Provisions of Security Interest (Enforcement) Rules, 2002 applied for forfeiture of earnest money deposit for auction of movable and immovable property

Calcutta High Court: A Single Judge Bench comprising of Debangsu Basak, J. decided a writ petition in which the forfeiture of earnest money deposit was challenged.

The brief facts of the case are that the first petitioner participated in a sale of movable and immovable properties conducted by the respondent governed under the provisions of SARFAESI Act, 2002. An offer was made by the petitioner which was not accepted initially, though subsequently negotiations were made between the parties and a new agreement was formed. Petitioner wanted the sale certificate for immovable property to be issued in favour of K.P. Commodities Pvt. Ltd. therefore, respondent was required to issue the sale certificate in favour of the nominee, further for non issuance of the same, and refund of earnest money deposit along with interest was required.

Contentions on behalf of the respondent are stated that the petitioners have a statutory alternative remedy available, therefore by relying on the case of Agarwal Tracom Pvt. Ltd. v. Punjab National Bank, 2016 SCC OnLine Del 3004, the writ petition should not be entertained on the basis of alternative remedy being made available. He also stated that the correspondence between the parties do not bring any novation, due to which the respondents are entitled to forfeit the entire earnest money deposit.

The Hon’ble Court held that existence of a statutory alternate remedy available does not oust the jurisdiction of writ court. Since the respondents did not raise the point of maintainability, the consideration of merits of the write petition should not be denied on the ground of existence of statutory alternative remedy when the point of maintainability was not even raised.

Therefore, according to Rule 9(5) and Rule 9(4) of the Security Interest (Enforcement) Rules, 2002 forfeiture of the deposit of earnest money and payment of the balance amount of purchase price before the 15th day of confirmation of sale of the immovable property is permitted. Failure on part of the petitioner to pay the balance amount of purchase resulted in the forfeiture of the earnest money deposit, which is a justified action taken by the respondent. [Poddar Commodities Private Limited v. Arms,  2018 SCC OnLine Cal 1645, dated 01.05.2018]

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