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Judgment
A.S. Bopanna, J.—The petitioner is before this Court assailing the communications dated 17/18-01-2013 and 28.01.2013 which are at Annexures-A and B by which the respondents have rejected the request of the petitioner to refund a sum of Rs. 15,00,000/- as sought by the petitioner. The brief facts are that respondents No. 1 and 2 in respect of certain dues from their borrower had brought the property belonging to the borrower to sale by e-auction. The petitioner was one of the bidders who had submitted her bid in respect of the said property. In the auction conducted on 31.10.2011, she had offered a sum of Rs. 1,50,00,000/- as the price. Subsequent thereto, the petitioner is stated to have noticed certain transaction between the owner of the property and one Sri A. Ramanjinappa due to which the petitioner had certain apprehension in proceeding further with the transaction. In that circumstance, the balance amount payable by the petitioner had not been deposited though a sum of Rs. 94,50,000/- had been deposited. In the said circumstance, the respondents had cancelled the further process therein and had forfeited a sum of Rs. 15,00,000/- and refunded only a sum of Rs. 79,50,000/-.
At that stage, the petitioner was before this Court in W.P. No. 2009/2013. During the pendency of the said petition, the respondents had once again brought the property to sale. The petition was disposed of on 15.01.2013 granting leave to the petitioner to take part in the subsequent auction process and also make appropriate representation to the respondents for adjustment of Rs. 15,00,000/- which had been forfeited by them towards the subsequent transaction. In the subsequent tender process dated 20.12.2012, the petitioner has once again participated and she was the successful bidder having offered a sum of Rs. 1,57,00,000/- and the transaction has been completed and the entire price has been deposited with the respondents. In such circumstance, though at the earlier instance the petitioner had sought for adjustment of the said sum of Rs. 15,00,000/- towards the sale consideration, presently, the petitioner is seeking refund of the said amount.
The respondents have opposed the contention put forth in the petition. Learned counsel for the respondents would refer to Rule 9(4) and (5) of the- Security Interest and Enforcement Rules, 2002 (for short the ''Rules 2002) to contend that the same empowers the respondents to forfeit the amount if the balance amount required to be paid is not paid. It is also his contention that in the auction notification itself, a condition has been imposed, in that regard Further, reference is also made to the judgment of the Hon''ble Supreme Court in the case of Himadri Coke and Petro Limited vs. Soneko Developers (P) Ltd. and Others [(2005) 12 SCC 364] wherein the act of the respondents therein to forfeit the amount has been upheld. The decision in the case of Satish Batra vs. Sudhir Rawal in Civil Appeal No. 7588/2012 is also referred to contend that the Hon''ble Supreme Court in the said case also had upheld the action of forfeiting the earnest money. Having referred to the same, learned counsel for the respondents would contend that in the instant facts, though the respondents had extended the time at the first instance itself the petitioner had failed to deposit the amount. Subsequently, re-auction was conducted. Even though the respondents were entitled to forfeit the entire amount of Rs. 94,50,000/- which had been deposited, they have on humanitarian grounds refunded a sum of Rs. 79,50,000/- and forfeited only a sum of Rs. 15,00,000/-. Therefore, they are justified in their action is the contention.
Having noticed the rival contentions, with regard to the provision contained in the Rules, 2002, which provides for the manner in which the auction is to be conducted and also the forfeiture in the event of the higher bidder not depositing the amount, from the decisions referred no doubt, the Hon''ble Supreme Court in the facts and circumstances arising therein has arrived at the conclusion that the forfeiture made is justified in law. With regard to the legal position that when an auction is conducted, the deposits would have to be made in the manner as provided for i.e., the bid amount to the said extent of 25% would have to be deposited immediately and the balance would have to be deposited within the time frame cannot be in dispute.
However, what requires to be noticed in the instant case is as to whether the facts herein is distinguishable from the situation where it is strictly guided by the said provisions and the manner in which the law has been interpreted. To consider this aspect of the matter, first and foremost, it is to be noticed that the petitioner herein at the first instance had not deposited the balance amount due to certain apprehension that when there was another transaction entered into by the owner of the property with a third party, the title of the petitioner may result in litigation.
Be that as it may, when the respondents had indicated that there was a first charge in their favour and therefore they were entitled to sell the property in usual circumstance, the said assurance was sufficient and the apprehension can be termed as baseless. But what is further to be noticed in the instant case is that when the amount was forfeited, the petitioner was before this Court in W.P. No. 2009/2013 which was disposed of on 15.01.2013. During the pendency of the petition, when the respondents sought to re-auction the property, the petitioner had taken leave from this Court to participate in the said auction and had also taken permission to make an application for adjustment of the said amount. It is no doubt true that even if such representation was made, it was for the respondents to consider the same and no specific direction had been issued by this Court. The said aspect however is taken into consideration to assess the conduct of the parties in a matter where the amount deposited earlier is sought to be forfeited by the statutory authorities as penalty for not completing the process.
While taking note of this aspect, what is also to be kept in view is that the provision in the contract as also the Rules, 2002, provided is to see that the person who does not have the capacity to bid is discouraged from bidding, as otherwise by making deposits of a portion of the amount, the process would be dragged on. Hence, the provision for forfeiture is essentially a deterrent. If this aspect is kept in perspective, what is also to be taken note is that when the property was re-auctioned, it is the petitioner herself who was the highest bidder even in the second auction. The petitioner has further deposited the entire amount and completed the transaction. This in my view is the distinguishing factor in the instant case since this will make it evident that at the first instance the petitioner had not participated for the sake participating. On the other hand, though she was the successful bidder had not thereafter deposited the balance amount as initially certain apprehension was made out with regard to the title of the property and before the same could be resolved, the process had been cancelled and the forfeiture had been made. Subsequently when the property was re-auctioned, the petitioner has once again offered the bid and was the successful bidder and has also paid the amount which indicates that the earlier attempt of the petitioner was not with an intention of dragging on the matter nor was it speculative. In such circumstance, when the petitioner herself has taken part in the second auction and succeeded, the respondents would not be justified in forfeiting the entire amount as if she had defaulted so as to inflict the penalty.
Needless to mention that due to the apprehension expressed by the petitioner and non- completion, the process had to be re-done and when the respondents had to re-auction the property, with regard to publication of the notice and conducting of the auction, certain expenses have been incurred by the respondents for which the petitioner will be liable. Therefore, certainly, to the extent of the actual expenses incurred by the respondents, they would be entitled to adjust the amount from the amount which has been forfeited and not the entire amount of Rs. 15,00,000/-. Therefore, the communications at Annexures-A and B rejecting the request of the petitioner for refund of the entire amount of Rs. 15,00,000/- are set-aside. A direction is issued to respondents No. 1 and 2 to consider the request of the petitioner keeping in view the observations made above and refund the amount after deducting the actual expenses incurred by the respondents for re-notifying the auction and completing the same.
In terms of the above, the petition stands disposed of.