Holding

The forfeiture of the deposit under Rule 9(5) was valid and non‑arbitrary, and the High Court’s order directing a refund was erroneous.

Summary

The State Bank of India, as authorized officer, conducted an e‑auction of a secured asset of a defaulting borrower. The highest bidder, C. Natarajan, paid 25% of the sale price but failed to pay the balance within the extended deadline and sought further extensions, which were refused. The officer forfeited the 25% deposit under Rule 9(5) of the SARFAESI Rules and cancelled the sale. The bidder filed a writ petition seeking a refund, arguing that the bank should not be enriched. The High Court ordered a refund, but the Supreme Court held that the forfeiture power is statutorily conferred, was exercised reasonably, and there was no arbitrariness or unjust enrichment. Consequently, the High Court’s refund order was set aside and the appeal was allowed.

Issues considered

Whether the Authorized Officer exercised the statutory power of forfeiture under Rule 9(5) of the SARFAESI Rules in an arbitrary or unreasonable manner.
Whether the High Court was justified in interfering with the forfeiture order on the ground of alleged enrichment of the bank.

Legislation cited

Indian Contract Act, 1872s. 73, s. 74
Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002s. 13(4), s. 17, s. 35, s. 37, s. 38

Subjects

SARFAESI ActForfeitureE‑auctionSecured creditorExtension of timeUnjust enrichmentContract lawRule 9Statutory penaltyJudicial review

Judgment

[2023] 5 S.C.R. 1067 1067

AUTHORISED OFFICER STATE BANK OF INDIA A
v.
C. NATARAJAN & ANR.
(Civil Appeal No. 2545/2023)
APRIL 10, 2023 B
[S. RAVINDRA BHAT AND DIPANKAR DATTA, JJ.]
Securitization and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 : ss. 13(4), 17 – Security
Interest (Enforcement) Rules, 2002 – r. 9 – Contract Act – ss. 73, 74
C
– Power of forfeiture by the Authorized Officer – Exercise of –
Interference with the forfeiture order by the High Court –
Justification of – On facts, default committed by one in discharging
its debts to the Bank and declared as non-performing asset – E-
auction held by the Authorized Officer for secured asset of the
defaulter– Respondent declared the highest bidder and paid the D
earnest money and 25% of the sale price – However, could not pay
the balance 75% within the stipulated period and sought extension
of timeand the same was granted – Respondent further sought
extension and the same was rejected– Thereafter, the Authorized
Officer cancelled the e-auction sale concluded in favour of
E
respondent and forfeited the amount deposited– Respondent applied
before the DRT for the extension of time to deposit the balance
amount – DRT directed the Authorized officer to maintain status
quo – In appeal, the DRAT permitted the Authorized Officer to
proceed with fresh auction without, however, vacating the order of
status quo passed earlier – Writ petition by the respondent seeking F
refund of the forfeited amount – Meanwhile, the secured asset was
put up for auction and was sold to another auction-purchaser for
the same amount– High Court directed refund of forfeited amount
on the ground that the Bank should not be permitted to enrich by
forfeiting the amount from the respondent– On appeal, held: Power
G
of forfeiture is statutorily conferred – Nothing prevented the
respondent from making full payment of the balance amount and
have the sale certificate issued in his favour – Respondent not
genuinely interested in proceeding with his part of obligations –
Counsel for the respondent has not shown how the Authorized
Officer acted in derogation of the statute – While dealing with a H
1067
1068 SUPREME COURT REPORTS [2023] 5 S.C.R.

A case covered by r. 9, an order of forfeiture of sale price should not
be lightly interfered – Thus, no arbitrariness or unreasonableness
in the action of the Authorized Officer found in forfeiting 25% of
the sale price – Furthermore, there being no enrichment of the Bank
by reason of the forfeiture, the High Court not justified in directing
a refund of 25% of the sale price – Thus, the order passed by the
B
High Court set aside.
Words and Phrases:”Forfeiture” – Meaning of.
Allowing the appeal, the Court
HELD: 1.1The bare perusal of the provisions reveals an
C ordainment in sub–rule (4) of r. 9 of the Security Interest
(Enforcement) Rules, 2002 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; but, extension
beyond ninety days is not permissible on any count. Since grant
D of extension for intermittent periods so that the duration of such
periods taken together does not exceed ninety days would
suggest some element of discretion being reserved unto the
authorized officer of a secured creditor under sub–rule (5) of rule
9. However, there can be no gainsaying that such discretion has
to be exercised reasonably and not on whims or caprice; at the
E same time, no auction purchaser can claim extension as a matter
of right and that too beyond the statutorily prescribed period.
Whether or not a case for extension does exist would depend
upon the peculiar facts of each case and no strait–jacket formula
can ever be laid down therefor. If, however, circumstances are
F shown to exist where a bidder is faced with such a grave disability
that he has no other option but to seek extension of time on
genuine grounds so as not to exceed the stipulated period of
ninety days and the prayer is rejected without due consideration
of all facts and circumstances, refusal of the prayer for extension
could afford a ground for a judicial review of the decision-making
G process on valid ground(s). [Para 13][1080-A-E]
1.2. Sub-rule (5) of rule 9 does envisage forfeiture, should
there be a default in payment of the balance amount of purchase
price within the period mentioned in sub–rule (4). The power of

H
AUTHORISED OFFICER STATE BANK OF INDIA v. 1069
C. NATARAJAN & ANR.

