Statutory forfeiture on auction default applies despite re-auction gain and no loss to the bank.

Default by an auction purchaser in paying the balance consideration within the prescribed time under the Security Interest (Enforcement) Rules, 2002 attracts statutory forfeiture under Rule 9(5). The purchaser was therefore not entitled to refund of the amount retained, and the bank was entitled to forfeit 25% of the bid amount after cancellation of the sale. The absence of loss to the bank, and even a higher price in the re-auction, did not affect the forfeiture, because equity cannot override the clear statutory mandate governing sale of secured assets.

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Issues: (i) Whether the plaintiff was entitled to refund of the balance sale amount after default in paying the auction sale consideration within the stipulated time; (ii) whether the defendant bank was entitled to forfeit 25% of the bid amount under the SARFAESI auction rules; (iii) whether absence of loss to the bank or a higher price fetched in the re-auction affected the right of forfeiture.

Issue (i): Whether the plaintiff was entitled to refund of the balance sale amount after default in paying the auction sale consideration within the stipulated time?

Analysis: The plaintiff admittedly failed to remit the entire bid amount within the period prescribed in the auction terms and the security interest enforcement rules. The sale in his favour was therefore cancelled, and the amount already retained by the bank was adjusted in accordance with the auction conditions and the statutory framework governing sale of secured assets.

Conclusion: The plaintiff was not entitled to refund of the forfeited amount.

Issue (ii): Whether the defendant bank was entitled to forfeit 25% of the bid amount under the SARFAESI auction rules?

Analysis: Rule 9(3) and Rule 9(4) of the Security Interest (Enforcement) Rules, 2002 required payment of the balance consideration within the stipulated time, and Rule 9(5) prescribed forfeiture on default. The forfeiture was treated as a statutory consequence of non-payment, not dependent on any separate finding of loss or on the purchaser's subsequent participation in another auction.

Conclusion: The defendant bank was entitled to forfeit 25% of the bid amount.

Issue (iii): Whether absence of loss to the bank or a higher price fetched in the re-auction affected the right of forfeiture?

Analysis: The higher value obtained in the re-auction did not dilute the statutory consequence of default. The Court applied the principle that equity cannot override a clear statutory mandate, and held that the forfeiture under Rule 9(5) operated irrespective of the subsequent sale price or the extent of recovery made by the bank.

Conclusion: Absence of loss to the bank and the higher re-auction price did not affect the forfeiture.

Final Conclusion: The suit failed in full because the forfeiture flowed from the plaintiff's default under the auction rules and no equitable ground could displace the statutory consequence.

Ratio Decidendi: Where the auction purchaser defaults in paying the balance consideration within the prescribed time, forfeiture under Rule 9(5) of the Security Interest (Enforcement) Rules, 2002 is a statutory consequence that operates irrespective of any subsequent higher sale price or questions of loss, and equitable considerations cannot override that mandate.

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