J.B. PARDIWALA, J.:

For the convenience of exposition, this judgment is divided in the following parts:-

INDEX A.

FACTUAL MATRIX ............................................................................. 3 B.

IMPUGNED ORDER .......................................................................... 13 C.

SUBMISSIONS OF THE APPELLANT ............................................ 17 D.

SUBMISSIONS OF THE RESPONDENT ......................................... 18 E.

ANALYSIS (Points for Determination) .............................................. 19 i) Legislative History and Scheme of the SARFAESI Act ..................... 20 ii) Applicability of Section(s) 73 & 74 of the 1872 Act to Forfeiture under the SARFAESI Rules. ............................................................... 32 a. Forfeiture under the SARFAESI Rules ........................................... 44 Digitally signed by Sanjay Kumar Date: 2024.02.02 15:31:40 IST Reason:

Signature Not Verified b. Concept of Earnest-Money & Law on Forfeiture of Earnest-Money Deposit ............................................................................................ 49 c. Law on the principle of ‘Reading-Down’ a provision ...................... 66 iii) Whether, the forfeiture of the entire earnest-money deposit amounts to Unjust Enrichment? ........................................................................ 73 iv) Whether Exceptional Circumstances exist to set aside the forfeiture of the earnest money deposit? .................................................................. 77 F.

CONCLUSION .................................................................................... 81 a

1. Since the issues raised in both the captioned appeals are the same, the parties are also the same and the challenge is also to the self-same judgment and order passed by the High Court, those were taken up for hearing analogously and are being disposed of by this common judgment and order.

2. For the sake of convenience, the appellant shall hereinafter be referred to as the Bank being the Secured Creditor, and the respondent shall hereinafter be referred to as the original Auction-Purchaser.

3. These appeals are at the instance of a Nationalized Bank and are directed against the common judgment and order dated 27.10.2021 passed by the High Court of judicature at Madras in C.R.P No(s). 1892 & 2282 respectively of 2021 (“Impugned Order”) by which the High Court allowed the respondent’s writ petition and held that the forfeiture of the earnest money deposit by the appellant bank could only be to the extent of the loss suffered by it.

A.

FACTUAL MATRIX

4. It appears from the materials on record that the appellant bank herein had sanctioned credit facilities to one ‘Best and Crompton Engineering Projects’ against a parcel of land admeasuring 10581 sq.ft. (approx.) with superstructures situated in Survey Nos. 60 and 65/2, Block 6, Alandur village, Mambalam- Guindy, Chennai (for short the, “Secured Asset”) as security interest in the form of a simple mortgage in lieu of the sanctioned credit. Sometime thereafter the said borrowers defaulted and the said loan account was classified as a non- performing asset (“NPA”) by the appellant bank on 28.05.2013.

5. In order to recover its dues, the appellant bank took measures under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short, the “SARFAESI Act”), more particularly under Section 13(4) by taking over the possession of the Secured Asset and putting the same for sale by way of public auction.

6. Accordingly, on 24.10.2016 an e-auction notice for the sale of the Secured Asset at a reserve price of Rs. 9,62,00,000/- came to be issued by the appellant bank, with the following terms and conditions: -

“TERMS & CONDITIONS

1. The e-Auction is being held on “AS IS WHERE IS” and “AS IS WHAT IS” basis and “NO COMPLAINT” condition.

2. The auction sale will be Online E-Auction/Bid