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2025 Supreme(All) 2168
IN THE HIGH COURT OF JUDICATURE AT ALLAHABAD
SHEKHAR B.SARAF, YOGENDRA KUMAR SRIVASTAVA, JJ.
Anil Kumar Jaiswal - Appellant
Vs.
Union Bank of India - Respondent
WRIT - C No. - 13012 of 2025
Decided On : 06-05-2025
For the Petitioner:Vipul Pandey, Advocate
For the Respondent:Anil Kumar Bajpai and Ashish Agrawal, Advocate
The court held that statutory forfeiture under Rule 9(5) of the 2002 Rules prevails over equitable considerations, and no exceptional circumstances justified the refund of the forfeited amount.
Headnote:
(A) Constitution of India - Article 226 - Security Interest (Enforcement) Rules, 2002 - Writ petition challenging forfeiture of earnest money deposited in e-auction - Petitioner failed to deposit balance amount, leading to forfeiture under Rule 9(5) - Bank's subsequent withdrawal of SARFAESI action does not affect statutory forfeiture - No exceptional circumstances presented to warrant refund. (Paras 2, 4, 9)
(B) Law and Equity - The court emphasized that where the law is clear, it must prevail over equitable considerations, and statutory provisions cannot be diluted by equity. (Paras 6, 7)
Facts of the case:
The petitioner deposited Rs.17.49 Lacs in an e-auction but failed to pay the remaining amount, resulting in forfeiture. The bank later withdrew its SARFAESI action but did not provide grounds for refunding the forfeited amount.
Findings of Court:
The court found no exceptional circumstances justifying the refund of the forfeited amount, affirming the statutory nature of the forfeiture under Rule 9(5) of the 2002 Rules.
Issues: The main issues were whether the forfeiture was justified and if the bank's subsequent actions could affect the statutory consequence of forfeiture.
Ratio Decidendi: The court ruled that the forfeiture under Rule 9(5) is a legal consequence that cannot be overridden by equitable considerations, and the petitioner failed to demonstrate any exceptional circumstances.
Result: Writ petition dismissed.
JUDGMENT :
(Yogendra Kumar Srivastava, J.)
1. Heard Sri Rahul Agarwal, learned counsel appearing along with learned counsel, Sri Vipul Pandey, in support of this petition and Sri Anil Kumar Bajpai, learned counsel appearing on behalf of the respondent-Bank.
2. This is a writ petition under Article 226 of the Constitution of India , wherein the petitioner is aggrieved by the inaction on the part of the respondent authority(ies), in refunding the 25% of amount i.e. to the tune of Rs.17.49 Lacs, deposited by the petitioner pursuant to the e-auction dated 29.12.2023, stated to be forfeited by the respondent-Bank in exercise of Rule 9(5) of the Security Interest (Enforcement) Rules , 2002 (hereinafter referred to as “2002 Rules”).
3. The case of the petitioner is that after the petitioner failed to deposit the balance 75% within the time prescribed, the earnest money was forfeited. However, the petitioner submits that the bank subsequently itself withdrew the entire previous SARFAESI action against the mortgaged property by a letter dated November 18, 2024, with liberty to take a fresh SARFAESI action, which was once again taken on November 18, 2024.
4. Sri Rahul Agarwal, learned counsel who is appearing along with Sri Vipul Pandey, for the petitioner, submits that the present case is peculiar in its nature as there are exceptional circumstances wherein the forfeited amount should be returned/refunded to the petitioner on grounds of the law of equity. He submits that since the entire SARFAESI action taken by the bank was ipso facto withdrawn by it, on a later date, the forfeiture of the amount deposited by the petitioner would be contrary to the principles of law and would amount to unjust enrichment. Sri Rahul Agarwal, learned counsel, draws the attention of the Court to paragraphs 108 to 118 of the Supreme Court judgment in the case of Authorised Officer, Central Bank of India Vs. Shanmugavelu reported in (2024) 6 SCC 641 to buttress his arguments that in certain exceptional circumstances the forfeited amount may be refunded.
5. Per contra, the counsel appearing on behalf of the bank submits that the aforesaid judgment in Shanmugavelu (supra) specifically states that the concept of unjust enrichment would not apply in case of forfeiture of amount under Rule 9(5) of the 2002 Rules. He submits that in fact the exceptional circumstances that have been discussed in paragraphs 115 to 118, would only relate to extraneous conditions that may have existed which had prevented the successful bidder from depositing the balance of the amount. Any steps taken by the bank subsequent to the failure of the auction-purchaser would have no relevance whatsoever with regard to the said forfeiture.
6. Upon perusal of the records and after hearing the counsel appearing on behalf of the parties, we may rely on paragraph 112 of the judgment in Shanmugavelu (supra), which is delineated below:
“112. The consequence of forfeiture of 25% of the deposit under Rule 9(5) of the SARFAESI Rules is a legal consequence that has been statutorily provided in the event of default in payment of the balance amount. The consequence envisaged under Rule 9(5) follows irrespective of whether a subsequent sale takes place at a higher price or not, and this forfeiture is not subject to any recovery already made or to the extent of the debt owed. In such cases, no extent of equity can either substitute or dilute the statutory consequence of forfeiture of 25% of deposit under Rule 9(5) of the SARFAESI Rules.”
7. J.B. Pardiwala, J. in his inimitable style has examined a catena of judgments to understand the interplay between law and equity. Paragraph 113 of the judgment is apposite to be quoted below:
“113. This Court in National Spot Exchange Ltd. v. Dunar Foods Ltd. (Resolution Professional) , (2022) 11 SCC 761 after referring to a catena of its other judgments, had held that where the law is clear the consequence thereof must follow. The High Court has no option but to implement the
