Punjab & Haryana High Court: Challenge to Forfeiture of E-Auction Deposit Under SARFAESI Act Not Maintainable in Writ; Remedy Lies Before DRT
Case Name: Devi Hospitality Pvt. Ltd. v. Punjab National Bank and Another
Date of Judgment: 08 May 2026
Citation: CWP-16191-2022
Bench: Justice Sheel Nagu and Justice Sanjiv Berry
Held: The Punjab and Haryana High Court held that forfeiture of earnest money by a secured creditor under Rule 9(5) of the Security Interest (Enforcement) Rules, 2002 forms part of the measures under Section 13(4) of the SARFAESI Act. Consequently, an aggrieved auction purchaser must avail the statutory remedy under Section 17 before the Debt Recovery Tribunal and not invoke writ jurisdiction under Article 226.
Summary: The petitioner-company participated in an e-auction conducted by Punjab National Bank pursuant to a sale notice dated 30.01.2020 issued under the SARFAESI Act and emerged as the highest bidder for ₹4.25 crores. The petitioner deposited the earnest money and 25% of the bid amount within the stipulated period.
The petitioner contended that the Bank failed to issue a proper sale confirmation letter in compliance with Rule 9(2) of the Security Interest (Enforcement) Rules, 2002 and that the auto-generated email lacked essential property details and banking particulars. It was alleged that despite repeated emails seeking clarification and extension of time, the Bank cancelled the sale and forfeited ₹1.07 crores already deposited by the petitioner.
The respondent Bank argued that the petitioner was fully aware of the property details and confirmation of sale and had deliberately delayed payment of the balance sale consideration. It was submitted that since the petitioner failed to deposit the remaining 75% amount within the prescribed time, the Bank validly cancelled the sale and forfeited the earnest money under Rule 9(5) of the 2002 Rules.
The Bank also raised a preliminary objection regarding maintainability of the writ petition on the ground that an efficacious statutory remedy was available before the Debt Recovery Tribunal under Section 17 of the SARFAESI Act.
Accepting the objection, the High Court relied upon Agarwal Tracom Pvt. Ltd. v. Punjab National Bank and held that forfeiture of earnest money under Rule 9(5) is a measure connected with Section 13(4) proceedings and therefore falls within the jurisdiction of the Debt Recovery Tribunal under Section 17 of the SARFAESI Act.
The Court further relied upon United Bank of India v. Satyawati Tondon to reiterate that High Courts should ordinarily refrain from entertaining writ petitions where an effective alternative statutory remedy exists under the SARFAESI framework.
Observing that several disputed questions of fact were involved regarding communication of sale confirmation and compliance with statutory requirements, the Court held that such issues could not properly be adjudicated in writ jurisdiction and relegated the petitioner to avail remedy before the Debt Recovery Tribunal.
Decision: The Punjab and Haryana High Court disposed of the writ petition with liberty to the petitioner to approach the jurisdictional Debt Recovery Tribunal under Section 17 of the SARFAESI Act within 45 days. The Court directed that if such proceedings are initiated within the prescribed period, the same shall be considered on merits without being dismissed solely on limitation.