ascertain the true character of the
term ‘forfeiture’. Black’s Law Dictionary, inter alia ,
explains ‘forfeiture’ as “the loss of a right,
privilege, or property because of a crime, breach
of obligation, or neglect of duty” or “something
(esp. money or property) lost or confiscated by
this process; a penalty” . It is also explained as “ a
destruction or deprivation of some estate or right
because of the failure to perform some obligation
or condition contained in a contract ”.
2
(2018) 1 SCC 626
16
16. It is also found from the same dictionary that
though penalty is usually referable to a crime,
penalty is sometimes imposed for civil wrongs
such as a statutory penalty for a statutory
violation; especially, a penalty imposing automatic
liability on a wrongdoer for violation of the terms
of a statute without reference to any actual
damage suffered.
17. A Constitution Bench of this Court in R.S.
3
Joshi vs Ajit Mills Ltd. held that “(F)orfeiture, as
judicially annotated, is a punishment annexed by
law to some illegal act or negligence” . This Court
referred to its earlier decision in Bankura
4
Municipality vs Lalji Raja & Sons where it was
observed:
“According to the dictionary meaning of the
word ‘forfeiture’ the loss or the deprivation of
goods has got to be in consequence of a
crime, offence or breach of engagement or has
to be by way of penalty of the transgression or
a punishment for an offence. Unless the loss or
deprivation of the goods is by way of a penalty
or punishment for a crime, offence or breach
of engagement it would not come within the
definition of forfeiture”.
3
(1977) 4 SCC 98
4
AIR 1953 SC 248
17
18. Having regard to the terms of rule 9, the
notice for auction constitutes the ‘invitation to
offer’; the bids submitted by the bidders constitute
the ‘offer’ and upon confirmation of sale in favour
of the highest bidder under sub-rule (2) of rule 9,
the contract comes into existence. Once the
contract comes into existence, the bidder is bound
to honour the terms of the statute under which the
auction is conducted and suffer consequences for
breach, if any, as stipulated. Rule 9(5) legislatively
lays down a penal consequence. ‘Forfeiture’
referred to in sub-rule (5) of rule 9, in the setting
of the SARFAESI Act and the Rules, has to be
construed as denoting a penalty that the
defaulting bidder must suffer should he fail to
make payment of the entire sale price within the
period allowed to him by the authorized officer of a
secured creditor.
19. Though it is true that the power conferred by
sub-rule (5) of rule 9 of the Rules ought not to be
18
exercised indiscriminately without having due
regard to all relevant facts and circumstances, yet,
the said sub-rule ought also not be read in a
manner so as to render its existence only on
paper. Drawing from our experience on the Bench,
it can safely be observed that in many a case the
borrowers themselves, seeking to frustrate auction
sales, use their own henchmen as intending
purchasers to participate in the auction but
thereafter they do not choose to carry forward the
transactions citing issues which are hardly tenable.
This leads to auctions being aborted and issuance
of fresh notices. Repetition of such a process of
participation-withdrawal for a couple of times or
more has the undesirable effect of rigging of the
valuation of the immovable property. In such
cases, the only perceivable loss suffered by a
secured creditor would seem to be the extent of
expenses incurred by it in putting up the
immovable property for sale. However, what does
generally escape notice in the process is that it is
the mischievous borrower who steals a march over
19
the secured creditor by managing to have a highly
valuable property purchased by one of its
henchmen for a song, thus getting such property
freed from the clutches of mortgage and by
diluting the security cover which the secured
creditor had for its loan exposure. Bearing in mind
such stark reality, sub-rule (5) of rule 9 cannot but
be interpreted pragmatically to serve twin
purposes — first, to facilitate due enforcement of
security interest by the secured creditor (one of
the objects of the SARFAESI Act); and second, to
prohibit wrong doers from being benefitted by a
liberal construction thereof.