forfeiture is, therefore, statutorily conferred. The express power A
conferred on a secured creditor by sub-rule (5) of rule 9 to forfeit
the initial deposit made by the bidder in case he commits any
default in paying installments of the sale price to the secured
creditor is an action which is part of the measures specified in
section 13(4) of the SARFAESI Act and, therefore, amenable to
B
challenge on valid ground(s) in an application under section 17(1)
thereof. [Para 14][1080-F-G]
1.3. Rule 9(5) legislatively lays down a penal consequence.
‘Forfeiture’ referred to in sub-rule (5) of rule 9, in the setting of
the SARFAESI Act and the Rules, has to be construed as denoting
a penalty that the defaulting bidder must suffer should he fail to C
make payment of the entire sale price within the period allowed
to him by the authorized officer of a secured creditor. Though it
is true that the power conferred by sub-rule (5) of rule 9 of the
Rules ought not to be exercised indiscriminately without having
due regard to all relevant facts and circumstances, yet, the said D
sub-rule ought also not be read in a manner so as to render its
existence only on paper. 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 E
thereof. [Paras 18, 19][1081-G-H; 1082-A-C, F]
1.4As regards the question does sub-rule (5) of rule 9,
which is part of a delegated legislation, i.e., the Rules, have the
effect of diluting section 73 and section 74 of the Contract Act,
the answer must be in the negative. While the Contract Act F
embodies the general law of contract, the SARFAESI Act is a
special enactment, inter alia, for enforcement of security interest
without intervention of court. Rule 9(5) providing for forfeiture
is part of the Rules, which have validly been framed in exercise
of statutory power conferred by section 38 of the SARFAESI Act. G
Law is well settled that rules, when validly framed, become part
of the statute. Apart from the presumption as to constitutionality
of a statute, the contesting respondent did not mount any
challenge to sub–rule (5) of rule 9 of the Rules. The applicability

H
1070 SUPREME COURT REPORTS [2023] 5 S.C.R.

A and enforcement of sub–rule (5) of rule 9 on its terms, therefore,
has to be secured in appropriate cases. [Para 22][1084-E-H]
1.5 Whenever a challenge is laid to an order of forfeiture
made by an authorized officer under sub–rule (5) of rule 9 of the
Rules by a bidder, who has failed to deposit the entire sale price
B 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. Insofar as challenge to an order of forfeiture
C 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
D 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
E 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
F 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. In any event, the
underlying principle of least intervention by tribunals/courts and
the overarching objective of the SARFAESI Act duly
G complimented by the Rules, which are geared towards efficient
and speedy recovery of debts, together with the interpretation of
the relevant laws should not be lost sight of. Losing sight thereof
may not be in the larger interest of the nation and susceptible to
interference. [Para 24][1085-F-H; 1086-A-E]
H
AUTHORISED OFFICER STATE BANK OF INDIA v. 1071
C. NATARAJAN & ANR.

1.6 There is no reason to hold that there has either been A
any manifest arbitrariness or unreasonableness, which warranted
interdiction with the order of forfeiture. [Para 26][1087-B-C]
1.7 It has to be held that the transaction fell through by
reason of the default or failure of the contesting respondent to
deposit 75% of the sale price by 23rd October, 2017, as per the B
terms of rule 9(4). On facts, the contesting respondent was
arranging for funds when he received the summons from the DRT
on 10th October, 2017. It is, therefore, clear that at least till that
date, the contesting respondent was lacking in financial resources
to make payment of the entire sale price. Although it is not always
necessary for an auction purchaser to arrange for funds and be C
ready to pay the entire sale price within 15 days of confirmation
of sale, since extension of time is contemplated in rule 9, it is
beyond comprehension why the contesting respondent while
applying for an extension of time on 27th September, 2017 sought
for only 25 days’ time and not for more time, at least up to the D
entire period of ninety days, being the maximum time that he
could have asked for and made available to him in terms of rule
9(4). He had also moved the DRT for extension of time, which
was not granted. The DRT, however, granted him liberty to
participate in the auction to be held on 5th January, 2018 but
without waiving any condition. These are circumstances which E
certainly are adverse to the contesting respondent. [Para
27][1087-G-H; 1088-A-C]
1.8 The terms of the auction notice made it clear that the
auction sale would be conducted in terms of the provisions
contained in the SARFAESI Act. All prospective bidders were, F
therefore, put on guard as to what could follow in case of a default
or neglect. Notwithstanding the proceedings that were initiated
before the DRT by defaults of which the contesting respondent
became aware on 10th October, 2017, nothing prevented him
from making full payment of the balance amount and have the G
sale certificate issued in his favour. It can be inferred from the
facts and circumstances that the contesting respondent was
seeking to buy time. Counsel for the contesting respondent has
not shown how the Authorized Officer acted in derogation of the
statute. Indeed, it was open to the Authorized Officer to extend
the time further; equally, he was also free not to grant further H
1072 SUPREME COURT REPORTS [2023] 5 S.C.R.

A extension having regard to the conduct of the contesting
respondent. When two options are legally open to be exercised
in a given set of facts and circumstances and one option is
exercised, which does not appear to be wholly unreasonable, it is
not for the writ court to find fault on the specious ground that the
secured creditor has not suffered any financial loss. That such
B creditor had not suffered financial loss cannot be the sole
determinative factor in view of the special law that the SARFAESI
Act is. Efforts made by recalcitrant borrowers to stall sale
proceedings at any costs is not uncommon. Many a time, when a
sale does not fructify because of an injunction, the time taken
and efforts made together with costs incurred by the secured
C
creditor to put up the secured asset (immovable property) for
sale once again and close the transaction by itself may result in
prejudicial affectation of its interest in enforcement of the security
interest. While dealing with a case covered by rule 9 of the Rules,
an order of forfeiture of sale price should not be lightly interfered.
D The contesting respondent was not genuinely interested in
proceeding with his part of his obligations and there is no
arbitrariness in the action of the Authorized Officer in forfeiting
Rs. 30,75,000/– being 25% of the sale price. [Para 28][1088-D-
H; 1089-A-B]
1.9 The High Court committed an error of law in directing
E
refund on the ground that the Bank “should not be permitted to
enrich by forfeiting the amount from the writ petitioner”. It is not
a question of the Bank’s enrichment or deriving any undue
advantage that the Court was really concerned with. It seems to
have posed a wrong question for being answered. [Para 30][1089-
F C]
1.10 The Bank has not been enriched, much less unjustly
enriched, by reason of the impugned forfeiture. Receipt of 25%
of the sale price by the Bank from the contesting respondent
was not the outcome of any private negotiation or arrangement
between them. It was pursuant to a public auction, involving a
G
process of offer and acceptance, and it was in terms of statutory
provisions contained in the Rules, particularly rule 9(3), that
money changed hands for a definite purpose. Receipt of 25% of
the sale price does not constitute a benefit, a fortiori, retention
thereof by forfeiture cannot be termed unjust or inequitable, so
H as to attract the doctrine of unjust enrichment. The Bank, as a
AUTHORISED OFFICER STATE BANK OF INDIA v. 1073
C. NATARAJAN & ANR.

