MANU/DR/0422/2020

BEFORE THE DEBTS RECOVERY TRIBUNAL

BANGALORE
T.S.A. No. 4/2019
Decided On: 29.01.2020
Appellants: Gobal Emerging Market India Limited
Vs.
Respondent: Housing and Urban Development Corporation Limited
Hon'ble Judges/Coram:
K. Ravindran Nair, (Presiding Officer)
Counsels:
For Appellant/Petitioner/Plaintiff: AKS Law Associates
For Respondents/Defendant: Dua Associates
Case Note:
Banking - Refund - Earnest Money Deposit - Section 17, Rule 9(3) of
Securitisation and Reconstruction of Financial Assets and Enforcement of
Security Interest Act, 2002 (SARFAESI Act) - Present application under
Section 17 r/w Rule 9(3) of SARFAESI Act seeking direction to Respondent
bank to refund Appellant Earnest Money Deposit (EMD) amount of Rs.
3,00,00,000/- - Whether Applicant has made out the case to allow appeal -
Held, Applicant failed to comply with terms of sale which particularly
specified that successful bidder was required to deposit balance of 25% of
sale price immediately - Thus, EMD forfeited by Respondent-bank was in
accordance with terms and conditions of e-auction notice - Thus, Applicant
has not made out case to allow appeal - Appeal dismissed. [14], [15]
ORDER
K. Ravindran Nair, (Presiding Officer)
1. The present SA has been filed by a third party i.e. auction purchaser (hereinafter
referred to as appellant/applicant) under Section 17 r/w. Rule 9(3) of the
Securitisation and Reconstruction of Financial Assets and Enforcement of Security
Interest Act, 2002 (in short the 'SARFAESI Act') seeking to set aside letter 7.5.2014
(Annexure 'H') issued by respondent and seeking direction to respondent bank to
confirm the sale in favour of appellant or in alternative direct the respondent bank to
refund to the appellant EMD amount of Rs. 3,00,00,000/- deposited with respondent
bank on 2.5.2014 along with interest @ 36% p.a. from the date of deposit.
2 . It is the case of the Applicant company that is engaged in the business of
investments in Hotel industry, setting up of hotels and other allied activities in India
and abroad. It is stated that over the schedule property in question, a hotel in the
name and style M/s. Vikat Hotels Pvt. Ltd. was being run. Respondent bank had
issued a public auction notice dated 26.03.2014 inviting bid for auction in respect to
the schedule property in question. The Applicant evinced its interest in purchasing the
schedule property and accordingly mobilized the required funds by borrowing from
family and friends and also from financial institution to participate in the e-auction

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for purchase of the schedule property for the purposes of setting up a hotel.
Accordingly in terms of the auction sale, the appellant deposited an earnest amount
of Rs. 3,00,00,000/- on 02.05.2014. Said e-auction was held on 05.05.2014 and
applicant was the successful bidder and the bid was valued at Rs. 30,10,00,000/-. It
is stated that on 06.05.2014, Respondent bank addressed a letter which was also sent
by e-mail of Applicant to deposit a sum in addition to the EMD which would thereby
constitute 25% of the sale price after adjusting the amount of Rs. 3 crore already
paid as EMD. Copy of the said letter is produced at Annexure C. It is stated that
Applicant was and is ready and willing to deposit the balance amount i.e. Rs.
4,52,50,000/-. When things stood thus, the Applicant and Respondent bank received
a notice dated 07.05.2014 raising various issues and bringing to the notice of
Applicant and Respondent about the pendency of the suit in O.S. No. 3603/2010 with
regard to the schedule property. Copy of said notice is produced at Annexure 'E'. Said
notice also brought out the issue on the license/statutory requirements not complied
by the owners. Thereupon appellant immediately addressed a letter to the
Respondent bank on 07.05.2014 seeking full information and particulars concerned to
the legal notice. It was also brought to the notice of Respondent bank about the non-
disclosure of the material information about the e-auction under Rule 6(f) of the
SARFAESI Act. Copy of letter dated 07.05.2014 written to Respondent bank is
produced at Annexure 'P. Instead of responding to said letter, Respondent bank kept
mute and on 13.05.2014 Applicant received a caveat from respondent bank. Copy of
said caveat is produced at Annexure 'G'. It is stated that when the Applicant is ready
and willing to deposit the balance amount, it is the duty of the Respondent bank to
clarify about the details sought under the letter of Applicant dated 07.05.2014. It is
alleged that bank has not disclosed complete material particulars on the nature of the
title of property and failure to do so would be interpreted as breach of statutory duty
by the bank. It is pleaded that Applicant has reliably learnt that to defeat the valuable
right of Applicant, bank is proposing to re-auction and respondent bank is also
proposing to forfeit the EMD deposited by the appellant. Hence the appellant is
seeking a direction from the Hon'ble Tribunal to Respondent bank to clarify the
details sought by the Applicant by his letter dated 07.05.2014 and thereafter accept
the balance auction amount and issue a sale certificate in favour of the Applicant. On
14.05.2014, the Applicant received letter dated 07.05.2014 purportedly forfeiting the
EMD amount of Rs. 3,00,00,000/- without giving an opportunity of paying the
money. Copy of the said letter is produced at Annexure 'H'. Appellant being aggrieved
by the impugned letter dated 07.05.2014 has filed the present appeal on the
following grounds:
(i) When the Applicant is ready and willing to deposit the balance amount, it
is incumbent on the bank to clarify the Applicant as to why material facts
have been suppressed to the Applicant in the public notice and why no
response is given to the appellant about the details sought under letter dated
07.05.2014.
(ii) Rule 9 does not contemplate forfeiture of earnest money. To defeat the
valuable right of the Applicant, the Respondent bank is proposing to re-
auction and respondent bank is also proposing to forfeit the EMD.
(iii) Respondent bank has suppressed the fact of pendency of suit in respect
to schedule property and respondent bank is duty bound to disclose all the
information which are material for the applicant to know in order to judge
the nature and value of the secured assets.