20. In terms of the Indian Contract Act, 1872 (for
brevity “Contract Act”, hereafter), a person can
withdraw his offer before acceptance. However,
once a party expresses willingness to enter into a
contractual relationship subject to terms and
conditions and makes an offer which is accepted
but thereafter commits a breach of contract, he
does so at his own risk and peril and naturally has
20
to suffer the consequences. We are not oblivious
of the terms of section 73 and section 74 of the
Contract Act, being part of Chapter VI thereof
titled “Of the Consequence of Breach of Contract” .
These sections, providing for compensation for
breach of contract and for liquidated damages,
have remained on the statute book for generations
and permit the party suffering the breach to
recover such quantum of loss or damage from the
party in breach. However, with changing times, the
minds of people are also changing. The judiciary,
keeping itself abreast of the changes that are
bound to occur in an evolving society, must
interpret new laws that are brought in operation to
suit the situation appropriately. In the current era
of globalization, the entire philosophy of society,
mainly on the economic front is making rapid
strides towards changes. Unscrupulous people
have been inventing newer modes and
mechanisms for defrauding and looting the nation.
It is in such a scenario that provisions of
enactments, particularly those provisions which
21
have a direct bearing on the economy of the
nation, must receive such interpretation so that it
not only fosters economic growth but is also in
tune with the intention of the law-makers in
introducing a provision such as sub-rule (5) of rule
9, which though harsh in its operation, is intended
to suppress the mischief and advance the remedy.
If indeed section 73 and section 74, which are part
of the general law of contract, were sufficient to
cater to the remedy, the need to make sub-rule (5)
of rule 9 as part of the Rules might not have
arisen. Additionally, insertion of sub-rule (5) with
such specificity regarding forfeiture must not have
been thought of only for reiterating what is already
there. It was visualized by the law makers that
there was a need to arrest cases of deceptive
manipulation of prices at the instance of
unscrupulous borrowers by thwarting sale
processes and this was the trigger for insertion of
such a provision with wide words conferring
extensive powers of forfeiture. The purpose of
such insertion must have also been aimed at
22
instilling a sense of discipline in the intending
purchasers while they proceed to participate in the
auction-sale process. At the cost of repetition, it
must not be forgotten that the SARFAESI Act was
enacted because the general laws were not found
to be workable and efficient enough to ensure
liquidity of finances and flow of money essential
for any healthy and growth-oriented economy. The
decision of this Court in Mardia Chemicals vs
5
Union of India , while outlawing only a part of the
SARFAESI Act and upholding the rest, has traced
the history of this legislation and the objects that
Parliament had in mind in sufficient detail. Apart
from the law laid down in such decision, these are
the other relevant considerations which ought to
be borne in mind while examining a challenge to a
forfeiture order.
21. There is one other aspect which is, more often
than not, glossed over. In terms of sub-rule (5) of
rule 9, generally, forfeiture would be followed by
an exercise to resell the immovable property. On
5
(2004) 4 SCC 311
23
the date an order of forfeiture is in contemplation
of the authorized officer of the secured creditor for
breach committed by the bidder, factually, the
position is quite uncertain for the former in that
there is neither any guarantee of his receiving bids
pursuant to a future sale, much to the satisfaction
of the secured creditor, nor is there any gauge to
measure the likely loss to be suffered by it
(secured creditor) if no bidders were interested to
purchase the immovable property. Since the
extent of loss cannot be immediately foreseen or
calculated, such officers may not have any option
but to order forfeiture of the amount deposited by
the defaulting bidder in an attempt to recover as
much money as possible so as to reduce the
secured debt. That the immovable property is later
sold at the same price or at a price higher than the
one which was offered by the party suffering the
forfeiture is not an eventuality that occurs in each
and every case. Sections 73 and 74 of the Contract
Act would not, therefore, be sufficient to take care
of the interest of the secured creditor in such a
24
case and that also seems to be another reason for
bringing in the provision for forfeiture in rule 9.
Ordinarily, therefore, validity of an order of
forfeiture must be judged considering the
circumstances that were prevailing on the date it
was made and not based on supervening events.