secured creditor, is entitled in law to enforce the security interest A
and in the process to initiate all such steps and take all such
measures for protection of public interest by recovering the public
money, lent to a borrower and who has squandered it, in a manner
authorized by law. The contesting respondent participated in the
auction well and truly aware of the risk of having 25% of the sale
B
price forfeited in case of any default or failure on his part to make
payment of the balance amount of the sale price. Question of the
Bank being enriched by a forfeiture, which is in the nature of a
statutory penalty, does not and cannot therefore arise in the
circumstances. [Para 35][1090-B-F]
1.11 The High Court failed to bear in mind that the power C
of judicial review of a writ court will not be permitted to be invoked
to protect private interest at the cost of public interest, or to
decide contractual disputes, unless a clear–cut case of
arbitrariness or mala fides or bias or irrationality is made out. On
the pleadings, this was not one such case where the High Court D
should have interfered. [Para 36][1090-F-G]
1.12 In the present case, the Authorized Officer had
adhered to the statutory rules. If by such adherence any amount
is required to be forfeited as a consequence, the same cannot be
scrutinized wearing the glasses of misplaced sympathy. [Para E
37][1090-H; 1091-A]
1.13 There being no enrichment of the Bank by reason of
the forfeiture. The High Court was not justified in exercising
writ jurisdiction and directing a refund of 25% of the sale price.
The impugned judgment and order of the High Court is set aside. F
[Para 38][1091-A]
Alisha Khan vs Indian Bank (Allahabad Bank) 2021
SCC OnLine SC 3340 ; Agarwal Tracom Private Ltd
vs Punjab National Bank and Ors (2018) 1 SCC 626 :
[2017] 11 SCR 164 ; R.S. Joshi vs Ajit Mills Ltd (1977) G
4 SCC 98 : [1978] 1 SCR 338 ; BankuraMunicipality
vs Lalji Raja & Sons AIR 1953 SC 248 : [1953] SCR
767 ; Mardia Chemicals vs Union of India (2004) 4
SCC 311 : [2004] 3 SCR 982; Mahabir Kishore vs.
State of Madhya Pradesh (1989) 4 SCC 1 : [1989] 3
SCR 596; Sahakari Khand Udyog Mandal Ltd. vs.CCE H
1074 SUPREME COURT REPORTS [2023] 5 S.C.R.

A & Customs (2005) 3 SCC 738 : [2005] 2 SCR 606;
Indian Council for Enviro Legal Action vs. Union of
India (2011) 8 SCC 161 : [2011] 9 SCR 146 ; Martin
Burn Ltd vs The Corporation of Calcutta (1966) 1 SCR
543 –referred to.
B Black’s Law Dictionary – referred to.
Case Law Reference
[2017] 11 SCR 164 referred to Para 14
[1978] 1 SCR 338 referred to Para 17
C [1953] SCR 767 referred to Para 17
[2004] 3 SCR 982 referred to Para 20
[1989] 3 SCR 596 referred to Para 32
[2005] 2 SCR 606 referred to Para 33
D [2011] 9 SCR 146 referred to Para 34
(1966) 1 SCR 543 referred to Para 37
CIVIL APPELLATE JURISDICTION : Civil Appeal No.2545
of 2023.
E From the Judgment and Order dated 27.03.2018 of the High Court
of Judicature at Madras in WP No.4519 of 2018.
Sanjay Kapur, Ms. Megha Karnwal, Surya Prakash, Mrs. Shubhra
Kapur, Ms. Mahima Kapur, Advs. for the Appellant.
V. K. Shukla, Sr. Adv., G. Balaji, Adv. for the Respondents.
F
The Judgment of the Court was delivered by
DIPANKAR DATTA, J.
Leave granted.

G 2. The Authorized Officer (for brevity “the Authorized Officer”,
hereafter) of the State Bank of India, Stressed Asset Management
Branch, Coimbatore, Tamil Nadu (for brevity “the Bank”, hereafter)
has impugned the judgment and order dated 27th March, 2018 of the
Madras High Court allowing a writ petition (W.P. No.4519 of 2018)
instituted by the contesting respondent herein.
H
AUTHORISED OFFICER STATE BANK OF INDIA v. 1075
C. NATARAJAN & ANR.[DIPANKAR DATTA, J.]

