# Anil Pathak & Anr v. State of U.P. & Ors. 508 INDIAN LAW REPORTS ALLAHABAD SERIES

- **Citation:** (2025) 1 ILRA 507
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2025-01-21
- **Case number:** Writ C No. 2228 of 2025
- **Bench:** Siddhartha Varma, Dr. Yogendra Kumar Srivastava
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/anil-pathak-anr-v-state-of-u-p-ors-508-indian-law-reports-allahabad-series-52887
- **Pages:** 13

## Headnote

A. Banking and Recovery Law - Payment
of balance amount of purchase price -
SARFAESI Act, 2002 - Section 13(4) -
Security Interest (enforcement) Rules,
2002 - Rule 9 (4) - Even the plenary
powers of the Supreme Court u/Article
142 of the Constitution could not be
invoked to supplant the substantive law,
ignoring the express statutory provisions
dealing with the subject and thereby to
achieve something indirectly, which could
not be achieved directly. The balance
amount of the purchase price has to be paid by
the auction purchaser to the Authorized Officer
on or before the 15th day of confirmation of
sale or such extended period as may be agreed
upon in writing between the purchaser and the
secured creditor, in any case not exceeding
three months. (Para 27)

Provisions contained in Sub-rules (4) and
(5) of Rule 9 of the Rules, 2002 - A
discretion is available to the Authorized
Officer
of
the
secured
creditor
for
extension of time for depositing the
balance consideration, but not exceeding
the prescribed limit of ninety days. The
objective and necessity of enactment of the
powers of forfeiture of deposited amount of the
secured creditor u/sub-rule (5) further clarifies
that the legislature had visualized that there
was a need to arrest cases of deceptive
manipulation of prices at the instance of
unscrupulous borrowers by thwarting sale
processes. The purpose of the provision was
aimed at instilling a sense of discipline in the
intending purchasers while they proceed to
participate in the auction-sale process. (Para 28)

In the present case, there is no material on
record, which may persuade this Court to come
to a conclusion that there has been any
manifest arbitrariness or unreasonableness on
the part of the respondent-Bank in not acceding
the repeated requests of the petitioners for
depositing of the balance 75% amount of the
bid amount beyond the time period stipulated
u/Rule 9(4) of the Rules, 2002. The maximum
permissible limit of three months, as provided
under the relevant statutory rules, having
already been granted by the secured creditor,
there is no plausible reason which may warrant
issuance of any direction for further extension of
time period, as sought by the petitioners. (Para
30, 31)

B. When a statute requires a particular
thing to be done in a particular manner, it
must be done in that manner or not at all,
and other methods of performance are
necessarily forbidden. (Para 32)

Rule 9 (4) of the Rules, 2002, as amended with
effect from 4.11.2016, contains an ordainment
that on mutual agreement, the time for making
deposit of the balance amount of sale price can
be extended for a period not exceeding ninety
days; however, extension beyond ninety days
would not be permissible in any case. (Para 33)

The secured creditor is entitled in law to enforce
the security interest and in the process, to
initiate all such steps and take all such
measures for the protection of public interest by
recovering public money lent to a borrower,
who has defaulted in its repayment. (Para 35)

Writ petition dismissed. (E-4)

Precedent followed:

## Text

_Characters 0–39,627 of 44,092. This is a partial read: ask again with offset=39627 for what follows._

1 All. Anil Pathak & Anr. Vs. State of U.P. & Ors.
507
which the Oriental Insurance Company
Limited filed the aforesaid SLP which has
also been dismissed. The said judgment of
Hon'ble
the
Supreme
Court
dated
11.03.2022 (supra) reads as under:

"The sole arguments raised by
learned counsel for the petitioner is that the
claim was not filed within a period of one
month or extending condonable period of one
month.

We do not find any merit in the
said arguments in view of Section 28 of the
Indian Contract Act, 1872 (for short, 'the
Act') which reads as under:-

"28. Agreements in restraint of
legal proceedings, void.? [Every agreement,?

(a) by which any party thereto is
restricted absolutely from enforcing his rights
under or in respect of any contract, by the
usual legal 2 proceedings in the ordinary
tribunals, or which limits the time within
which he may thus enforce his rights; or

(b) which extinguishes the rights of
any party thereto, or discharges any party
thereto, from any liability, under or in respect
of any contract on the expiry of a specified
period so as to restrict any party from
enforcing his rights, is void to the extent.]"

In view of the aforesaid Section,
the condition of lodging claim within a period
of one month, extendable by another one
month is contrary to Section 28 of the Act and
thus void.

In view of the said fact, we do not
find any ground to interfere with the order
passed by the High Court.

The special leave petition is,
accordingly, dismissed.

Pending application(s), if any, also
stand disposed of."

6. Although the judgment has been
rendered at the SLP stage, but, it is a reasoned
judgment, therefore, it contains a binding
ratio.