22. Does sub-rule (5) of rule 9, which is part of a
delegated legislation, i.e., the Rules, have the
effect of diluting section 73 and section 74 of the
Contract Act? We have considered it necessary to
advert to this question as it is one of general
importance and are of the considered opinion that
the answer must be in the negative. While the
Contract Act embodies the general law of contract,
the SARFAESI Act is a special enactment, inter alia,
for enforcement of security interest without
intervention of court. Rule 9(5) providing for
forfeiture is part of the Rules, which have validly
been framed in exercise of statutory power
conferred by section 38 of the SARFAESI Act. Law
is well settled that rules, when validly framed,
25
become part of the statute. Apart from the
presumption as to constitutionality of a statute,
the contesting respondent did not mount any
challenge to sub-rule (5) of rule 9 of the Rules. The
applicability and enforcement of sub-rule (5) of
rule 9 on its terms, therefore, has to be secured in
appropriate cases.
23. That apart, significantly, section 35 of the
SARFAESI Act mandates that the provisions thereof
would have effect, notwithstanding anything
inconsistent therewith contained in any other law
for the time being in force or any other instrument
having effect by virtue of any such law. At the
same time, section 37 of the SARFAESI Act
postulates that provisions thereof or the rules
made thereunder shall be in addition to and not in
derogation of the enumerated enactments or any
other law for the time being in force. What is of
importance is that the non-obstante clause in
section 35 of the SARFAESI Act is not subject to
section 37 thereof; however, a plain reading of the
26
latter provision would suggest that rights,
liabilities, obligations, remedies, etc.
created/imposed/ provided by the SARFAESI Act
and the Rules are preserved, irrespective of what
is provided in the stated enactments or any other
law for the time being in force. The regime under
the SARFAESI Act is altogether different and
sections 35 and 37 are intended to extend a cover
to the secured creditor if it abides by the
governing law, which cannot be subject to any
other provision of a general law like the Contract
Act. Since section 35 overrides other laws in the
same or related field and having regard to the
scheme of the SARFAESI Act and the dominant
purpose sought to be achieved, as noted above,
none can and should be allowed to take the
auctions conducted thereunder lightly. No court
ought to countenance a bidder entering and
exiting the process at his sweet will without any
real intent to take it to fruition. The provisions of
the SARFAESI Act as well as the Rules are to be
interpreted positively and purposefully in the
27
context of a given case to give meaning to sub-
rule (5) of rule 9. Besides, we have no hesitation to
hold that in case of any seeming conflict or
inconsistency between the general law, i.e., the
Contract Act and the special law, i.e., the
SARFAESI Act, it is the latter that would prevail.
24. The up-shot of the aforesaid discussion is that
whenever a challenge is laid to an order of
forfeiture made by an authorized officer under
sub-rule (5) of rule 9 of the Rules by a bidder, who
has failed to deposit the entire sale price within
ninety days, the tribunals/courts ought to be
extremely reluctant to interfere unless, of course,
a very exceptional case for interference is set up.
What would constitute a very exceptional case,
however, must be determined by the
tribunals/courts on the facts of each case and by
recording cogent reasons for the conclusion
reached. Insofar as challenge to an order of
forfeiture that is made upon rejection of an
application for extension of time prior to expiry of
28
ninety days and within the stipulated period is
concerned, the scrutiny could be a bit more
intrusive for ascertaining whether any patent
arbitrariness or unreasonableness in the decision-
making process has had the effect of vitiating the
order under challenge. However, in course of such
scrutiny, the tribunals/courts must be careful and
cautious and direct their attention to examine
each case in some depth to locate whether there is
likelihood of any hidden interest of the bidder to
stall the sale to benefit the defaulting borrower
and must, as of necessity, weed out claims of
bidders who instead of genuine interest to
participate in the auctions do so to rig prices with
an agenda to withdraw from the fray post
conclusion of the bidding process. In course of
such determination, the tribunals/courts ought not
to be swayed only by supervening events like a
subsequent sale at a higher price or at the same
price offered by the defaulting bidder or that the
secured creditor has not in the bargain suffered
any loss or by sentiments and should stay at a
29
distance since extending sympathy, grace or
compassion are outside the scope of the relevant
legislation. In any event, the underlying principle
of least intervention by tribunals/courts and the
overarching objective of the SARFAESI Act duly
complimented by the Rules, which are geared
towards efficient and speedy recovery of debts,
together with the interpretation of the relevant
laws by this Court should not be lost sight of.
