/2023 INSC 0273/
NON­REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
          CIVIL APPEAL NO(S).            OF 2023
(Arising out of SLP(Civil) No(s). 17470 of 2019)
MOHD. SHARIQ ….APPELLANT(S)
VERSUS
PUNJAB NATIONAL BANK AND OTHERS ….RESPONDENT(S)
J U D G M E N T
Rastogi, J.
1. Leave granted.
2. The present appeal is directed against the judgment and order
dated   10 th
  March,   2016   passed   by   the   Division   Bench   of   the   High
Court   of   Uttarakhand,   Nainital   whereby   the   High   Court   while
reversing the finding returned by the learned Single Judge under its
order   dated   21 st
  July,   2015   upheld   the   re­auction   proceedings
initiated   by   the   first   respondent(Punjab   National   Bank­secured
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creditor) held on 1 st
  May, 2014 and granted liberty to the appellant
to initiate independent proceedings before the competent forum for
recovery   of   the   amount   which   stood   forfeited   by   the   first
respondent.
3. The   seminal   facts  culled  out   from   the   record  and   relevant   for
the purpose are that the third respondent borrowed money from the
first   respondent.     However,   the   third   respondent   later   became
defaulter and its bank accounts became NPA and ultimately notice
under   Section   13(2)   of   the   Securitisation   and   Reconstruction   of
Financial   Assets   and   Enforcement   of   Security   Interest   Act,
2002(hereinafter   being   referred   to   as   the   “Act   2002”)   was   issued
and   thereafter   assets   of   the   borrower   were   taken   into   possession
under   Section   13(4)   of   the   Act,   2002.     In   furtherance   thereof,
auction notice was published by the Bank on 18 th
  June, 2013 with
reserve price of  Rs.1.19  crores  inviting  the   bids  in  reference  to  the
mortgage property of the borrower.
4. The appellant who was the successful bidder furnished his bid
of   Rs.2,01,00,000/­   on   22 nd
  July,   2013   and   deposited   earnest
money   of   Rs.11,19,000/­   as   per   the   condition   of   the   bid/auction
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which successful bidder has to deposit (25% of the bid amount) on
acceptance of the bid and that was deposited on 27 th
 July, 2013.  
5. On   25 th
  July,   2013,   the   borrower(third   respondent)   preferred
an   appeal   before   the   Debt   Recovery   Tribunal,   Lucknow(hereinafter
being   referred   to   as   “DRT”)   assailing   the   auction   notice   dated   18 th
June, 2013.  DRT vide order dated 26 th
 July, 2013, after hearing the
counsel   for   the   borrower,   passed   an   interim   order   directing   that
since   auction   is   to   be   held   on   that   day   itself   (i.e.   26 th
  July,   2013),
the Bank is at liberty to proceed with the auction but confirmation
of   the   sale   shall   be   kept   in   abeyance   and   await   further   orders   of
DRT.
6. The auction was held on 26 th
 July, 2013.  It is an admitted fact
that   the   appellant   was   completely   unaware   of   the   interim   order
passed   by   DRT   on   26 th
  July,   2013.     As   the   highest   bidder,   the
appellant had to deposit 25% of the bid amount which he deposited
on 27 th
 July, 2013 amounting to Rs.38,35,000/­ (balance of 25% of
the bid) which the first respondent accepted.
7. In total, the appellant deposited an amount of Rs.50,25,000/­
which   included   earnest   money   and   25%   of   the   bid   amount.     The
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DRT later vacated the interim order due to non­prosecution on 14 th
October,   2013   but   the   substantive   proceedings   before   the   DRT
remained   pending   and   were   posted   for   18 th
  October,   2013.     Since
the   appellant   was   completely   unaware   of   the   pending   proceedings
before   the   DRT   initiated   at   the   instance   of   the   third
respondent(borrower)   and   it   was   nowhere   indicated   in   the   auction
notice which ordinarily in the instant fact situation would not have
been   possible   but   the   date   when   auction   was   held   on   26 th
  July,
2013   and   the   appellant   was   called   upon   to   deposit   the   earnest
money   and   25%   of   the   bid   amount,   no   such   information   was
extended   to   the   appellant   about   the   pending   proceedings   in
reference to the auction notice published on 18 th
 June, 2013 before
the DRT.