7. In view of the above quoted
judgment, the reason given for rejecting the
claim of the petitioner i.e. delay, is not
acceptable. The impugned decision is
accordingly quashed. The District Level
Committee is directed to reconsider the claim
of the petitioner keeping in mind the
judgment quoted hereinabove, on merits. The
decision shall be taken with expedition, say,
within a period of three months of receipt of
certified copy of this order.

8. The writ petition is allowed.

9. Similar petitions have been kept
pending by this Court in view of pendency of
similar matters before Hon'ble the Supreme
Court of India in Special Leave Petition (C)
No.7647 of 2021, The National Insurance
Company Limited Vs. Gauam Yadav and
others, however, now there is a judgment of
Hon'ble the Supreme Court on record,
therefore, the Registry is directed to list all
such similar matters which are pending at the
earliest. Counsel for the petitioner in such
petitions are at liberty to move application for
listing of their cases.
----------
(2025) 1 ILRA 507
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 21.01.2025

BEFORE

THE HON'BLE SIDDHARTHA VARMA, J.
THE HON'BLE DR. YOGENDRA KUMAR
SRIVASTAVA, J.

Writ C No. 2228 of 2025

Anil Pathak & Anr. ...Petitioners
Versus
State of U.P. & Ors. ...Respondents
508 INDIAN LAW REPORTS ALLAHABAD SERIES
Counsel for the Petitioners:
Brijesh Kumar Kesharwani, Mamta Singh

Counsel for the Respondents:
A.S.G.I., Anoop Tiwari, C.S.C., Krishna
Mohan Asthana

A. Banking and Recovery Law - Payment
of balance amount of purchase price -
SARFAESI Act, 2002 - Section 13(4) -
Security Interest (enforcement) Rules,
2002 - Rule 9 (4) - Even the plenary
powers of the Supreme Court u/Article
142 of the Constitution could not be
invoked to supplant the substantive law,
ignoring the express statutory provisions
dealing with the subject and thereby to
achieve something indirectly, which could
not be achieved directly. The balance
amount of the purchase price has to be paid by
the auction purchaser to the Authorized Officer
on or before the 15th day of confirmation of
sale or such extended period as may be agreed
upon in writing between the purchaser and the
secured creditor, in any case not exceeding
three months. (Para 27)

Provisions contained in Sub-rules (4) and
(5) of Rule 9 of the Rules, 2002 - A
discretion is available to the Authorized
Officer
of
the
secured
creditor
for
extension of time for depositing the
balance consideration, but not exceeding
the prescribed limit of ninety days. The
objective and necessity of enactment of the
powers of forfeiture of deposited amount of the
secured creditor u/sub-rule (5) further clarifies
that the legislature had visualized that there
was a need to arrest cases of deceptive
manipulation of prices at the instance of
unscrupulous borrowers by thwarting sale
processes. The purpose of the provision was
aimed at instilling a sense of discipline in the
intending purchasers while they proceed to
participate in the auction-sale process. (Para 28)

In the present case, there is no material on
record, which may persuade this Court to come
to a conclusion that there has been any
manifest arbitrariness or unreasonableness on
the part of the respondent-Bank in not acceding
the repeated requests of the petitioners for
depositing of the balance 75% amount of the
bid amount beyond the time period stipulated
u/Rule 9(4) of the Rules, 2002. The maximum
permissible limit of three months, as provided
under the relevant statutory rules, having
already been granted by the secured creditor,
there is no plausible reason which may warrant
issuance of any direction for further extension of
time period, as sought by the petitioners. (Para
30, 31)

B. When a statute requires a particular
thing to be done in a particular manner, it
must be done in that manner or not at all,
and other methods of performance are
necessarily forbidden. (Para 32)

Rule 9 (4) of the Rules, 2002, as amended with
effect from 4.11.2016, contains an ordainment
that on mutual agreement, the time for making
deposit of the balance amount of sale price can
be extended for a period not exceeding ninety
days; however, extension beyond ninety days
would not be permissible in any case. (Para 33)

The secured creditor is entitled in law to enforce
the security interest and in the process, to
initiate all such steps and take all such
measures for the protection of public interest by
recovering public money lent to a borrower,
who has defaulted in its repayment. (Para 35)

Writ petition dismissed. (E-4)

Precedent followed:

1. Mardia Chemical Ltd. Vs U.O.I., (2004) 4 SCC
311 (Para 15)

2. United Bank of India Vs Satyawati Tandon,
(2010) 8 SCC 110 (Para 4)

3. Union Bank of India Vs Rajat Infrastructure
(P) Ltd., (2023) 10 SCC 232 (Para 27)

4. Authorized Officer, St. Bank of India Vs C.
Natarajan, (2024) 2 SCC 637 (Para 28)

5. Taylor Vs Taylor, (1875) LR 1 Ch D 426 (Para
32)

6. Nazir Ahmad Vs King Emperor, AIR 1936 PC
253 (2) (Para 32)
1 All. Anil Pathak & Anr. Vs. State of U.P. & Ors.
509
7. Rao Shiv Bahadur Singh Vs St. of Vindhya
Pradesh, (1954) 1 SCC 296 (Para 32)

