DRAT Allahabad (2026.02.02) in Punjab National Bank Vs. Mr. Birendra Kachhap, S/o Late Maghi Kashyap [Regular Appeal No. 43/2022 ] held that;
In this regard, it is stated that the success of the respondent-auction purchaser in the second sale conducted by the Bank cannot be a ground for saving the forfeiture of 25% amount deposited in the earlier sale.
However, Rule 9(5) empowers the Bank to forfeit 25% of the bid amount in case of default of payment within the period mentioned in sub-rule 4 and to resell the property. Thus the appellant-Bank has rightly forfeited 25% of the bid amount deposited by the respondent-auction purchaser, as he has already been given ample time by the Bank to deposit remaining 75% of the bid amount, but he did not deposit the same.
Excerpts of the Order;
# 1. The present appeal has been filed under section 18 of the Securitization and Reconstruction of Financial Asset and Enforcement of Security Interest Act, 2002 (hereinafter referred to as "the SARFAESI Act") against the judgment dated 26.06.2020, whereby the Securitization Application No. 02/2019 filed by the respondent has been allowed.
# 2. Brief facts of the matter are that one M/s Urmila Construction was granted different types of credit facility, in which several properties were mortgaged in favour of the appellant-bank. After NPA, the demand notice dated 02.12.2015 u/s 13(2) of the SARFAESI Act was issued followed by the possession notice u/s 13(4) of the said Act. Thereafter, the appellant-Bank published the auction sale notice in the newspapers for auction of the property in question on 13.06.2018, in which the respondent was declared as highest bidder and deposited 25% of the bid amount including the earnest money i.e. Rs.4,90,500/- by 14.06.2018 and the remaining 75% of the bid amount was to be deposited on or before 28.06.2018, but instead of depositing the same, the respondent-auction purchaser filed one application dated 27.06.2018 for extension of time to deposit the same, which was allowed and further 15 days' time was granted by the Bank vide letter dated 30.06.2018. However, within that time, the respondent could not deposit the same, but filed another application dated 12.07.2018 for further extension of time to deposit the remaining 75% of the bid amount, whereas the same was to be deposited on or before 12.07.2018 as per letter dated 30.06.2018 issued by the appellant-Bank. The said request of the respondent was declined by the Bank vide letter dated 16.07.2018 by forfeiting 25% of the bid amount. The said impugned order was challenged by the respondent-auction purchaser before the Hon'ble High Court by filing Writ Petition (C) No. 4936/2018, which was dismissed vide order dated 27.11.2018 with liberty to file Securitization Application u/s 17 of the SARFAESI Act within three weeks. Accordingly, the present S.A. was filed by the respondent-auction purchaser before the Tribunal below, which has been allowed vide order impugned directing the appellant-Bank to refund the 25% amount deposited by the S.A. applicant within one month along with normal FD interest from the date of deposit till the date of payment and also the amount of Rs.5.00 lacs, if deposited, be also refunded on the same terms to the applicant. Being aggrieved by the said order, the present appeal has been filed by the appellant-Bank.
# 3. Learned counsel for the appellant submitted that after completion of the sale proceedings on 13.06.2020, the respondent-auction purchaser deposited 25% of the bid amount including the earnest money by 14.06.2018. It was further contended that for the remaining 75% of the sale proceed, the auction purchaser moved one application dated 27.06.2018 for extension of time for depositing the same, which was allowed vide letter dated 30.06.2018 and further 15 days' time was granted vide letter dated 30.06.2018 stipulating therein that in case of failure, the amount already deposited will be forfeited, but instead of complying the same, the respondent- auction purchaser moved another application dated 12.07.2018 for further extension of time of 30 days, which was rejected by the Bank vide letter dated 16.07.2018 and 25% of the bid amount was forfeited, against which the respondent-auction purchaser preferred a Writ Petition as mentioned above before the Hon'ble High Court, which was dismissed as not maintainable vide order dated 27.11.2018.
# 4. Learned counsel for the appellant further submitted that the fact of re-auction is not concerning with the present sale. It was also contended that in re-auction of the same property, the respondent no. 1 again participated and being successful bidder, he deposited entire sale consideration of Rs.16.00 lacs and the appellant-Bank issued sale certificate on 31.10.2018 in favour of the respondent.
# 5. Learned counsel further submitted that after completion of earlier auction dated 13.06.2018, the sale was confirmed vide letter dated 13.06.2018, as due to clerical mistake the date of the said confirmation letter was typed as 28.04.2017. It was next contended that the respondent-auction purchaser, instead of filing the writ petition before the Hon'ble High Court, ought to have obtained the restraint order from the Hon'ble High Court of Jharkhand or from DRT, Ranchi against the second sale, because he challenged the right of Bank to grant extension of time till of time till 3 months for depositing the remaining balance amount, but he did not do so. It was further contended that the observation made in para 11 of the impugned order is vague and based on wrong interpretation of Rule 9(4) & 9(5) of the Rules, 2002. It was further contended that there is nothing on record, which may suggest that the then manager had verbally assured that he would grant second extension, extension, as according to the provisions of the of the SARFAESI Act everything is done in writing and extension may only be granted with consent of both the parties and both were at liberty to decide their issues in accordance with the given circumstances. It was also contended that after first extension of time for 15 days, which was expired on 12.07.2018, the respondent did not deposit any part of the due amount, so it is sufficient to understand the bonafide intention of the respondent-auction purchaser. It was further contended that if the respondent-auction purchaser had deposited any part of amount during that period, it would have been proper for the Bank to grant further extension to deposit remaining balance, but the respondent intentionally and knowingly did not deposit the total balance amount nor any part thereof. It was thus contended that the Bank has rightly rejected the application for further extension of time. It was further contended that the Tribunal below has not considered the provisions of Rule 9(4) & 9(5) of the Rules, 2002 in its right perspective, therefore, the order impugned is not sustainable. It was, therefore, prayed that the order impugned may be set aside and the appeal may be allowed.