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 (iv) Respondent bank has not given the appellant an opportunity to pay the
balance money and has unilaterally forfeited the money of Rs. 3,00,00,000/-
in a manner not known to law.
3 . In view of the above-referred grounds urged, Applicant pleads for allowing the
present appeal and granting the reliefs sought.
4 . In support of present S.A., Applicant has produced copy of the above-referred
documents annexed to the appeal memo as Annexures 'A' to 'H'.
5. In response to the notice, the Respondent bank appeared through its counsel and
filed its objection, inter alia, contending that, it published public auction notice dated
27.01.2014 in the newspapers Time of India' and 'Kannada Prabha' notifying the
auction to be held on 06.03.2014 as per the rules of sales under SARFAESI Act
inviting bid for e-auction of the schedule property in question. Subsequently the e-
auction was extended upto 26.03.2014 and for notifying the extension, short
advertisements were published dated 06.03.2014 in 'Hindu' and another short
advertisement was published on 16.03.2014 in Times of India'. The e-auction was yet
again extended upto 05.05.2014 and short advertisement relating to the same was
published on 26.03.2014 in 'Hindu' newspaper. Extension of e-auction dates were
also published on the e-auction portal as per the provision and requirement under
Clause 12 of the terms and conditions of e-auction notice. However, the same were
also published in the newspaper for additional information even though it was not
mandatory requirement where the extension of e-auction date is involved without
change in the terms and conditions like reserve price, EMD, etc. Respondent bank had
clearly mentioned in the aforesaid sale notice that the schedule property is being sold
on 'as is where is' basis and 'as is what is' basis. A pre-condition to participate in the
auction was that all the proposed bidders had to deposit an amount equal to 10%
reserve price towards EMD. The appellant pursuant to this had deposited EMD of said
sum on 2.5.2014 and thereafter the e-auction was held on 05.05.2014 and the
appellant was declared as the successful bidder. Copy of the email sent to the
appellant by the respondent declaring them to be the successful bidder is produced
as document No. R3. As per the terms and conditions of e-auction sale notice, the
successful bidder was required to deposit 25% of the sale price less EMD amount
already paid immediately after confirmation of sale as contemplated under relevant
clause 9 of the terms and conditions of e-auction sale notice. The appellant was thus
liable to deposit 25% of the sale price immediately after the confirmation of sale i.e.
immediately on receipt of the email dated 05.05.2014 sent by respondent to the
appellant. But however, appellant defaulted in making such payment and the
respondent by way of letter dated 06.05.2014 which was also sent by way of email
on the same day, was constrained to call upon the Applicant to deposit the 25% of
the sale price after adjusting the EMD immediately. On account of this delay and
default by the Applicant in making a payment of 25% of the sale price after adjusting
the EMD despite repeated reminders, the Respondent has proceeded to forfeit the
EMD deposited by the Applicant in accordance with the terms and conditions of e-
auction sale notice. However, to its surprise on the same date 07.05.2014, the
respondent bank has received a notice from a firm called Dharma Law partners
calling upon it to withdraw the confirmation of sale and return the EMD to the
appellant. Respondent bank was surprised to receive the said notice because, it was
silent as to on whose behalf the said notice had been issued. Further on the same
date, the Respondent received a letter from the appellant stating that it was ready
and willing to complete the transaction by payment of the remaining amounts subject
to the clarification of certain issues raised by the appellant vide their letter dated