8. St. of UP Vs Singhara Singh, AIR 1964 SC 358
(Para 32)

9. Babu Verghese Vs Bar Council of Kerala,
(1990) 3 SCC 422, (Para 32)

10. Municipal Corp. of Greater Mumbai Vs
Abhilash Lal, (2020) 13 SCC 234 (Para 32)

11. Nareshbhai Bhagubhai Vs U.O.I., (2019) 15
SCC 1 (Para 32)

Precedent distinguished:

1. Gaurav Garg Vs Syndicate Bank & ors., Writ-C
No. 2196 of 2019 (Para 8)

2. G.M., Sri Siddeshwara Cooperative Bank Ltd. &
anr. Vs Sri Ikbal & ors.(2013) 10 SCC 83 (Para 8)

(Delivered by Hon'ble Dr. Yogendra
Kumar Srivastava, J.)

1. Instructions provided by Sri Prakhar
Shukla, learned Advocate, holding brief of
Sri Ramesh Kumar Shukla, learned counsel
for the respondent-Bank, be kept on record.

2.
Heard
Sri
Brijesh
Kumar
Kesharwani,
learned
counsel
for
the
petitioners, Sri Prakhar Shukla, holding
brief of Sri Ramesh Kumar Shukla, learned
counsel for the respondent-Bank and
learned Standing Counsel for the Staterespondents.

3. The facts as pleaded in the writ
petition indicate that House No.24, Awas
Vikas
Colony
Betiyahata,
Gorakhpur,
owned by Ujjwal Banka and Tushar Banka,
was mortgaged against a loan amount of
Rs.1 Crore plus Rs.20 Lakhs over draft.

4. The above mentioned loan amount,
having not been repaid, respondent no.3Bank issued a notice under Section 13 (2)
of the Securitization and Reconstruction of
Financial Assets and Enforcement of
Security Interest Act, 20021. Thereafter, a
possession notice under Section 13 (4) of
the SARFAESI Act, 2002 was issued, and a
newspaper publication for auction of the
above mentioned property was also made.
The auction date was fixed on 23.10.2024
and the petitioners, being the only bidders
were declared successful.

5. The petitioners deposited 25% of
the
auction
money,
amounting
to
Rs.55,93,750/-, within the prescribed time
period of 15 days. For depositing the
balance 75% of the auction money, the
petitioners applied for a loan from the
respondent-Bank. The said application was
rejected
by
the
respondent-Bank
on
3.1.2025. It is stated that although the
petitioners have made a request for grant of
three months' further time for depositing
the balance 75% of the auction money, but
the respondent-Bank is going to auction the
property on 22.1.2025.

6. The petitioners have, accordingly,
preferred the present writ petition, seeking
a direction to respondent no.3-Bank for
granting three months' further time for
depositing the balance 75% of the auction
money, or to refund 25% amount deposited
earlier, within a stipulated time period.

7. Learned counsel for the petitioners
has referred to the afore-stated facts, to
contend that the delay in depositing 75% of
the auction money is mainly due to
rejection of the loan application of the
petitioners by the respondent-Bank, and
accordingly, they have sought further three
months' time for the purpose. It is
submitted that the Bank is seeking to re-
510 INDIAN LAW REPORTS ALLAHABAD SERIES
auction the property which would gravely
prejudice their interests.

8. Learned counsel for the petitioner
has placed reliance upon a decision of this
Court in Writ-C No.2196 of 2019 (Gaurav
Garg vs. Syndicate Bank and others),
which was disposed of, following the
judgment in the case of GM, Sri
Siddeshwara Cooperative Bank Ltd. and
another vs. Sri Ikbal and others.

9. Learned counsel appearing for the
respondent-Bank has submitted that as per
his instructions, the petitioners, who were
declared highest bidders in the online
auction held on 23.10.2024, upon having
deposited 25% of the bid amount, were
advised to deposit the remaining 75% of
the bid amount by 7.11.2024. However,
considering their request vide letter dated
5.11.2024, the Bank granted extension of
time till 6.12.2024. Thereafter, by means of
another representation dated 2.12.2024, the
petitioners sought further extension of time
till 7.1.2025, stating their difficulty in
arranging the funds. Considering the said
request, the Bank further allowed extension
of time for depositing of the remaining sale
amount till 27.12.2024. It is stated that
instead of depositing the balance sale
amount within the extended time period,
the
petitioners
submitted
another
representation on
22.12.2024,
seeking
further extension of time upto 7.2.2025.