# 6. Learned counsel for the respondent submitted that the application dated 12.07.2018 was moved before the expiry of the extended time of 15 days for deposit, which was 15.07.2018. It was further contended that the SARFAESI Act provides a period of 90 days, up to which time can be granted by the authorized officer for deposit of balance of 75% of the bid amount, but the respondent- Bank rejected the same, which is arbitrary, unjust and improper, because no reason for the same has been assigned by the Bank. It was further contended that the Rule 9(4) of the Rules, 2002 was amended in the year 2016 for the purpose of enabling the auction purchaser to seek time beyond 15 days for depositing the balance 75% of the bid amount and the Bank or the Financial Institution has been empowered to extend the period for deposit of the same up to 90 days. It was thus contended that in the present case, the appellant-Bank has acted arbitrarily in not granting the extension of time, as such the Tribunal below has rightly directed the appellant to refund the auction amount along with interest vide order impugned. It was, therefore, prayed that the appeal may be dismissed with heavy costs.
# 7. I have considered the rival contentions of the learned counsels for the parties and perused the material available on record.
# 8. The main controversy involved in the present case is, as to whether the appellant-Bank had rightly rejected the application of the respondent for further extension of time for 30 days to deposit the remaining 75% of the bid amount or not?
# 9. Admittedly, the auction of the property in question was held on 13.06.2018 and 25% of the bid amount was deposited by the respondent-Auction Purchaser by 14.06.2018 including the earnest money. As per Rule 9(4) of the Rules, 2002, 75% of the bid amount is to be deposited on or before 15th day of confirmation of sale 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. As such, the said remaining amount was to be deposited on or before 29.06.2018. The respondent-Auction Purchaser vide letter dated 27.06.2018, copy of which is placed at page no. 26 of the paper book, requested the appellant-Bank to extend 15 days further time to deposit the remaining 75% of the bid amount, which was accordingly allowed by the Bank vide letter dated 30.06.2018 stipulating therein that if you fails to deposit the amount of 75% i.e. Rs.14,71,500/- within the extended period of 15 days, the amount already deposited Rs.4,90,500/- will be forfeited by the Bank and Bank reserves the right to conduct fresh e-auction of the said IP of NPA A/c-Urmila Construction. Thus it is clear that the respondent-Auction Purchaser had to deposit the said amount within the extended period, which was sought by the respondent- Auction Purchaser himself, but the respondent-Auction Purchaser could not honour the same, instead filed another application dated 12.07.2018, copy of which is placed at page no. 28 of the paper book, for further extension of time for 30 days. The said request was declined by the appellant-Bank vide letter dated 16.07.2018 and forfeited 25% of the bid amount. In this regard, Rule 9(4) clearly says that the Bank or Financial Institution may extend the period for deposit of remaining 75% of the bid amount up to 90 days beyond 15 days, but the Auction Purchaser and the secured creditor agree, meaning thereby, the said extension can be made mutually and not by anyone. In the present case, the appellant-Bank had once extended the period as requested by the Auction Purchaser, but for the second time, it refused to accept the same, as the said provision does not specify that the Bank or the Financial Institution is bound to extend the period for deposit of 75% of the bid amount. As per the said rule, the Bank may extend the period for the same or may not extend the same, as it is discretionary and not mandatory or directory. If the case of the respondent was that there was some encumbrances in the said sale, then the matter would have been otherwise, been otherwise, but the case of the respondent is that the Bank was under obligation to extend further period for depositing the remaining 75% of the bid amount in view of the Rule 9(4), which is not sustainable, as the said Rule does not compel the Bank to do so. However, the present extension was applied by the respondent-auction purchaser, which was declined by the Bank for second time, as the first extension for the said purpose was granted to the auction purchaser, but the respondent has failed to comply the same. Thus the appellant-Bank has rightly rejected the request of the respondent for the second time of extension and forfeited the 25% of the bid amount, but the Tribunal below without considering this aspect of the matter has directed the appellant-Bank to return the forfeited amount on the ground that the respondent participated in the second auction sale of the Bank and was declared as highest bidder and has deposited the entire sale consideration with the Bank. In this regard, it is stated that the success of the respondent-auction purchaser in the second sale conducted by the Bank cannot be a ground for saving the forfeiture of 25% amount deposited in the earlier sale.
# 10. However, Rule 9(5) empowers the Bank to forfeit 25% of the bid amount in case of default of payment within the period mentioned in sub-rule 4 and to resell the property. Thus the appellant-Bank has rightly forfeited 25% of the bid amount deposited by the respondent-auction purchaser, as he has already been given ample time by the Bank to deposit remaining 75% of the bid amount, but he did not deposit the same. As such, the order impugned passed by the Tribunal below is liable to be set aside to this extent.
# 11. In view of the discussions as held above, the order impugned is set aside to the extent of direction for the Bank to refund the forfeited amount along with interest. Rest part of the order impugned shall remain intact. The appeal filed by the appellant-Bank is accordingly, disposed off.
# 12. A copy of this judgment be forwarded to the parties as well as the DRT concerned and be also uploaded on the e-DRT portal.
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