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07.05.2014. However despite the offer of Applicant to complete the transaction, the
appellant has failed to make any payments let alone the 25% of the sale price which
was to be deposited with the Respondent immediately upon confirmation of sale. It is
contended that Applicant was provided with sufficient time in order to deposit the
required amount but has failed to do so and has instead sent a conditional letter
dated 07.05.20.14 raising certain issues and seeking response from bank before
making further payment of balance 25% of the sale price. Appellant was well aware
of the terms and conditions of the e-auction and further the Respondent bank has
made prior arrangements to provide sufficient opportunity to inspect both the
documents and the premises. Moreover it is also contemplated that no prospective
buyer/investor will invest such a huge amount of Rs. 30.10 crore without carrying out
their own assessment/inspect of property/valuation/due diligence, etc. The Applicant
cannot raise any issues and clarifications at this stage as it was the duty of the
Applicant to verify/inquire into all the details of the property being purchased.
Further it is stated that during the said verification of documents by the prospective
parties, all the details related to the property have been informed including
background of the project, all statutory approvals, CMM Court permission for taking
over possession of the property, panchanama, inventory carried out at the time of
taking over of physical possession of the property. The respondent bank did not
suppress any fact as alleged by the appellant It is ultimately contended that
Respondent bank has provided sufficient time to the Applicant in order to deposit the
required amount but the Applicant failed to do so. Under these circumstances, the
Respondent being a Government of India Undertaking has to follow the laid down
procedures and as per the same Respondent is entitled to forfeit the deposit and
further re-auction the schedule property. In view of what has been stated above, the
Respondent Bank has prayed for the dismissal of the appeal with exemplary costs, in
the interest of justice and equity.
6 . In support of its objection statement, Respondent bank has produced copy of
Board Resolution, copies of public auction notices, copy of e-mail sent by
Respondent, copy of letter issued by Respondent, corrected copy of the Annexure-A
submitted by Applicant and copy of declaration of bidder(s).
7 . On the above background, I have gone through the records and heard the
arguments advanced by Learned Counsels appearing for both sides and written
submission filed by the Applicant and the following points arise for my consideration:
a) Whether the Applicant has made out the case to allow the appeal? and
b) To what relief, the parties are entitled?
REASONS
8 . The Applicant is a third party who participated in the e-auction of the schedule
property held on 05.05.2014 in which the Applicant was declared as successful bidder
for bid value at Rs. 30.10 crore. The Applicant approached this Tribunal by filing the
S.A. No. 286/2014 for quashing and setting aside the letter dated 07.05.2014 issued
by Respondent and produced vide Annexure-H. By the impugned letter the
Respondent advised the Applicant that upon failure of payment of balance amount of
Rs. 4,52,50,000/- which was required to be paid immediately by the Applicant after
the auction on 05.05.2014, as per the terms and conditions of e-auction, the amount
of Rs. 3.00 crore paid by the Applicant by way of EMD stood forfeited. This Tribunal
(my Learned predecessor) after considering the appeal and the objections filed by the

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Respondent and records of the case dismissed the said S.A. No. 286/2014 vide its
order dated 31.03.2015, holding that the appeal filed under Section 17 does not
survive in the light of principles laid down by the Hon'ble High Court of Karnataka
(Division Bench) by order dated 04.12.2013 in R.F.A. No. 2102/2011 holding that
cases like the present appeal pertaining to the right of auction purchaser regarding
refund of bid amount or otherwise civil suit lies, but not an appeal under Section 17
of the SARFAESI Act. The law has since been settled by Hon'ble Supreme Court in the
case of Agarwal Tracom Private Limited Vs. Punjab National Bank, permitting the
aggrieved auction purchaser to file appeal under Section 17 before DRT. In the
meantime, the Applicant filed Writ Petition No. 16016/2015 before the Hon'ble High
Court of Karnataka praying to set aside the order dated 31.03.2015 in S.A. No.
286/2014 and for a direction to the Tribunal to re-hear the said S.A. No. 286/2014 or
in the alternative to allow the application of the Petitioner. The Hon'ble High Court
passed an interim order on 16.06.2016. Aggrieved of the interim order passed by the
Learned Single Judge, the Respondent approached the Hon'ble Division Bench of
Hon'ble High Court and the Hon'ble Division Bench vacated the ad interim order
passed by the Learned Single Judge. Being aggrieved the Applicant approached the
Hon'ble Supreme Court by filing Civil Appeal No. 97-98/2018 which was disposed by
the Hon'ble Supreme Court vide order dated 09.01.2018 by which the interim order
granted by the Learned Single Judge was restored and further directed the Hon'ble
High Court of Karnataka to dispose of the Writ Petition expeditiously. The Hon'ble
High Court relegated the Petitioner for adjudicating the grievance of the Petitioner by
this Tribunal on merits. The Hon'ble High Court has, therefore, quashed the order
passed by this Tribunal on 31.03.2015 and directed this Tribunal to decide the
application filed by the Applicant afresh after affording an opportunity of hearing the
parties by a speaking order within a period of three months from the date of certified
copy of the order. Consequently, the Applicant has filed a memo with a copy of the
order dated 08.04.2019 of the Hon'ble High Court in W.P. No. 16016/2015 for
compliance of the direction of the Hon'ble High Court by hearing the parties afresh.
Subsequently, both the sides appeared before this Tribunal through their respective
counsels and sought time for exploring a settlement inter se and at the request of
both the sides, sufficient time was granted for both sides/to arrive at a settlement of
the disputes by mutual negotiation as also observed by the Hon'ble High Court. As
the parties could not settle their disputes amicably by mutual negotiation after
availing sufficient time, the matter was thereafter taken up for hearing when Counsels
for both sides advanced arguments.
9. The facts of the dispute between the parties are that the Respondent who had to
recover substantial dues from its borrower-Vikat Hotels Private Limited had initiated
enforcement of security interest against the schedule property and the schedule
property was brought to sale on 05.05.2014. The Respondent Bank issued public
notice on 26.03.2014 for sale of schedule property on "AS IS WHERE IS" and "AS IS
WHAT IS" basis and as per the Condition No. 1, the bidders were required to make
independent inquiries regarding encumbrances, title of the property, etc. The last
date for submission of EMD was 02.05.2014 and as per the Condition No. 9 of the e-
auction notice 25% of the sale price was required to be deposited immediately on
acceptance of bid. The Applicant deposited EMD of Rs. 3.00 crore on 02.05.2014 and
was the successful bidder in e-auction held on 05.05.2014 for Rs. 30.1 crore. On the
same day, the Respondent sent e-mail to the Applicant informing that the Applicant
was the successful bidder and requiring the Applicant to deposit the balance amount
of Rs. 4,52,50,000/- immediately. The Respondent sent another letter dated
06.05.2014 to the Applicant informing that the Applicant was successful bidder and
required to deposit the said amount of Rs. 4,52,50,000/- immediately. In the

