[COVID-19] "Lockdown" cannot be used as a magic wand to wish away every default: Madras High Court

The Madras High Court on Monday emphasised that the COVID-19 lockdown cannot always be invoked as a "magic wand" to wish away every default, while disposing of a plea moved by a bidder who had failed to complete the payment for a property auctioned under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 (K Kayalvizhi v. The Branch Manager)..The Bench of Chief Justice Sanjib Banerjee and Justice Senthilkumar Ramamoorthy added that while "a kind of mercy jurisdiction" is resorted to at times, this is done without the Court being mindful of the fact that the exercise of such authority may prejudice another who may not be before the Court or may grant undue favour to a person merely because he has approached the Court.."When Courts are arbitrary in showing mercy, all this happens. Courts have no authority to change the law… Lockdown is not a magic wand," Chief Justice Banerjee orally observed during the hearing. .When the law requires an auction purchaser to pay the entire consideration within 90 days of the auction, unless there are exceptional circumstances, the Court opined that it must be slow in enlarging the time for making payment since that would amount to conferring an undue benefit to a party in breach.."It is true that the pandemic and the lockdown imposed in its wake may be an extraordinary situation; but it is not as extraordinary as it may have been perceived to be some 12 or 14 months prior to now. Further, the lockdown cannot be used a magic wand by every defaulter to wish away the default on its part. Despite the recent lockdown during second surge, financial transactions continued on the net and otherwise," the Court added..In view of these observations, the Court disposed of the plea. However, it clarified that the petitioner is entitled to participate in any fresh auctions conducted by the bank, and issued directions on how this can be done as well. .The petitioner was the highest bidder for certain immovable property in a SARFAESI auction. The petitioner had made the initial deposit but was unable to complete the balance payment and cited the lockdown as the reason for such failure. The auction sale, in this case, was conducted in February 2021. .The Court observed that the petitioner, in any case, should have been aware of his obligations to make the payment within time. .Merely because the second COVID-19 surge hit after February 2021 or because a lockdown was imposed thereafter, would not be a ground by itself to ignore the petitioner's default, the Court said. .As such, the Court held that the secured creditor would be free to advertise fresh sale of the assets in question..[Read Order]