Allowed

State Bank of India v. Smt S Suganthy

DRAT21 May 2024REGULAR APPEAL/10/2023

Case brief

AI extract

What is this about?

The Debts Recovery Appellate Tribunal allowed an appeal by a bank against an order refunding a forfeited 25% auction deposit. The Court held that forfeiture under SARFAESI Rules does not amount to unjust enrichment even if the asset is resold at a higher price.

What did the court decide?

The impugned order dated 19.04.2022 directing refund is set aside and the Securitisation Application stands dismissed.

State Bank of India versus Smt S Suganthy — Execution and Attachment | DRAT (2024)

¶1

RA (SA) 10/2023

¶2

IN THE DEBTS RECOVERY APPELLATE TRIBUNAL AT CHENNAI

¶3

Dated the 21^st of May, 2024

¶4

PRESENT: Hon’ble Mr. Justice S. Ravi Kumar CHAIRPERSON

¶5

RA (SA) 10/2023

¶6

(SA 304/2017 on the file of DRT, Coimbatore)

¶7

Between

¶8

The Authorised Officer,

¶9

State Bank of India,

¶10

Formerly: State Bank of Hyderabad,

¶11

Regional Office-II, 43-B, Abirami Towers, II Floor, Cowly Brown Road,

¶12

R.S. Puram, Coimbatore – 641 002.

¶13

State Bank of India, Represented by its Branch Manager, Mr. S. Suresh Sivanandapuram Branch,

¶14

307 – Visagam Complex, Sathy Main Road, Sivanandapuram, Saravanampatti, Coimbatore – 641 002.

¶15

… Appellants

¶16

AND

¶17

Smt. S. Suganthy, D/o Mr. M. P Srinivasan, 13-A, Subbathaal Layout –II Cross, Rathinapuri,

¶18

Coimbatore – 641 027.

¶19

¶20

RA (SA) 10/2023

¶21

Smt. S. Chinthamani, W/o, Mr. M.P. Srinivasan, 13-A, Subbathaal Layout –II Cross, Rathinapuri, Coimbatore – 641 027.

¶22

. ……Respondents Counsel for Appellants. : Mr. B. Raghavalu Naidu Counsel for Respondents : Mr. A. Suresh Sakthi Murugan

RA (SA) 10/2023

O R D E R

This Appeal is against Order dated 19.04.2022 of DRT, Coimbatore, in SA 304/2017.

¶27

Brief facts that are relevant for the purpose of this Appeal are as follows:-

¶28

Respondents herein had participated in auction held on 23.01.2017 conducted by Appellant Bank and became a successful bidder. On declaring as successful bidder, Respondents herein deposited Rs.22,11,250/-, being the 25% of bid amount, on 24.01.2017. Respondents did not pay the balance amount of 75%, and Appellants herein addressed a Letter dated 18.04.2017 calling upon Respondents to remit the balance amount as per Sale Confirmation Letter dated 24.01.2017, and stated, failure to deposit, would result in forfeiture of amount deposited

¶29

¶30

RA (SA) 10/2023

¶31

by Respondents. As Respondents failed to remit the balance amount, Appellants forfeited the deposit amount of Rs.22,11,250/-. Challenging said forfeiture and Letter dated 18.04.2017, Respondents filed Securitisation Application; contending that Respondents purchased the property which was under occupation of tenants on the promise of Appellants that tenants shall be vacated through Order of District Magistrate under Section 14 of SARFAESI Act, 2002. Respondents also contended that Bank promised that time for deposit of 75% of bid amount would be extended till vacation of tenants.

¶32

Appellant Bank resisted the Application contending that Respondents purchased property knowing fully well that the property is under occupation of tenants. Bank also contended that they never promised as alleged by Appellants herein, and the property was sold ‘as is where is’ and ‘as is what is’ basis . It is further contended that as Respondents failed to pay the balance bid amount within the stipulated time, the deposit amount is forfeited as per

¶33

¶34

RA (SA) 10/2023

¶35

Security Interest (Enforcement) Rules, 2002, (shortly called

¶36

as Enforcement Rules) and prayed for dismissal of Securitisation Application.

¶37

Tribunal below, on a consideration of contentions and rival contentions of both parties, allowed the Securitisation Application mainly on the ground that, Bank, having resold

¶38

the property in a fresh auction, forfeiting the amount of Rs.22,11,250/-, would amount to unjust enrichment. Aggrieved by said Order, Bank preferred this Appeal.

