When the right of forfeiture under Rule 9(5) of Security Interest (Enforcement) Rules, 2002 is exercised by the Secured Creditor after the lapse of stipulated period of three months, Auction Purchaser should be given an opportunity of hearing – The Authorised Officer, Punjab National Bank Vs. Bikash Saha – DRAT Kolkata
July 21, 2023
In this case, on non-payment of sale consideration, the Secured Creditor had forfeited the deposited/EMD amount, however, forfeiture took after on expiry of three months period. DRAT held that Rule “Audi Alterem Partem” would be applicable when a right accrues in favour of the Auction Purchaser by not forfeiting the amount on lapse of three months period then if that right of forfeiture is exercised by the Secured Creditor after the lapse of stipulated period, Auction Purchaser should be given an opportunity of hearing. It is the basic principle of natural justice; although it is true, the principle of natural justice is not made applicable under the SARFAESI Act but when a right accrues in favour of the Auction Purchaser and is being denied by the Secured Creditor then the Auction Purchaser has a right of hearing before the forfeiture of the amount. No doubt powers have been given to the Secured Creditor under the SARFAESI Act but those powers have to be exercised in accordance with law. Any exercise against the provisions of law would be an arbitrary exercise of powers which cannot be accepted under the law.
