Dismissed

Sunil Singh v. Union Bank of India

DRT12 Mar 2026SA/496/2025

Case brief

AI extract

What is this about?

The Debt Recovery Tribunal dismissed an application seeking to set aside the forfeiture of an Earnest Money Deposit. The court held the bank was statutorily entitled to forfeit the 10% EMD because the successful bidder failed to pay the remaining 15% of the sale consideration by the deadline.

What did the court decide?

Forfeiture of Rs.41,60,000/- as Earnest Money Deposit by the respondent bank was upheld; the Securitization Application was dismissed.

Sunil Singh versus Union Bank of India — Company and Corporate | DRT (2026)

SA No.496/2025

12.03.2026

IN THE DEBTS RECOVERY TRIBUNAL-III, CHENNAI

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Dated this the 12^th day of March, 2026

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Present: SMT. S.V. GOWRAMMA Presiding Officer

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SARFAESI APPLICATION No. 496 of 2025

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Mr. Sunil Singh, S/o. Jitendra Singh, Gali No.1, Ward No.3, Shisham Jhari, Munikireti, Tehri Garhwal, Uttarakhand – 249 137.

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….Applicant

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-Vs-

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The Authorized Officer Union Bank of India, No.38/39, Whites Road, Royapettah, Chennai – 600 014. ….Respondent

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Counsels on record / appeared:

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Counsel for Applicant : M/s. G. Sanjeevi & K. Priyadharshini Counsel for respondent : M/s. A. Jaishankar

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ORDER ON SA 496/2025

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The present Securitization Application [SA] is filed on 10.03.2023 under sub section [1] of S.17 of the Securitization And Reconstruction of Financial Asset and Enforcement of Security Interest Act,2002 (for short the ‘Act’) challenging the action and the measure taken by the secured creditor under the Security Interest Enforcement Rules, 2002 [for short the Rules].

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The applicant has filed the present SA to set aside forfeiture letter dated 27.02.2023 issued by the Authorized Officer of the respondent in forfeiting the amount deposited by the applicant without giving some more time to the applicant.

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Pleadings of the applicant:

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The applicant is the successful bidder who has filed the present SA impugning the letter dated 27.02.2023 forfeiting the EMD amount paid pursuant to the participation to the Sale Notice 04.02.2023 scheduling the property to be sold on 23.02.2023.

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3.1 The applicant participated in the E-Auction conducted by the Authorized Officer of the respondent bank on 23.02.2023 and is the highest bidder, had paid the EMD amount of 10% a sum of Rs.41,60,000/-, is declared has the successful bidder for the subject property for quoting the amount of Rs.4,21,00,000/-.

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3.2 The applicant could not make the balance sale consideration as per the terms of the sale due to Typhoid fever on 24.02.2023, was not in a position to instruct anyone to remit the balance amount of 15% of the bid amount on 24.02.2023. However, applicant representative went to respondent bank on 27.02.2023, then bank intimated about the forfeiture of the amount of Rs.41,60,000 as per the forfeiture clause in the Sale Notice dated 04.02.2023.

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3.3 Aggrieved by forfeiture, the present SA is field on the grounds that the Authorized Officer failed to consider the representation of the applicant, or to receive the 15% balance and forfeited the EMD amount without even considering the applicant health issue. The forfeiture of EMD amount is against the spirit of the Security Interest Rules and in an arbitrarily manner

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has forfeiture of EMD amount. Hence, the applicant prays to set aside the letter dated 27.02.2023.

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Objections of the respondent bank:

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The respondent bank in their counter submits that the present SA is filed seeking for refund of the 10% of the bid amount paid by the applicant pursuant to the auction sale held on 23.02.2023. As the applicant failed to pay the balance 15% of sale consideration as per the terms of the sale, the bank as provided under Rule 9(3) of the SIE Rules.

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4.1 It is the case of the bank that one M/s. Kailash Traders Private Limited had approached the erstwhile Corporation Bank, Puducherry branch now Union Bank of India, for availing Overdraft facility for the business purpose. The respondent bank had sanctioned Overdraft facility (Non Fund based credit facility LC) of Rs.11.70 cores to the borrowers vide Sanction Letter dated 28.12.2012 and the borrower had executed necessary loan documents in favour of the respondent, agreed to repay the loan together with interest.

