2018 (4) TMI 1341 - SC - Indian Laws

Deposit of earnest money - relevant time - auction - from which date the period of fifteen days would start for making the deposit of remaining 75 percent; from the date of communication of confirmation of sale or from the date of the auction? - Held that - Rule 9(2) makes it clear that after confirmation by the secured creditor the amount has to be deposited. Rule 9(3) also makes it clear that period of fifteen days has to be computed from the date of confirmation. In this case, confirmation has been made and communicated on 27th February 2013 and within fifteen days thereof i.e. on 13th March 2018, the amount of twenty-five percent had been deposited. Thereafter, sale certificate has been issued under Rule 9(6). Even before the confirmation of sale within fifteen days, the amount would be forfeited by the authorised officer who may decide not to confirm the sale that would be a result not contemplated in Rule 9(2), 9(4) and 9(5) which fortify our conclusion that it is only after the confirmation is made under Rule 9(4) that amount has to be deposited and on failure to deposit the amount, twenty-five percent amount has to be forfeited and property has to be resold. - various provisions of Rule 9 makes it clear that interpretation made by Debts Recovery Tribunal and Debts Recovery Appellate Tribunal and as affirmed by the High Court cannot be said to be correct. The provisions had been fully complied with by the auction purchaser as he has complied with the provisions of Rule 9 by making a deposit of 75 percent of the amount from the rate of confirmation of sale - auction is held to be valid - appeal allowed.

Summary

Issues:
Interpretation of Rule 9 of the Security Interest (Enforcement) Rules, 2002 regarding the timeline for depositing the remaining 75% of the auction amount after confirmation of sale.

Analysis:
The judgment involves a dispute arising from an auction of property where the appellant was the highest bidder. The appellant claimed to have deposited the required amounts within the specified timelines after being intimated of the confirmation of sale by the Authorised Officer. The owner and principal borrower challenged the auction, leading to a series of legal proceedings culminating in the present appeal.

The main issue before the court was to determine from which date the period of fifteen days for depositing the remaining 75% of the auction amount should commence - from the date of communication of confirmation of sale or from the date of the auction. The interpretation of Rule 9 of the Security Interest (Enforcement) Rules, 2002 was crucial in resolving this question.

The appellant argued that Rule 9(4) mandates the deposit only after confirmation of sale, supported by references to Rule 9(2), (5), and (6). On the other hand, the borrower contended that confirmation of sale occurs as soon as the highest bid is accepted, requiring the deposit within fifteen days, failing which forfeiture of the deposit follows.

The court delved into the provisions of Rule 9 to decipher the legislative intent. It noted that Rule 9(1) deals with confirmation by the secured creditor, while Rule 9(3) specifies the timeline for the deposit of 25% of the sale price. Rule 9(4) explicitly states that the balance amount is payable on or before the fifteenth day of confirmation of sale. The court emphasized that the deposit forfeiture and resale are consequences of non-payment after confirmation, not before.

The court concluded that the auction purchaser had complied with Rule 9 by depositing 75% of the amount from the date of confirmation of sale. As the sale certificate was rightfully issued to the purchaser, the auction could not be set aside. Therefore, the appeal was allowed, setting aside the impugned orders and directing the delivery of possession in accordance with the law.

In summary, the judgment clarifies the timeline for depositing the auction amount post-confirmation, emphasizing compliance with Rule 9 of the 2002 Rules. The court's interpretation safeguards the interests of both parties involved in the auction process and ensures adherence to the statutory provisions governing such transactions.