Losing sight thereof may not be in the larger
interest of the nation and susceptible to
interference.
25. In the present case, undisputedly, payment
of 25% of the sale price was made by the
th
contesting respondent on 15 September, 2017;
hence sub-rule (3) of rule 9 stood complied with.
The contesting respondent was notified to deposit
th
the balance 75% of the sale price by 29
September, 2017. Admittedly, he could not or did
th
not so deposit till 27 September, 2017,
whereupon he prayed for extension of time by 25
30
th
days by his request letter of even date, i.e., 27
September, 2017. The Authorized Officer
responded favourably and extended the time for
deposit by 25 days as prayed by the contesting
rd
respondent, i.e., till 23 October, 2017. Extension
rd
of time till 23 October, 2017, therefore, was by
mutual agreement – a course of action permitted
th
by sub-rule (4). On 20 October, 2017, the
contesting respondent made a further request for
extension of time by 15 days citing pendency of
proceedings at the instance of Stallion before the
DRT. This request came to be rejected by the
st
Authorized Officer by his letter dated 21 October,
2017 referring to absence of any order of stay in
operation and that the contesting respondent was
free to deposit the balance amount of sale price
and take possession of the auctioned immovable
property. The contesting respondent not having
rd
deposited the balance amount of sale price by 23
October, 2018, the mutual agreement for
extension of time, thus, lapsed with effect from
th
24 October, 2017. This resulted in the order of
31
forfeiture being passed by the Authorized Officer in
terms of sub-rule (5).
26. We do not see reason to hold that there has
either been any manifest arbitrariness or
unreasonableness, which warranted interdiction
with the order of forfeiture. The contesting
respondent in terms of the statutory ordainment
was required to pay the balance amount of sale
price on or before 15 days of confirmation of sale.
Days prior to expiry of such period, he prayed for
an extension of 25 days. Such prayer was granted.
Further prayer for extension was made ten days
after receipt of summons from the DRT. The exact
date on which the contesting respondent applied
before the DRT for extension of time as well as the
exact terms of the order passed on such
application, however, is not available on record.
We shall proceed on the premise that the prayer
for extension of time was not granted. The order of
th
the Authorized Officer dated 24 October, 2017
forfeiting 25% of the sale price was also not
32
challenged by the contesting respondent before
the DRT in any independent proceeding; on the
contrary, after the DRAT granted permission to the
Authorized Officer to conduct sale afresh by its
th
order dated 12 December, 2017 and pursuant
whereto a fresh e-auction notice was issued on
th
18 December, 2017, the contesting respondent
had instituted an independent application under
section 17(1) of the SARFAESI Act before the DRT
and had also filed I.A. No. 2542/2017 therein for
interim stay of e-auction. The DRT by its order
rd
dated 3 January, 2018 dismissed I.A. No.
2542/2017 relying upon the order of the DRAT
th
dated 12 December, 2017, but permitted the
contesting respondent to participate in the e-
th
auction to be held on 5 January, 2018 which
failed for want of bidders. It is then that the
contesting respondent instituted the writ petition
before the High Court.