3. The facts leading to institution of the writ petition, as recorded A
in the impugned judgment and order, are noticed hereunder:
a. Default was committed by M/s Stallion Knitwear India Private
Limited (for brevity “Stallion”, hereafter) in discharging its debts
to the Bank. Consequent upon classification of its account as non-
performing asset, the Authorized Officer had taken possession of B
the secured asset (being the plant and machinery of Stallion) as a
measure under section 13(4) of the Securitization and
Reconstruction of Financial Assets and Enforcement of Security
Interest Act, 2002 (for brevity “the SARFAESI Act”, hereafter).
Thereafter, e-auction notice dated 22nd August, 2007 was issued
by the Authorized Officer putting up the plant and machinery of C
Stallion for sale. The contesting respondent had participated in
the e-auction held on 15th September, 2017 by depositing requisite
earnest money. Having quoted a sum of Rs. 1,23,00,000/-, which
exceeded the reserve price by Rs. 1,00,000/-, he was declared
the highest bidder. Inclusive of the earnest money deposit, the D
petitioner paid Rs. 30,75,000/- towards 25% of the sale price by
RTGS on 15th September, 2017 itself, and was under advice to
pay the balance 75% thereof, i.e., Rs. 92,25,000/-, on or before
29th September, 2017.
b. The contesting respondent failed to arrange requisite funds and E
by a request letter dated 27th September, 2017, sought for extension
of time to pay the balance of amount within 25 days. Acceding to
such request, the Authorized Officer, on the following day, extended
the time for payment till 23rd October, 2017. Two weeks prior to
the extended last date for making payment of the balance amount,
the contesting respondent received summons dated 10th October, F
2017 from the Debt Recovery Tribunal, Coimbatore (for brevity
“the DRT”, hereafter), intimating him that Stallion having filed an
application under section 17 of the SARFAESI Act had applied
for interim relief, which was set down for hearing on 6th November,
2017. Having learnt of pendency of proceedings before the DRT, G
the contesting respondent met the Authorized Officer who assured
the contesting respondent of appropriate care to be taken to contest
such proceedings. Hearing such assurance and while referring to
the summons received from the DRT, the contesting respondent
by his letter dated 20th October, 2017 prayed for further extension
H
1076 SUPREME COURT REPORTS [2023] 5 S.C.R.

A of time by 15 days to pay the balance amount. The request of the
contesting respondent was rejected by the Authorized Officer by
his letter dated 21st October, 2017 and the contesting respondent
was advised to make payment of the balance amount on or before
23rd October, 2017. Since the contesting respondent did not pay
the balance amount of the sale price by 23rd October, 2017, the
B
Authorized Officer sent a letter dated 24th October, 2017 to the
contesting respondent informing him that the e-auction sale held
on 15th September, 2017, which was concluded in his favour, stands
cancelled and that the amount of Rs. 30,75,000/- paid by him
forfeited.
C c. The contesting respondent, seeking to intervene in the
proceedings before the DRT, had applied for advancement of the
date of hearing of the application under section 17. He also applied
for extension of time to deposit the balance amount till the disposal
of the interim application filed before the DRT by Stallion. DRT
D advanced the hearing date from 6 th November, 2017 to
31st October, 2017. An order dated 31st October, 2017 was also
passed directing the Authorized Officer to maintain status quo
and while calling for counter-affidavits, the case was posted to
28th November, 2017.
E d. The order of status quo passed by the DRT was challenged by
the Authorized Officer in an appeal carried before the Debts
Recovery Appellate Tribunal, Chennai (for brevity “the DRAT”,
hereafter). On 12th December, 2017, the DRAT permitted the
Authorized Officer to proceed with fresh auction without, however,
vacating the order of status quo passed earlier.
F
e. Availing the liberty granted by the DRAT, the Authorized Officer
issued fresh e-auction notice dated 15th December, 2017, fixing
5th January, 2018 as the date of auction. The contesting respondent
having come to learn of such notice filed an interim application
before the DRT seeking stay of the auction; however, by an order
G dated 3rd January, 2018, the DRT dismissed the application relying
on the interim order of the DRAT dated 12th December, 2017 but
granted liberty to the contesting respondent to participate in the e-
auction proposed to be held on 5th January, 2018. The auction,
however, could not be held on 5th January 2018 for want of adequate
H number of bidders.
AUTHORISED OFFICER STATE BANK OF INDIA v. 1077
C. NATARAJAN & ANR.[DIPANKAR DATTA, J.]

4. It was, at this stage, that the contesting respondent invoked the A
writ jurisdiction of the High Court seeking refund of the forfeited amount
of Rs. 30,75,000/-, by challenging the letter dated 24 th October, 2017 of
the Authorized Officer.
5. During the pendency of the writ proceedings before the High
Court, the secured asset was once again put up for sale by auction and B
was sold for 1,23,00,000/-.
6. The High Court, upon hearing the parties, was of the view that
the Authorized Officer having sold the secured assets for the very same
value of Rs. 1,23,00,000/- to another auction purchaser, which was the
same amount quoted by the contesting respondent, the Bank “should C
not be permitted to enrich by forfeiting the amount from the writ
petitioner and simultaneously appropriate the sale proceeds from
the highest bidder in the auction sale notice dated 15.12.2017”.
Consequently, the High Court directed refund of the amount of Rs.
30,75,000/- within 4 weeks with interest @ 9% per annum on the amount
to be refunded till refund is effected. D

7. Appearing in support of the appeal, counsel for the Authorized
Officer contended that the High Court committed gross error in ordering
a refund of Rs. 30,75,000/- to the contesting respondent. According to
him, the contesting respondent by his letter dated 27th September, 2017
had prayed for extension of 25 days’ time to deposit the balance amount E
of sale price and upon grant of such prayer, time was allowed till 23rd
October, 2017; however, the contesting respondent did not make payment
within the extended date by raising the bogey of pendency of proceedings
before the DRT, at the instance of Stallion. He further contended that
prior to 31st October, 2017, no order of stay passed by the DRT was F
subsisting and there was absolutely no reason for the contesting
respondent, if he was genuinely interested in closing the deal, to deposit
the balance amount of sale price while at the same time reserving his
right to claim the entire amount deposited, if the sale did not fructify. It
was also contended that the contesting respondent had applied for
extension of time to deposit the balance amount before the DRT, but no G
order was passed on his application and the Authorized Officer, perceiving
that the contesting respondent was seeking to delay matters, rightly
proceeded to forfeit the amount of Rs. 30,75,000/. He, accordingly,
submitted that the impugned judgment and order of the High Court is
unsustainable in law and, hence, deserves to be set aside. H
1078 SUPREME COURT REPORTS [2023] 5 S.C.R.

