Now Reading: Supreme Court: EMD shortfall doesn’t invalidate auction if 25% paid on sale day
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Supreme Court: EMD shortfall doesn’t invalidate auction if 25% paid on sale day
Supreme Court: EMD shortfall doesn’t invalidate auction if 25% paid on sale day
The Supreme Court has ruled that an auction sale under the SARFAESI Act cannot be set aside merely because the earnest money deposit (EMD) was short, as long as the buyer paid…
The Supreme Court has ruled that an auction sale under the SARFAESI Act cannot be set aside merely because the earnest money deposit (EMD) was short, as long as the buyer paid 25% of the sale price on the auction day. A bench of Justices Pamidighantam Sri Narasimha and Alok Aradhe allowed an appeal by auction purchasers whose sale certificate was cancelled by the Madras High Court and the Debt Recovery Appellate Tribunal due to a Rs 35,000 shortfall in the EMD of Rs 21.15 lakh.
The court observed that the buyers had deposited Rs 54.35 lakh (25% of the bid amount) the day after the auction, and the full balance later. It said the shortfall was not fatal because the statutory requirement of paying 25% on the sale day was substantially complied with. The judgment set aside the restoration of the property to the borrower and directed the bank to refund Rs 1.33 crore with 7% interest from March 2010 to the borrower.
Indian Opinion Analysis
This ruling settles a recurring dispute in SARFAESI auctions: whether a technical EMD shortfall can undo a completed sale. The court's emphasis on substantial compliance protects auction purchasers from post-sale litigation years later. The borrower in this case lost possession nearly 17 years after the auction. The key number to watch is the refund amount: Rs 1.33 crore plus interest, which the borrower will now receive instead of the property.
Source: livelaw.in
This story was synthesised by AI from the source linked above.
