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TMI Blog2023 (4) TMI 1232X X X X Extracts X X X X X X X X Extracts X X X X ..... llenge - In any event, the underlying principle of least intervention by tribunals/courts and the overarching objective of the SARFAESI Act duly complimented by the Rules, which are geared towards efficient and speedy recovery of debts, together with the interpretation of the relevant laws by this Court should not be lost sight of. Losing sight thereof may not be in the larger interest of the nation and susceptible to interference. In the present case, undisputedly, payment of 25% of the sale price was made by the contesting Respondent on 15th September, 2017; hence Sub-rule (3) of Rule 9 stood complied with. The contesting Respondent was notified to deposit the balance 75% of the sale price by 29th September, 2017. Admittedly, he could not or did not so deposit till 27th September, 2017, whereupon he prayed for extension of time by 25 days by his request letter of even date, i.e., 27th September, 2017. The Authorized Officer responded favourably and extended the time for deposit by 25 days as prayed by the contesting Respondent, i.e., till 23rd October, 2017. Extension of time till 23rd October, 2017, therefore, was by mutual agreement - a course of action permitted by Sub-rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... genuinely interested in proceeding with his part of his obligations and we see no arbitrariness in the action of the Authorized Officer in forfeiting Rs. 30,75,000/- being 25% of the sale price. Whether the High Court was justified in its interference with the forfeiture order on the ground assigned in the impugned judgment and order? - HELD THAT:- The High Court to have committed an error of law in directing refund on the ground that the Bank should not be permitted to enrich by forfeiting the amount from the writ Petitioner . It is not a question of the Bank's enrichment or deriving any undue advantage that the Court was really concerned with. It seems to have posed a wrong question for being answered. When does an enrichment or unjust enrichment occur? - HELD THAT:- In SAHAKARI KHAND UDYOG MANDAL LTD. VERSUS COMMISSIONER OF C. EX. CUS. [ 2005 (3) TMI 116 - SUPREME COURT ], this Court had the occasion to reiterate that unjust enrichment means retention of a benefit by a person that is unjust or inequitable. Unjust enrichment occurs when a person retains money or benefit which in justice, equity and good conscience, belongs to someone else. The doctrine of unj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , hereafter) has impugned the judgment and order dated 27th March, 2018 of the Madras High Court allowing a writ petition (W.P. No. 4519 of 2018) instituted by the contesting Respondent herein. 3. The facts leading to institution of the writ petition, as recorded in the impugned judgment and order, are noticed hereunder: a. Default was committed by M/s. Stallion Knitwear India Private Limited (for brevity Stallion , hereafter) in discharging its debts to the Bank. Consequent upon classification of its account as non-performing asset, the Authorized Officer had taken possession of the secured asset (being the plant and machinery of Stallion) as a measure Under Section 13(4) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for brevity the SARFAESI Act , hereafter). Thereafter, e-auction notice dated 22nd August, 2007 was issued by the Authorized Officer putting up the plant and machinery of Stallion for sale. The contesting Respondent had participated in the e-auction held on 15th September, 2017 by depositing requisite earnest money. Having quoted a sum of Rs. 1,23,00,000/-, which exceeded the reserve price by Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. DRT advanced the hearing date from 6th November, 2017 to 31st October, 2017. An order dated 31st October, 2017 was also passed directing the Authorized Officer to maintain status quo and while calling for counter-affidavits, the case was posted to 28th November, 2017. d. The order of status quo passed by the DRT was challenged by the Authorized Officer in an appeal carried before the Debts Recovery Appellate Tribunal, Chennai (for brevity the DRAT , hereafter). On 12th December, 2017, the DRAT permitted the Authorized Officer to proceed with fresh auction without, however, vacating the order of status quo passed earlier. e. Availing the liberty granted by the DRAT, the Authorized Officer issued fresh e-auction notice dated 15th December, 2017, fixing 5th January, 2018 as the date of auction. The contesting Respondent having come to learn of such notice filed an interim application before the DRT seeking stay of the auction; however, by an order dated 3rd January, 2018, the DRT dismissed the application relying on the interim order of the DRAT dated 12th December, 2017 but granted liberty to the contesting Respondent to participate in the e-auction proposed to be held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the contesting Respondent was seeking to delay matters, rightly proceeded to forfeit the amount of Rs. 30,75,000/-. He, accordingly, submitted that the impugned judgment and order of the High Court is unsustainable in law and, hence, deserves to be set aside. 