8. The   appellant   was,   for   the   first   time,   informed   by   a
communication   dated   18 th
  October,  2013   wherein   he   was  asked  to
pay the balance amount as interim relief has been rejected by DRT.
The   appellant   responded   to   the   communication   made   and
submitted   that   he   volunteers   to   pay   the   balance   amount   provided
the   matter  pending   with  DRT  is decided.    Certain  communications
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were   made   between   the   appellant   and   the   first   respondent.
However,   the   first   respondent   later   informed   the   appellant   by
communication   dated   28 th
  October,   2013   that   if   he   fails   to   deposit
the   balance   amount   of   the   auction   bid,   the   first   respondent   may
forfeit the earnest money.
9. There   is   no   material   on   record   to   substantiate   that   the   first
respondent ever passed the order to forfeit the money deposited by
the   appellant   pursuant   to   the   communication   dated   28 th
  October,
2013 of which a reference has been made.
10. Without   awaiting   any   further   action,   the   first   respondent
initiated   the   re­auction   proceedings   pursuant   to   notice   dated   5 th
March, 2014.  Immediately, when this fact came to the notice of the
appellant,   he   approached   the   High   Court   by   filing   writ   petition
under   Article   226   of   the   Constitution   seeking   Mandamus   to
withhold   re­auction   proceedings   which   has   been   initiated   by   the
first   respondent   pursuant   to   notice   dated   5 th
  March,   2014   and
further   prayed   directing   the   first   respondent   to   execute   the   sale
deed in favour of the appellant on deposit of the balance money  of
the   auction   bid   or   in   alternative,   refund   the   amount   which   the
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appellant   had   deposited   pursuant   to   the   auction   proceedings
initiated in reference to notice dated 18 th
 October, 2013.  
11. On   the   request   made   by   the   appellant,   the   High   Court,   by
interim   order   permitted   the   re­auction   proceedings   to   proceed
further,   but   made   the   auction   subject   to   the   outcome   of   writ
proceedings.     It   reveals   from   the   record   that   in   the   pending
proceedings   before   the   High   Court,   to   test   bona   fides   of   the
appellant, the High Court directed the appellant to deposit Rs.1.77
crores,   after   adjustment   of   the   sum   already   deposited   with   10%
interest, which indisputedly the appellant deposited on 10 th
  March,
2015.     It   is   informed   that   the   highest   bid   of   Rs.1,70,50,000/­   in
re­auction   held   on   5 th
  March,   2014   against   Rs.1.70   Crore   as   a
reserve price was confirmed and the sale deed was executed by the
first respondent in favour of the subsequent purchaser on 1 st
  May,
2014.
12. Taking   note   of   the   bona   fides   of   the   appellant,   as   a   final   bid
amount was deposited in compliance of order of the High Court, the
learned Single Judge keeping in view the paramount principle that
the   mortgaged   property   must   fetch   the   maximum   realizable   value
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on which the security interest was created, set aside the re­auction
proceedings   and   directed   the   first   respondent   to   execute   the   sale
deed   in   favour   of   the   appellant   and   directed   that   the   amount
deposited by the appellant, i.e., of Rs.1.77 crore be adjusted by the
first   respondent   and   money   deposited   by   the   subsequent   auction
purchaser be returned with 10% interest under its order dated 21 st
July 2015.
13. The   extract   of   the   order   dated   21 st
  July,   2015   passed   by   the
learned Single Judge is referred as under:­
“Consequently, writ petition succeeds and is hereby allowed.