27. Under such circumstances, it has to be held
that the transaction fell through by reason of the
33
default or failure of the contesting respondent to
rd
deposit 75% of the sale price by 23 October,
2017, as per the terms of rule 9(4). On facts, we
find that the contesting respondent was arranging
for funds when he received the summons from the
th
DRT on 10 October, 2017. It is, therefore, clear
that at least till that date, the contesting
respondent was lacking in financial resources to
make payment of the entire sale price. Although it
is not always necessary for an auction purchaser
to arrange for funds and be ready to pay the entire
sale price within 15 days of confirmation of sale,
since extension of time is contemplated in rule 9,
it is beyond our comprehension why the contesting
respondent while applying for an extension of time
th
on 27 September, 2017 sought for only 25 days’
time and not for more time, at least up to the
entire period of ninety days, being the maximum
time that he could have asked for and made
available to him in terms of rule 9(4). He had also
moved the DRT for extension of time, which was
not granted. The DRT, however, granted him
34
liberty to participate in the auction to be held on
th
5 January, 2018 but without waiving any
condition. These are circumstances which certainly
are adverse to the contesting respondent.
28. Also, the terms of the auction notice made it
clear that the auction sale would be conducted in
terms of the provisions contained in the SARFAESI
Act. All prospective bidders were, therefore, put on
guard as to what could follow in case of a default
or neglect. Notwithstanding the proceedings that
were initiated before the DRT by Stallion of which
th
the contesting respondent became aware on 10
October, 2017, nothing prevented him from
making full payment of the balance amount and
have the sale certificate issued in his favour. It can
be inferred from the facts and circumstances that
the contesting respondent was seeking to buy
time. Counsel for the contesting respondent has
not shown how the Authorized Officer acted in
derogation of the statute. Indeed, it was open to
the Authorized Officer to extend the time further;
35
equally, he was also free not to grant further
extension having regard to the conduct of the
contesting respondent. When two options are
legally open to be exercised in a given set of facts
and circumstances and one option is exercised,
which does not appear to be wholly unreasonable,
it is not for the writ court to find fault on the
specious ground that the secured creditor has not
suffered any financial loss. That such creditor had
not suffered financial loss cannot be the sole
determinative factor in view of the special law that
the SARFAESI Act is. As noted above, efforts made
by recalcitrant borrowers to stall sale proceedings
at any costs is not uncommon. Many a time, when
a sale does not fructify because of an injunction,
the time taken and efforts made together with
costs incurred by the secured creditor to put up
the secured asset (immovable property) for sale
once again and close the transaction by itself may
result in prejudicial affectation of its interest in
enforcement of the security interest. While dealing
with a case covered by rule 9 of the Rules, an
36
order of forfeiture of sale price should not be
lightly interfered. The contesting respondent was
not genuinely interested in proceeding with his
part of his obligations and we see no arbitrariness
in the action of the Authorized Officer in forfeiting
Rs. 30,75,000/- being 25% of the sale price.
29. The first question is answered accordingly.
30. Moving on to the second question, we find the
High Court to have committed an error of law in
directing refund on the ground that the Bank
“should not be permitted to enrich by forfeiting the
amount from the writ petitioner”. It is not a
question of the Bank’s enrichment or deriving any
undue advantage that the Court was really
concerned with. It seems to have posed a wrong
question for being answered.
31. The circumstances of the case make it
imperative to consider the question: when does an
enrichment or unjust enrichment occur?
37
32. Mahabir Kishore vs. State of Madhya
6
Pradesh is a decision of this Court which traced
various English decisions and ultimately laid down
the requirements of unjust enrichment as follows:
“11. The principle of unjust enrichment
requires: first, that the defendants has
been ‘enriched’ by the receipt of a
‘benefit’; secondly, that this enrichment is
‘at the expense of the plaintiffs’; and
thirdly, that the retention of the
enrichment be unjust. This justifies
restitution. Enrichment may take the form
of direct advantage to the recipient wealth
such as by the receipt of money or indirect
one for instance where inevitable expense
has been saved.”