10. It has been submitted that as per
the request received from the petitioners
vide representation dated 22.12.2024, the
competent authority of the Bank had
granted further extension of time till
23.1.2025,
as
final
opportunity
for
depositing the remaining balance. It has
been pointed out that the Bank has duly
sent a communication dated 18.1.2025 to
the petitioners, with an advise to deposit
the
remaining
sale
amount
of
Rs.1,67,81,250.00, not later than 23.1.2025
failing which, the initial deposit of
Rs.55,93,750.00 shall be forfeited to the
Bank and the said property shall be re-sold.

11. Learned counsel for the Bank has
submitted that the auction sale has been
conducted as per the provisions of the
SARFAESI Act, 2002 and Rules made
thereunder, and in terms thereof, it is to be
a time bound process and no extension can
be granted to the auction purchaser beyond
the time period stipulated under the
relevant statutory rules. Further, in default
of payment of entire sale amount within the
stipulated time period, the deposit made by
the auction purchaser is to be forfeited to
the secured creditor-Bank.

12. In order to examine the rival
contentions,
the
relevant
statutory
provisions would be required to be referred.

13. The SARFAESI Act, 2002 was
enacted to regulate securitisation and
reconstruction of financial assets and
enforcement of security interest and to
provide for a central database of security
interests created on property rights, and for
matters connected therewith or incidental
thereto.

14. The Statement of Objects and
Reasons of the Act reads as under:

"STATEMENT OF OBJECTS AND
REASONS
The financial sector has been one of the
key drivers in India's efforts to achieve
success in rapidly developing its economy.
While the banking industry in India is
progressively
complying
with
the
international
prudential
norms
and
1 All. Anil Pathak & Anr. Vs. State of U.P. & Ors.
511
accounting practices there are certain areas
in which the banking and financial sector
do not have a level playing field as
compared to other participants in the
financial markets in the world. There is no
legal provision for facilitating securitisation
of financial assets of banks and financial
institutions. Further, unlike international
banks, the banks and financial institutions
in India do not have power to take
possession of securities and sell them. Our
existing
legal
framework
relating
to
commercial transactions has not kept pace
with the changing commercial practices
and financial sector reforms. This has
resulted in slow pace of recovery of
defaulting loans and mounting levels of
non-performing
assets
of
banks
and
financial
institutions.
Narasimham
Committee I and II and Andhyarujina
Committee constituted by the Central
Government for the purpose of examining
banking sector reforms have considered the
need for changes in the legal system in
respect of these areas. These Committees,
inter alia, have suggested enactment of a
new legislation for securitisation and
empowering
banks
and
financial
institutions to take possession of the
securities and to sell them without the
intervention of the court. Acting on these
suggestions,
the
Securitisation
and
Reconstruction of Financial Assets and
Enforcement
of
Security
Interest
Ordinance, 2002 was promulgated on the
21st June, 2002 to regulate securitisation
and reconstruction of financial assets and
enforcement of security interest and for
matters connected therewith or incidental
thereto. The provisions of the Ordinance
would
enable
banks
and
financial
institutions to realise long-term assets,
manage problem of liquidity, asset liability
mismatches and improve recovery by
exercising powers to take possession of
securities, sell them and reduce nonperforming assets by adopting measures for
recovery or reconstruction."

15. The history and the legislative
backdrop that led to the enactment of the
SARFAESI Act was examined in the case
of Mardia Chemical Ltd. vs. Union of
India, and it was observed as follows:

"34. Some facts which need to be
taken note of are that the banks and the
financial institutions have heavily financed
the petitioners and other industries. It is
also a fact that a large sum of amount
remains unrecovered. Normal process of
recovery of debts through courts is lengthy
and time taken is not suited for recovery of
such dues. For financial assistance rendered
to
the
industries
by
the
financial
institutions, financial liquidity is essential
failing which there is a blockade of large
sums of amounts creating circumstances
which
retard
the
economic
progress
followed by a large number of other
consequential ill effects. Considering all
these circumstances, the Recovery of Debts
Due to Banks and Financial Institutions Act
was enacted in 1993 but as the figures
show it also did not bring the desired
results. Though it is submitted on behalf of
the petitioners that it so happened due to
inaction on the part of the Governments in
creating Debts Recovery Tribunals and
appointing presiding officers, for a long
time. Even after leaving that margin, it is to
be noted that things in the spheres
concerned are desired to move faster. In the
present-day global economy it may be
difficult to stick to old and conventional
methods of financing and recovery of dues.
Hence, in our view, it cannot be said that a
step taken towards securitisation of the
debts and to evolve means for faster
recovery of NPAs was not called for or that
512 INDIAN LAW REPORTS ALLAHABAD SERIES
it was superimposition of undesired law
since one legislation was already operating
in the field, namely, the Recovery of Debts
Due to Banks and Financial Institutions
Act. It is also to be noted that the idea has
not erupted abruptly to resort to such a
legislation. It appears that a thought was
given to the problems and the Narasimham
Committee
was
constituted
which
recommended
for
such
a
legislation
keeping in view the changing times and
economic situation whereafter yet another
Expert Committee was constituted, then
alone the impugned law was enacted.
Liquidity of finances and flow of money is
essential for any healthy and growthoriented economy. But certainly, what must
be kept in mind is that the law should not
be in derogation of the rights which are
guaranteed to the people under the
Constitution. The procedure should also be
fair, reasonable and valid, though it may
vary looking to the different situations
needed to be tackled and object sought to
be achieved."