Re­auction   held   pursuant   to   the   re­auction   notice   dated
05.03.2014   in   favour   of   respondents   nos.07   and   8   sale   dated
executed   in   favour   of   respondent   no.7   and   8   on   27.05.2014   is
hereby   held   invalid.     Consequently,   sale   certificate   dated
01.05.2014   issued   in   favour   of   respondent   nos.   7   and   8   and   sale
deed executed in favour of respondent no. 7 and 8 on 27.05.2014
is   hereby   declared  void  and  non  est.  Mandamus  is  issued   against
the   Bank   to   execute   sale   deed   in   favour   of   the   petitioner   at   the
earliest,   in   any   case,   within   two   weeks   from   today.   Bank   shall   be
at liberty to withdraw Rs.1,77,00,000/­ deposited by the petitioner
with the Registrar General of this Court.   Bank is further directed
to   refund   the   amount   taken   from   respondents   no.7   and   8   along
with   10%   interest   thereon   within   two   weeks   from   today.   It   is,
however,   made   clear   that   sale   in   favour   of   the   petitioner   shall   be
subject  to  the  final  decision  in  the case  pending  before  the  D.R.T.
No cost.”
14. The   order   of   the   learned   Single   Judge   came   to   be   challenged
by   the   subsequent  auction   purchaser  before  the   Division   Bench   of
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the   High   Court.     The   High   Court,   after   hearing   the   parties,   was   of
the view that no error was committed in the re­auction proceedings
initiated pursuant to notice dated 5 th
  March, 2014 and at least the
subsequent   auction   purchaser   was   not   at   fault   and   if   there   is   no
error   been   committed   in   the   decision   making   process   adopted   by
the   first   respondent,   there   appears   no   reason   to   set   aside   the   re­
auction proceedings initiated in reference to notice dated 5 th
 March,
2014   and   accordingly   while   upholding   the   re­auction   proceedings
directed   the   first   respondent   to   return   the   sum   of   Rs.1.77   crores
which   was   deposited   by   the   appellant   pending   proceedings   with
accrued interest before the learned Single Judge of the High Court
and   so   far   as   the   amount   which   stands   forfeited,   liberty   was
granted to the appellant to avail appropriate remedy for recovery as
admissible   under   the   law.     The   operative   part   of   the   order   of   the
Division Bench of the High Court dated 10 th
  March, 2016 is quoted
hereunder:­
“The upshot  of the above discussion in that  the appeal filed
must be allowed; the directions issued by the learned Single Judge
must   be   set   aside;   and   the   writ   petition   must   be   dismissed.
However, we would think that, in regard to the question about the
forfeiture   of   Rs.50,00,000/­   which   has   been   effected   by   the
respondent Bank, we should leave it open to the writ petitioner  to
seek   appropriate   remedy   before   the   competent   forum,   if   advised.
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The amount, however, deposited by the writ petitioner in a sum of
Rs.1,77,00,000/­,   which   has   been   directed   to   be   put   in   Fixed
Deposit   under   orders   of   this   Court,   shall   be   returned   to   the   writ
petitioner along with the accrued interest.” 
15. The   order   of   the   Division   Bench   of   the   High   Court   became   a
subject matter of challenge in appeal before us.
16. Learned   counsel   for   the   appellant   has   made   a   limited
submission   that   so   far   as   the   money   which   has   been   forfeited   by
the   first   respondent   is   concerned,   no   finding   to   the   contrary   has
been   recorded   by   the   Division   Bench   of   the   High   Court   under   the
impugned judgment that the appellant is not qualified to claim the
amount   forfeited   by   the   first   respondent   still   left   the   appellant   to
avail the remedy which the law permits.