8. Per contra, counsel for the contesting Respondent sought to impress upon us that the order directing refund was passed on a concession made by counsel for the first Respondent before the High Court, i.e., the Authorized Officer; hence, the appeal was not maintainable. In the alternative, he contended that the Bank having sold the secured asset through a subsequent auction which fetched Rs. 1,23,00,000/-, i.e., the same price at which the contesting Respondent intended to purchase the immovable property, it cannot be the case of the Authorized Officer or, for that matter, the Bank that the latter has suffered any financial loss. He further contended that although not assigned as a specific ground for interference, a bare reading of the impugned judgment and order would reveal that the direction for refund was made bearing in mind such circumstance that the Bank did not suffer any loss. He also contended that there has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tain a price higher than the reserve price, he may, with the consent of the borrower and the secured creditor effect the sale at such price. (3) On every sale of immovable property, the purchaser shall immediately, i.e., on the same day or not later than next working day, as the case may be, pay a deposit of twenty-five per cent of the amount of the sale price, which is inclusive of earnest money deposited, if any, to the authorised officer conducting the sale and in default of such deposit, the property shall be sold again. (4) The balance amount of purchase price payable shall be paid by the purchaser to the authorised officer on or before the fifteenth day of confirmation of sale of the immovable property or such extended period as may be agreed upon in writing between the purchaser and the secured creditor, in any case not exceeding three months. (5) In default of payment within the period mentioned in Sub-rule (4), the deposit shall be forfeited [to the secured creditor] and the property shall be resold and the defaulting purchaser shall forfeit all claim to the property or to any part of the sum for which it may be subsequently sold. 13. Bare perusal of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enable to challenge on valid ground(s) in an application Under Section 17(1) thereof. 15. Before we take our discussion forward, it is necessary to ascertain the true character of the term 'forfeiture'. Black's Law Dictionary, inter alia, explains 'forfeiture' as the loss of a right, privilege, or property because of a crime, breach of obligation, or neglect of duty or something (esp. money or property) lost or confiscated by this process; a penalty . It is also explained as a destruction or deprivation of some estate or right because of the failure to perform some obligation or condition contained in a contract . 16. It is also found from the same dictionary that though penalty is usually referable to a crime, penalty is sometimes imposed for civil wrongs such as a statutory penalty for a statutory violation; especially, a penalty imposing automatic liability on a wrongdoer for violation of the terms of a statute without reference to any actual damage suffered. 17. A Constitution Bench of this Court in R.S. Joshi v. Ajit Mills Ltd. (1977) 4 SCC 98 held that (F)orfeiture, as judicially annotated, is a punishment annexed by law to some illegal act o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a secured creditor would seem to be the extent of expenses incurred by it in putting up the immovable property for sale. However, what does generally escape notice in the process is that it is the mischievous borrower who steals a march over the secured creditor by managing to have a highly valuable property purchased by one of its henchmen for a song, thus getting such property freed from the clutches of mortgage and by diluting the security cover which the secured creditor had for its loan exposure. Bearing in mind such stark reality, Sub-rule (5) of Rule 9 cannot but be interpreted pragmatically to serve twin purposes - first, to facilitate due enforcement of security interest by the secured creditor (one of the objects of the SARFAESI Act); and second, to prohibit wrong doers from being benefitted by a liberal construction thereof. 20. In terms of the Indian Contract Act, 1872 (for brevity Contract Act , hereafter), a person can withdraw his offer before acceptance. However, once a party expresses willingness to enter into a contractual relationship subject to terms and conditions and makes an offer which is accepted but thereafter commits a breach of contract, he does so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot found to be workable and efficient enough to ensure liquidity of finances and flow of money essential for any healthy and growth-oriented economy. The decision of this Court in Mardia Chemicals v. Union of India (2004) 4 SCC 311, while outlawing only a part of the SARFAESI Act and upholding the rest, has traced the history of this legislation and the objects that Parliament had in mind in sufficient detail. Apart from the law laid down in such decision, these are the other relevant considerations which ought to be borne in mind while examining a challenge to a forfeiture order. 21. There is one other aspect which is, more often than not, glossed over. In terms of Sub-rule (5) of Rule 9, generally, forfeiture would be followed by an exercise to resell the immovable property. On the date an order of forfeiture is in contemplation of the authorized officer of the secured creditor for breach committed by the bidder, factually, the position is quite uncertain for the former in that there is neither any guarantee of his receiving bids pursuant to a future sale, much to the satisfaction of the secured creditor, nor is there any gauge to measure the likely loss to be suffered by it ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereof or the Rules made thereunder shall be in addition to and not in derogation of the enumerated enactments or any other law for the time being in force. What is of importance is that the non-obstante Clause in Section 35 of the SARFAESI Act is not subject to Section 37 thereof; however, a plain reading of the latter provision would suggest that rights, liabilities, obligations, remedies, etc. created/imposed/ provided