2023 INSC 341 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,
Digitally signed by
Neetu Khajuria
Date: 2023.04.28
Stressed Asset Management Branch,
15:31:08 IST
Reason:

Coimbatore, Tamil Nadu (for brevity “the Bank”,

1
hereafter) has impugned the judgment and order

dated 27th 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

dated 22nd 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

held on 15th 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

RTGS on 15th September, 2017 itself, and was

under advice to pay the balance 75% thereof,

i.e., Rs. 92,25,000/-, on or before 29 th

September, 2017.

b. The contesting respondent failed to

arrange requisite funds and by a request letter

dated 27th 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

till 23rd October, 2017. Two weeks prior to the

3
extended last date for making payment of the

balance amount, the contesting respondent

received summons dated 10th 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

for hearing on 6th 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

respondent by his letter dated 20 th 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

dated 21st October, 2017 and the contesting

4
respondent was advised to make payment of

the balance amount on or before 23 rd October,

2017. Since the contesting respondent did not

pay the balance amount of the sale price by

23rd October, 2017, the Authorized Officer sent

a letter dated 24th October, 2017 to the

contesting respondent informing him that the

e-auction sale held on 15 th 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

6th November, 2017 to 31 st October, 2017. An

order dated 31st October, 2017 was also

5
passed directing the Authorized Officer to

maintain status quo and while calling for

counter-affidavits, the case was posted to 28 th

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

DRAT”, hereafter). On 12 th 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

notice dated 15th December, 2017, fixing 5th

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,

by an order dated 3rd January, 2018, the DRT

6
 dismissed the application relying on the

interim order of the DRAT dated 12 th

December, 2017 but granted liberty to the

contesting respondent to participate in the e-

auction proposed to be held on 5 th January,

2018. The auction, however, could not be held

on 5th 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

24th 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

letter dated 27th September, 2017 had prayed for

extension of 25 days’ time to deposit the balance

amount of sale price and upon grant of such

prayer, time was allowed till 23 rd 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

that prior to 31st 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

vs Indian Bank (Allahabad Bank) 1, 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

Punjab National Bank and Ors. 2 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.

Joshi vs Ajit Mills Ltd. 3 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

Municipality vs Lalji Raja & Sons 4 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

Union of India5, 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

contesting respondent on 15 th September, 2017;

hence sub-rule (3) of rule 9 stood complied with.

The contesting respondent was notified to deposit

the balance 75% of the sale price by 29 th

September, 2017. Admittedly, he could not or did

not so deposit till 27th September, 2017,

whereupon he prayed for extension of time by 25

30
days by his request letter of even date, i.e., 27 th

September, 2017. The Authorized Officer

responded favourably and extended the time for

deposit by 25 days as prayed by the contesting

respondent, i.e., till 23rd October, 2017. Extension

of time till 23rd October, 2017, therefore, was by

mutual agreement – a course of action permitted

by sub-rule (4). On 20th 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

Authorized Officer by his letter dated 21 st 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

deposited the balance amount of sale price by 23 rd

October, 2018, the mutual agreement for

extension of time, thus, lapsed with effect from

24th 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

the Authorized Officer dated 24 th 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

order dated 12th December, 2017 and pursuant

whereto a fresh e-auction notice was issued on

18th 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

dated 3rd January, 2018 dismissed I.A. No.

2542/2017 relying upon the order of the DRAT

dated 12th December, 2017, but permitted the

contesting respondent to participate in the e-

auction to be held on 5 th 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

deposit 75% of the sale price by 23 rd 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

DRT on 10th 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

on 27th 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

5th 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

the contesting respondent became aware on 10 th

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

Pradesh6 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.

CCE & Customs7, 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-

Legal Action vs. Union of India 8, 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

Calcutta9.

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;
10th April, 2023.

43