Supreme Court Upholds Auction Sale Despite Shortfall in Earnest Money Deposit, Holds Substantial Compliance Sufficient

Case Snapshot

• Case Name: Lakshmi Mohan (Dead) Through LRs. & Anr. v. M/s. Airtech Projects Engineers Pvt. Ltd. & Anr.

• Citation: 2026 INSC 909

• Bench: Justice Pamidighantam Sri Narasimha and Justice Alok Aradhe

• Date of Judgment: August 21, 2026

• Area of Law: SARFAESI Act, Securitisation, Auction Sales, Tender Law

The Judgment in One Line

Shortfall in earnest money deposit does not vitiate auction sale when both bidders had similar shortfall and no prejudice caused.

Why This Judgment Matters

This judgment is significant as it clarifies the distinction between essential and non-essential conditions in auction notices under the SARFAESI Act. The Supreme Court held that a shortfall in earnest money deposit (EMD) does not automatically invalidate an auction sale when there is substantial compliance and no prejudice is caused to any party. The Court distinguished between conditions that go to the root of eligibility and those that are merely ancillary. The judgment also addresses the bank's liability to pay interest on surplus sale proceeds retained without being placed in an interest-bearing account. This will guide secured creditors and auction purchasers in understanding the enforceability of auction sales despite minor procedural deviations.

Background

The

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