On appeal against the order of the single judge, the Court held that in pursuance of an e-auction notice issued by the Securities and Exchange Board of India, the appellant participated in the e-auction and was declared the highest bidder in respect of certain property mentioned in the e-auction notice. Its bid was confirmed by the Board upon finalisation of the e-auction process and the appellant paid a sum towards earnest money deposit and made further deposits as well. However, on the appellant having failed to make payment of the remaining amount of consideration money towards such purchase by the stipulated time, the Board informed the appellant of the forfeiture of the entire money paid by the appellant, declared the sale cancelled and put the property to auction afresh. The appellant’s writ petitioner challenging the decision of the Board to forfeit the entire amount paid by the appellant was dismissed by the single judge. Allowing the appeal, the High Court of Calcutta held that the proceedings for e-auction of the properties, confirmation and cancellation of the auction sale were taken in accordance with relevant provisions of the Rules contained in the Second Schedule to the Income Tax Act, 1961 with necessary modifications. No such discretion was exercised by the Board and the Board proceeded to forfeit the entire deposit amount in a manner as if it was automatic. No opportunity of hearing was afforded to the appellant. The entire earnest money deposit was directed to be forfeited without taking into consideration the loss and damage suffered by the Board owing to the default on the part of the appellant in making the payment of balance consideration money. The judgment of the single judge, so far as it related to the rejection of the prayer of the appellant for return of earnest money deposit, was to be set aside. The Board shall proceed to determine the nature and extent of forfeiture of the earnest money deposit amount afresh. In doing so, the Board shall provide sufficient opportunity of being heard to the appellant. The Board is at liberty to hear any other parties and consult any document as it deemed necessary.

The purport of Rule 9(5) of the Security Interest (Enforcement) Rules, 2002 (framed under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002) is that in the case of a sale by auction of secured assets, in case of default in payment by the purchaser within the period mentioned in sub-rule (4), the deposit shall be forfeited to the secured creditor. The property shall be resold and the defaulting purchaser shall forfeit all claims to the property or to any part of the sum for which it may be subsequently sold. The provision does not any discretion with the authorities to determine and quantify the actual loss or damages incurred. Appellant had not challenged the finding of the single judge rejecting the case of the appellant to the effect that he was prevented by the intervention of COVID-19 in making payment of the balance consideration money within time specified in the contract. Therefore, there was no justification to interfere with the finding. Order of single judge set aside and order so far as it relates to the rejection of the prayer of the appellant for return of earnest money deposit.