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meantime, a legal notice dated 07.05.2014 was sent to the Respondent as well as the
Applicant, calling upon the Respondent to withdraw confirmation of sale and return
EMD to the Applicant. The legal notice sent through Advocate Dharma Law Partners
and produced vide Annexure-E to the application was addressed to both Respondent
and Applicant and the notice did not reveal on whose behalf the said notice was
issued. The Applicant also issued a letter to the Respondent on the same date which
is produced vide Annexure-F referring to the legal notice received by the Applicant
and also to the e-mail dated 05.05.2014 confirming the bid of the Applicant in the
caption. In the said letter addressed to the Respondent and drawing the attention of
the Authorized Officer, the Applicant requested the Respondent to apprise them about
Commencement Certificate issued by the BBMP; Occupation Certificate issued by the
BBMP; mahazar or panchnama of the physical possession taken of the hotel; whether
the Applicant could inspect the hotel if Respondent is in physical possession; whether
there was any agreement entered into between the Respondent and borrower-Vikat
Hotels Private Limited appointing the borrower as manager; whether valuation of the
property was taken through an approved valuer as per Rule 8(5) of the Security
Interest (Enforcement) Rules, 2002; Whether the Respondent issued public notice
with regard to e-auction in English daily and in vernacular daily and why the
Respondent did not disclose the pendency of the suit in O.S. No. 3603/2010 in the
sale notice; whether the Respondent is named as Defendant, etc. The Applicant in the
said letter further stated that the property cannot be registered with the jurisdictional
Sub-Registrar until and unless there is a proper commencement certificate and
occupation certificate and therefore these material facts should have been informed in
e-auction sale notice, etc. It was further stated in the said letter that as per the terms
and conditions of the e-auction sale notice and as per the Rule 9 of the SIE Rules,
Applicant is ready and willing to deposit the balance 15% amounting to Rs.
4,52,50,000/- in order to complete Applicant's part of the transaction and the
Respondent as a Government of India Undertaking however would agree with the
aforesaid facts and circumstances and will not be confronting the Applicant as the
Applicant is a bona fide purchaser for value. On the same day i.e. 07.05.2014 vide
Annexure-E, the Respondent sent a letter to the Applicant stating that they have
forfeited the EMD of Rs. 3.00 crore. The Respondent filed a caveat before this
Tribunal stating that the Applicant failed to arrange balance sale consideration. The
Applicant filed application under Section 17 of the SARFAESI Act on 15.05.2014 for
quashing and setting aside of the impugned letter dated 07.05.2014 or in the
alternative direct the Respondent to confirm the sale in favour of Applicant as per
Rule 9(4) and to execute certificate of sale as per Rule 9(6) and after satisfying the
Applicant with regard to queries raised in the notice dated 07.05.2014 as per
Annexure-F or in the alternative direct the Respondent Bank to refund the Applicant
the EMD of Rs. 3.00 crore deposited on 02.05.2014 along with interest @ 36% p.a.
from the date of the deposit. The Learned Counsels appearing for both sides have
advanced elaborate arguments to support the contentions of both the sides. The short
question to be examined in the present appeal is:
"Whether the forfeiture of EMD done by the Respondent on 07.05.2014 is in
accordance with law having regard to the provisions of the Act and rules as
well as e-auction sale notice dated 26.03.2014?"
Annexure-A is public notice of e-auction sale of movable and immovable properties
produced by Applicant whereby properties were offered to sale on "AS IS WHERE IS"
basis and "AS IS WHAT IS" basis for realization of the Respondent's dues recoverable
from the borrower. The description of the properties with name of the owner of the
property i.e. the borrower and details of property, outstanding amount, demand

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notice date, reserve price, date and time of e-auction are given in a tabular form in
the sale notice. The terms and conditions are also given in the sale notice where it is
stated that e-auction is being held on "AS IS WHERE IS" and "AS IS WHAT IS" basis.
Condition No. 1 of the terms and conditions states that,
"To the best of knowledge and information of the Authorized Officer, there is
no encumbrance on the property. However, the intending bidders should
make their own independent inquiries regarding the encumbrances, title of
property(ies) put on auction and claims/rights/dues/affecting the property,
prior to submitting their bid. The e-auction advertisement does not constitute
and will not be deemed to constitute any commitment or any representation
of the HUDCO. The property is being sold with all the existing and future
encumbrances whether known or unknown to the HUDCO. The Authorized
Officer/Secured Creditor shall not be responsible in any way for any third
party claims/rights/dues."
Condition No. 2 of the terms and conditions states that,
"It shall be the responsibility of the bidders to inspect and satisfy themselves
about the asset and specification before submitting their Bid. The inspection
of property(ies) put on auction will be permitted to interested bidders at sites
from 10:00 AM to 5:00 PM from date of publication to last date of Bid
Documents."
Condition No. 9 of the terms and conditions states that,
"The Earnest Money Deposit (EMD) of the successful bidder shall be retained
towards part sale consideration and the EMD of unsuccessful shall be
refunded. The EMD shall not bear any interest. The successful bidder shall
have to deposit 25% of the sale price, adjusting the EMD already paid,
immediately after the acceptance of bid price by the Authorized Officer. In
case of default in payment by the successful bidder, the amount already
deposited by such bidder shall be forfeited and property shall be put to re-
auction and the defaulting borrower shall have no claim/right in respect of
property/already deposited amount"
Condition No. 13 of the terms and conditions states that,
"The Bidders are advised to go through the detailed terms and conditions of
e-auction process available on the web portal of M/s. CI India Pvt. Ltd.
Before submitting their bids and taking part in the e-auction."
10. The e-auction also contains various other terms and conditions which are not
relevant for consideration of the dispute which is raised herein and therefore are not
being discussed in detail. It is clear from the e-auction notice and terms and
conditions that the Respondent had given mandatory notice as required under the
provisions of the Act which is also not disputed by the Applicant herein. The terms
and conditions of e-auction clearly state that the properties being sold is "AS IS
WHERE IS" and "AS IS WHAT IS" basis and the intending bidders were advised to
make their own independent inquiries regarding encumbrances, title of the
property(ies) put on auction and claims/rights/dues/affecting the property, prior to
submitting their bid vide terms and conditions No. 1. It was further re-iterated by
terms and conditions No. 2 that it shall be the responsibility of the bidders to inspect

