Auction cancellation for alleged payment default held illegal where buyers were ready to pay and no hearing was given.
Under Rule 9(4) of the Security Interest (Enforcement) Rules, 2002, the balance sale consideration was not treated as unpaid default where the auction purchasers were ready and willing to pay, but the secured creditor itself declined to accept payment and acted on later external developments. The time for payment was not absolute and could be extended by written agreement under Rule 9(4) read with Rule 9(5). A unilateral cancellation of the confirmed auction, without any recorded finding of purchaser default and without notice or hearing, violated natural justice and could not be justified later by affidavit. The cancellation and refusal to issue the sale certificate were held illegal.
Issues: Whether the secured creditor could cancel a confirmed auction and refuse issuance of the sale certificate on the ground of non-deposit of the balance sale consideration under Rule 9(4) of the Security Interest (Enforcement) Rules, 2002, and whether such cancellation was sustainable in law.
Analysis: The balance amount was not deposited within the original period because the secured creditor itself declined to accept it and relied on subsequent developments such as a CBI complaint, an ED advisory, and interim proceedings in a connected writ petition. The correspondence showed that the auction purchasers were ready and willing to pay the balance amount, and the time for payment under Rule 9(4) was not absolute, but could be extended by written agreement under Rule 9(4) read with Rule 9(5). The cancellation communication contained no finding of default by the auction purchasers and could not be supplemented later by affidavit. The cancellation was also unilateral and made without notice or hearing, contrary to natural justice.
Conclusion: The auction purchasers were not in default under Rule 9(4) and Rule 9(5); the cancellation of the auction and refusal to issue the sale certificate were illegal, and the appeals failed.
TaxTMI 
AI Drafter ✕
TaxTMI 
