NO. 14633 OF RESERVED ON : SE DATE OF DECISIO SEPTEMBER 06 v. Union Bank of nager nk of India through Chief Manager

confirmed the receipt of the EMD and declare eclared the petitioner to be the successful bidde dder. As per the terms and conditio nditions of the E-auction notice the successful ssful bidder was required to deposi deposit 25% of the sale price (inclusive of E of EMD) immediately on the date e date of the sale or the next working day. day. On March 16, 2024, the petitio petitioner deposited a sum of Rs.6,72,93,675/ 3,675/- being 15% of the bid amount mount. Thus, the petitioner had deposited a tota total sum of Rs.11,14,64,802/- bein being 25% of the entire sale price.

3. As per Clause 14 of the E-auction As uction notice, the petitioner was required to dep to deposit remaining 75% of the bid he bid amount within 15 days from the date date of confirmation of sale. There Therefore, the petitioner was required to depo o deposit the remaining 75% by March March 30, 2024. The petitioner firm wrote a le etter of request dated March 30, 2 h 30, 2024 seeking extension of SHALINI BHATIA 2024.10.15 17:59 I attest to the accuracy and integrity of this document. High Court, Chandigarh CWP-14633- -2024 90 days to dep to deposit the balance amount. The . The petitioner’s request was acceded to by to by the respondent-bank vide lette e letter dated March 30, 2024 (Annexure P-6) 6) and the petitioner was require equired to deposit the balance sale consideratio deration on or before the extended date ed date i.e. June 13, 2024. PETITIONER’ NER’S CASE

4. Mr. Batra, learned counsel appe Mr l appearing on behalf of the petitioner subm submitted that the petitioner was rea as ready and willing to deposit 75% of the rem e remaining amount in terms of E-au auction notice and had also gotten a draft draft dated March 30, 2024 (Annexu nnexure P-5) prepared for the balance sum o um of Rs.33,42,17,898/-. However, ever, since it transpired that insolvency reso y resolution proceedings which had b had been initiated against the debtor compan mpany under the Insolvency and and Bankruptcy Code, 2016 (hereinafter refe er referred to as “the Code”) before before the NCLT, Chandigarh were pending at ing at the time of on-going process of cess of E-auction and an interim moratorium und under Section 96 of the Code w ode was operating against the assets of the deb he debtor company, the balance sum sum was not paid.

5. He further submitted that the re He he respondent bank did not mention the s the same in the E-auction notice notice or anytime after the confirmation of ion of sale to the petitioner/successf ccessful bidder. The petitioner aggrieved by lack of transparenc parency also material suppression/con on/concealment on the part of resp f respondent bank had issued through their Ad eir Advocates a legal notice on April April 18, 2024 (Annexure P-7) calling upon the on the bank to confirm whether it w it was in a position to hand over the physic physical possession of the secured as red asset/auctioned property to the petitioner. ner. The petitioner demanded that th the entire amount deposited with the respon respondent-bank i.e., 25% of the bid e bid amount be refunded with SHALINI BHATIA 2024.10.15 17:59 I attest to the accuracy and integrity of this document. High Court, Chandigarh CWP-14633- -2024 interest thereupo ereupon along with damages suffered uffered by the petitioner due to the illegal actio l action on part of the respondent ndent bank by suppression of material facts, in the alternative. However, the e respondent bank failed to respond to the sa o the said legal notice.

6. It was further submitted by learned It w earned counsel for the petitioner that instead of p d of providing details with regard to rd to the encumbrances relating to the secured a ured asset in question or the impendi pending litigations with regard to said asset, t , the respondent bank insisted tha ed that the balance 75% of the bid, amounting nting to Rs.33,42,17,898/- be deposite eposited by the petitioner within the extended tim ded time period i.e. on or before June e June 13, 2024. The bank had also insisted vid vide e-mails dated May 06, 2024, 2024, May 07, 2024, May 22, 2024 and June June 10, 2024, for payment of bal of balance amount. Moreover, during the meet meetings dated June 04, 2024 and Ju and June 06, 2024 held between the representativ entatives of the petitioner company a pany and the respondent bank, the aforesaid pa aid payment of 75% was insisted up ted upon. Vide communication dated June 11, e 11, 2024, the bank insisted that that the balance amount of Rs.33,42,17,898 17,898/- should be deposited urgen urgently within the stipulated period (i.e by Ju e by June 13, 2024) so that the sale c sale could be concluded within the stipulated t lated time line or else it threatene eatened to forfeit the amount deposited by th by the petitioner relating to the sale sale. Therefore, he submitted that the bank ha ank had acted fraudulently and illegall llegally by not only suppressing material facts facts but also acted arbitrarily by t by threatening to forfeit the deposited amoun amount. RESPONDENT DENT’S CASE

