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TMI BlogSupreme Court Upholds Forfeiture of Earnest-Money Deposits under SARFAESI RulesX X X X Extracts X X X X X X X X Extracts X X X X ..... ctrines concerning the interpretation and application of the SARFAESI Rules, specifically Rule 9(5), which governs the forfeiture of earnest-money deposits. Arguments Presented The primary arguments presented in the case centered around the following key issues: The applicability of Sections 73 and 74 of the Indian Contract Act, 1872 , to the forfeiture of earnest-money deposits u/r 9(5) of the SARFAESI Rules. The principle of reading down a provision and its proper application in the context of Rule 9(5). Whether the forfeiture of the entire earnest-money deposit, even after the secured creditor has recovered its dues from a subsequent sale, amounts to unjust enrichment. The existence of exceptional circumstances that could warrant setting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chment is a by-product of the doctrine of equity, and equity cannot supplant the law if the law is clear and unambiguous. The forfeiture u/r 9(5) is a legal consequence that 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 the extent of the debt owed. Exceptional Circumstances The court acknowledged that in exceptional circumstances, such as those presented in the case of Alisha Khan Versus Indian Bank (Allahabad Bank) Ors - 2021 (12) TMI 1483 - Supreme Court , where the successful auction purchaser was unable to pay the balance amount due to COVID-19 complications, the courts may consider refunding the earnest-money deposit. However, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eme Court's judgement in this case provides a comprehensive analysis and interpretation of the SARFAESI Rules, specifically Rule 9(5), which governs the forfeiture of earnest-money deposits in e-auctions conducted under the SARFAESI Act. The court upheld the validity and applicability of Rule 9(5), rejecting the arguments regarding the applicability of Sections 73 and 74 of the Indian Contract Act, 1872 , and the principle of reading down the provision. The court emphasized that the forfeiture of the entire earnest-money deposit u/r 9(5) is a legal consequence that follows irrespective of subsequent events or the extent of the debt owed. The court clarified that the concept of unjust enrichment cannot override the clear and unambiguous ..... X X X X Extracts X X X X X X X X Extracts X X X X
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