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4.2 It is submitted that Mr.N.Dinesh Patel, Mrs. Laxmi N. Patel, and Mr. Narashina M Patel had deposited the title deeds of their property in respect of the schedule property by executing Memorandum of Deposit of title deeds dated 08.09.2014 Reg. Doc.No.3586 of 2014 and dated 06.03.2013 Reg. as Doc.No.1159 of 2013 in favour of the respondent, as security for the due repayment of the credit facilities.

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12.03.2026

4.3 The respondent had renewed the overdraft facility and had enhanced the LC facility to the extent of Rs.19 Crores vide Sanction Letter dated 16.02.2015 and subsequently, the respondent had enhanced LC facility to the extent of Rs.44 Crores and Over Draft facility of Rs.2.70 Crores on 18.01.2016. The borrower along with directors of the borrower and guarantors had executed necessary loan document including guarantee agreement in favour of the respondent and had also executed Memorandum of Deposit of title deeds dated 18.01.2016 in favour of the respondent as security for the due repayment of the credit facilities.

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4.4 The repayment of the borrower firm was not satisfactory; the accounts became irregular and the account was declared as NPA on 31.12.2017 as per the RBI guidelines and issued a Demand Notice u/s. S.13[2] to borrowers as well as Guarantors which was duly served on the borrowers and returned by the Guarantors as endorsed Unclaimed, the respondent had published the Demand Notice in Two Leading Newspaper one in English Edition and another one in Tamil Edition both dated 11.04.2018.

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4.5 This respondent had initiated further steps in issuing a possession notice under section 13(4) of the SARFAESI Act read with Rule 8 on 06.10.2018 for the constructive possession of the secured assets and complied with other formalities.

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4.6 Therefore the Respondent had issued Sale Notice dated 18.12.2019 for E-Auction Sale fixed on 21.01.2020, after obtaining the valuation of the

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12.03.2026

property from the approved valuer. The sale Notice was duly served to the borrowers as well as mortgagors on 21.12.2019 by giving 30 days of sale notice to the borrower/mortgagors as per Rule 8(6) of the Act and published in two newspapers in compliance with Rule 9. The sale was held and the auction purchaser failed to remit the sale amount within time as prescribed in Rule 9(5) of Act. Hence, the said has been cancelled by this respondent.

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4.7 The respondent Bank had issued fresh Sale Notice dated 04.02.2023 fixing the E-Auction Sale on 23.02.2023, affixed on 07.02.2023, duly published in the two newspapers one in English “The New Indian Express” and another one in Tamil “Dinamani” in Villupuram Edition both dated 05.02.2023. The Reserve Price has been fixed in compliance with the Rule 8 (5) and based on the Valuation Report obtained from the Approved Valuer.

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4.8 The applicant participated in the auction in respect of item No.4 (i.e) property situated at Puducherry Municipal limit Oulgaret Municipal Limit, No.36, Reddiarpalayam Revenue Village, as per the document R.S.No.100/3, Cad No.213, R.S. No.100/3, Cad.No.214, as per the survey settlement records in R.S.No.100/3, Cad. Nos.213 & 214, Patta No.634, measurement in East to west 300 ft, south to North 81 ft to a total extent 24,450 sq.ft., and became successful bidder for an auction price of Rs.4,21,00,000/- as against reserved price of Rs.4,16,00,000/-. After declared the applicant as successful bidder, he had failed to pay the remaining 15% sale amount on the same day or next working day.

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4.9 Hence, the respondent has forfeited the 10% of sale amount for default committed by the applicant for making balance 15% of sale amount as per Rule 9(3) of SIE Rules, 2002. The respondent has communicated the same vide letter dated 27.02.2023 to the applicant.

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4.10 The Respondent bank denies all the averments made in the present SA and has relied on the judgement of the Hon’ble Supreme Court of India in the case of Authorized Officer State Bank of India vs C. Natarajan & Anr in Civil Appeal No.2545 of 2023. Hence respondent bank prays for dismissal of the SA.

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Heard both sides of the Counsels and perused the records of

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the case

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It is manifest from the records that the respondent bank is the erstwhile Corporation Bank, Puducherry branch now Union Bank of India had sanctioned a Overdraft facility (Non Fund based credit facility LC) of Rs.11.70 cores M/s. Kailash Traders Private Limited - the borrower vide Sanction Letter dated 28.12.2012 and 1.Mr.N.Dinesh Patel, 2.Mrs. Laxmi N. Patel, 3.Mr. Narashina M Patel had deposited the title deeds of their property by executing Memorandum of Deposit of title deeds dated 08.09.2014 Reg. Doc.No.3586 of 2014 and dated 06.03.2013 Reg. as Doc.No.1159 of 2013 in favour of the respondent.