7. Mr. Sidhu, learned Senior counse Mr ounsel appearing on behalf of respondent ban t bank submitted that the petitione titioner participated in the E- SHALINI BHATIA 2024.10.15 17:59 I attest to the accuracy and integrity of this document. High Court, Chandigarh CWP-14633- -2024 auction held on eld on February 28, 2024 and was dec as declared to be the successful bidder on Marc March 15, 2024. The letter confirm ming sale was issued to the petitioner on th on the same day i.e. March 15, 2 15, 2024. The petitioner had deposited 25% o 25% of the bid amount by March 16, ch 16, 2024 and was required to deposit remaini maining 75% amount within next 1 next 15 days i.e by March 30,

2024. The petiti petitioner was unable to deposit the r it the remaining 75% amount by March 30, 202 , 2024 and vide letter of the same same date had requested for extension of tim of time to pay the balance 75% whic which was acceded to by the respondent ban t bank on the same date itself. Th . The respondent bank had extended the stipulated time for payment so so that the petitioner could deposit the bala e balance 75% of the bid amount. The nt. Therefore, the petitioner was under an obliga obligation to deposit the remaining aining 75% by June 13, 2024 (extended date e). Despite availing the aforesai foresaid extension and despite numerous reque requests/reminders being made on e on behalf of the respondent bank, the petitio petitioner willfully failed to deposit eposit balance of 75% amount within the stipu e stipulated period. Therefore, the , the respondent bank had no option but to ca t to cancel the bid and forfeit the amo he amount already deposited by ner. the petitioner.

8. Strong reliance was placed on Cla Stro on Clause 14 of the terms and conditions of the s of the E-auction notice which reads a eads as under : Clause 14 “Cl The successful bidder so de Officer shall deposit 25% of the Off EM EMD) in Cash/DD/RTGS/NEFT/I subject to realization, immediately later than next working day with the account bearing No.787101980 Off Officer, Union Bank of India, SC Chandigarh Branch, IFSC Code Cha balance 75% of the Sale Price on confirmation of sale or within s o declared by the Authorized the Sale price (inclusive of FT/Internet Transfer/Cheque iately on the sale day or not ith the Authorized Officer in 1980050000 of the Authorized a, SCO 137-138, Sector-8 C, ode UBIN0578711 and the e on or before the 15th day of in such extended period as SHALINI BHATIA 2024.10.15 17:59 I attest to the accuracy and integrity of this document. High Court, Chandigarh CWP-14633- -2024 agreed upon in writing between the purchaser, in any case, not exceedi n the secured creditor and the eeding three months. In the event of failure to tend the Sale price as per the terms o bidder, the EMD so deposited by secured creditor and the bid accep automatically and the defaulting b claim on the property nor on any p may be subsequently sold. tender 25% (15% + EMD) of ms of Sale by the successful by him shall be forfeited to ccepted shall stand cancelled ing bidder shall neither have ny part of the sum for which it In default of payment of bal price before 15 days from the date the Secured Creditor or such ext mutually agreed upon between the purchaser (not exceeding 03 mont the amount of sale price made s property shall forthwith be sold purchaser shall neither have claim any part of the sum for which it ma f balance amount of purchase ate of confirmation of sale by extended period as may be the secured creditor and the months)the deposit of 25% of de shall be forfeited and the old again and the defaulting claim on the property nor on t may be subsequently sold.”

9. Therefore, it was contended on b The on behalf of the respondent bank that the p the petitioner was fully aware of the of the conditions of E-auction notice at the tim the time of participating in the E-aucti auction and consciously chose not to deposit eposit the remaining 75% of the b the bid amount. Hence, the respondent ban t bank neither acted illegally or arb or arbitrarily in forfeiting the amount deposite eposited. Reference was made to the o the supreme Court judgments reported in “Authorized Officer, Centra in “ ntral Bank of India v. Shanmugamelu melu” being Civil Appeal Nos. 2 os. 235-236 of 2024 and in “Union Bank o nk of India v. Rajat Infrastructu ucture Pvt Ltd.” being Civil Appeal No. 190 o. 1902 of 2020 to contend that any at any dilution of the forfeiture clause provided vided under Rule 9 (5) of the SARFA RFAESI Rules would result in the entire auctio auction process under the SARFAESI AESI Rules being set at naught by mischievous ievous auction purchaser(s) through rough sham bids and thereby undermine the the overall objective of the law f for promotion of financial stability, reduc reducing of NPAs and fostering ring of a more efficient and streamlined mec ed mechanism for recovery of bad deb ad debts. It was also submitted SHALINI BHATIA 2024.10.15 17:59 I attest to the accuracy and integrity of this document. High Court, Chandigarh CWP-14633- -2024 that it was a we s a well settled preposition of law tha aw that if a statute described or required a parti a particular thing to be done in a pa n a particular manner then the same had to be be done in that particular manne manner or not at all and other methods of perf performance by the parties were nec re necessarily forbidden.

