{"id":333409,"date":"2024-10-19T10:00:02","date_gmt":"2024-10-19T04:30:02","guid":{"rendered":"https:\/\/www.scconline.com\/blog\/?p=333409"},"modified":"2024-10-24T11:02:38","modified_gmt":"2024-10-24T05:32:38","slug":"ph-hc-directs-union-bank-of-india-to-refund-forfeited-amount-deposited-by-auction-purchaser","status":"publish","type":"post","link":"https:\/\/www.scconline.com\/blog\/post\/2024\/10\/19\/ph-hc-directs-union-bank-of-india-to-refund-forfeited-amount-deposited-by-auction-purchaser\/","title":{"rendered":"\u2018Arbitrary, illegal and in colourable exercise of power\u2019; P&amp;H HC directs Union Bank of India to refund forfeited amount deposited by auction purchaser"},"content":{"rendered":"<div style=\"text-align: justify; line-height: 150%;\">\n<p style=\"margin-bottom: 3%;\"><span style=\"font-weight: bold;\">Punjab and Haryana High Court:<\/span> In a petition filed by the auction purchaser (&#8216;the petitioner&#8217;) for quashing the letter dated 14-06-2024, issued by the respondent (&#8216;bank&#8217;), whereby the sale transaction of the subject property was cancelled and the initial deposit was forfeited, the Division Bench of Anupinder Singh Grewal and <span style=\"font-weight: bold;\">Lapita Banerji*, JJ.<\/span>, observed that the bank was statutorily barred from taking any step of issuing the sale certificate, till the time the insolvency petition was rejected by NCLT. Thus, the Court held that the contract of sale that bank entered with the petitioner stood frustrated due to the intervening legal impossibility. The bank had acted in an arbitrary and illegal manner by claiming that the entire bid amount should be deposited by the petitioner, while on the other hand, avoiding the question of the supervening legal impossibility, which debarred them from issuing Sale Certificate or handing over the physical possession of the property to petitioner.<\/p>\n<p style=\"margin-bottom: 3%;\">Further, the Court stated that it was perplexing that the bank had forfeited the initial deposit of 25% without being able to perform its corresponding obligation. Such a conduct by a nationalized bank was arbitrary, illegal and in colourable exercise of power. Thus, the Court directed the bank to refund Rs. 11,14,64,802 to the petitioner withing four weeks with 10% interest per annum.<\/p>\n<h3>Background<\/h3>\n<p style=\"margin-bottom: 3%;\">The bank issued an e-auction sale notice dated 08-02-2024, for sale of secured asset being Commercial Land and Hotel on a &#8216;as is where is basis&#8217;. Pursuant to the e-auction, the petitioner submitted his bid online for Rs. 44,56,82,700. The said bid was declared to be successful by the bank and in accordance with the terms and conditions of the e-auction notice, the petitioner made payment of Rs, 4, 41,27,000 towards the earnest money deposit (&#8216;EMD&#8217;).<\/p>\n<p style=\"margin-bottom: 3%;\">Further, vide email dated 15-03-2024, the bank confirmed the receipt of EMD, and declared the petitioner to be a successful bidder. As per the terms and conditions of the e-auction notice, the successful bidder was required to deposit 25% of the sale price (inclusive of EMD) immediately on the date of the sale or the next working day. On 16-03-2024, the petitioner deposited Rs. 6,72,93,675, as it was being 15% of the bid amount. Thus, the petitioner deposited a total sum of Rs. 11,14,64,802, being 25% of the entire sale price.<\/p>\n<p style=\"margin-bottom: 3%;\">As per Clause 14 of the E-auction notice, the petitioner was required to deposit 75% of the bid amount within 15 days from the date of confirmation of sale. Therefore, the petitioner was required to deposit the remaining 75% by 30-03-2024. However, the request to extend the date was accepted and the petitioner was required to deposit the balance amount on or before 13-06-2024.