16.
In
this
context,
certain
observations made in the decision in the
case of United Bank of India vs.
Satyawati Tandon, may also be referred
to. The said observations are as follows:

"1. ... With a view to give
impetus to the industrial development of
the
country,
the
Central
and
State
Governments encouraged the banks and
other financial institutions to formulate
liberal policies for grant of loans and other
financial facilities to those who wanted to
set up new industrial units or expand the
existing units. Many hundred thousand
took advantage of easy financing by the
banks and other financial institutions but a
large number of them did not repay the
amount of loan, etc. Not only this, they
instituted frivolous cases and succeeded in
persuading the civil courts to pass orders of
injunction against the steps taken by banks
and financial institutions to recover their
dues. Due to lack of adequate infrastructure
and non-availability of manpower, the
regular courts could not accomplish the
task of expeditiously adjudicating the cases
instituted by banks and other financial
institutions for recovery of their dues. As a
result, several hundred crores of public
money
got
blocked
in
unproductive
ventures."

17. Section 13 of the SARFAESI Act
contains the provisions relating to the
enforcement of the security interest and the
manner in which the same may be done by
the
secured
creditor
without
the
intervention of the court or tribunal in
accordance with its provisions.

18. The procedural formalities to be
followed for the sale of immovable secured
assets as per Section 13 of the SARFAESI
Act is provided under Rules 8 and 9 of the
Security Interest (Enforcement) Rules,
20025.

19. The controversy involved in the
present case would relate to sub-rule (4) of
Rule 9 which provides for a time period
within which, the balance amount of the
purchase price payable by the auction
purchaser is to be paid. For ease of
reference, Rule 9 of the Rules, 2002 is
extracted below:

"9. Time of sale, issue of Sale
Certificate and delivery of possession,
etc. - (1) No sale of immovable property
under these rules, in first instance shall take
place before the expiry of thirty days from
the date on which the public notice of sale
is published in newspapers as referred to in
1 All. Anil Pathak & Anr. Vs. State of U.P. & Ors.
513
the proviso to sub-rule (6) of rule 8 or
notice of sale has been served to the
borrower:

Provided further that if sale of
immovable property by any one of the
methods specified by sub rule (5) of rule 8
fails and sale is required to be conducted
again, the authorised officer shall serve,
affix and publish notice of sale of not less
than fifteen days to the borrower, for any
subsequent sale.

(2) The sale shall be confirmed in
favour of the purchaser who has offered the
highest sale price in his bid or tender or
quotation or offer to the authorized officer
and shall be subject to confirmation by the
secured creditor:

Provided that no sale under this
rule shall be confirmed, if the amount
offered by sale price is less than the reserve
price, specified under sub-rule (5) of rule 8:

Provided further that if the
authorized officer fails to obtain a price
higher than the reserve price, he may, with
the consent of the borrower and the secured
creditor effect the sale at such price.

(3) On every sale of immovable
property, the purchaser shall immediately,
i.e. on the same day or not later than next
working day, as the case may be, pay a
deposit of twenty five per cent. of the
amount of the sale price, which is inclusive
of earnest money deposited, if any, to the
authorized officer conducting the sale and
in default of such deposit, the property
shall be sold again.

(4) The balance amount of
purchase price payable shall be paid by the
purchaser to the authorized officer on or
before the fifteenth day of confirmation of
sale of the immovable property or such
extended period as may be agreed upon in
writing between the purchaser and the
secured creditor, in any case not exceeding
three months.

(5) In default of payment within
the period mentioned in sub-rule (4), the
deposit shall be forfeited to the secured
creditor and the property shall be resold
and the defaulting purchaser shall forfeit all
claim to the property or to any part of the
sum for which it may be subsequently sold.

(6) On confirmation of sale by the
secured creditor and if the terms of
payment have been complied with, the
authorized officer exercising the power of
sale shall issue a certificate of sale of the
immovable property in favour of the
purchaser in the Form given in Appendix V
to these rules.

(7)
Where
the
immovable
property
sold
is
subject
to
any
encumbrances, the authorized officer may,
if he thinks fit, allow the purchaser to
deposit with him the money required to
discharge the encumbrances and any
interest due thereon together with such
additional amount that may be sufficient to
meet the contingencies or further cost,
expenses and interest as may be determined
by him:

Provided that if after meeting the
cost of removing encumbrances and
contingencies there is any surplus available
out of the money deposited by the
purchaser such surplus shall be paid to the
purchaser within fifteen days from the date
of finalisation of the sale.