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5.1 The respondent renewed the overdraft facility and had enhanced the LC facility to the extent of Rs.19 Crores vide Sanction Letter dated 16.02.2015 and subsequently enhanced LC facility to the extent of Rs.44

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Crores and Over Draft facility of Rs.2.70 Crores on 18.01.2016. The borrower along with directors of the borrower and guarantors had also executed Memorandum of Deposit of title deeds dated 18.01.2016 in favour of the respondent as security for the due repayment of the credit facilities.

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5.2 As the borrowers defaulted in repayment as per the terms and conditions of sanction and loan agreement, the loan account was declared as NPA on 31.12.2017. Consequent to classification of account as NPA, respondent bank had issued the demand notice section 13(2) of SARFAESI Act on 21.02.2018. The demand notice was duly served on the borrowers and returned by the Guarantors as endorsed “unclaimed”. In spite of service the outstanding liability was not liquidated, hence bank issued the possession notice under section 13(4) of the SARFAESI Act read with Rule 8 on 06.10.2018 and took symbolic possession of the property.

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5.3 The Respondent had issued Sale Notice dated 18.12.2019 for E- Auction Sale fixed on 21.01.2020, though the sale was conducted, auction purchaser failed to make the payment. Hence respondent Bank had issued fresh Sale Notice dated 04.02.2023 fixing the E-Auction Sale on 23.02.2023, the sale notice has also affixed on 07.02.2023, duly published in the two newspapers one in English “The New Indian Express” and another one in Tamil “Dinamani” in Villupuram Edition both dated 05.02.2023.

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5.4 The applicant participated in the auction in respect of item No.4 i.e., property situated at Puducherry Municipal limit Oulgaret Municipal Limit, No.36, Reddiarpalayam Revenue Village, as per the document

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R.S.No.100/3, Cad No.213, R.S. No.100/3, Cad.No.214, as per the survey settlement records in R.S.No.100/3, Cad. Nos.213 & 214, Patta No.634, measurement in East to west 300 ft, south to North 81 ft to a total extent 24,450 sq.ft., and became successful bidder for an auction price of Rs.4,21,00,000/- as against reserved price of Rs.4,16,00,000/-.

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5.5 It is pertinent to note that the auction sale was held on 23.02.2023 and the EMD amount has to be paid within 3 days after generating the challan for Global EMD wallet as per Clause 9(3) of the Sale notice. Accordingly, the applicant has paid the 10% of the Reserve price of Rs.41,60,000/- as EMD and participated in the E-auction sale.

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5.6 After declaring the applicant as successful bidder, he had failed to pay the remaining 15% sale amount on the same day or next working day as per terms and conditions of sale notice. Hence, the respondent has forfeited the 10% of sale amount for default committed by the applicant for making balance 15% of sale amount as per Rule 9(5) of SIE Rules, 2002. The respondent has communicated the forfeiture of EMD amount i.e., Rs.41,60,000/- vide letter dated 27.02.2023 to the applicant.

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5.7 The specific contention of the applicant that he could not pay the balance amount as he was suffering from thyroid and has produced the medical certificate dated 23.02.2023 at page 20 and 21, of the SA, reflects that the appellant was suffering from thyroid from 23.02.2023 to 26.02.2023, which is the same period the applicant ought to have made the payment in terms of the sale.

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5.8 The applicant has participated in the auction after making EMD payment of 10% of the reserve price on 23.02.2023, the balance ought to be paid on or before 24.02.2023. However, the applicant has not put forth the reason not making the payment from 24.02.2023 to 23.03.2023 and failed to pay the balance 15% of the amount i.e., Rs.1,05,25,000/- which was to be paid on or before 24.02.2023.

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5.9 However, the applicant defaulted in paying the balance 15% of the sale consideration against the Clauses 14 of auction sale notice. Hence, the secured creditor under Rule 9(5) of SIE Security Interest (Enforcement) Rules has forfeited the 10% i.e., EMD amount of the Sale consideration paid by the applicant which is communicated vide their letter dated 27.02.2023. For better understanding Clause 14 is extracted here under:

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“Clause 14:

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The successful bidder so declared by the Authorized Officer shall deposit 25% of the sale price (inclusive of EMD) in Cash/DD/RTGS/ NEFT/Internet transfer/ Cheque subject to realization, immediately on the sale day or not later than next working day with the Authorized Officer in the account bearing Number 173011980050000 of the E- Auction, Union Bank of India, Stressed Asset Management Branch, Chennai IFSC Code UBIN0817309 and the balance 75% of the Sale Price on or before 15th day of confirmation of sale or within such extended period as agreed upon in writing between the secured creditor and the purchaser, in any case not exceeding 3 months.