<\/p>\n<p style=\"margin-bottom: 3%;\">The petitioner contended that it was ready and willing to deposit the remaining amount, but the insolvency proceedings were initiated against the debtor company. The bank did not mention the same in the e-auction notice or any time after the confirmation of sale to the petitioner. The petitioner aggrieved by the lack of transparency and material suppression on the bank&#8217;s part, had issued the legal notice, calling upon the bank to confirm whether it was able to hand over the physical possession of the secured asset to the petitioner. However, the bank failed to respond to the said legal notice.<\/p>\n<h3>Analysis, Law, and Decision<\/h3>\n<p style=\"margin-bottom: 3%;\">The Court after perusal of Section <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0001549835\" target=\"_blank\" rel=\"noopener\">96<\/a> of the <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002802178\" target=\"_blank\" rel=\"noopener\">Insolvency and Bankruptcy Code, 2016<\/a> observed that once an insolvency petition against the debtor company was filed in the NCLT an interim moratorium would operate in relation to all the debts of the company under Section 96 of the IBC, till the said application was either admitted or rejected. The said petition before NCLT was pending till date and admittedly the interim moratorium was operating. Hence, the Court stated that all the proceedings in respect of any debt were to be remain stayed by operation of law.<\/p>\n<p style=\"margin-bottom: 3%;\">The Court stated that once the interim mortarium was in place and an interim resolution professional was appointed to deal with the assets of debtor company, the bank would not be in a legal position to either issue the Sale Certificate or secure physical possession of the property through the Tehsildar for handling over the same to the petitioner.<\/p>\n<p style=\"margin-bottom: 3%;\">However, as the bank was statutorily barred from taking any step of issuing the sale certificate, till the time the insolvency petition was rejected by NCLT, the Court held that the contract of sale that bank entered with the petitioner stood frustrated due to the intervening legal impossibility. The Court referred to <span style=\"font-style: italic;\">Satyabrata Ghose v. Mugneeram<\/span>, <a href=\"https:\/\/www.scconline.com\/Members\/NoteView.aspx?enc=MTk1NCBTQ1IgMzEwJiYmJiY0MCYmJiYmU2VhcmNoUGFnZQ==\" target=\"_blank\" rel=\"noopener\">(1953) 2 SCC 437<\/a>, and stated that it was a settled law that applicability of Section <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0001527470\" target=\"_blank\" rel=\"noopener\">56<\/a> of the <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002726954\" target=\"_blank\" rel=\"noopener\">Contract Act, 1872<\/a> was not limited to cases of physical impossibility, but also included cases of legal impossibility.<\/p>\n<p style=\"margin-bottom: 3%;\">Therefore, the Court stated that the bank was not able to hand over the secured asset to the petitioner even if the remaining 75% of the bid amount was paid, could not have forfeited 25% of the deposited amount. This is not the case where the petitioner has approbated and reprobated after availing of the extended time of payment. The bank had acted in an arbitrary and illegal manner by claiming that the entire bid amount should be deposited by the petitioner, while on the other hand, avoiding the question of the supervening legal impossibility, which debarred them from issuing Sale Certificate or handing over the physical possession of the property to petitioner.<\/p>\n<p style=\"margin-bottom: 3%;\">Further, the Court stated that it was perplexing that the bank had forfeited the initial deposit of 25% without being able to perform its corresponding obligation. Such a conduct by a nationalized bank was arbitrary, illegal and in colourable exercise of power. Thus, the Court directed the bank to refund Rs. 11,14,64,802 to the petitioner withing four weeks with 10% interest per annum. Additionally, the bank should pay Rs. 50,000 to the petitioner as costs, for dragging it into vexatious litigation.