10. Learned Senior Counsel further co Lea contended that the property was sold only o only on a “symbolic basis” and the e the entire fault was on part of the petitioner w who had defaulted in making pay payment of the balance 75% of the bid amou amount. The previously deposited 2 ited 25% had been forfeited as under Clause 14 use 14, it was unambiguously stipu ulated that in the event the bidder defaulted faulted in payment of entire sale pr ale price within the stipulated period, the pre e previously deposited amount wou t would be forfeited and the property would would be put to auction again imm n immediately. The defaulting bidder would ha uld have no claim on the property or o rty or on any part of the sum for which the prope property may be subsequently sold. sold. Therefore, the petitioner was under an r an obligation to make the payme payment of remaining amount without any del ny delay or laches. The obligation on ion on part of the bank to hand over the proper property would have only arisen after after the entire sale proceeds were handed ov ded over to the bank. The Demand D Draft that the petitioner had purportedly got got ready to show its readiness diness and willingness to the performance of of the contract was of no conseq consequence to the respondent bank as the said said draft had not been handed over over to the bank.

11. It has been denied on behalf of t It h lf of the respondent bank that NCLT proceedi oceedings were pending at the time time of issuance of E-auction notice dated Fe ted February 08, 2024 or on the date e date on which the E-auction was conducted ucted i.e February 28, 2024 as the pr he proceedings before NCLT, Chandigarh wer were filed only on February 28, 20 28, 2024 by one Ashish Mohan SHALINI BHATIA 2024.10.15 17:59 I attest to the accuracy and integrity of this document. High Court, Chandigarh CWP-14633- -2024 Gupta which la ich lay with the Registry being defec defective till March 27, 2024. Therefore, no p , no petition was pending before the re the NCLT, Chandigarh prior to March 27, 20 27, 2024.

12. The reply filed on behalf of the re T the respondent bank was relied upon to sugge est that the petitioner was acting i cting in collusion with the said guarantor-Ashis Ashish Mohan Gupta who was also also an erstwhile director of the debtor company mpany which owned the secured as red asset that had been put to auction. As the the petitioner was unable to pay to pay the remaining amount, collusive procee proceedings had been initiated by the y the said Ashish Mohan Gupta at the behest of of the petitioner. Therefore, the res the respondent bank was wholly justified in canc n cancelling the bid and forfeiting the a g the amount. FINDINGS OF S OF THE COURT

13. This Court has heard arguments o Thi ents of the parties and perused the material on r on record.

14. It transpires that admittedly the sale It tr he sale was confirmed in favour of the petitioner itioner on March 15, 2024 and the peti he petitioner had deposited 25% of the bid am id amount with the respondent ban nt bank on March 16, 2024. Admittedly, the ly, the time to pay the remaining 7 ning 75% was extended from March 30, 2024 , 2024 to June 13, 2024 by the respo e respondent bank. Admittedly, prior to June 13 une 13, 2024 (the deadline for deposit epositing the remaining 75% of the bid amount ount) an insolvency petition was file as filed by said Ashish Mohan Gupta (Director irector of the borrower/debtor compan ompany). Therefore, Insolvency resolution proc proceedings had been initiated before June 13, 2024. Admittedly the d he defects had been removed by Ma by March 27, 2024 i.e., prior to March 30, 2024 , 2024 the date on which the petitione titioner was initially required to pay the balance lance sum, even if no extension was g was granted to it. SHALINI BHATIA 2024.10.15 17:59 I attest to the accuracy and integrity of this document. High Court, Chandigarh CWP-14633- -2024

