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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
ASHOK S.KINAGI
Mohammad Riyaz S/o Hydrose – Appellant
Versus
Bank of Manager and Authorised Officer Union Bank of India, Mangaluru – Respondent
| Table of Content |
|---|
| 1. writ petition seeks to quash forfeiture order. (Para 1 , 2) |
| 2. arguments presented by petitioner and bank. (Para 4 , 5) |
| 3. facts of auction participation and deposit timeline. (Para 6 , 7) |
| 4. examination of rule 9 of the enforcement rules. (Para 8 , 9 , 10 , 11 , 12 , 13 , 14) |
| 5. court validates the bank's forfeiture power. (Para 15 , 16) |
| 6. writ petition is dismissed. (Para 17) |
ORDER :
1. The petitioner filed this writ petition seeking a writ of certiorari quashing the order at Annexure-A dated 30.09.2025 forfeiting the deposit amount of Rs.10,10,000/- deposited by the petitioner, and also sought a mandamus directing the respondent to consider the request of the petitioner and to execute a registered sale deed in favour of the petitioner.
2. Brief facts, leading rise to the filing of this writ petition are as follows:
The respondent-Bank has tendered ‘E’ auction notification. The petitioner participated in ‘E’ auction conducted by the respondent-Bank on 26.06.2025 and the petitioner was the successful bidder and petitioner deposited earnest money of Rs.4,00,000/- at the time of e-auction and deposited Rs.6,10,000/- being the 25% of the bid amount, totally the petitioner
The court upheld the forfeiture of a deposit by a bank as permissible under Rule 9(5) of Security Interest (Enforcement) Rules, due to the petitioner's default in timely payment.
The court reaffirmed that failure to pay the balance purchase price within the specified time results in automatic forfeiture of the deposit, as mandated by the applicable rules.
Rule 9(5) of the SARFAESI Act mandates forfeiture of earnest money for non-payment of the balance auction price, overriding general contract law principles.
The excess amount paid by the petitioner, beyond 25% of the bid amount, could not be considered as a deposit under Rule 9, and any retention of amount by the respondent without authority of law would....
The court affirmed that banks must comply with statutory requirements and not engage in arbitrary actions against successful auction bidders, protecting rights under Article 14.
Rule 9(5) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 is directory in nature, and forfeiture is justified only to compensate for the pa....
Under the Enforcement Rules, a period of 15 days is prescribed for payment of the balance sale consideration. Rule 9(4) of the Enforcement Rules after its amendment with effect from mandated that any....
The court upheld that failure to remit the full auction amount leads to the lawful forfeiture of the deposit as per applicable rules.
The SARFAESI Act mandates strict adherence to auction payment timelines, allowing forfeiture of deposits for non-compliance.
Forfeiture of EMD under Rule 9 of SARFAESI Rules is impermissible during a binding judicial stay, as it violates natural justice and can lead to unjust enrichment.
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