Supreme Court: ₹35,000 EMD shortfall doesn't vitiate auction sale if 25% paid on auction day

The case concerns a dispute over the validity of an auction sale of a secured asset under the SARFAESI Act, specifically whether a minor shortfall in the Earnest Money Deposit (EMD) submitted by the successful bidders vitiates the sale when they paid 25% of the sale price on the auction day.

Who it concerns: Appellants: Lakshmi Mohan (Dead) through Legal Representatives (Auction Purchasers), M/s. Airtech Projects Engineers Pvt. Ltd. (Borrower), and The Chief Manager and Authorized Officer (Bank). Respondents: M/s. Airtech Projects Engineers Pvt. Ltd., Mrs. Lakshmi Mohan (Dead) through Legal Representatives, and M/s Airtech Projects Engineers Pvt. Ltd. & Ors. Bench: Justice Alok Aradhe.

What the court decided

• Delay in filing the appeals was condoned.
• Leave was granted in both Special Leave Petitions.
• The Court noted that the appeals impugned a common judgment dated 22.03.2013 by the High Court of Judicature at Madras.
• The Court analyzed the distinction between essential conditions of eligibility and ancillary conditions in tender notices.
• The Court cited the legal principle that non-conformity with prescribed standards does not invalidate a tender if it does not result in substantial prejudice or injustice to any party or public interest.

Also in the document

• The successful bidders submitted an EMD of Rs. 21,15,000/-, which was a shortfall of Rs. 35,000/- from the stipulated Rs. 21,50,000/-.
• On the day of the auction, the bidders deposited a further sum bringing the total deposit to 25% of the bid amount, as required by Rule 9(3) of the Security Interest (Enforcement) Rules, 2002.
• The Debts Recovery Appellate Tribunal (DRAT) had previously held the auction was vitiated by non-compliance with Rule 8(5) and the auction notice terms.
• The High Court had dismissed the writ petitions filed by the auction-purchasers and the Bank against the DRAT's order.