"Lockdown" cannot be used as a magic word to wish away every default: Madras High Court

28th June,2021

"Lockdown" cannot be used as a magic word to wish away every default: Madras High Court



While dismissing an appeal filed by a bidder who had failed to complete the payment for a pr auction, the Madras High Court stressed that the COVID-19 shutdown cannot always be used as a "magic phrase" to wish away every default. The bench of Chief Justice Sanjib Banerjee and Justice Senthilkumar Ramamoorthy went on to say that in exercising such "mercy jurisdiction," courts may lose sight of the fact that doing so may prejudice other people who aren't in court or amount to granting undue favour to someone just because he approached the court. property auctioned under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act of 2002 (K Kayalvizhi v. The Brant Group) "All of this occurs when courts are capricious in their mercy decisions. Courts do not have the power to amend the law... Lockdown isn't a magical phrase "During the hearing, Chief Justice Banerjee made an oral observation. When the law requires an auction bidder to pay the entire consideration within 90 days of the auction, unless there are extraordinary circumstances, the Court reasoned that extending the time to pay would amount to conferring an undue benefit on a party in breach. True, the epidemic and the ensuing lockdown are extraordinary circumstances; yet, they are not as extraordinary as they may have been considered to be 12 or 14 months ago. Furthermore, any defaulter cannot employ the lockdown as a magic phrase to wish away the default on its part. Despite the recent lockout during the second surge, financial transactions on the internet and elsewhere proceeded, according to the Court. The Court dismissed the plea based on these views. It did, however, clarify that the petitioner is entitled to participate in any new auctions held by the bank, as well as provide instructions on how to do so. In a SARFAESI auction, the petitioner was the highest bidder for specified immovable property. The petitioner had made the initial deposit but had been unable to finish the remainder payment due to the lockdown, which he blamed on the lockdown. In this example, the auction sale took place in February 2021. In any event, the petitioner should have been aware of his responsibility to make the payment on time, according to the Court. The Court stated that the mere fact that the second COVID-19 surge occurred after February 2021 or that a lockdown was imposed afterward would not be enough to excuse the petitioner's default. As a result, the secured creditor is allowed to advertise a new auction of the assets in question, according to the Court.