A 8. Per contra, counsel for the contesting respondent sought to
impress upon us that the order directing refund was passed on a
concession made by counsel for the first respondent before the High
Court, i.e., the Authorized Officer; hence, the appeal was not
maintainable. In the alternative, he contended that the Bank having sold
the secured asset through a subsequent auction which fetched Rs.
B
1,23,00,000/-, i.e., the same price at which the contesting respondent
intended to purchase the immovable property, it cannot be the case of
the Authorized Officer or, for that matter, the Bank that the latter has
suffered any financial loss. He further contended that although not
assigned as a specific ground for interference, a bare reading of the
C impugned judgment and order would reveal that the direction for refund
was made bearing in mind such circumstance that the Bank did not
suffer any loss. He also contended that there has to be an overall
consideration of the facts and circumstances obtaining in the case which
led the contesting respondent to reasonably believe that pendency of
proceedings before the DRT at the instance of Stallion would result in
D
the entire sale price, if deposited, being blocked. In such view of the
matter, the Authorized Officer without proper consideration of the entire
facts and circumstances proceeded to forfeit the amount deposited. Since,
there has been patent arbitrariness on the part of the Authorized Officer
in not acceding to the request of the contesting respondent to extend the
E time further, the High Court was justified in its interference with the
order of forfeiture and rightly directed refund. It was, thus, prayed that
the appeal be dismissed.
9. We have heard counsel for the parties and perused the materials
on record.
F 10. At the outset, we reject the contention of the contesting
respondent that the High Court, based on concession of counsel for the
Authorized Officer, proceeded to pass the order for refund. After
referring to the applicable statutory provisions, the said counsel submitted
before the Court that the interest of the Authorized Officer should be
G taken care of. Such a submission does not, in our considered view, amount
to any concession rendering the appeal not maintainable.
11. Two legal questions now arise for consideration:
(i) Whether the power of forfeiture was exercised by the
Authorized Officer in an arbitrary manner?
H
AUTHORISED OFFICER STATE BANK OF INDIA v. 1079
C. NATARAJAN & ANR.[DIPANKAR DATTA, J.]

(ii) Whether the High Court was justified in its interference A
with the forfeiture order on the ground assigned in the
impugned judgment and order?
12. Sale of a secured asset, which is an immovable property, is
regulated by rule 9 of the Security Interest (Enforcement) Rules, 2002
(for brevity “the Rules”, hereafter). Sub-rules (2), (3), (4) and (5) thereof B
are relevant for answering the first question. The same read as under:
“(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 authorised officer and
shall be subject to confirmation by the secured creditor: C
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 authorised officer fails to
obtain a price higher than the reserve price, he may, with the D
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 E
per cent of the amount of the sale price, which is inclusive of
earnest money deposited, if any, to the authorised 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 F
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, in
any case not exceeding three months.
G
(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.”
H
1080 SUPREME COURT REPORTS [2023] 5 S.C.R.

A 13. Bare perusal of the aforesaid provisions reveals an ordainment
in sub-rule (4) 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; but, extension beyond ninety days is not
permissible on any count. Since grant of extension for intermittent periods
so that the duration of such periods taken together does not exceed
B
ninety days would suggest some element of discretion being reserved
unto the authorized officer of a secured creditor under sub-rule (5) of
rule 9. However, there can be no gainsaying that such discretion has to
be exercised reasonably and not on whims or caprice; at the same time,
no auction purchaser can claim extension as a matter of right and that
C too beyond the statutorily prescribed period. Whether or not a case for
extension does exist would depend upon the peculiar facts of each case
and no strait-jacket formula can ever be laid down therefor. If, however,
circumstances are shown to exist where a bidder is faced with such a
grave disability that he has no other option but to seek extension of time
on genuine grounds so as not to exceed the stipulated period of ninety
D
days and the prayer is rejected without due consideration of all facts and
circumstances, refusal of the prayer for extension could afford a ground
for a judicial review of the decision-making process on valid ground(s).
One such exceptional circumstance led to the decision in Alisha Khan
vs Indian Bank (Allahabad Bank)1, where this Court intervened and
E granted relief because, due to COVID complications, the appellant had
failed to pay the balance amount.
14. Sub-rule (5) of rule 9 does envisage forfeiture, should there
be a default in payment of the balance amount of purchase price within
the period mentioned in sub-rule (4). The power of forfeiture is, therefore,
F statutorily conferred. It may also be noted in this connection that the
express power conferred on a secured creditor by sub-rule (5) of rule 9
of the Rules to forfeit the initial deposit made by the bidder in case he
commits any default in paying installments of the sale price to the secured
creditor has been held by this Court in Agarwal Tracom Private Ltd
vs Punjab National Bank and Ors.2 to be an action which is part of
G the measures specified in section 13(4) of the SARFAESI Act and,
therefore, amenable to challenge on valid ground(s) in an application
under section 17(1) thereof.
1
2021 SCC OnLine SC 3340
2
(2018) 1 SCC 626
H
AUTHORISED OFFICER STATE BANK OF INDIA v. 1081
C. NATARAJAN & ANR.[DIPANKAR DATTA, J.]

15. Before we take our discussion forward, it is necessary to A
ascertain the true character of the term ‘forfeiture’. Black’s Law
Dictionary, inter alia, explains ‘forfeiture’ as “the loss of a right,
privilege, or property because of a crime, breach of obligation, or
neglect of duty” or “something (esp. money or property) lost or
confiscated by this process; a penalty”. It is also explained as “a
B
destruction or deprivation of some estate or right because of the
failure to perform some obligation or condition contained in a
contract”.
16. It is also found from the same dictionary that though penalty is
usually referable to a crime, penalty is sometimes imposed for civil wrongs
such as a statutory penalty for a statutory violation; especially, a penalty C
imposing automatic liability on a wrongdoer for violation of the terms of
a statute without reference to any actual damage suffered.
17. A Constitution Bench of this Court in R.S. Joshi vs Ajit
Mills Ltd.3 held that “(F)orfeiture, as judicially annotated, is a
punishment annexed by law to some illegal act or negligence”. This D
Court referred to its earlier decision in Bankura Municipality vs Lalji
Raja & Sons4 where it was observed:
“According to the dictionary meaning of the word ‘forfeiture’
the loss or the deprivation of goods has got to be in
consequence of a crime, offence or breach of engagement or E
has to be by way of penalty of the transgression or a
punishment for an offence. Unless the loss or deprivation of
the goods is by way of a penalty or punishment for a crime,
offence or breach of engagement it would not come within
the definition of forfeiture”. F
18. Having regard to the terms of rule 9, the notice for auction
constitutes the ‘invitation to offer’; the bids submitted by the bidders
constitute the ‘offer’ and upon confirmation of sale in favour of the
highest bidder under sub-rule (2) of rule 9, the contract comes into
existence. Once the contract comes into existence, the bidder is bound G
to honour the terms of the statute under which the auction is conducted
and suffer consequences for breach, if any, as stipulated. Rule 9(5)
legislatively lays down a penal consequence. ‘Forfeiture’ referred to in
3
(1977) 4 SCC 98
4
AIR 1953 SC 248
H
1082 SUPREME COURT REPORTS [2023] 5 S.C.R.