<\/p>\n<p style=\"margin-bottom: 3%;\">[<span style=\"font-weight: bold; color: #632423;\">Micro Turner v. Union Bank of India, <a href=\"http:\/\/www.scconline.com\/DocumentLink\/CpRv663M\" target=\"_blank\" rel=\"noopener\">2024 SCC OnLine P&#038;H 12413<\/a>, decided on 04-10-2024<\/span>]<\/p>\n<p style=\"text-indent: 18pt;\"><strong><span style=\"color: #000080;\">*Judgment authored by: Justice Lapita Banerji<\/span><\/strong><\/p>\n<hr\/>\n<p>Advocates who appeared in this case :<\/p>\n<p style=\"margin-left: 18pt;\"><span style=\"font-weight: bold;\">For the Petitioner:<\/span> Sidharth Batra Abhinav Sood, Anmol Gupta, Rhythm Katyal, Advocates.<\/p>\n<p style=\"margin-left: 18pt;\"><span style=\"font-weight: bold;\">For the Respondent:<\/span> Anmol Rattan Singh Sidhu, Senior Advocate with Mandeep Singla and Kamal Satija, Advocates.<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p style=\"font-style: italic;\">The bank has acted in an arbitrary and illegal manner by claiming that the entire bid amount shall be deposited by the petitioner, while on the other hand, avoiding the question of the supervening legal impossibility, which debarred them from issuing Sale Certificate or handing over the physical possession of the property to petitioner.<\/p>\n","protected":false},"author":67520,"featured_media":314970,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[3,10],"tags":[30315,33095,74260,2609,31387,40198,72921,72922,74259,2670,32650,74261],"class_list":["post-333409","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-casebriefs","category-highcourts","tag-arbitrary","tag-colourable-exercise-of-power","tag-forfeited-amount","tag-illegal","tag-insolvency-and-bankruptcy-code-2016","tag-insolvency-proceedings","tag-justice-anupinder-singh-grewal","tag-justice-lapita-banerji","tag-nationalized-bank","tag-Punjab_and_Haryana_High_Court","tag-sale-certificate","tag-supervening-legal-impossibility"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v26.4 (Yoast SEO v26.4) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>P&amp;H HC directs Union Bank of India to refund forfeited amount deposited by auction purchaser | SCC Times<\/title>\n<meta name=\"description\" content=\"Punjab and Haryana HC stated that it was perplexing that the bank forfeited the initial deposit without being able to perform its obligation and directed to refund forfeited amount.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.scconline.com\/blog\/post\/2024\/10\/19\/ph-hc-directs-union-bank-of-india-to-refund-forfeited-amount-deposited-by-auction-purchaser\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"\u2018Arbitrary, illegal and in colourable exercise of power\u2019; 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The Bench held that merely being the highest bidder in auction will not entitle one\u2026","rel":"","context":"In &quot;Case Briefs&quot;","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2022\/04\/MicrosoftTeams-image-149-1.jpg?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2022\/04\/MicrosoftTeams-image-149-1.jpg?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2022\/04\/MicrosoftTeams-image-149-1.jpg?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2022\/04\/MicrosoftTeams-image-149-1.jpg?resize=700%2C400&ssl=1 2x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2022\/04\/MicrosoftTeams-image-149-1.jpg?resize=1050%2C600&ssl=1 3x"},"classes":[]},{"id":330390,"url":"https:\/\/www.scconline.com\/blog\/post\/2024\/09\/09\/would-like-to-prevent-a-situation-where-lengthy-and-arduous-trial-becomes-punishment-in-itself-ph-hc-grants-bail-to-uapa-accused-in-custody-for-3-years-and-8-months\/","url_meta":{"origin":333409,"position":3},"title":"\u2018Would like to prevent a situation where lengthy and arduous trial becomes punishment in itself\u2019; P&amp;H HC grants bail to UAPA accused in custody for 3 years and 8 months","author":"Arushi","date":"September 9, 2024","format":false,"excerpt":"The allegations against the accused are that he was allegedly involved in anti-national activities but only a mobile phone was recovered from him containing objectionable photographs of arms and ammunition. 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