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and satisfy themselves about the asset and specification before submitting their bid
and it was also made clear that the inspection of the property put on auction will be
permitted from the date of publication in the newspapers till the last date of Bid
Documents are submitted. Therefore, this Tribunal observes that the Respondent
Bank had made it abundantly clear about the terms and conditions of the sale of the
secured asset in which the Applicant participated and was successful bidder on
05.05.2014. Is is also observed that the Applicant was advised of its being the
successful bidder on 05.05.2014 as well as on 06.05.2014 by way of e-mail and
letter. The terms and conditions clearly spelt out that the successful bidder is
required to make 25% of the sale price immediately after acceptance of the bid price
by the Authorized Officer vide Condition No. 9. Thus, it was made clear to the
Applicant in the auction notice that the Applicant is under obligation to comply with
the said Condition No. 9 by paying the balance of 25% i.e. Rs. 4,52,50,000/- as also
advised by the Respondent to the Applicant on 05.05.2014 by e-mail and again on
06.05.2014 by way of letter. The Applicant instead of complying with the above
requirement which was mandated as per the auction notice, relied on a lawyer's
notice which was not revealing at whose behest the same was issued, but it was
strangely addressed to both the Applicant and the Respondent raising various aspects
and various requirements and called upon the Respondent to comply with those
various requirements by issuing a letter on the same date i.e. 07.05.2014. A
conjoined reading of the communication of the lawyer's notice and the letter
addressed by the Applicant to the Respondent would show that the said lawyer's
notice was used as a reason for non-compliance of the Condition No. 9 which was a
mandatory requirement as per the e-auction notice. The Respondent has, therefore,
forfeited the EMD on the same date by the issuance of letter to the Applicant in terms
of Clause-(9) which clearly states that, "In case of default in payment by the
successful bidder, the amount already deposited by such bidder shall be forfeited and
property shall be put to re-auction and the defaulting borrower shall have no
claim/right in respect of property/already deposited amount." The Learned Counsel
who appeared for the Applicant has strenuously argued that the client is based in
Delhi and required sufficient time to comply with the requirement under Condition
No. 9, which did not state specific time except that the balance which constituted for
25% of the sale price was to be paid immediately, etc. He has also relied on the SIE
Rules, as it stood then prior to amendment when the auction took place and therefore
it is relevant to refer to Rule 9 of Security Interest (Enforcement) Rules, 2002, as it
stood during the notification of e-auction notice, Rule 9(3) states that, "On every sale
of immovable property, the purchaser shall pay immediately 25% of the amount of
sale price to the Authorized Officer conducting the sale and in default of such deposit,
the property shall invariably be sold again. Rule 9(4) states that the balance amount
of purchase price shall be paid by the purchaser to the Authorized Officer on or
before fifteenth day of confirmation of sale of the immovable property or such
extended period as may be agreed upon in writing between the parties. In any case,
Rule 9(4) is not relevant for consideration of the present appeal. Rule 9(5) states
that, in default of payment within the period mentioned in sub-rule (4), the deposit
shall be forfeited and the property shall be resold and the defaulting purchaser shall
forfeit all claims to the property or to any dart of the sum for which it may be
subsequently sold. Rule 9(3) was amended subsequently by amendment in 2016
when the word "immediately" was given a meaning i.e. on the same day or not later
than the next working day as the case may be for depositing balance of 25% of sale
price including the Earnest Money Deposit. Thus, it is clear that the amendment made
was more for clarification and intention is conspicuous and clear that the auction
purchaser is required to pay the balance of 25% of the sale price after adjusting 10%

