Introduction:

In the case of Anil Kumar Jaiswal v. Union Bank of India and Another [WRIT ­ C No. ­ 13012 of 2025], the Allahabad High Court addressed the issue of forfeiture of earnest money deposits under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). The petitioner, Anil Kumar Jaiswal, challenged the forfeiture of his deposit after failing to pay the balance amount for a property he successfully bid on during an auction conducted by the Union Bank of India.

Arguments Presented:

Petitioner’s Perspective:

Counsel for the petitioner, Rahul Agarwal and Vipul Pandey, argued that the bank’s reinitiation of SARFAESI proceedings constituted an “exceptional circumstance” that should exempt the petitioner from the forfeiture clause. They contended that the forfeiture amounted to unjust enrichment by the bank, especially since the bank proceeded with a subsequent auction of the same property.

Respondent’s Perspective:

Representing the Union Bank of India, Anil Kumar Bajpai and Ashish Agrawal maintained that the forfeiture was a statutory consequence under Rule 9(5) of the Security Interest (Enforcement) Rules, 2002. They emphasised that the petitioner failed to deposit the balance amount within the prescribed period, and no extraneous circumstances prevented him from doing so. The bank’s actions complied with the SARFAESI Act and relevant rules.

Court’s Observations and Judgment:

The bench, comprising Justice Shekhar B. Saraf and Justice Dr. Yogendra Kumar Srivastava, held that the forfeiture of the earnest money deposit was a legal consequence of the petitioner’s failure to comply with the payment timeline stipulated under Rule 9(5) of the SARFAESI Rules. The court noted that the bank’s subsequent actions, including reinitiating SARFAESI proceedings, did not constitute “exceptional circumstances” that would warrant a refund of the forfeited amount.

Citing the Supreme Court’s decision in Authorised Officer, Central Bank of India Vs. Shanmugavelu, the court reiterated that forfeiture under Rule 9(5) is not subject to the extent of loss suffered by the bank or any subsequent recovery. The court emphasised that in cases where the law is clear, equity cannot override statutory provisions.

Accordingly, the writ petition was dismissed, affirming the bank’s right to forfeit the earnest money deposit due to the petitioner’s non-compliance with the payment schedule.