A sub-rule (5) of rule 9, in the setting of the SARFAESI Act and the Rules,
has to be construed as denoting a penalty that the defaulting bidder must
suffer should he fail to make payment of the entire sale price within the
period allowed to him by the authorized officer of a secured creditor.
19. Though it is true that the power conferred by sub-rule (5) of
B rule 9 of the Rules ought not to be exercised indiscriminately without
having due regard to all relevant facts and circumstances, yet, the said
sub-rule ought also not be read in a manner so as to render its existence
only on paper. 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
C 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 times or
more has the undesirable effect of rigging of the valuation of the
D 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,
E 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
F (one of the objects of the SARFAESI Act); and second, to prohibit wrong
doers from being benefitted by a liberal construction thereof.
20. In terms of the Indian Contract Act, 1872 (for brevity “Contract
Act”, hereafter), a person can withdraw his offer before acceptance.
However, once a party expresses willingness to enter into a contractual
G relationship subject to terms and conditions and makes an offer which is
accepted but thereafter commits a breach of contract, he does so at his
own risk and peril and naturally has to suffer the consequences. We are
not oblivious of the terms of section 73 and section 74 of the Contract
Act, being part of Chapter VI thereof titled “Of the Consequence of
Breach of Contract”. These sections, providing for compensation for
H
AUTHORISED OFFICER STATE BANK OF INDIA v. 1083
C. NATARAJAN & ANR.[DIPANKAR DATTA, J.]

breach of contract and for liquidated damages, have remained on the A
statute book for generations and permit the party suffering the breach to
recover such quantum of loss or damage from the party in breach.
However, with changing times, the minds of people are also changing.
The judiciary, keeping itself abreast of the changes that are bound to
occur in an evolving society, must interpret new laws that are brought in
B
operation to suit the situation appropriately. In the current era of
globalization, 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 C
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
D
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 visualized by the law makers that there was a need
to arrest cases of deceptive manipulation of prices at the instance of E
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. At the cost
F
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 vs Union of India5, while outlawing only a part
of the SARFAESI Act and upholding the rest, has traced the history of G
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.
5
(2004) 4 SCC 311 H
1084 SUPREME COURT REPORTS [2023] 5 S.C.R.

A 21. 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 authorized 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
B
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
C 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 Act would not,
D
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
E events.
22. Does sub-rule (5) of rule 9, which is part of a delegated
legislation, i.e., the Rules, have the effect of diluting section 73 and section
74 of the Contract Act? We have considered it necessary to advert to
this question as it is one of general importance and are of the considered
F opinion that the answer must be in the negative. While the Contract Act
embodies the general law of contract, the SARFAESI Act is a special
enactment, inter alia, for enforcement of security interest without
intervention of court. Rule 9(5) providing for forfeiture is part of the
Rules, which have validly been framed in exercise of statutory power
conferred by section 38 of the SARFAESI Act. Law is well settled that
G rules, when validly framed, become part of the statute. Apart from the
presumption as to constitutionality of a statute, the contesting respondent
did not mount any challenge to sub-rule (5) of rule 9 of the Rules. The
applicability and enforcement of sub-rule (5) of rule 9 on its terms,
therefore, has to be secured in appropriate cases.
H
AUTHORISED OFFICER STATE BANK OF INDIA v. 1085
C. NATARAJAN & ANR.[DIPANKAR DATTA, J.]

23. That apart, significantly, section 35 of the SARFAESI Act A
mandates that the provisions thereof would have effect, notwithstanding
anything inconsistent therewith contained in any other law for the time
being in force or any other instrument having effect by virtue of any
such law. At the same time, section 37 of the SARFAESI Act postulates
that provisions thereof or the rules made thereunder shall be in addition
B
to and not in derogation of the enumerated enactments or any other law
for the time being in force. What is of importance is that the non-obstante
clause in section 35 of the SARFAESI Act is not subject to section 37
thereof; however, a plain reading of the latter provision would suggest
that rights, liabilities, obligations, remedies, etc. created/imposed/ provided
by the SARFAESI Act and the Rules are preserved, irrespective of C
what is provided in the stated enactments or any other law for the time
being in force. The regime under the SARFAESI Act is altogether
different and sections 35 and 37 are intended to extend a cover to the
secured creditor if it abides by the governing law, which cannot be subject
to any other provision of a general law like the Contract Act. Since
D
section 35 overrides other laws in the same or related field and having
regard to the scheme of the SARFAESI Act and the dominant purpose
sought to be achieved, as noted above, none can and should be allowed
to take the auctions conducted thereunder lightly. No court ought to
countenance a bidder entering and exiting the process at his sweet will
without any real intent to take it to fruition. The provisions of the E
SARFAESI Act as well as the Rules are to be interpreted positively and
purposefully in the context of a given case to give meaning to sub- rule
(5) of rule 9. Besides, we have no hesitation to hold that in case of any
seeming conflict or inconsistency between the general law, i.e., the
Contract Act and the special law, i.e., the SARFAESI Act, it is the latter
F
that would prevail.
24. The up-shot of the aforesaid discussion is that whenever a
challenge is laid to an order of forfeiture made by an authorized 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 G
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.
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 H
1086 SUPREME COURT REPORTS [2023] 5 S.C.R.