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of the EMD on the same day prior to amendment and in any case not later than the
next working day. As the sale in the instant case has taken place on 05.05.2014 prior
to amendment as it stood then the said rule, the auction purchaser who is the
Applicant herein was under obligation to pay the balance of 25% on the same day or
at least the next working day i.e. 06.05.2014. Considering the above contentions of
the Applicant herein, that it was not granted time for payment before its forfeiture of
EMD on 07.05.2014 by the Respondent, it is clear that the Respondent has given time
upto 06.05.2014 for compliance of Condition No. 9 and it is only on 07.05.2014
when a notice was received from an anonymous through a lawyer on which also the
Applicant has placed reliance and called for more details and requirements, the
Respondent has cancelled the sale and forfeited the amount as per Condition No. 9.
11. Learned Counsel for Applicant has relied on the following citations to support its
contention raised in the appeal:
i) Maula Bux Vs. Union of India [MANU/SC/0081/1969 : AIR 1970 SC 1955]
This ruling pertains to sale of goods and pertains to Sale of Goods Act and
Contract Act in which earnest money deposited by the contractor as security
was under the consideration of Hon'ble Apex Court. This ruling stands at
different and distinct footings from the facts of the present appeal and
therefore cannot be applicable to the present case.
ii) Haryana Financial Corporation and others Vs. Rajesh Gupta
[MANU/SC/1892/2009]
This ruling deals with regard to refund of amount illegally forfeited, along
with interest. Facts of this ruling are distinct from the facts of the present
appeal as in the aforesaid case, Appellant-Corporation failed to disclose to
the Respondent the material defect about the non-existence of independent
passage to the property. In the instant case, there is no such failure on the
part of the Respondent in disclosing such material information pertaining to
the schedule property. On the contrary, as already stated supra, the
Respondent has notified vide terms and conditions No. 1 and 2 stating that
the property being sold is "AS IS WHERE IS" and "AS IS WHAT IS" basis and
the intending bidders were advised to make their own independent inquiries
regarding encumbrances, title of the property(ies) put to auction and
claims/rights/dues/affecting the property, prior to submitting their bid vide
terms and conditions No. 1. It was further reiterated by terms and conditions
No. 2 that it shall be the responsibility of the bidders to inspect and satisfy
themselves about the asset and specification before submitting their bid and
it was also made clear that the inspection of the property put on auction will
be permitted from the date of publication in the newspapers till the last date
of Bid Documents are submitted. Thus this ruling will not come to the help of
Applicant.
iii) E. Ali Vs. Syndicate Bank and others [MANU/KA/1220/2015]
The facts of this case relied on by the Applicant are that the refund of 25% of
bid amount was sought as secured creditor has not taken physical possession
of the property though it was in the possession of the borrower and the
auction purchaser was the highest bidder and the sale was confirmed in his
favour and he deposited 25% of the amount bid amount. Property in question
was not vacant and was occupied by some persons, Petitioner was insisting

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for assurance for handing over vacant possession of the premises at the time
of execution of sale and the bank informed the Petitioner that the amount
deposited by auction purchaser stands forfeited, but no further
communication would be entertained. Bank received full amount under OTS
scheme from the borrower and the matter was settled with borrower by bank.
Advertisement itself being defective - advertisement should have
communicated the status relating to possession of property - further
statutory provisions do not authorize the bank to sell the property without
taking possession from the borrower etc. The law with respect to sale of
property without physical possession has since been settled by the Hon'ble
Supreme Court of India in the case of ITC Limited vs. Blue Coast Hotels
Limited where the Hon'ble Supreme Court upheld the sale/auction of the
property without taking physical possession. Further in the present case as
per the e-auction notice, the possession has been taken by the Respondent
and hence the ratio of this judgment is also not helping the case of the
Applicant herein as the facts are not similar.
iv) V. Sambandan Vs. Punjab National Bank and another
[MANU/TN/0057/2017]
In this case, it was held that the bank could not shirk their duty to hand over
possession to auction purchaser. Ratio of this judgment will not come to the
rescue of the contention of the Applicant in view of the judgment of the
Hon'ble Apex Court in ITC Limited vs. Blue Coast Hotels Limited as stated
supra.
v) Sri Siddeshwara Co-operative Bank Ltd. and another Vs. Sri Ikbal and
others [MANU/SC/0856/2013]
Facts of the case are that the Petitioner borrower challenged issuance of sale
certificate to auction purchaser and hence the ratio of this judgment cannot
be applied to the case of the Applicant
vi) Balraj Taneja and others Vs. Sunil Madan and another
MANU/SC/0551/1999 : (1999) 8 SCC 396
Its observed that the facts of this judgment are totally not applicable to the
facts of the present case and hence the Applicant cannot avail of the ratio
laid down in the said judgment.
vii) ICICI Bank Limited, CMA Group Vs. P. Veerendar Chordia
[MANU/TN/3790/2010]
Facts of the said ruling consist of sale by private treaty. Therefore this ruling
is not applicable to the present case.
viii) Janatha Textiles and others Vs. Tax Recovery Officer and others
[MANU/SC/2670/2008]
The question which arise for consideration in this case was whether I.T.
Department is justified in auctioning the attached property for recovery of
debt. Facts of this case are found to be distinct from the facts of the case of
the Applicant and therefore ratio of this judgment will not have any
application for the Applicant's case.

