AUTHORISED OFFICER STATE BANK OF INDIA versus C. NATARAJAN & ANR

Citation: [2023] 5 S.C.R. 1067 · Decided: 10-04-2023 · Supreme Court of India · Bench: S. RAVINDRA BHAT · Disposal: Appeal(s) allowed

Cited by 1 judgment(s) · cites 6 · see the full citation network in Lexace

Judgment (excerpt)

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   [2023] 5 S.C.R. 1067
1067
AUTHORISED OFFICER STATE BANK OF INDIA
v.
C. NATARAJAN & ANR.
(Civil Appeal No. 2545/2023)
APRIL 10, 2023
[S. RAVINDRA BHAT AND DIPANKAR DATTA, JJ.]
Securitization and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 : ss. 13(4), 17 – Security
Interest (Enforcement) Rules, 2002 – r. 9 – Contract Act – ss. 73, 74
– Power of forfeiture by the Authorized Officer – Exercise of –
Interference with the forfeiture order by the High Court –
Justification of – On facts, default committed by one in discharging
its debts to the Bank and declared as non-performing asset – E-
auction held by the Authorized Officer for secured asset of the
defaulter– Respondent declared the highest bidder and paid the
earnest money and 25% of the sale price – However, could not pay
the balance 75% within the stipulated period and sought extension
of timeand the same was granted – Respondent further sought
extension and the same was rejected– Thereafter, the Authorized
Officer cancelled the e-auction sale concluded in favour of
respondent and forfeited the amount deposited– Respondent applied
before the DRT for the extension of time to deposit the balance
amount – DRT directed the Authorized officer to maintain status
quo – In appeal, the DRAT permitted the Authorized Officer to
proceed with fresh auction without, however, vacating the order of
status quo passed earlier – Writ petition by the respondent seeking
refund of the forfeited amount – Meanwhile, the secured asset was
put up for auction and was sold to another auction-purchaser for
the same amount– High Court directed refund of forfeited amount
on the ground that the Bank should not be permitted to enrich by
forfeiting the amount from the respondent– On appeal, held: Power
of forfeiture is statutorily conferred – Nothing prevented the
respondent from making full payment of the balance amount and
have the sale certificate issued in his favour – Respondent not
genuinely interested in proceeding with his part of obligations –
Counsel for the respondent has not shown how the Authorized
Officer acted in derogation of the statute – While dealing with a
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SUPREME COURT REPORTS
[2023] 5 S.C.R.
case covered by r. 9, an order of forfeiture of sale price should not
be lightly interfered – Thus, no arbitrariness or unreasonableness
in the action of the Authorized Officer found in forfeiting 25% of
the sale price – Furthermore, there being no enrichment of the Bank
by reason of the forfeiture, the High Court not justified in directing
a refund of 25% of the sale price – Thus, the order passed by the
High Court set aside.
Words and Phrases:”Forfeiture” – Meaning of.
Allowing the appeal, the Court
HELD: 1.1The bare perusal of the provisions reveals an
ordainment in sub–rule (4) of r. 9 of the Security Interest
(Enforcement) Rules, 2002 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 (5) of rule
9. However, there can be no gainsaying that such discretion has
to be exercised reasonably and not on whims or caprice; at the
same time, no auction purchaser can claim extension as a matter
of right and that too beyond the statutorily prescribed period.
Whether or not a case for extension does exist would depend
upon the peculiar facts of each case and no strait–jacket formula
can ever be laid down therefor. If, however, circumstances are
shown to exist where a bidder is faced with such a grave disability
that he has no other option but to seek extension of time on
genuine grounds so as not to exceed the stipulated period of
ninety days and the prayer is rejected without due consideration
of all facts and circumstances, refusal of the prayer for extension
could afford a ground for a judicial review of the decision-making
process on valid ground(s). [Para 13][1080-A-E]
1.2. Sub-rule (5) of rule 9 does envisage forfeiture, should
there be a default in payment of the balance amount of purchase
price within the period mentioned in sub–rule (4). The power of
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forfeiture is, therefore, statut

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