by the SARFAESI Act and the Rules are preserved, irrespective of what is provided in the stated enactments or any other law for the time being in force. The regime under the SARFAESI Act is altogether different and Sections 35 and 37 are intended to extend a cover to the secured creditor if it abides by the governing law, which cannot be subject to any other provision of a general law like the Contract Act. Since Section 35 overrides other laws in the same or related field and having regard to the scheme of the SARFAESI Act and the dominant purpose sought to be achieved, as noted above, none can and should be allowed to take the auctions conducted thereunder lightly. No court ought to countenance a bidder entering and exiting the process at his sweet will without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunals/courts and the overarching objective of the SARFAESI Act duly complimented by the Rules, which are geared towards efficient and speedy recovery of debts, together with the interpretation of the relevant laws by this Court should not be lost sight of. Losing sight thereof may not be in the larger interest of the nation and susceptible to interference. 25. In the present case, undisputedly, payment of 25% of the sale price was made by the contesting Respondent on 15th September, 2017; hence Sub-rule (3) of Rule 9 stood complied with. The contesting Respondent was notified to deposit the balance 75% of the sale price by 29th September, 2017. Admittedly, he could not or did not so deposit till 27th September, 2017, whereupon he prayed for extension of time by 25 days by his request letter of even date, i.e., 27th September, 2017. The Authorized Officer responded favourably and extended the time for deposit by 25 days as prayed by the contesting Respondent, i.e., till 23rd October, 2017. Extension of time till 23rd October, 2017, therefore, was by mutual agreement - a course of action permitted by Sub-rule (4). On 20th October, 2017, the contesting Respondent made a further re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idders. It is then that the contesting Respondent instituted the writ petition before the High Court. 27. Under such circumstances, it has to be held that the transaction fell through by reason of the default or failure of the contesting Respondent to deposit 75% of the sale price by 23rd October, 2017, as per the terms of Rule 9(4). On facts, we find that the contesting Respondent was arranging for funds when he received the summons from the DRT on 10th October, 2017. It is, therefore, clear that at least till that date, the contesting Respondent was lacking in financial resources to make payment of the entire sale price. Although it is not always necessary for an auction purchaser to arrange for funds and be ready to pay the entire sale price within 15 days of confirmation of sale, since extension of time is contemplated in Rule 9, it is beyond our comprehension why the contesting Respondent while applying for an extension of time on 27th September, 2017 sought for only 25 days' time and not for more time, at least up to the entire period of ninety days, being the maximum time that he could have asked for and made available to him in terms of Rule 9(4). He had also moved t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the Authorized Officer in forfeiting Rs. 30,75,000/- being 25% of the sale price. 29. The first question is answered accordingly. 30. Moving on to the second question, we find the High Court to have committed an error of law in directing refund on the ground that the Bank should not be permitted to enrich by forfeiting the amount from the writ Petitioner . It is not a question of the Bank's enrichment or deriving any undue advantage that the Court was really concerned with. It seems to have posed a wrong question for being answered. 31. The circumstances of the case make it imperative to consider the question: when does an enrichment or unjust enrichment occur? 32. Mahabir Kishore v. State of Madhya Pradesh (1989) 4 SCC 1 is a decision of this Court which traced various English decisions and ultimately laid down the requirements of unjust enrichment as follows: 11. The principle of unjust enrichment requires: first, that the Defendants has been 'enriched' by the receipt of a 'benefit'; secondly, that this enrichment is 'at the expense of the Plaintiffs'; and thirdly, that the retention of the enrichment be unjust. This justifies r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ault or failure on his part to make payment of the balance amount of the sale price. Question of the Bank being enriched by a forfeiture, which is in the nature of a statutory penalty, does not and cannot therefore arise in the circumstances. 36. The High Court, in our considered opinion, failed to bear in mind the settled principle of law that the power of judicial review of a writ court will not be permitted to be invoked to protect private interest at the cost of public interest, or to decide contractual disputes, unless a clear-cut case of arbitrariness or mala fides or bias or irrationality is made out. On the pleadings, this was not one such case where the High Court should have interfered. 37. The question under consideration can also be addressed from a different perspective. In the present case, the Authorized Officer had adhered to the statutory rules. If by such adherence any amount is required to be forfeited as a consequence, the same cannot be scrutinized wearing the glasses of misplaced sympathy. Law is well settled that a result flowing from a statutory provision is never an evil and that a court has no power to ignore that provision to relieve what it conside ..... X X X X Extracts X X X X X X X X Extracts X X X X
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