15. Section 96 of the Insolvency and Sec y and Bankruptcy Code, 2016 reads as under : nder :- SECTION 96- INTERIM MORAT SEC RATORIUM (i) When an application is fil (i) s filed under Section 94 or Section 95 - (a) an interim-moratorium shall (a) the application in relation t cease to have effect on the d application; and hall commence on the date of ion to all the debts and shall the date of admission of such (b) (b) during the interim-moratoriu torium period— (i) any legal action or proce of any debt shall be deemed t (ii) the creditors of the deb legal action or proceedings i roceeding pending in respect ed to have been stayed; and debtor shall not initiate any ngs in respect of any debt. (2) Where the application has b (2) firm, the interim-moratorium und operate against all the partners of the application. as been made in relation to a under sub-section (1) shall s of the firm as on the date of (3) (3) The provisions of sub-sectio such transactions as may be n Government in consultation wit Go regulator.” ection (1) shall not apply to be notified by the Central with any financial sector Therefore, once an insolvency pe The ncy petition against the debtor company is file is filed in the NCLT an interim mora moratorium would operate in relation to all l the debts of the company un ny under Section 96, till said application is ei n is either admitted or rejected. The s The said petition before NCLT is pending till d g till date and admittedly the interim terim moratorium is operating. Hence, all the proceedings in respect of any de ebt are to remain stayed by operation of la aw.

16. The IBC is a complete Code in it The in itself and once the interim moratorium is i m is in place and an interim resolut esolution professional (IRP) is appointed to de to deal with the assets of the debtor ebtor company, the respondent SHALINI BHATIA 2024.10.15 17:59 I attest to the accuracy and integrity of this document. High Court, Chandigarh CWP-14633- -2024 bank would not ld not be in a legal position to either either issue the Sale Certificate or secure physi physical possession of the property t perty through the Tehsildar for the purpose of h se of handing over the same to the peti he petitioner/auction purchaser.

17. It was vehemently argued on beha It w n behalf of the respondent bank that the petitio petitioner had failed to perform its rm its part of obligation and therefore, the ba bank rightly forfeited the deposite eposited amount. Neither in the reply filed to th d to the writ petition nor in the oral oral arguments addressed on behalf of the the bank the question whether the r the respondent-bank was in a position to perf to perform its corresponding obligat bligation of handing over the property/secured ecured asset to the petitioner/auction uction purchaser upon payment of the entire bid ire bid amount was paid, had been add en addressed.

18. It is not lost upon the mind of th It i of this Court that the learned counsel appeari ppearing on behalf of the respondent ndent bank vehemently pointed out the failure ilure on part of the auction purchase urchaser to deposit the balance amount without ithout referring to the corresponding onding obligation of the bank stipulated in Cl in Clause 16 of the auction notice. otice. Clause 16 of the auction notice reads as ds as under : CLAUSE 16 “CL On confirmation of sale by t the terms of payment have been successful bidder, the Authorize certificate of sale of moveable/ favour of the purchaser in Appen Interest (Enforcement) Rules, 2002 Inte by the secured creditor and if been complied with by the rized Officer shall issue a ble/immoveable property in ppendix-III/V to the Security 002.”

19. As the respondent is statutorily ba As barred from taking any step till such time th ime the insolvency petition was rejec s rejected by NCLT, this Court has no hesitation sitation to hold that the contract of sale of sale that the respondent bank had sought to en t to enter with the auction purchaser haser stood frustrated due to the SHALINI BHATIA 2024.10.15 17:59 I attest to the accuracy and integrity of this document. High Court, Chandigarh CWP-14633- -2024 intervening lega legal impossibility. The insolvency vency proceedings having been initiated against gainst the debtor-company by an ope an operational creditor and the interim morator oratorium being in place debarred th rred the bank from issuing the Sale Certificate ificate, in the present circumstances.

20. It is settled law that applicability o It is ility of Section 56 of the Indian Contract, 1872 1872 is not limited to cases of physic physical impossibility, but also includes cases s of legal impossibility. Section 5 ction 56 of the Indian Contract Act, 1872, is set set out hereinafter: ible act.—An agreement to do “56 56. Agreement to do impossible a id. an act impossible in itself is void. Contract to do an act impossible or unlawful.—A contr after the contract is made, beco reason of some event which the pr unlawful, becomes void when the a unlawful. act afterwards becoming ontract to do an act which, becomes impossible, or, by e promisor could not prevent, the act becomes impossible or Compensation for loss thro act known to be impossible or person has promised to do somet with reasonable diligence, might ha promisee did not know, to be imp promisor must make compensation loss which such promisee sust performance of the promise.” through non-performance of or unlawful.— Where one omething which he knew, or, ht have known, and which the impossible or unlawful, such tion to such promisee for any sustains through the non-

