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2021 (6) TMI 1161 - MADRAS HIGH COURTFailure to make the balance payment for auction sale - right to forfeit - forfeiture clause to be used as a penalty or not - HELD THAT:- The right to forfeit must be balanced against the corresponding principle enshrined in the rule against unlawful enrichment. While an auction purchaser is liable for the further expenses incurred by the secured creditor in conducting a second auction sale, the secured creditor cannot forfeit the entire money that has been tendered without having suffered loss commensurate with the quantum of money deposited and proposed to be forfeited. A forfeiture clause, at the highest, may indicate the maximum amount that may be forfeited to compensate the other party for the breach committed by the party in default. But the amount of forfeiture, unless it is a small percentage of the total consideration, cannot be well in excess of the loss or damage suffered by the party not in breach. There are times that Courts presume that they have the extraordinary authority to enlarge the time. A kind of mercy jurisdiction is also resorted to at times without the Court being mindful of the fact that the exercise of such authority may prejudice another who may not be before the Court or may amount to granting undue favour to a person merely because he has approached the Court - The petitioner in either case should have been aware of his obligation to make the payment within the time the payment was due and merely because the second surge hit after February 18, 2021 or the lockdown was imposed sometime thereafter is not, by itself, enough ground to ignore the default committed by the petitioner. Accordingly, the secured creditor will be free to advertise for the fresh sale of the assets. It is made clear that the petitioner will be entitled to participate in the auction for such purpose. If the petitioner is successful once again, in respect of both the properties, and if the quantum of bid in either case is lower, it is the lower amounts that the petitioner would have to pay together with all expenses incurred by the secured creditor in conducting the fresh sale and the diminution of price together with the interest thereon from the date of the original auction - Even if the petitioner is not the highest bidder, if there is a lower amount at which either property is sold, the petitioner will have to make good the difference together with the interest from the date of the original auction till the date of payment and the reasonable costs that the secured creditor may have incurred for conducting a fresh auction. Petition disposed off.
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