Case Note & Summary
The appellant, IDBI Bank, conducted an e-auction on 10.04.2018 for a property comprising 2 guntas of land in Telangana. The respondents were the highest bidders and deposited 25% of the bid amount (Rs. 36,00,000) on the auction day. The bank issued a sale confirmation letter requiring payment of the balance within 15 days. However, the bank refused to accept the balance amount due to a CBI complaint made before the auction, an ED advisory to keep documents in safe custody, and a stay order obtained by a guarantor in a writ petition. The bank eventually cancelled the auction on 24.12.2019 and refunded the deposit, which the respondents did not encash. The respondents filed a writ petition in the High Court, which allowed it and directed the bank to issue the sale certificate upon receiving the balance amount. The Supreme Court dismissed the bank's appeal, holding that the respondents were not in default; the delay in payment was attributable to the bank's own actions and external factors. The Court noted that the time under Rule 9(4) is extendable by written agreement, and the bank's silence implied extension. The cancellation order did not mention any default under Rule 9(4), and the bank could not raise that plea for the first time in a counter affidavit. The Court also relied on precedents that the time for deposit is not sacrosanct.
Headnote
A) Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - Auction Sale - Default in Payment - Rule 9(4) of Security Interest (Enforcement) Rules, 2002 - The time stipulated for deposit of balance sale consideration is not sacrosanct and can be extended by written agreement between the parties; the auction purchaser cannot be termed a defaulter if the delay in payment is attributable to the bank or external factors such as CBI complaint, ED advisory, or stay order by court. (Paras 13-16) B) Administrative Law - Validity of Order - Reasons - The validity of an order can only be adjudged on the basis of the reasoning contained in the order itself; such reasoning cannot be supplemented by a counter affidavit or supplementary affidavit filed in litigation. (Para 12) C) Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - Auction Sale - Cancellation - Communication cancelling auction must specify the default; a plea of default under Rule 9(4) cannot be raised for the first time in a counter affidavit. (Para 12)
Issue of Consideration
Whether there was any default on part of the respondents in depositing the balance amount within the time prescribed pursuant to the auction sale dated 10.04.2018 so as to attract Rule 9(4) of the Security Interest (Enforcement) Rules, 2002 and allow the appellant-Bank to cancel the auction which had already been confirmed.
Final Decision
The Supreme Court dismissed the appeals, upholding the High Court's judgment and order dated 19.09.2022 and the order dated 29.11.2022 dismissing the review petition. The Court directed the appellant-Bank to issue the sale certificate to the respondents upon payment of the balance sale consideration of Rs. 1,06,50,000/- within a period of four weeks from the date of the judgment.
Law Points
- Rule 9(4) of Security Interest (Enforcement) Rules
- 2002 is not sacrosanct
- time for deposit of balance sale consideration can be extended by written agreement
- validity of an order must be judged on reasons contained therein
- not supplemented by counter affidavit
- auction purchaser cannot be termed defaulter if delay in payment is attributable to the bank or external factors