17. Learned counsel further submits that there is no requirement
of adopting any other remedial mechanism when there is no dispute
either   on   facts   or   on   law   that   the   sum   which   was   forfeited   by   the
first   respondent   pursuant   to   the   auction   proceedings   initiated   in
reference to notice dated 18 th
  June, 2013, the appellant is qualified
to   seek   refund   of   the   amount   forfeited   and   it   is   an   apparent
manifest   error   committed   by   the   High   Court   under   the   impugned
judgment   and   at   least   the   appellant   is   entitled   to   refund   of   the
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amount deposited and if the appellant is being thrust upon to adopt
any   other   remedial  mechanism,  it will  cause  great injustice  to  him
and needs interference of this Court.
18. Per   contra,   learned   counsel   for   the   first   respondent   Bank
submits   that   as   per   terms   and   conditions   of   the   auction   notice
dated 18 th
  June, 2013, since the appellant has failed to deposit the
balance   amount   of   the   auction   bid   within   the   time   stipulated,
despite reasonable  opportunity  being  afforded, the  first respondent
is justified in taking a decision of forfeiture of the earnest money.
19. Learned   counsel   further   submits   that   the   decision   taken   by
the first respondent regarding forfeiture is in accordance with Rule
9(5)   of   the   Security   Interest(Enforcement)   Rules,   2002(hereinafter
being   referred   to   as   the   “Rules   2002”)   and   in   the   facts   and
circumstances, no error was committed by the respondent Bank in
taking decision of forfeiture of the amount deposited in reference to
auction notice dated 18 th
 June, 2013.
20. Learned counsel further submits that earlier when the auction
notice dated 18 th
  June, 2013 was published, the highest bid of the
appellant   was   of   Rs.2.01   crores   but   because   of   the   litigation,   the
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highest   bid   in   the   subsequent   auction   proceedings   pursuant   to
notice dated 5 th
 March, 2014 was of Rs.1,70,50,000/­.  Thus, it was
because   of   the   appellant   the   distress   value   of   the   property   was
deflated and thus it is only the appellant who is responsible to bear
the loss and if the first respondent is directed to refund the money
forfeited,   it   may   be   in   contravention   to   Rule   9(5)   of   Rules,   2002,
thus the finding  returned by  the  Division Bench of the High Court
needs no interference.
21. We  have  heard   learned   counsel   for   the   parties   and  with   their
assistance perused the material available on record.
22. We   have   already   noticed   the   narration   of   facts   but   it   will   be
apposite to summarise for better appreciation.   The auction notice,
in   the   first   instance,   was   published   on   18 th
  June,   2013   with   the
reserve   price   of   Rs.1.19   crores   and   the   appellant’s   bid   of   Rs.2.01
crores was the  highest.    The earnest money  of  Rs.11.19 lakhs was
deposited on 22 nd
 July, 2013 and the bid was finalized on 26 th
 July,
2013 and 25% of the bid in terms of the auction notice of Rs.38.35
lakhs was deposited by the appellant on 27 th
  July, 2013.   This fact
has   not   been   disputed   that   DRT   passed   an   interim   order   on   26 th
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July, 2013 and the fact that the proceedings had been initiated and
pending   on   the   date   when   the   auction   was   held   and   the   date   on
which 25% of  the  bid  amount  was  deposited by  the  appellant,  i.e.,
27 th
  July,   2013,   was   never   brought   to   the   notice   of   the   appellant
which   would   give   him   an   option   to   revisit   as   to   whether   he   may
proceed with the auction or withdraw at that stage.