(8) On such deposit of money for
discharge
of
the
encumbrances,
the
authorised officer shall issue or cause the
purchaser to issue notices to the persons
interested in or entitled to the money
deposited with him and take steps to make
the payment accordingly.

(9) The authorised officer shall
deliver the property to the purchaser free
from encumbrances known to the secured
creditor on deposit of money as specified in
sub-rule (7) above.
514 INDIAN LAW REPORTS ALLAHABAD SERIES

(10) The certificate of sale issued
under
sub-rule
(6)
shall
specifically
mention that whether the purchaser has
purchased the immovable secured asset free
from any encumbrances known to the
secured creditor or not."

20. Rule 9 of the Rules, 2002 relates to
the time of sale, issue of sale certificate and
delivery of possession etc. Public notice of
sale is to be published in the newspaper and
only after thirty days thereafter, the sale of
immovable property can take place. Under
Rule 9 (2) of the 2002 Rules, the sale is
required to be confirmed in favour of the
purchaser who has offered the highest sale
price to the authorised officer and shall be
subject to confirmation by the secured
creditor. The proviso makes it clear that
sale under the said Rule would be
confirmed if the amount offered and the
whole price is not less than the reserved
price as specified in Rule 9 (5).

21. Rule 9 (3) makes it clear that on
every sale of immovable property, the
purchaser on the same day or not later than
next working day, has to make a deposit of
twenty-five per cent of the amount of the sale
price, which is inclusive of earnest money
deposited if any. Rule 9 (4) makes it clear that
balance amount of the purchase price payable
shall be paid by the purchaser to the authorised
officer on or before the fifteenth day of
"confirmation of sale of the immovable
property" or such extended period as may be
agreed upon in writing between the purchaser
and the secured creditor.

22. The liability of a successful auction
purchaser to deposit the requisite amount
begins from the date when the sale is
confirmed by the secured creditor and
communicated to the auction purchaser and
as per sub-rule (3) of Rule 9 of the Rules,
2002, twenty five per cent amount of auction
price has to be deposited, as earnest money,
no later than next working day from the date
of confirmation of sale and the balance
amount within 15 days from the said date.

23. As per terms of sub-rule (3) of Rule
9 of the Rules, 2002, as it originally existed,
15 days time period for depositing of the
balance 75% of the purchase price was
extendable for a period, as may be agreed
upon in writing between the parties. For ease
of reference, sub-rule (4) of Rule 9 of the
Rules, 2002, as it originally existed, is
reproduced below:

"(4) The balance amount of
purchase price payable shall be paid by the
purchaser to the authorised officer on or
before the fifteenth day of confirmation of
sale of the immovable property or such
extended period as may be agreed upon in
writing between the parties."

24. Sub-rule (4) of Rule 9 of the Rules,
2002 was subsequently amended vide GOI
Notification
No.GSR
1046
(E)
dated
3.11.2026 and clause (iv) of Rule 7 of the
Security
Interest
(Enforcement)
(Amendment) Rules, 2002 reads as under:

"(iv) in sub-rule (4), for the words
"as may be agreed upon in writing between
the parties", the words, "as may be agreed
upon in writing between the purchaser and
the secured creditor, in any case not
exceeding
three
months"
shall
be
substituted."

25. Subsequent to the aforesaid
amendment, sub-rule (4) of Rule 9 of the
Rules, 2002, now reads as under:

"(4) The balance amount of
purchase price payable shall be paid by the
1 All. Anil Pathak & Anr. Vs. State of U.P. & Ors.
515
purchaser to the authorized officer on or
before the fifteenth day of confirmation of
sale of the immovable property or such
extended period as may be agreed upon
in writing between the purchaser and the
secured creditor, in any case not
exceeding three months."

(emphasis supplied)

26. The effect of the amendment to
sub-rule (4) of Rule 9 of the Rules, 2002 is
that the fifteen days time period for
depositing of the balance amount of the
purchase price by the purchaser would be
extendable upon agreement in writing
between the purchaser and the secured
creditor, for a period not exceeding three
months in any case.

