- 1 - HC-KAR NC: 2025:KHC:28951 WP No. 25628 of 2024 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 28TH DAY OF JULY, 2025 BEFORE THE HON'BLE MR. JUSTICE B M SHYAM PRASAD WRIT PETITION NO. 25628 OF 2024 (GM-RES) BETWEEN: SRI LAXMINARASIMHAIAH S/O SRI DODDANARASIMAHAIAH, AGED 50 YEARS, RESIDING AT NO. 442, 3RD CROSS, BEML 3RD PHASE, RAJARAJESHWARINAGAR, BANGALORE - 560098. …PETITIONER (BY SRI. RAMESH ADITHYA., ADVOCATE) AND: 1. KARNATAKA GRAMIN BANK REPRESENTED BY ITS AUTHORIZED OFFICER, REGIONAL OFFICE CHITRADURGA, HEAD OFFICE 32, SANGANKAL ROAD, GANDHINAGAR, BALLARI 583103. 2. M/S VENKATESH RAMALASKHMI COLD STORAGE REPRESENTED BY ITS PROPRIETOR, Digitally signed by VANAMALA N Location: High Court of Karnataka - 2 - HC-KAR NC: 2025:KHC:28951 WP No. 25628 of 2024 HOTTAPPANAHALLY VILLAGE, CHALLAKERE TALUK, CHITRADURGA DISTRICT - 577522. …RESPONDENTS (BY SRI. T P MUTHANNA.,ADVOCATE FOR R1) THIS WP IS FILED UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA PRAYING TO-QUASH THE ENDORSEMENT BEARING NO. KAGB/ROCTA/SARFAESI/01/2024-25 DATED 07.05.2024 PRODUCED AT ANNEXURE-F ISSUED BY THE R-1, IN RESPECT OF SCHEDULE NO. 1 AND 2' DIRECT R-1 TO RECONSIDER THE REPRESENTATION DATED 30.03.2024 GIVEN BY THE PETITIONER PRODUCED AT ANNEXURE-D INCLUDING AWARDING COSTS. THIS PETITION, COMING ON FOR PRELIMINARY HEARING, THIS DAY, ORDER WAS MADE THEREIN AS UNDER: CORAM: HON'BLE MR. JUSTICE B M SHYAM PRASAD - 3 - HC-KAR NC: 2025:KHC:28951 WP No. 25628 of 2024 ORAL ORDER The petitioner, who successfully participated in the auction for purchase of a certain property brought to sale by the first respondent under duress, is aggrieved by the first respondent's Endorsement dated 07.05.2024 [Annexure-F]. The first respondent, while refunding 25% of the sale price offered, has refused refund of the amount offered by the petitioner over such 25%. 2. The petitioner contends that he is entitled to receive the entire amount [including 25% of the now refunded amount] because the first respondent, contrary to the assurance, could not deliver possession of the subject property. The first respondent, relying upon Rule 9[5] of the Security Interest [Enforcement] Rules, 2002 and the terms of the subject Show Cause Notice, contends that the petitioner has participated in the auction subject to the Rules applicable and the terms made a part of the - 4 - HC-KAR NC: 2025:KHC:28951 WP No. 25628 of 2024 Sale Notice, and that if the petitioner has not paid the entire sale consideration in terms of the Sale Notice, the first respondent is entitled to forfeit 25% of the amount received. 3. Sri Ramesh Adithya, the learned counsel for the petitioner, submits that the first respondent has issued a sale notice suppressing the prior litigation, and therefore, it is bound in law to return even 25% of the price offered. As against this assertion, Sri T P Muthanna, the learned counsel for the first respondent, submits that the first respondent could have had recourse to the remedy available under the relevant Statute [the SARFEASI Act] to recover possession even if there was any difficulty and make over the possession to the petitioner on successful completion of the sale transaction, but the petitioner, having participated in the sale proceedings knowing the consequence, could - 5 - HC-KAR NC: 2025:KHC:28951 WP No. 25628 of 2024 not have on his own stalled the sale proceedings without incurring the consequence of forfeiture. 4. These rival submissions are considered in the light of Rule 9 [1] to [5] of the Security Interest [Enforcement] Rules, 2002 and the terms of the Sale Notice. This Rule in its material part reads as1: 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 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 authorized officer shall serve, affix and publish notice of sale of not less than fifteen days to the borrower, for any subsequent sale. 1 The other provisions of this Rule relate to confirmation of the sale and discharge of encumbrance, and many portions of this Rule are amended/ substituted by Notification No. G.S.R. 1046 (E), dated 3.11.2016 (w.e.f. 20.9.2002). - 6 - HC-KAR NC: 2025:KHC:28951 WP No. 25628 of 2024 (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 - 7 - HC-KAR NC: 2025:KHC:28951 WP No. 25628 of 2024 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. The underlining is by this Court The relevant term of the Sale Notice reads as hereunder: "6. The successful bidder should pay 25% of the bid amount [inclusive of EMD] immediately on the same day by NEFT/RTGS to credit A/C No.105681013050189, Branch IFSC: PKGB0010568 and balance 75% of the bid amount within 15 days thereafter. If the successful bidder defaults in effecting payment or fails to adhere to the terms of Sale in any manner, the amount already deposited will be forfeited and he/she shall not have any claim on such forfeited amount or to the property, which shall be sold subsequently." 5. These Rules/terms require the auction purchaser to deposit 25% of the sale price offered on the same day. However, if the Rules require the remaining amount, subject to the agreement in - 8 - HC-KAR NC: 2025:KHC:28951 WP No. 25628 of 2024 writing with the secured creditor, to be paid within the next 15 days but not later than three [3] months from the date of auction, the afore terms contemplate only fifteen days. The Apex Court in SBI v. C. Natarajan2, while holding that the Rules are validly made under the Statute, has opined thus in the matter of the Courts interfering with the Secured Creditor’s decision to forfeit the incomplete price offered. 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. 2 (2024) 2 SCC 637 - 9 - HC-KAR NC: 2025:KHC:28951 WP No. 25628 of 2024 6. This Court must opine that the petitioner cannot succeed in this petition because: [a] the petitioner, having participated in the auction proceedings being aware of the consequences [and being put on notice thereof], should have offered the entire sale price, [b] if there was any default by the first respondent in delivering possession [or otherwise in complying with the terms of the sale requirement], the petitioner should have availed the remedies in law to operate upon tendering the full value offered. [c] the petitioner has withdrawn from the auction proceedings without tendering the entire sale price offered, he cannot show cause against forfeiture in the light - 10 - HC-KAR NC: 2025:KHC:28951 WP No. 25628 of 2024 of the statutory provisions and the terms of the Auction Notice. Further, this Court opines that the petitioner has not offered the sale price to his own peril inviting the consequences, and there is no reason to interfere under Article 226 of the Constitution of India only because the first respondent has refunded some part of the price offered. As such, the petition stands rejected. Sd/- (B M SHYAM PRASAD) JUDGE AN/-