33. In Sahakari Khand Udyog Mandal Ltd. vs.
7
CCE & Customs , this Court had the occasion to
reiterate that unjust enrichment means retention
of a benefit by a person that is unjust or
inequitable. Unjust enrichment occurs when a
person retains money or benefit which in justice,
equity and good conscience, belongs to someone
else. The doctrine of unjust enrichment, therefore,
is that no person can be allowed to enrich
inequitably at the expense of another. A right of
6
(1989) 4 SCC 1
7
(2005) 3 SCC 738
38
recovery under the doctrine of unjust enrichment
arises where retention of a benefit is considered
contrary to justice or against equity.
34. Yet again, in Indian Council for Enviro-
8
Legal Action vs. Union of India , this Court
held that a person is enriched if he has received a
benefit, and he is unjustly enriched if retention of
the benefit would be unjust.
35. In the light of guidance provided by the above
decisions, what needs to be ascertained first is
whether the Bank received or derived any benefit
or advantage by forfeiture of 25% of the sale
price. We do not think that the Bank has been
enriched, much less unjustly enriched, by reason
of the impugned forfeiture. Receipt of 25% of the
sale price by the Bank from the contesting
respondent was not the outcome of any private
negotiation or arrangement between them. It was
pursuant to a public auction, involving a process
of offer and acceptance, and it was in terms of
statutory provisions contained in the Rules,
8
(2011) 8 SCC 161
39
particularly rule 9(3), that money changed hands
for a definite purpose. Receipt of 25% of the sale
price does not constitute a benefit, a fortiori ,
retention thereof by forfeiture cannot be termed
unjust or inequitable, so as to attract the doctrine
of unjust enrichment. The Bank, as a secured
creditor, is entitled in law to enforce the security
interest and in the process to initiate all such
steps and take all such measures for protection of
public interest by recovering the public money,
lent to a borrower and who has squandered it, in a
manner authorized by law. The contesting
respondent participated in the auction well and
truly aware of the risk of having 25% of the sale
price forfeited in case of any default or failure on
his part to make payment of the balance amount
of the sale price. Question of the Bank being
enriched by a forfeiture, which is in the nature of a
statutory penalty, does not and cannot therefore
arise in the circumstances.
36. The High Court, in our considered opinion,
failed to bear in mind the settled principle of law
40
that the power of judicial review of a writ court will
not be permitted to be invoked to protect private
interest at the cost of public interest, or to decide
contractual disputes, unless a clear-cut case of
arbitrariness or mala fides or bias or irrationality is
made out. On the pleadings, this was not one such
case where the High Court should have interfered.
37. The question under consideration can also be
addressed from a different perspective. In the
present case, the Authorized Officer had adhered
to the statutory rules. If by such adherence any
amount is required to be forfeited as a
consequence, the same cannot be scrutinized
wearing the glasses of misplaced sympathy. Law is
well settled that a result flowing from a statutory
provision is never an evil and that a court has no
power to ignore that provision to relieve what it
considers a distress resulting from its operation.
The statute must, of course, be given effect to
whether a court likes the result or not. This is the
statement of law in the decision of this Court in
41
Martin Burn Ltd vs The Corporation of
9
Calcutta .
38. There being no enrichment of the Bank by
reason of the impugned forfeiture, based on our
reading of the aforesaid decisions, we answer the
second question by holding that the High Court
was not justified in exercising writ jurisdiction and
directing a refund of 25% of the sale price.
39. One of the points raised by counsel for the
Authorized Officer is that the writ petition of the
contesting respondent was not maintainable
having regard to the alternative remedy available
to him under section 17(1) of the SARFAESI Act.
The objection to the maintainability of the writ
petition has substance; but since we have
examined the questions arising for decision on its
merits, relegating the contesting respondent to the
forum under section 17(1) of the SARFAESI Act
would serve no useful purpose.
9
(1966) 1 SCR 543
42
40. For the reasons aforesaid, the impugned
judgment and order of the High Court stands set
aside and the civil appeal stands allowed. Parties
shall, however, bear their own costs.
…………………………….J
(S. RAVINDRA BHAT)
……………………………J
(DIPANKAR DATTA)
NEW DELHI;
th
10 April, 2023.
43