27. Rule 9 (4) of the Rules, 2002 was
examined in the decision in Union Bank of
India vs. Rajat Infrastructure (P) Ltd.,
wherein in was clarified that the balance
amount of the purchase price has to be paid
by the auction purchaser to the Authorized
Officer on or before the fifteenth day of
confirmation of sale or such extended
period as may be agreed upon in writing
between the purchaser and the secured
creditor, in any case not exceeding three
months. It was observed that even the
plenary powers of the Supreme Court under
Article 142 of the Constitution could not be
invoked to supplant the substantive law,
ignoring the express statutory provisions
dealing with the subject and thereby to
achieve something indirectly, which could
not be achieved directly. It was observed as
follows:

27. As discernible from the
aforestated sub-rule (4) of Rule 9, the
balance amount of purchase price payable
by the purchaser to the authorised officer
has to be paid on or before the fifteenth day
of confirmation of sale of the immovable
property or such extended period as may be
agreed upon in writing between the
purchaser and the secured creditor, in any
case not exceeding three months. Sub-rule
(5) thereof states that in default of payment
within the period mentioned in sub-rule (4),
the deposit shall be forfeited to the secured
creditor and the property shall be resold,
and that defaulting purchaser shall forfeit
all claim to the property or to any part of
the sum for which it may be subsequently
sold. As per sub-rule (6) thereof, on the
confirmation of sale by the secured creditor
and if the terms of payment have been
complied with, the authorised officer
exercising the power of sale would issue a
certificate of sale of the immovable
property in favour of the purchaser in the
form prescribed under the Rules.

28. The provisions contained in subrules (4) and (5) of Rule 9 of the Rules,
2002, came up for consideration in the
decision in the case of Authorized Officer,
State Bank of India vs. C. Natarajan,
wherein it was observed that a discretion is
available to the Authorized Officer of the
secured creditor for extension of time for
depositing the balance consideration, but
not exceeding the prescribed limit of ninety
days. The objective and necessity of
enactment of the powers of forfeiture of
deposited amount of the secured creditor
under sub-rule (5) was also explained by
pointing out that the legislature had
visualized that there was a need to arrest
cases of deceptive manipulation of prices at
the instance of unscrupulous borrowers by
thwarting sale processes. It was observed
that the purpose of the provision was aimed
at instilling a sense of discipline in the
intending purchasers while they proceed to
participate in the auction-sale process.
516 INDIAN LAW REPORTS ALLAHABAD SERIES
Relevant
observations
made
in
the
judgment in this regard are as follows:

27.
In
the
current
era
of
globalisation, the entire philosophy of
society, mainly on the economic front is
making rapid strides towards changes.
Unscrupulous people have been inventing
newer
modes
and
mechanisms
for
defrauding and looting the nation. It is in
such
a
scenario
that
provisions
of
enactments, particularly those provisions
which have a direct bearing on the
economy of the nation, must receive such
interpretation so that it not only fosters
economic growth but is also in tune with
the
intention
of
the
law-makers
in
introducing a provision such as sub-rule (5)
of Rule 9, which though harsh in its
operation, is intended to suppress the
mischief and advance the remedy. If indeed
Section 73 and Section 74, which are part
of the general law of contract, were
sufficient to cater to the remedy, the need
to make sub-rule (5) of Rule 9 as part of the
Rules might not have arisen. Additionally,
insertion
of
sub-rule
(5)
with
such
specificity regarding forfeiture must not
have been thought of only for reiterating
what is already there. It was visualised by
the law-makers that there was a need to
arrest cases of deceptive manipulation of
prices at the instance of unscrupulous
borrowers by thwarting sale processes and
this was the trigger for insertion of such a
provision with wide words conferring
extensive powers of forfeiture. The purpose
of such insertion must have also been
aimed at instilling a sense of discipline in
the
intending
purchasers
while
they
proceed to participate in the auction-sale
process.

28. At the cost of repetition, it
must not be forgotten that the Sarfaesi Act
was enacted because the general laws were
not found to be workable and efficient
enough to ensure liquidity of finances and
flow of money essential for any healthy and
growth-oriented economy. The decision of
this Court in Mardia Chemicals Ltd. v.
Union of India [Mardia Chemicals Ltd. v.
Union of India, (2004) 4 SCC 311] , while
outlawing only a part of the Sarfaesi Act
and upholding the rest, has traced the
history of this legislation and the objects
that Parliament had in mind in sufficient
detail. Apart from the law laid down in
such decision, these are the other relevant
considerations which ought to be borne in
mind while examining a challenge to a
forfeiture order.

29. There is one other aspect
which is, more often than not, glossed over.
In terms of sub-rule (5) of Rule 9,
generally, forfeiture would be followed by
an exercise to resell the immovable
property. On the date an order of forfeiture
is in contemplation of the authorised officer
of
the
secured
creditor
for
breach
committed by the bidder, factually, the
position is quite uncertain for the former in
that there is neither any guarantee of his
receiving bids pursuant to a future sale,
much to the satisfaction of the secured
creditor, nor is there any gauge to measure
the likely loss to be suffered by it (secured
creditor) if no bidders were interested to
purchase the immovable property. Since
the extent of loss cannot be immediately
foreseen or calculated, such officers may
not have any option but to order forfeiture
of the amount deposited by the defaulting
bidder in an attempt to recover as much
money as possible so as to reduce the
secured debt. That the immovable property
is later sold at the same price or at a price
higher than the one which was offered by
the party suffering the forfeiture is not an
eventuality that occurs in each and every
case. Sections 73 and 74 of the Contract
1 All. Anil Pathak & Anr. Vs. State of U.P. & Ors.
517
Act would not, therefore, be sufficient to
take care of the interest of the secured
creditor in such a case and that also seems
to be another reason for bringing in the
provision
for
forfeiture
in
Rule
9.
Ordinarily, therefore, validity of an order of
forfeiture must be judged considering the
circumstances that were prevailing on the
date it was made and not based on
supervening events.