¶39

Heard both sides.

¶40

Advocate for Appellants submitted that forfeiture in

¶41

this case would not amount to unjust enrichment as per

¶42

the latest Judgement of Hon’ble Supreme Court, and findings of the Tribunal below are incorrect.

¶43

¶44

RA (SA) 10/2023

¶45

On the other hand, Advocate for Respondents submitted that, as tenants are in occupation, Respondents did not pay the balance bid amount. He further submitted that there is pending litigation and the same is not disclosed, and further, Respondents submitted an application dated 22.04.2017 seeking refund, and Tribunal below was right in refunding the amount.

¶46

I have perused the material papers and the impugned Order dated 19.04.2022.

¶47

As seen from the impugned Order, Tribunal below

¶48

ordered for refund of 25% bid amount, mainly on the ground that, Bank has resold the property in a fresh auction, and forfeiting the amount, would amounts to unjust enrichment. Tribunal below did not go into the aspects of whether Respondents participated in the auction knowing that the property is under the occupation of tenants or that there was any promise from Appellant Bank as alleged in the Securitisation Application. Only ground

¶49

¶50

RA (SA) 10/2023

¶51

on which Tribunal below ordered for refund is that forfeiture would amount to ‘unjust enrichment’, since the property was already sold and Bank realized its money. Tribunal below relied on the Judgements of Hon’ble High Court of Madras, in arriving at such conclusion.

¶52

Advocate for Appellant Bank mainly placed reliance on the Judgement of Hon’ble Supreme Court in The Authorised Officer, Central Bank of India Vs. Shanmugavelu, in Civil Appeal Nos. 235 and 236/2024 . In this case, Hon’ble Supreme Court is pleased to set aside the Judgement of Hon’ble High Court of Madras, holding that the observation of Hon’ble High Court is incorrect. Hon’ble Supreme Court observed as follows:-

¶53

“ 111. The consequence of forfeiture of 25% of the deposit under Rule 9(5) of the SARFAESI Rules is a legal consequence that has been statutorily provided in the event of default in payment of the balance amount.

¶54

¶55

RA (SA) 10/2023

¶56

The consequence envisaged under Rule 9(5) follows irrespective of whether a subsequent sale takes place at a higher price or not, and this forfeiture is not subject to any recovery already made or to the extent of the debt owed. In such cases, no extent of equity can either substitute or dilute the statutory consequence of forfeiture of 25% of deposit under Rule 9(5) of the SARFAESI Rules.”

¶57

In the above referred decision, Hon’ble High Court interfered with forfeiture, mainly on the ground that the secured asset was resold and Bank got higher price than the previous auction. Even in such circumstance, the Hon’ble Supreme Court held that forfeiture is justified and it would not amount to unjust enrichment. Therefore, as rightly pointed out by Advocate for Appellants, in view of Judgement of Hon’ble Supreme Court, Order of Tribunal below, directing refund of amount, cannot be sustained and

¶58

the same is liable to be set aside.

¶59

¶60

RA (SA) 10/2023

¶61

In view of my above findings and observations, it is held that forfeiture does not amount to unjust enrichment, therefore, refund ordered by Tribunal below, is liable to be set aside.

¶62

I n the result , t he Appeal in RA (SA) 10/2023 is

¶63

allowed. Impugned Order dated 19.04.2022 is set aside. Consequentially, Securitisation Application SA 304/2017, on the file of DRT, Coimbatore, stands dismissed. Both parties shall bear their own costs. All pending IAs, if any, stand closed.

¶64

[Dictated to Athistamani, PS transcribed by her, corrected, signed and pronounced by me in open court, this 21^st of May, 2024]

¶65

[Justice S. Ravi Kumar] CHAIRPERSON

¶66

State Bank of India v. Smt S Suganthy

Case brief

What is this about?

What did the court decide?

State Bank of India v. Smt S Suganthy

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Cases cited

Statutes considered

Parties & counsel

Coram

Case details

All orders in this case

Similar cases

Sri K Deivendran versus Tamilnad Mercantile Bank Limited

A.O.,State Bank of India versus Mskg Engineering Consultancy Services

R Jayanthi versus Union Bank of India

Pradeep Kothari versus Tamilnad Mercantile Bank Ltd. & 20 others

Asma Stone Crushers versus Karnataka Gramin Bank

Universal Hospital Al Ain Llc versus Yes Bank