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12. Per contra, the Learned Counsel for Respondent relied on the following citations:
(i) Ruling of the Hon'ble Apex Court in National Highways Authority of India
Vs. Ganga Enterprises and another [(MANU/SC/0665/2003 : 2003) SC 3823]
wherein in para-8; it was held as under:
"In our view, the High Court fell in error in so holding. By invoking
the Bank guarantee and/or enforcing the bid security there is no
statutory right, exercise of which was being fettered. There is no
term in the contract which is contrary to the provisions of the Indian
Contract Act. The Indian Contract Act merely provides that a person
can withdraw his offer before its acceptance. But withdrawal of an
offer, before. It is accepted is a completely different aspect from
forfeiture of earnest/security money which has been given for a
particular purpose. A person may have a right to withdraw his offer
but if he has made his offer on a condition that some earnest money
will be forfeited for not entering into contract or if some act is not
performed, then even though he may have a right to withdraw his
offer, he has no right to claim that the earnest/security be returned
to him. Forfeiture of such earnest/security, in no way, affects any
statutory right under the Indian Contract Act. Such earnest/security
is given and taken to ensure that a contract comes into existence. It
would be an anomalous situation that a person who, by his own
conduct, precludes the coming into existence of the contract is then
given advantage or benefit of his own wrong by not allowing
forfeiture. It must be remembered that, particularly in
Government contracts, such a term is always included in
order to ensure that only a genuine party makes a bid. If
such a term was not there even a person who does not have
the capacity or a person who has no intention of entering
into the contract will make a bid. The whole purpose of such
a clause i.e. to see that only genuine bids are received would
be lost if forfeiture was not permitted."
(emphasis supplied)
Thus, the ratio of this judgment is found to be applicable to the facts of the
present case as the Hon'ble Supreme Court in the aforesaid judgment held
that when earnest money/security is given and taken to ensure that a
contract comes into existence, it would be an anomalous situation that a
person who, by his own conduct, precludes the coming into existence of the
contract is then given advantage or benefit of his own wrong by not allowing
forfeiture. It was further held that it must be remembered that, particularly in
Government contract, such a term is always included in order to ensure that
only a genuine party makes a bid. If such a term was not there even a person
who does not have the capacity or a person who has no intention of entering
into the contact will make a bid. The whole purpose of such a clause i.e. to
see that only genuine bids are received would be lost if forfeiture was not
permitted. Thus forfeiture of earnest money was held to be valid in the
aforesaid judgment of Hon'ble Supreme Court.
(ii) Sujit Dasgupta Vs. State Bank of India [MANU/WB/0774/2015]
The facts of this case relied by the Learned Counsel for the Respondent are

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 that the petition was filed by the unsuccessful bidder in an auction sale
conducted by the Respondent Bank under the provisions of SARFAESI Act.
Pursuant to taking physical possession of the secured assets, the bank issued
public notice of sale of secured assets on "AS IS WHERE IS" basis and "AS IS
WHAT IS" basis. The Petitioner deposited earnest money and participated in
the said auction and after being declared the higher bidder, was called upon
to deposit 25% of the sale amount in terms of the Clause 10 of the public
notice. The Petitioner failed and neglected to do so and accordingly the
Respondent Bank forfeited the earnest amount. Such action of the
Respondent Bank was challenged in the Writ Petition. It was the contention
of the Petitioner that the Petitioner did not deposit the earnest amount in as
much as the bank was unable to furnish relevant documents relating to the
secured assets which was put on sale. The Petitioner contended that the
certified document relating to the property like Municipal sanctioned building
plan, B.L. & L.R.O. Tax receipt and parcha were not provided by the bank and
it was the duty of the bank to satisfy the intending purchaser as to the title of
the property notwithstanding the notice which referred to sale being "as is
where is" basis. Reliance was also placed on Haryana Financial Corporation
Vs. Rajesh Gupta reported in MANU/SC/1892/2009 : (2010) 1 SCC 655 and
Mathew Varghese Vs. M. Amritha Kumar reported in MANU/SC/0114/2014 :
(2014) 5 SCC 610, particularly paras 32 and 33 in support of said contention.
The Learned Counsel for the Petitioner resisted such contention and prayer
on the premise that the Petitioner was fully aware as to the status of the
property and thereafter entered into the bidding process. He further
submitted that the documents were otherwise available to the intending
purchaser and the said plea was only raised as a bogey when he failed to
make the requisite deposit within the stipulated time frame notwithstanding
repeated notices issued to him in that regard. The Hon'ble High Court on
considering the above submission and materials on record dismissed the Writ
Petition holding that the action of the Respondent Bank in forfeiting the
secured deposit was in terms of Clause 10 of the auction notice and therefore
is unexceptionable.
It is observed that the facts of the above case and present appeal are exactly
identical and therefore ratio of the above judgment of Hon'ble High Court,
Calcutta would have direct application to the present appeal. Thus forfeiture
of earnest money by the Respondent in the present case will gain support
from the above judgment of the Hon'ble High Court of Calcutta as canvassed
by the Learned Counsel for Respondent.
13. Thus, on considering the facts of the case and also records of the case and the
citations relied on by the rival parties, this Tribunal is of the considered view that the
earnest money was rightfully appropriated by the Respondent Bank when the
Applicant failed to comply with the terms and conditions of the sale which particularly
specified that the successful bidder was required to deposit the balance of 25% of the
sale price immediately. As the sale took place on 05.05.2014 which is an undisputed
fact by both sides, the Applicant should have deposited the balance of 25% of sale
price after adjusting the EMD of Rs. 3.00 crore. In any case, even applying the
interpretation of the word "immediately" which was given effect in the subsequent
amendment which was carried out in 2016, it is made clear in the amended Rule 9(3)
that the purchaser was immediately on the same day or not later than next working
day as the case may be pay a deposit of 25% of the amount of sale price which is

