Supreme Court says an auction bidder who misses the balance payment loses the deposit under e-auction terms
· Reported by Law Trend
In an IBC liquidation e-auction, the Supreme Court held that the earnest money and deposited amount are forfeited automatically when a bidder fails to pay the balance in time, because the e-auction notice terms govern even where the liquidation regulations are silent on forfeiture. Liquidators and lenders can enforce the forfeiture clause as written, and a bidder cannot claim a refund on the ground that the regulations say nothing.
What this changes for a title check
The auction notice, not the regulation, decides what a defaulting bidder loses. Read the notice line by line before it goes out: the deposit percentage, the payment deadline and an express forfeiture clause on default. If the clause is there, this ruling lets the liquidator keep the deposit without proving any loss. If the notice is silent on forfeiture, do not assume the regulations will fill the gap, because the Court leaned on the terms the bidder accepted when it paid the 10 percent deposit. When checking title on an auctioned property, ask for the notice, the deposit receipt and any forfeiture or re-auction record along with the sale certificate, since a failed first sale changes who the purchaser is and when the sale was confirmed. This is an IBC liquidation case, so a SARFAESI auction still runs on its own Rule 9 deposit and forfeiture provisions.