Auction Bidder Who Missed 15% Payment Must Challenge Rs 4.95 Lakh EMD Forfeiture Before DRT, Karnataka HC Says

The petitioner participated in an e-auction conducted on 17 July 2026 under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act), was declared a qualified bidder, and paid an earnest money deposit (EMD) of ₹4,95,000.

She did not pay the balance required to make up 25% of the bid amount on the date she was declared successful, despite being called upon to do so.

The secured creditor subsequently forfeited the EMD.

The petitioner alleged that the pendency of a suit concerning the property had not been disclosed and sought, among other reliefs, repayment of the EMD and registration of a criminal case against the relevant respondents.

The secured creditor objected that the writ petition was not maintainable because the petitioner’s remedy lay before the Debt Recovery Tribunal (DRT) under Section 17 of the SARFAESI Act.

Section 17(1) of the SARFAESI Act permits “any person” aggrieved by a measure taken by a secured creditor under Section 13(4) to apply to the DRT.

In Agarwal Tracom Pvt. Ltd. v. Punjab National Bank, (2018) 1 SCC 626, the Supreme Court held that an auction purchaser aggrieved by forfeiture of a deposit falls within “any person” and may challenge the secured creditor’s action before the DRT under Section 17(1).

The judgment also records the respondent’s contention that the forfeiture was a measure under Section 14 of the Act and should be challenged under Section 17.

The Court relied on Agarwal Tracom, which directly addressed an auction purchaser’s challenge to forfeiture and recognised Section 17(1) as the available remedy.

Applying that principle, the Court held that the petitioner could pursue remedies under the SARFAESI Act rather than maintain the writ petition.

It did not decide the merits of the petitioner’s allegation concerning nondisclosure of the pending suit or the legality of the forfeiture.

The dismissal was without prejudice to the petitioner availing herself of remedies available under the Act.