A 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
B
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
C 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. In any event, the underlying principle of least intervention by
D
tribunals/courts and the overarching objective of the SARFAESI Act
duly complimented 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
E interference.
25. In the present case, undisputedly, payment of 25% of the sale
price was made by the contesting respondent on 15th September, 2017;
hence sub-rule (3) of rule 9 stood complied with. The contesting respondent
was notified to deposit the balance 75% of the sale price by 29 th
F September, 2017. Admittedly, he could not or did not so deposit till 27 th
September, 2017, whereupon he prayed for extension of time by 25 days
by his request letter of even date, i.e., 27 th September, 2017. The
Authorized Officer responded favourably and extended the time for
deposit by 25 days as prayed by the contesting respondent, i.e., till 23rd
October, 2017. Extension of time till 23rd October, 2017, therefore, was
G by mutual agreement – a course of action permitted by sub-rule (4). On
20th October, 2017, the contesting respondent made a further request
for extension of time by 15 days citing pendency of proceedings at the
instance of Stallion before the DRT. This request came to be rejected by
the Authorized Officer by his letter dated 21st October, 2017 referring to
H absence of any order of stay in operation and that the contesting
AUTHORISED OFFICER STATE BANK OF INDIA v. 1087
C. NATARAJAN & ANR.[DIPANKAR DATTA, J.]

respondent was free to deposit the balance amount of sale price and A
take possession of the auctioned immovable property. The contesting
respondent not having deposited the balance amount of sale price by
23rd October, 2018, the mutual agreement for extension of time, thus,
lapsed with effect from 24th October, 2017. This resulted in the order of
forfeiture being passed by the Authorized Officer in terms of sub-rule
B
(5).
26. We do not see reason to hold that there has either been any
manifest arbitrariness or unreasonableness, which warranted interdiction
with the order of forfeiture. The contesting respondent in terms of the
statutory ordainment was required to pay the balance amount of sale
price on or before 15 days of confirmation of sale. Days prior to expiry C
of such period, he prayed for an extension of 25 days. Such prayer was
granted. Further prayer for extension was made ten days after receipt
of summons from the DRT. The exact date on which the contesting
respondent applied before the DRT for extension of time as well as the
exact terms of the order passed on such application, however, is not D
available on record. We shall proceed on the premise that the prayer for
extension of time was not granted. The order of the Authorized Officer
dated 24th October, 2017 forfeiting 25% of the sale price was also not
challenged by the contesting respondent before the DRT in any
independent proceeding; on the contrary, after the DRAT granted
permission to the Authorized Officer to conduct sale afresh by its order E
dated 12th December, 2017 and pursuant whereto a fresh e-auction notice
was issued on 18th December, 2017, the contesting respondent had
instituted an independent application under section 17(1) of the
SARFAESI Act before the DRT and had also filed I.A. No. 2542/2017
therein for interim stay of e-auction. The DRT by its order dated 3rd F
January, 2018 dismissed I.A. No. 2542/2017 relying upon the order of
the DRAT dated 12th December, 2017, but permitted the contesting
respondent to participate in the e- auction to be held on 5 th January, 2018
which failed for want of bidders. It is then that the contesting respondent
instituted the writ petition before the High Court.
G
27. Under such circumstances, it has to be held that the transaction
fell through by reason of the default or failure of the contesting respondent
to deposit 75% of the sale price by 23rd October, 2017, as per the terms
of rule 9(4). On facts, we find that the contesting respondent was
arranging for funds when he received the summons from the DRT on
H
1088 SUPREME COURT REPORTS [2023] 5 S.C.R.

A 10th October, 2017. It is, therefore, clear that at least till that date, the
contesting respondent was lacking in financial resources to make payment
of the entire sale price. Although it is not always necessary for an auction
purchaser to arrange for funds and be ready to pay the entire sale price
within 15 days of confirmation of sale, since extension of time is
contemplated in rule 9, it is beyond our comprehension why the contesting
B
respondent while applying for an extension of time on 27th September,
2017 sought for only 25 days’ time and not for more time, at least up to
the entire period of ninety days, being the maximum time that he could
have asked for and made available to him in terms of rule 9(4). He had
also moved the DRT for extension of time, which was not granted. The
C DRT, however, granted him liberty to participate in the auction to be held
on 5th January, 2018 but without waiving any condition. These are
circumstances which certainly are adverse to the contesting respondent.
28. Also, the terms of the auction notice made it clear that the
auction sale would be conducted in terms of the provisions contained in
D the SARFAESI Act. All prospective bidders were, therefore, put on
guard as to what could follow in case of a default or neglect.
Notwithstanding the proceedings that were initiated before the DRT by
Stallion of which the contesting respondent became aware on 10th
October, 2017, nothing prevented him from making full payment of the
balance amount and have the sale certificate issued in his favour. It can
E be inferred from the facts and circumstances that the contesting
respondent was seeking to buy time. Counsel for the contesting
respondent has not shown how the Authorized Officer acted in derogation
of the statute. Indeed, it was open to the Authorized Officer to extend
the time further; equally, he was also free not to grant further extension
F having regard to the conduct of the contesting respondent. When two
options are legally open to be exercised in a given set of facts and
circumstances and one option is exercised, which does not appear to be
wholly unreasonable, it is not for the writ court to find fault on the specious
ground that the secured creditor has not suffered any financial loss.
That such creditor had not suffered financial loss cannot be the sole
G determinative factor in view of the special law that the SARFAESI Act
is. As noted above, efforts made by recalcitrant borrowers to stall sale
proceedings at any costs is not uncommon. Many a time, when a sale
does not fructify because of an injunction, the time taken and efforts
made together with costs incurred by the secured creditor to put up the
H secured asset (immovable property) for sale once again and close the
AUTHORISED OFFICER STATE BANK OF INDIA v. 1089
C. NATARAJAN & ANR.[DIPANKAR DATTA, J.]