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inclusive of the earnest money deposit to the Authorized Officer conducting the sale
and in the default of such deposit, the property shall be sold again. Thus, in the
instant case, the auction purchaser has failed to pay the balance of 25% of sale price
either on 05.05.2014 or on 06.05.2014 and the Respondent has addressed an e-mail
and letter on both these dates, which has also been fairly admitted by the Applicant,
requiring the Applicant to deposit the said amount. It is further observed that it is
only after a notice from a lawyer without revealing on whose behalf he has addressed
such a notice issued to both the Respondent and the Applicant requiring the
Respondent to withdraw the confirmation of sale on various grounds and reasons and
the Applicant also, pursuant to the said notice issued on behalf of anonymous person
also asked for further documents and details as listed supra, the Respondent has
gone ahead and forfeited the earnest money by addressing a letter on the same day
to the Applicant herein. The Learned Counsel for Applicant has persistently contended
that the Applicant being in Delhi required time to comply with for payment of balance
25% as it is in a faraway place. This has been vehemently refuted by the Learned
Counsel for Respondent Bank stating that it is not difficult to remit balance sale
consideration by RTGS or online transfer in these days when the sale took place and
the distance between the Applicant and the Respondent is not a factor which has
caused nonpayment of balance 25%. In any case, the Applicant herein while agreeing
to the terms and conditions, it participated in the auction and it was under an
obligation to comply with the condition for payment of the balance 25% immediately
in any case within the next working day. It is not the case that the EMD was
deposited without affording opportunity to pay the balance amount at least on the
next working day i.e. 06.05.2014.
1 4 . The Applicant has also vide its letter dated 07.05.2014 addressed to the
Respondent and produced vide Annexure-F has admitted confirmation of bid in
Applicant's favour vide Sl. No. 3 of the caption "(3) Your mail dated 5th May
2014 confirming our bid." (emphasis supplied). Thus, it is also not the case of the
Applicant that Applicant is not aware about the confirmation of the sale or bid of the
Applicant which is admitted by the Applicant vide Annexure-F. The Applicant has
produced vide Annexure-D copy of certificate dated 15.05.2014 of Syndicate Bank,
certifying that there is a credit balance of Rs. 4,53,28,633.70 at 2.00 p.m. on 15th
May 2014 in the Current Account No. 90171010008283 of the Applicant with the said
bank and stating that, "This certificate is issued at the specific request of the party
(Applicant), without any risk or responsibility on the part of the Bank or any of its
officials" to support its contentions that the Applicant had money in its account to
comply with the balance of 25%. It is observed that this certificate is dated
15.05.2014 whereas the forfeiture was effected by the Respondent on 07.05.2014 as
per Annexure-H. In any case, the Applicant was required to comply with the balance
of 25% either on 05.05.2014 or 06.05.2014 and hence the Applicant's claim that it
has balance on 15.05.2014 as per Annexure-D certificate would not help the case of
the Applicant. If Applicant had money with the said bank on 05.05.2014 or
06.05.2014 Applicant could have very well arranged for transfer of the said amount
to the Respondent by RTGS for compliance of condition to pay the balance 25% as
per Condition No. 9 which admittedly has not been done. Further, the Applicant in
furtherance to the notice of Dharma Law Partners dated 07.05.2014 in Annexure-E
raised more or less the same points and issues raised in the said legal notice which
was also not revealing on whose behalf such notice was issued. This would give
sufficient room or scope to presume that the said notice was issued only to seek
certain papers or documents or clarifications from the Respondent after participating
in the auction which was done after sufficient notice as required under the provisions
of the Act which is not disputed by the Applicant herein. The Applicant had all the

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time in the world to satisfy its requirement prior to participating in the auction as the
notification for auction was published well in time and therefore a conjoined reading
of the notice issued by the lawyer without revealing on whose behalf it was issued
and the Applicant taking cover of such notice and asking for papers, documents, etc.,
from the Respondent would show that the said notice of lawyer was made use of for
non-compliance of the Condition No. 9 for balance of 25% of the sale price. Thus,
considering from all angles, this Tribunal comes to the conclusion that the Applicant
failed to comply with terms and conditions of e-auction notice which resulted in the
forfeiture of the earnest money deposit made by the Applicant with Respondent. The
Learned Counsel for Respondent has also submitted during the course of hearing that
the Respondent has to recover huge amount in excess of over Rs. 100 crore and
because of the pendency of the appeal and stay, the property could not be re-sold
and thus delaying the recovery and causing further loss by not realizing the property
all these while due to the dispute raised by the Applicant herein and even the
forfeiture of Rs. 3.00 crore would be insignificant as against the loss caused due to
delayed realization which is yet to take place of the property.
15. Considering all the above aspects, this Tribunal comes to the conclusion that the
Earnest Money Deposit forfeited by the Respondent is in accordance with the terms
and conditions of e-auction notice and the same is also supported by judgment of the
Hon'ble Apex Court as well as the judgment of Calcutta High Court relied on by the
Respondent and stated supra. The various citations relied on by the Applicant are
found to be not applicable to the facts of the case of the Applicant and, therefore, do
not help the case of the Applicant The appeal, therefore, fails and is liable to be
dismissed. I, therefore, pass following:
ORDER
In the result, TSA 4/2019 is dismissed.
Interim order if any stands vacated and pending IAs, if any, stand closed as
infructuous.
There will be no order as to cost.
(Dictated to the Stenographer, after its transcription and necessary correction/signed
and pronounced by me in the Open Court on this 29th day of January 2020)
© Manupatra Information Solutions Pvt. Ltd.

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