21. A beneficial reference is made t A ade to the three-judge bench judgment of th of the Supreme Court in Satyabrat brata Ghose v. Mugneeram Bangur & Co. ., reported as (1953) 2 SCC 432

32. Relevant extract of which is reproduced he ced herein below: “ “10. Although various theories h by the Judges and jurists in E juridical basis of the doctrine o essential idea upon which the doct impossibility of performance of impossibility and interchangeable expressions. The c it is said, make the performa ies have been propounded n England regarding the ne of frustration, yet the doctrine is based is that of of the contract; in fact n are often used as he changed circumstances, rmance of the contract frustration SHALINI BHATIA 2024.10.15 17:59 I attest to the accuracy and integrity of this document. High Court, Chandigarh CWP-14633- -2024 impossible and the parties are abs performance of it as they did not impossibility. The parties shall be e Xxx Xxx We We hold, therefore, that the doc really an aspect or part of the contract by reason of superven illegality of the act agreed to be d within the purview of Section 56 o would be incorrect to say that Sect Act Act applies only to cases of phys that where this section is not appli had to the principles of English frustration. Xxx” Xxx absolved from the further not promise to perform an be excused…. doctrine of frustration is the law of discharge of ervening impossibility or be done and hence comes 56 of the Contract Act. It Section 56 of the Contract physical impossibility and pplicable, recourse can be lish law on the subject of

22. The Apex Court in a recent judgm The judgment in Loop Telecom & Trading Ltd. v. td. v. Union of India, reported as as (2022) 6 SCC 762 while placing reliance liance on judgment in Satyabrata Gho Ghose (supra) reiterated that the applicability ability of Section 56 of the Contract A tract Act is not limited to cases of physical imp al impossibility and with regard to rd to the law of frustration of contract in India n India, the only test which should app ld apply “is that of supervening impossibility or lity or illegality of the act agreed to eed to be contractually done”. Furthermore, th ore, the doctrine underlying Section 5 ction 56 is to be understood by construing the g the word “impossible” in its practi practical sense, not just in its literal sense.

23. Therefore, the bank not being in a The in a position to hand over the secured asset to sset to the auction purchaser even if en if the remaining 75% of the bid amount wa was paid, could not have forfeite orfeited 25% of the deposited amount. This i This is not the case where the petiti petitioner has approbated and reprobated after d after availing of the extended time d time period of payment. The bank has acted acted in an arbitrary and illegal man al manner by claiming that the entire bid amou amount be deposited on one hand hand and on the other hand, avoiding the qu the question of the supervening lega g legal impossibility debarring SHALINI BHATIA 2024.10.15 17:59 I attest to the accuracy and integrity of this document. High Court, Chandigarh CWP-14633- -2024 them from issu uance of the Sale Certificate or te or handing over the physical possession of t n of the property to the petitioner ioner due to the existence of moratorium.

24. After analyzing the aforesaid facts Aft facts and the position of law, this Court finds finds it perplexing that the bank has nk has proceeded to forfeit the initial deposit posit of 25% without being in a in a position to perform its corresponding obligation. Such a conduct by t by a nationalized bank is arbitrary, illega illegal and in colourable exercise of ise of power, that is not at all appreciated. Furthermore, no material was b was brought on record by the respondent ba t bank to corroborate the bal e bald allegation petitioner/auctio /auction purchaser, due to its lack o lack of funds had fraudulently setup the operat operational creditor-Ashish Mohan Gu an Gupta to delay auction sale.

25. Consequently, this Court directs th Con cts that the aforesaid amount of Rs.11,14,64,802 64,802/- be refunded to the petitioner itioner/auction purchaser within a period of of four weeks along with interes interest @ 10% per annum. Additionally, th the respondent bank shall pay a s ay a sum of Rs.50,000/- to the petitioner as cos costs, for dragging it into this hara s harassive/vexatious litigation.

26. Pending application(s), if any, sha Pen y, shall also stand disposed of accordingly. (ANUPINDER JUD DER SINGH GREWAL) JUDGE (LAPITA BANERJI) JUDGE OCTOBER 04 Shalini ER 04, 2024 Whether speakin Whether reporta speaking/reasoned : reportable : Yes Yes SHALINI BHATIA 2024.10.15 17:59 I attest to the accuracy and integrity of this document. High Court, Chandigarh