transaction by itself may result in prejudicial affectation of its interest in A
enforcement of the security interest. While dealing with a case covered
by rule 9 of the Rules, an order of forfeiture of sale price should not be
lightly interfered. The contesting respondent was not genuinely interested
in proceeding with his part of his obligations and we see no arbitrariness
in the action of the Authorized Officer in forfeiting Rs. 30,75,000/- being
B
25% of the sale price.
29. The first question is answered accordingly.
30. Moving on to the second question, we find the High Court to
have committed an error of law in directing refund on the ground that
the Bank “should not be permitted to enrich by forfeiting the amount C
from the writ petitioner”. It is not a question of the Bank’s enrichment
or deriving any undue advantage that the Court was really concerned
with. It seems to have posed a wrong question for being answered.
31. The circumstances of the case make it imperative to consider
the question: when does an enrichment or unjust enrichment occur? D
6
32. Mahabir Kishore vs. State of Madhya Pradesh is a
decision of this Court which traced various English decisions and ultimately
laid down the requirements of unjust enrichment as follows:
“11. The principle of unjust enrichment requires: first, that
the defendants has been ‘enriched’ by the receipt of a ‘benefit’; E
secondly, that this enrichment is ‘at the expense of the
plaintiffs’; and thirdly, that the retention of the enrichment be
unjust. This justifies restitution. Enrichment may take the form
of direct advantage to the recipient wealth such as by the
receipt of money or indirect one for instance where inevitable F
expense has been saved.”
33. In Sahakari Khand Udyog Mandal Ltd. vs. CCE &
Customs 7, this Court had the occasion to reiterate that unjust
enrichment means retention of a benefit by a person that is unjust
or inequitable. Unjust enrichment occurs when a person retains
G
money or benefit which in justice, equity and good conscience,
belongs to someone else. The doctrine of unjust enrichment,
therefore, is that no person can be allowed to enrich inequitably at
the expense of another. A right of recovery under the doctrine of
6
(1989) 4 SCC 1
7
(2005) 3 SCC 738 H
1090 SUPREME COURT REPORTS [2023] 5 S.C.R.

A unjust enrichment arises where retention of a benefit is considered
contrary to justice or against equity.
34. Yet again, in Indian Council for Enviro- Legal Action vs.
Union of India8, this Court held that a person is enriched if he has
received a benefit, and he is unjustly enriched if retention of the benefit
B would be unjust.
35. In the light of guidance provided by the above decisions, what
needs to be ascertained first is whether the Bank received or derived
any benefit or advantage by forfeiture of 25% of the sale price. We do
not think that the Bank has been enriched, much less unjustly enriched,
C by reason of the impugned forfeiture. Receipt of 25% of the sale price
by the Bank from the contesting respondent was not the outcome of any
private negotiation or arrangement between them. It was pursuant to a
public auction, involving a process of offer and acceptance, and it was in
terms of statutory provisions contained in the Rules, particularly rule
9(3), that money changed hands for a definite purpose. Receipt of 25%
D of the sale price does not constitute a benefit, a fortiori, retention thereof
by forfeiture cannot be termed unjust or inequitable, so as to attract the
doctrine of unjust enrichment. The Bank, as a 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 protection of public interest
E by recovering the public money, lent to a borrower and who has
squandered it, in a manner authorized by law. The contesting respondent
participated in the auction well and truly aware of the risk of having
25% of the sale price forfeited in case of any default or failure on his
part to make payment of the balance amount of the sale price. Question
of the Bank being enriched by a forfeiture, which is in the nature of a
F statutory penalty, does not and cannot therefore arise in the circumstances.
36. The High Court, in our considered opinion, failed to bear in
mind the settled principle of law that the power of judicial review of a
writ court will not be permitted to be invoked to protect private interest
at the cost of public interest, or to decide contractual disputes, unless a
G clear-cut case of arbitrariness or mala fides or bias or irrationality is
made out. On the pleadings, this was not one such case where the High
Court should have interfered.
37. The question under consideration can also be addressed from
a different perspective. In the present case, the Authorized Officer had
8
H (2011) 8 SCC 161
AUTHORISED OFFICER STATE BANK OF INDIA v. 1091
C. NATARAJAN & ANR.[DIPANKAR DATTA, J.]

adhered to the statutory rules. If by such adherence any amount is A
required to be forfeited as a consequence, the same cannot be scrutinized
wearing the glasses of misplaced sympathy. Law is well settled that a
result flowing from a statutory provision is never an evil and that a court
has no power to ignore that provision to relieve what it considers a distress
resulting from its operation. The statute must, of course, be given effect
B
to whether a court likes the result or not. This is the statement of law in
the decision of this Court in Martin Burn Ltd vs The Corporation of
Calcutta9.
38. There being no enrichment of the Bank by reason of the
impugned forfeiture, based on our reading of the aforesaid decisions, we
answer the second question by holding that the High Court was not C
justified in exercising writ jurisdiction and directing a refund of 25% of
the sale price.
39. One of the points raised by counsel for the Authorized Officer
is that the writ petition of the contesting respondent was not maintainable
having regard to the alternative remedy available to him under section D
17(1) of the SARFAESI Act. The objection to the maintainability of the
writ petition has substance; but since we have examined the questions
arising for decision on its merits, relegating the contesting respondent to
the forum under section 17(1) of the SARFAESI Act would serve no
useful purpose. E
40. For the reasons aforesaid, the impugned judgment and order
of the High Court stands set aside and the civil appeal stands allowed.
Parties shall, however, bear their own costs.

Nidhi Jain Appeal allowed. F
(Assisted by : Tamana, LCRA)

G

9
(1966) 1 SCR 543 H