33. The upshot of the aforesaid
discussion is that whenever a challenge is
laid to an order of forfeiture made by an
authorised officer under sub-rule (5) of
Rule 9 of the Rules by a bidder, who has
failed to deposit the entire sale price within
ninety days, the tribunals/courts ought to be
extremely reluctant to interfere unless, of
course, a very exceptional case for
interference is set up. What would
constitute
a
very
exceptional
case,
however, must be determined by the
tribunals/courts on the facts of each case
and by recording cogent reasons for the
conclusion reached.

34. Insofar as challenge to an
order of forfeiture that is made upon
rejection of an application for extension of
time prior to expiry of ninety days and
within the stipulated period is concerned,
the scrutiny could be a bit more intrusive
for
ascertaining
whether
any
patent
arbitrariness or unreasonableness in the
decision-making process has had the effect
of vitiating the order under challenge.
However, in course of such scrutiny, the
tribunals/courts
must
be
careful
and
cautious and direct their attention to
examine each case in some depth to locate
whether there is likelihood of any hidden
interest of the bidder to stall the sale to
benefit the defaulting borrower and must,
as of necessity, weed out claims of bidders
who
instead
of
genuine
interest
to
participate in the auctions do so to rig
prices with an agenda to withdraw from the
fray post conclusion of the bidding process.
In course of such determination, the
tribunals/courts ought not to be swayed
only
by
supervening
events
like
a
subsequent sale at a higher price or at the
same price offered by the defaulting bidder
or that the secured creditor has not in the
bargain suffered any loss or by sentiments
and should stay at a distance since
extending sympathy, grace or compassion
are outside the scope of the relevant
legislation.

35. In any event, the underlying
principle
of
least
intervention
by
tribunals/courts
and
the
overarching
objective
of
the
Sarfaesi
Act
duly
complemented by the Rules, which are
geared
towards
efficient
and
speedy
recovery of debts, together with the
interpretation of the relevant laws by this
Court should not be lost sight of. Losing
sight thereof may not be in the larger
interest of the nation and susceptible to
interference.

29. The objective and the background
under which stringent consequences for
default have been provided were taken note
of in the decision in the case of Authorized
Officer, State Bank of India (supra), and
it was observed as follows:

"24.
...Drawing
from
our
experience on the Bench, it can safely be
observed that in many a case the borrowers
themselves, seeking to frustrate auction
sales, use their own henchmen as intending
purchasers to participate in the auction but
thereafter they do not choose to carry
forward the transactions citing issues which
are hardly tenable. This leads to auctions
being aborted and issuance of fresh notices.
Repetition
of
such
a
process
of
participation-withdrawal for a couple of
518 INDIAN LAW REPORTS ALLAHABAD SERIES
times or more has the undesirable effect of
rigging of the valuation of the immovable
property.
In
such
cases,
the
only
perceivable loss suffered by a secured
creditor would seem to be the extent of
expenses incurred by it in putting up the
immovable property for sale. However,
what does generally escape notice in the
process is that it is the mischievous
borrower who steals a march over the
secured creditor by managing to have a
highly valuable property purchased by one
of its henchmen for a song, thus getting
such property freed from the clutches of
mortgage and by diluting the security cover
which the secured creditor had for its loan
exposure. Bearing in mind such stark
reality, sub-rule (5) of rule 9 cannot but be
interpreted pragmatically to serve twin
purposes
-
first,
to
facilitate
due
enforcement of security interest by the
secured creditor (one of the objects of the
SARFAESI Act); and second, to prohibit
wrong doers from being benefitted by a
liberal construction thereof."

30. In the case, at hand, the petitioners
having participated in the auction held on
23.10.2024, and having deposited 25% of
the bid amount on the said date, were
required to deposit the remaining 75% of
the purchase price before the fifteenth day
of the sale confirmation, i.e. by 7.11.2024.
However, upon request being made by the
petitioners on 5.11.2024, the Bank granted
extension of time till 6.12.2024. Another
representation
dated
2.12.2024
was
submitted by the petitioners, seeking
extension of time till 7.1.2025, stating their
difficulty in arrangement of funds. The said
request was also acceded to by the Bank
and further extension of time was allowed
to deposit the balance sale price till
27.12.2024. The petitioner made yet
another representation dated 22.12.2024,
seeking further extension of time upto
7.2.2025, which was turned down by the
Bank on the ground that no extension could
be granted to the auction purchaser beyond
the time period stipulated under the
statutory rules.

31.