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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 ..... 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. 1,00,000/-, he was declared the highest bidder. Inclusive of the earnest money deposit, the Petitioner paid Rs. 30,75,000/- towards 25% of the sale price by RTGS on 15th September, 2017 itself, and was under advice to pay the balance 75% thereof, i.e., Rs. 92,25,000/-, on or before 29th September, 2017. b. The contesting Respondent failed to arrange requisite funds and by a request letter dated 27th September, 2017, sought for extension of time to pay the balan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 on 5th January, 2018. The auction, however, could not be held on 5th January 2018 for want of adequate number of bidders. 4. It was, at this stage, that the contesting Respondent invoked the writ jurisdiction of the High Court seeking refund of the forfeited amount of Rs. 30,75,000/-, by challenging the letter dated 24th October, 2017 of the Authorized Officer. 5. During the pendency of the writ proceedings before the High Court, the secured asset was once again put up for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer; 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 to be an overall consideration of the facts and circumstances obtaining in the case which led the contesting Respondent to reasonably believe that pendency of proceedings before the DRT at the instance of Stallion would result in the entire sale price, if deposited, being blocked. In such view of the matter, the Authorized Officer without proper consideration of the entire facts and circumstances proceeded to forfeit the amount deposited. Since, there has been patent arbitrariness on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hall 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 aforesaid provisions reveals an ordainment in Sub-rule (4) that on mutual agreement, the time for making deposit of the balance amount of sale price can be extended for a period not exceeding ninety days; but, extension beyond ninety days is not permissible on any count. Since grant of extension for intermittent periods so that the duration of such periods taken together does not exceed ninety days would suggest some element of discretion being reserved unto the authorized officer of a secured creditor Under Sub-rule ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vation 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 or negligence". This Court referred to its earlier decision in Bankura Municipality v. Lalji Raja & Sons AIR 1953 SC 248 where it was observed: According to the dictionary meaning of the word 'forfeiture' the loss or the deprivation of goods has got to be in consequence of a crime, offence or breach of engagement or has to be by way of penalty of the transgression or a punishment for an offence. Unless the loss or deprivation of the goods is by way of a penalty or punishment for a crime, offence or breach of engagement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty, 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 at his own risk and peril and naturally has to suffer the consequences. We are not oblivious of the terms of Section 73 and Section 74 of the Contract Act, being part of Chapter VI thereof titled "Of the Consequence of Breach of Contract". These sections, providing for compensation for breach of contract and for liquidated damages, have remained on the statute book for generations and permit the party suffering the breach to recover such quantum of loss or damage from the party in breach. However, with changing times, the minds of peopl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 (secured creditor) if no bidders were interested to purchase the immovable property. Since the extent of loss cannot be immediately foreseen or calculated, such officers may not have any option but to order forfeiture of the amount deposited by the defaulting bidder in an attempt to recover as much money as possible so as to reduce the secured debt. That the immovable property is later sold at the same price or at a price higher than the one which was offered by the party suffering the forfeiture is not an eventuality that occurs in each a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w 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 any real intent to take it to fruition. The provisions of the SARFAESI Act as well as the Rules are to be interpreted positively and purposefully in the context of a given case to give meaning to Sub-rule (5) of Rule 9. Besides, we have no hesitation to hold that in case of any seeming conflict or inconsistency between the general law, i.e., the Contract Act and the special law, i.e., the SARFAESI Act, it is the latter that would prevail. 24. The up-shot of the aforesaid discussion is that whenever a challenge is laid to an order of forfeitu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 request for extension of time by 15 days citing pendency of proceedings at the instance of Stallion before the DRT. This request came to be rejected by the Authorized Officer by his letter dated 21st October, 2017 referring to absence of any order of stay in operation and that the contesting Respondent was free to deposit the balance amount of sale price and take possession of the auctioned immovable property. The contesting Respondent not having deposited the balance amount of sale price by 23rd October, 2018, the mutual agreement for extension of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the DRT for extension of time, which was not granted. The DRT, however, granted him liberty to participate in the auction to be held on 5th January, 2018 but without waiving any condition. These are circumstances which certainly are adverse to the contesting Respondent. 28. Also, the terms of the auction notice made it clear that the auction sale would be conducted in terms of the provisions contained in the SARFAESI Act. All prospective bidders were, therefore, put on guard as to what could follow in case of a default or neglect. Notwithstanding the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 restitution. Enrichment may take the form of direct advantage to the recipient wealth such as by the receipt of money or indirect one for instance where inevitable expense has been saved. 33. In Sahakari Khand Udyog Mandal Ltd. v. CCE & Customs (2005) 3 SCC 738, 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 unjust enrichment, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... des 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 considers a distress resulting from its operation. The statute must, of course, be given effect to whether a court likes the result or not. This is the statement of law in the decision of this Court in Martin Burn Ltd. v. The Corporation of Calcutta (1966) 1 SCR 543. 38. There being no enrichment of the Bank by reason of the impugned forfeiture, based on our reading of the aforesaid decisions, we answer the second question by holding that the High Court was not justified in exercising writ jurisdiction and directing a refund of 25% of the sale price. 39. One of the points raise ..... X X X X Extracts X X X X X X X X Extracts X X X X
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