23. This   fact   can   be   further   corroborated   which   has   come   on
record   that   even   when   the   correspondence   was   made   by   the   first
respondent, the only request made by the appellant throughout was
that   he   had   no   difficulty   to   pay   the   balance   amount   provided   the
matter is finally  decided by  DRT.   Obviously, as a man of ordinary
prudence,   one   is   always   supposed   to   assess   the   value   of   the
property on which the auction was held by the secured creditor(first
respondent).     To   test   the   bona   fide   of   the   appellant,   when   the
subsequent   auction   proceedings   at   the   later   stage   were   initiated
pursuant  to  notice  dated 5 th
  March,  2014 with the  reserve  price of
Rs.1.70   crores   and   the   highest   bid   was   of   Rs.1,70,50,000/­,   just
Rs.50,000/­ above the reserve price and pending proceedings before
the learned Single Judge, appellant was called upon to deposit the
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balance   of   Rs.1.77   crores(in   terms   of   his   bid   of   Rs.2.01   crores)
without fail, it was deposited by him on 10 th
  March, 2015 and that
was the reason which persuaded the learned Single Judge not only
to set aside the subsequent auction held dated 5 th
 March, 2014 but
further directed to the first respondent to execute the sale deed on
the   final   bid   of   Rs.2.01   crores   being   deposited,   in   favour   of   the
appellant.
24. The   Division   Bench   of   the   High   Court   although   has   reversed
the   finding   so   far   as   the   subsequent   auction   proceedings   held
pursuant   to   notice   dated   5 th
  March,   2014   is   concerned,   the
appellant has no quarrel with the same.   The only grievance of the
appellant   is   relegating   him   to   avail   remedy   which   the   law   permits
for recovery of the amount forfeited, there appears, in our view, no
justification   in   the   facts   and   circumstances   particularly   when   the
factual   matrix   is   not   in   dispute   and   the   money   deposited   by   the
appellant towards earnest money and the first instalment of 25% in
terms   of   the   auction   notice   dated   18 th
  June,   2013   is   the   accepted
fact by either party.
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25. We are of the considered view that once there is no dispute on
the facts came on record, there appears no reason for the appellant
to   be   relegated   to   avail   other   remedial   mechanisms   for   recovery   of
the   indisputed   amount   and   the   Division   Bench   has   committed   a
manifest   error   in   the   facts   and   circumstances   in  not   exercising  its
power under Article 226 of the Constitution and instead of resolving
the dispute, the Division Bench under the impugned judgment has
kept the issue alive, permitting the parties to have a second innings
in reference to the dispute which stands crystalized/settled.
26. So   far   as   the   submission   made   by   the   first   respondent   in
reference to Rule 9(5) of the Rules, 2002 is concerned, that may not
be   of   any   assistance   for   the   reason   that   ordinarily   if   the   highest
bidder fails to deposit the balance amount of the purchase price, in
terms   of   9(4)   within   the   stipulated   period   and  commits   default,   its
consequence is stipulated under Rule 9(5) of the Rules, 2002.   But
the   instant   case   was   not   a   case   of   simple   default.     The   appellant
has come with the bona fide defence that he was never informed on
the   date   when   the   auction   was   held   or   day   thereafter   that   the
substantive   proceedings   are   pending   before   the   DRT   instituted   at
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the   instance   of   the   borrower.     As   a   man   of   ordinary   prudence,   if
someone has been called upon to participate in the bidding process,
the facts must be made clear to the parties for the reason that there
is  always   a  high   variance  between   market  realizable  value  and   the
distress value of the mortgaged property when put to public auction
under the provisions of the Act, 2002.
27. We   further   make   it   clear   that   since   the   appellant   filed   the
present appeal after a long delay which we have condoned as such,
he is not entitled to any interest on the amount forfeited by the first
respondent.
28. Consequently,   the   appeal   succeeds   and   accordingly   allowed.
The   first   respondent   is   directed   to   return   the   money   of   Rs.50.25
lakhs   to   the   appellant   deposited   in   reference   to   the   auction   notice
dated 18 th
 June, 2013 within a period of two months failing which it
shall carry interest @ 12% per annum until the date it is made over
to the appellant.  No costs.
29. Pending application(s), if any, shall stand disposed of.
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…………………………….J.
(AJAY RASTOGI)
……………………………..J.
(BELA M. TRIVEDI)
NEW DELHI;
APRIL 11, 2023.
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