Auction forfeiture and nondisclosure of material facts: secured asset bidder entitled to refund, not mechanical forfeiture.

The SC considered whether forfeiture of a bidder's deposited earnest money and instalment under a secured asset auction could stand where material facts about pending DRT proceedings and interim protection were not disclosed at the auction stage. It noted that the bidder had complied with the auction terms, the relevant facts were undisputed, and the default provision in Rule 9(5) of the Security Interest (Enforcement) Rules, 2002 could not be applied mechanically. In these circumstances, the dispute was suitable for direct restitution rather than relegation to an alternative remedy, and refund of the deposited amount with consequential interest was directed if payment was delayed.

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Issues: Whether the bank was justified in forfeiting the appellant's deposited amount and in relegating him to an alternative remedy, despite the undisputed facts surrounding the auction and the pendency of proceedings before the Debt Recovery Tribunal.

Analysis: The appellant had deposited the earnest money and the first instalment in accordance with the auction terms, but the pendency of the borrower's proceedings and the interim protection granted by the Tribunal were not brought to his notice when the auction was conducted and the subsequent deposit was made. The dispute on forfeiture was not one requiring the appellant to be sent to another forum, because the material facts were already crystallized and undisputed. The default contemplated under Rule 9(5) of the Security Interest (Enforcement) Rules, 2002 could not be mechanically applied in a case where the bidder's conduct was affected by nondisclosure of material auction-related facts.

Conclusion: The forfeiture could not be sustained, and the appellant was entitled to refund of the amount deposited.

Final Conclusion: The appeal was allowed, and the bank was directed to return the appellant's deposited money with consequential interest if payment was delayed beyond the stipulated period.

Ratio Decidendi: Where the material facts affecting participation in a secured asset auction are not disclosed and the entitlement to refund is undisputed, the court may exercise writ jurisdiction to grant restitution rather than compel recourse to another remedy, and the statutory consequence of forfeiture under the auction rules will not apply mechanically.

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