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In the event of failure to tender 25% (15%+EMD) of the sale price as per the terms of Sale by the successful bidder, the EMD so deposited by him shall be forfeited to secured creditor and the bid accepted shall stand cancelled automatically and the defaulting bidder shall neither have claim on the property nor on any part of the sum

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for which it may be subsequently sold. In default of payment of balance amount of purchase price before 15 days from the date of confirmation of sale by the Secured Creditor or such extended period as may be mutually agreed upon between the secured creditor and the purchaser (not exceeding 3 months) the deposit of 25% of the amount of sale price made shall be forfeited and the property shall forthwith be sold again and the defaulting purchaser shall neither have claim on the property nor on any part of the sum for which it may be subsequently sold.”

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5.10 A reading of the above clause clearly directs that in the event of failure to tender 25% (15%+EMD) of the sale price as per the terms of Sale, the EMD so deposited by the purchaser shall be forfeited to secured creditor and the bid accepted shall stand cancelled automatically and the defaulting bidder shall neither have claim on the property nor on any part of the sum for which it may be subsequently sold.

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5.11 The applicant in spite of being aware of the conditions of sale had participated in the auction and having failed to comply with the terms of sale has questioned the forfeiture of the 10% (Earnest Money Deposit to participate in the auction) of the bid amount.

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5.12 The issue of forfeiture of EMD amount and whether the forfeiture of EMD amount is violation in terms of Section 73 and 74 of the contract Act was considered by the Hon’ble Supreme Court in the case titled “The Authorized Officer Central Bank of India Vs. Shanmugavel where it is held that the entire EMD amount paid by the auction purchaser would be forfeited as per Rule 9(5) of the SIE Rules on the failure to deposit the remaining amount. Further it held that the forfeiture of deposit is a legal

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consequence that has been statutorily provided in the event of default in repayment of the balance amount. 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 owned.

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5.13 Further the Hon’ble Apex Court considered the right of the secured creditor to forfeit the earnest deposit amount paid by the auction purchaser doesn't arise due to loss or damage suffered due to a breach of contract but under a statutory requirement mentioned under SARFAESI Rules.

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5.14 The responsibility of a successful auction purchaser to deposit the requisite amount begins from the date when he participated in the auction sale, then sale is confirmed by the secured creditor and communicated to the auction purchaser, wherein 25% of the amount has to be deposited as earnest money no later than the next working day from the date of confirmation and the balance amount within 15 days from the said date. In the instant matter the applicant has failed to make 15% of sale consideration within the next working day and failed to comply.

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5.15 It is apt to mention that the secured creditor is statutorily required to forfeit the EMD amount on two conditions, firstly when the sale have been confirmed by the secured creditor and secondly when there is a default in payment of the balance sale consideration of the bid amount. On satisfaction of the above two conditions, if the auction purchaser fails to deposit the balance amount, the secured creditor is required to forfeit the

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original auction purchaser’s earnest money deposit and the secured assets have to be resold.

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5.16 In fact the Hon’ble High Court of Karnatak in the case titled Kalyanamurthy K Vs. State Bank of India explained the entitlement of bank to forfeit the amount which is as under:

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Why banks should be entitled to forfeit entire amount:

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(i) Firstly, it would be quite preposterous to suggest that in an auction which is a process meant for recovery of debt due to default of the borrower, the balance amount if not paid by the successful auction purchaser, another recovery proceeding would have to be initiated by the secured creditor in terms of Section(s) 73 and 74 of the 1872 Act to recoup the loss and expenditure occasioned to it by the defaulting successful auction purchaser.

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(ii) Secondly, such an interpretation would allow unscrupulous borrowers being hands-in-glove with the auction purchasers to use subversive methods to participate in an auction only to not pay the balance amount at the very end and escape relatively unscathed under the guise of Section(s) 73 and 74 of the 1872 Act, thereby gaming the entire auction process and leaving any possibility of recoveries under the SARFAESI Act at naught.

