Is Cheque a in DRT Recovery Certificate Sales?
In the high-stakes world of proceedings, securing assets through recovery certificate sales is a critical process for banks and financial institutions. But what happens when a bidder tenders payment via cheque, and the sale notice doesn't explicitly prohibit it? This question often arises: Is Cheque a Good Tender of Amount in DRT Recovery Certificate Sale if Sale Notice doesn't Prohibit?
This blog post dives deep into the legal nuances, drawing from judicial precedents and statutory principles. We'll explore whether cheques qualify as , the role of sale notices, and key takeaways to guide bidders and creditors. Note: This is general information based on case law and should not be considered legal advice. Consult a qualified lawyer for your specific situation.
Main Legal Finding: Cheques Can Be Absent Prohibition
Generally, a cheque can be considered a of payment in a DRT recovery certificate sale provided that the sale notice does not explicitly prohibit its use as a mode of payment1997 5 Supreme 62. Courts have recognized cheques as negotiable instruments under the , making them a unless restricted.
Key factors include:- Terms of the sale notice: If silent or non-prohibitive, cheques are typically acceptable.- and : Payment must be within stipulated timelines, and the cheque must clear.- Party conduct: Prudent actions by the tendering party strengthen validity 1997 5 Supreme 62.
Relevance of Sale Notice Terms in DRT Auctions
The cornerstone of validity lies in the sale notice. Under the , and , auction processes are governed by procedural rules. If the notice doesn't specify modes like cash, DD, RTGS/NEFT, or explicitly bar cheques, tendering a cheque aligns with general commercial practices.
For instance, in a matter, The tender document did not mandate that 15% of the Sale Amount is to be paid through DD/RTGS/NEFT, and there was no bar in the tender document against the making of the payment of the balance 15% through cheque IND_Delhi_WP(C)-11080_2021 2022_DHC_2154-DBIND_Delhi_WP(C)-10164_2021 2022_DHC_2154-DB. This implies permissibility when not barred.
Conversely, restrictions can invalidate: In another DRAT ruling, payment of 15% bid amount by way of a cheque which is not permissible led to challenges, highlighting the need for compliance with tender terms
.
Judicial Precedents on Cheque as Tender
Principle from Rent Tender Cases
In 1997 5 Supreme 62, the court upheld cheque tender for rent, stating it was valid even if sent to a third party, provided it was within the statutory 30-day period and prudently done. The respondent's delay in refusing was deemed imprudent. This principle extends analogously to DRT sales: absent prohibition, cheques suffice.
DRT-Specific Insights
Several cases affirm contextual acceptance:- Payment via cheque was made within the extended period... on and and Sale Certificate was issued on 2025 Supreme(Online)(Tel) 13005, suggesting didn't invalidate the sale.- In
, the Recovery Officer was directed to examine a cheque for Rs.27,38,000/- being the balance sale price, indicating scrutiny but potential validity if compliant.
However, tribunals have quashed sales where notices implied restrictions. For example, DRAT noted violations where cheque was used despite tender conditions
. In contrast, where no bar exists, sales proceed, as in upheld DRT orders post-cheque payment 2025 Supreme(Online)(MP) 2067.
Under (often cited in DRT/DRAT), procedural compliance is key, but silence on modes favors flexibility 2020 0 Supreme(SC) 247.
Exceptions and Limitations to Watch For
While promising, cheque tenders aren't foolproof:- Explicit prohibitions: If the notice mandates only cash/DD/RTGS, cheques fail
.- Timing and clearance: Must be honored within deadlines; invite penalties under NI Act.- nuances: 15-25% often requires immediate modes; balance may allow cheques if unspecified .- : Borrowers must tender full dues pre-auction notice
.
In 2024 Supreme(Online)(Del) 33321, auction notices under SARFAESI emphasized timelines for sale certificates, underscoring prompt payment.
Practical Recommendations for Bidders and Creditors
To navigate DRT sales confidently:1. Scrutinize the sale notice: Confirm no cheque ban; note specified modes.2. Prepare multiple options: Have DD/RTGS ready as backup.3. Document tender: Issue cheques prudently, obtain receipts, track clearance.4. Seek extensions if needed: Courts allow if justified 2025 Supreme(Online)(Tel) 13005.5. Challenge strategically: If rejected unfairly, approach DRT/DRAT citing absence of prohibition 1997 5 Supreme 62.
Recovery Officers must verify compliance impartially
2025 Supreme(Online)(DRAT) 537.
Conclusion and Key Takeaways
In summary, absent in the sale notice, a cheque is generally regarded as a in DRT recovery certificate sales, bolstered by cheque's status as a negotiable instrument and supportive precedents 1997 5 Supreme 62. However, explicit terms govern, and deviations risk annulment
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Key Takeaways:- Always review sale/tender documents meticulously.- Cheques work if not barred, but prioritize specified modes.- Timely, honored payment is non-negotiable.
For tailored advice, engage a DRT specialist. Stay informed on evolving RDB/SARFAESI jurisprudence to safeguard your interests in recovery auctions.
References:- 1997 5 Supreme 62: Validity of cheque tender principles.- 2020 0 Supreme(SC) 247: Procedural compliance in sales.- 2025 Supreme(Online)(Tel) 13005, 2025 Supreme(Online)(MP) 2067, , ,
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, 2024 Supreme(Online)(Del) 33321, 2025 Supreme(Online)(DRAT) 537,
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