S.G.K. Industrial Corporation and Others Vs Authorized Officer (DRT Chandigarh)
The Debts Recovery Tribunal (DRT), Chandigarh, allowed a securitisation application filed under Section 17 of the SARFAESI Act challenging the measures taken by the bank, including the auction of secured assets. The applicants had availed cash credit, vehicle loan and FITL facilities, with mortgages created over two adjoining plots owned by the proprietor and the guarantor. Following financial losses during the COVID period, the loan account was classified as a Non-Performing Asset (NPA) on 28.10.2021, after which the bank issued a demand notice under Section 13(2), took symbolic possession under Section 13(4), and initiated several auction attempts. The applicants submitted multiple One-Time Settlement (OTS) proposals, including an offer of Rs. 42 lakh with an upfront payment of Rs. 10 lakh, but the bank did not respond. Eventually, the bank sold the mortgaged properties through an e-auction on 29.03.2024 for Rs. 33.52 lakh after repeatedly reducing the reserve price from earlier auction notices.
The applicants challenged the auction on several grounds. They contended that the bank had taken possession of machinery that had not been hypothecated, ignored their OTS proposals despite offering an amount higher than the eventual sale price, auctioned the guarantor’s property after his death without issuing notice to his legal heirs, and combined two separately mortgaged plots into a single auction instead of fixing separate reserve prices. They also argued that the mandatory notice period before the auction had not been complied with, as the newspaper publication was made on 17.03.2024 while the auction was conducted on 29.03.2024.