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It further held that the consequence of forfeiture is not a matter of breach of contract but an operation of the statutory provision. “No doubt, the forfeiture is a result of a breach of obligation, but the consequence of forfeiture in such case is taking place not because of the breach but because of operation of the statutory provision providing for forfeiture that is attracted as a result of the breach”

SA No.496/2025

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“However, the legislature has consciously provided for only one consequence in the event of failure of the successful auction purchaser in depositing the balance amount i.e., forfeiture and has not provided for imposition of any other stipulation by the secured creditor in the event of a breach. This has been done, keeping in mind the larger object of the SARFAESI Act, which is to facilitate recovery of debt in a time-bound manner by giving teeth to the measures enumerated within Section 13 of the SARFAESI Act, more particularly sale of the secured asset in the event the borrower fails to repay the debt.” , the court added.

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5.17 Accordingly, the court held that the mandate to forfeit the entire 25% deposit amount in the event of failure to deposit the remaining amount by the auction purchaser would not be due to a breach of contract and therefore, cannot be held to the extent of loss or damages incurred by the Bank but only according to the statutory requirement i.e., entire 25% deposit amount.

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5.18 Further, it held that respondent bank cannot forfeit more than 25%

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of deposit amount made by auction purchaser who fails to deposit remaining amount. But in the instant matter the applicant has paid only 10% of EMD amount and failed to pay the balance 15% of the sale consideration amount.

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5.19 The reason as put forth for non-compliance of the payment of balance is due to ill health as applicant was suffering from thyroid would not come to aid of the applicant herein as the medical certificate issued is for the period of 23.02.2023 to 25.02.2023 and 26.02.2023 which is produced at Pg.20 and 21, after the due date for payment of 15% of sale consideration.

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5.20 The Tribunal placing reliance on the judgments mentioned supra comes to conclusion that the respondent as secured creditor is statutorily entitled for forfeiture of 10% of bid amount in the instant matter.

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5.21 For the foregoing reasons, the notice of forfeiture letter dated 27.02.2023 issued by the respondent bank to the applicant is held as valid notice as the applicant being the successful bidder has failed to pay the balance sale consideration of Rs.1,05,25,000/- on or before 24.02.2023 as mandated under the Act and Rules. Accordingly, the forfeiture of Rs.41,60,000/- by respondent bank as secured creditor is in accordance with Rule 9(5) of SIE Rules.

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5.22 Resultantly the present SA stands dismissed. Interim Order granted, if any stands vacated, pending IAs are disposed of in terms of this final

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order. No order as to cost. Sd/-

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(S.V. GOWRAMMA) PRESIDING OFFICER, DRT-III, CHENNAI

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( Dictated to Steno (Suriya), transcribed by him, corrected, signed and pronounced by me on this the 12^th day of March, 2026)

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ANNEXURES

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LIST OF DOCUMENTS PRODUCED BY THE APPLICANT

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Sl. No.	Description of Documents	Documents No.
1.	Sale Notice issued by the respondent dated 04.02.2023.	A-1
2.	EMD proof by the applicant.	A-2
3.	Medical report of applicant dated 23.02.2023.	A-3
4.	Email sent by Applicant dated 27.02.2023.	A-4
5.	Forfeiture letter by the respondent dated 27.02.2023.	A-5

SA No.496/2025

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LIST OF DOCUMENTS PRODUCED BY THE RESPONDNET

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Sl. No.	Description of Documents	Documents No.
1.	Sale Notice issued by the respondent dated 04.02.2023.	R-1
2.	Letter issued by the respondent to the applicant about informed the forfeited 10% sale amount dated 27.02.2023.	R-2

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SCHEDULE OF PROPERTY

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All that piece and parcel of the property at Puducherry Registration District, Oulgaret Sub Registration District, Oulgaret Municipal limit, No.36-Reddiarpalayam Revenue Village, as per the document R.S.No.100/3, Cad.No.213, R.S.No.100/3, Cad.No.214, as per the Survey Settlement record in R.S.No.100/3, Cad. Nos.213 & 214, Patta No.634, measurement East to West 300 Ft., South to North 81 Ft., in total extent of 24,450 sq.ft., belonging to J. Aruna and covered by following boundaries.

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East by : Land belongs to P. Sandhya North by : Land in R.S. No.100/1, West by : Land belongs to D. Kalpana South by : Newly Provided Road (By Pass Road)

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Sd/- (S.V. GOWRAMMA) PRESIDING OFFICER, DRT-III, CHENNAI

Sunil Singh v. Union Bank of India

Case brief

What is this about?

What did the court decide?

Sunil Singh v. Union Bank of India

Case brief

What is this about?

What did the court decide?

What the court decided

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