can cheque payment be made for emd/ 25% for sarfaesi bidding

technical head

Dear friends,

Regarding bidding in an SARFAESI auction, can a nationalized bank accept checque payment as the required 10% EMD payment in contravention of their own 'Terms and conditions for e-auction"?

The Bank perhaps has a sweetheart relationship with the alleged succesful bidder, going by the process they have followed to essentially deprive me of my property.

In the bid sheet provided to us, there were four bidders who had paid the required EMD by the approved mode of payment -NEFT/RTGS/Demand Draft drawn on a nationalised or scheduled bank by the date on which EMD ought to be furnished (say) 12-8-2017.

On the day of the auction (say) 14-8-2017, yet another bidder (alleged successful bidder) shows up, and is declared the successful bidder by the Bank, and the other four bidders had their 10% EMD returned to them.

After about 14 months of being given the run around.  The DRT refused to order the Bank to provide me the bid details, and asked me to go the RTI route. Applied for RTI, was denied because the matter is sub-judice,then upon appeal bid details were provided to me.

In this sheet I noticed the word 'chk' written on it, and approached DRT for check encashment details, Bank once again gave the run around, and upon orders this time from the DRAT, finally got the Bank statement.  The following came to light:

a) The bidder had given a checque dated 12-08-2017 which was credited to Bank account 14-08-2017 (for the 10% EMD), day of auction.
b) The bidder had also given a cheque for the remailning 15 percent (total of 25%) dated 23-08-2017, which was credited to the Bank account only on 08-08-2017.

The terms and conditions of the e-Auction clearly state the following:

a) The intending purchaser/bidder is REQUIRED to deposit EMD amount either through NEFT/RTGS in the account no......or by way of Demand Draft drawn on a Nationalised or Scheduled Bank by 5m on XX-XX-2017.

Dear friends, the following are my questions which I would be grateful if I can get inputs:from you:

1. Is this a valid auction, and if not can the auction be set aside on this basis?
2. Are there any citations from any High Courts/Supreme Court that would augment the above rule?

I say this since the Bidder is highly influential, and capable of exerting undue influence at all stages of the bidding process.  If it is of any relevance, the Bank informs me that the Bidder has Overdraft with the same bank, had paid the money through the said Overdraft amount, and in anycase since the account is also in the same Bank, the cheque is as good as a Demand Draft.

It has been my experience that the DRT here pretty much acts as an extension of the Bank.  I have had 5 successive IA that were denied by the DRT, which were allowed when I appealed at the DRAT.

The citations are important to me to 'convince' the Presiding Officer of the validity of my claim.

Thank you in advance for any inputs and suggestions, God bless.


Retired employee.

If the amount is received before that last date by the bank, it is valid though technically it is not correct.  On this count alone, you can not argue, as it is in between Bank and other party.  As bank is already having the money and the process involved is transferring from one account to another account.


technical head

Thank you Shri GLN Prasad for your response.  I am curious though.  If cheque payments can be made for EMD, and time for EMD also extended for one person, would it not have been better had they said this is the published terms and conditions?  The idea is to get the highest bid amount, and this way they could have gotten more bids right?  Also, why even place a deadline for receipt of EMD, when they arbitrarily extend it for one known person to submit it on the day of auction?  Something does not seem right here!

Retired employee.

You can find replies to all your questions in my response.  Bank has not forbidden or barred from any others in filing such bids.  Infact, in several cases, when there are no bids, banks encourage their own customers to bid the same to recover the amount.  If the borrower is interested, he can also encourage his friends to bid and there are no restrictions.  The institutions are only concerned to recover the amount and there are fair chances to borrowers also.  There is no link in between borrower's repaying the amount as per agreements and Bank opening the bids.  If borrower thinks that bank is not fair and proper, he can always bring injunction order from a competent court with such reasons and stop further actions of bank.

technical head

@G.L.N.Prasad: Again thank you sir, for your succinct and prompt responses.  I thought it was settled law that Auction Rules need to be followed meticulously under Sarfaesi Act.  The Act is unique in that that contrary to other established proceses where Adjudication precedes Execution, under Sarfaesi Act the Banks are equipped under the Act to first Execute and then provide a mechanism for Adjudication by the Borrower.  As such if a Bank publishes Auction rules that REQUIRE someone to submit Earnest Money Deposit to be submitted via RTGS/NEFT/Demand Draft by a PARTICULAR date BEFORE auction, and then allows just one bidder to violate the auction rules by paying by CHEQUE on the day of auction, I believe that this is an unconsionable action by the Bank.  I was seeking advice from the learned panel posters here, for the DRT that I am dealing with pretty much functions as an extension of the Bank.  There have been FOUR consecutive IA's that have been denied by the Hon'ble PO, which have then been allowed by the Appelate Authority. 

The action of the Bank is hit by the Latin maxim expressio unius est exclusio alterius” (=meaning thereby that an authority clothed with statutory power should perform his action according to law prescribed otherwise do not perform at all.).  I am not a lawyer, but have started reading law books just to navigate this morass.  The Sarfaesi Act and Rules by itself is not that volumnous.  Yet I am appalled at the ignorance of even some DRT lawyers about the Act, and the callousness of the Presiding Officers!  I am left wondering about the common man, not the Corporates and the well heeled.  How is the common man to find Justice under these circumstances?  I KNOW that I am correct in my observation.  I was hoping for validation, and for citations such that I can prevent a long distance travel to appeal my IA once it is denied by the Presiding Officer. This has become the routine for me!

Retired employee.


I am not an expert.  I have in my first post provided an opinion that recovery of dues by Insitution is important to them and if bidders are not coming forward, the officials should hunt for them and look for early disposal of the loan.  The law permits borrowers also the same process to get higher bidders.  I know bankers that made overdrafts and helped the bidders to close the  existing  NPA

I am not mixing up issues.  The issue is Bank accepting their own cheque as EMD as it is just a book entry.  Not accepting your IAs in another issue not connected.

I have also suggested that you can contact advocate who can agree with your opinions for cancellation of the bid.

In our case we have such a bigger problem .  For purchaing a property, a bidder a politician submitted a bid which was finalized.  The parties approached HC, and HC has directed the parties to offer single rupee extra over the bid and deposit the amount in HC, so that they can order the Bank.  The parties retracted and the issue is pulling from last five years.  Now the Bank is not getting bids though they are prepared even to accept several crores less than their first accepted bids.

technical head

@G.L.N.Prasad:  Sir, my respectful thanks to you for your valuable inputs.
Apart from posing the questions that I had originally asked, the other reason for doing so was for people visiting this forum to be enlightened about the Sarfaesi law, and its rampant abuse by banking institutions.  I have found this from speaking to small and middle income people at the DRT. 
I would hope that people who are affected would at least read the bare Act, which is not that lengthy.  The Sarfaesi act arms the Banks with a lot of power, which they need to weild with responsibility.  Alas, they behave like typical government servants, and harass harange and harm the interests of vulnerable Borrowers.  One has to realize that the DRT is a Debt Recovery Tribunal first, and the Presiding Officer's main duty is recovery of debts due to the Bank.  The bar is set high for Borrowers to prove wrongdoing for Prima Facie the assumption is that the Banks are angels and the Borrowers are vultures.  In truth, in the 5 or so cases I have come across, including mine, the Banks are Shylocks and loan sharks! 
In any case, I request your prayers as I am shortly going to attempt setting aside my auction and for settlement of my loan account. 

Retired employee.

My sincere prayers are that everyone has his own story and one has to appreciate the role of the others.  Comparing a banker that recovers sincerely public money without single paisa benefit is being branded as Shylock, a jew who has his own axe to grind.  It is a thankless job.  All borrowers are not definitely angels, as even angels demand prayers for granting any boon.  I sincerely pray for a settlement.  All borrowers and Bankers never face any problem and most borrowers show great respects to Banker for timely help.  The problem comes only with the case of wilful defaults and they find fault with Bankers and do not realize the help they received in time.

technical head

You are absolutely correct in that everyone has their own story to tell.  I read yours, and empathize with your situation, and at face value.  I am not judging you, or casting aspersions on your claim. 
In the light of all the skeletons tumbling out of the cupboard about unscrupulous bankers, and their collusion with crooked customers, it is surprising that you continue to think that Banks are all that above board and honest in their dealing with customers.  My conscience alone knows what I have been going through.  I am not a wilful defaulter by any stretch of the imagination.  But that is my story of course. 
I wish you well, and hope it works out for you with the situation faced by your bank and bidder. Thanks for your prayer for a settlement. 




Your are not logged in . Please login to post replies

Click here to Login / Register  


  Search Forum



IPC Grand Course     |    x