Case Law Details
Classic Chemicals Limited Vs Debts Recovery Appellate Tribunal At Kolkata (Telangana High Court)
Telangana High Court held that the whole auction proceedings are rightly vitiated since auction was done blatantly in violation of Rule 9(3) and Rule 9(4) of the Security Interest (Enforcement) Rules, 2002. Accordingly, writ dismissed.
Facts- This Writ Petition is filed by the auction purchaser (M/S Classic Chemicals Limited) in the nature of Writ of Certiorari for setting aside the impugned order, dated 10.01.2C25 passed by the Debts Recovery Appellate Tribunal (DRAT) at Kolkata and to quash the same, confirm the auction sale conducted on 22.03.2013 as valid and in accordance with The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act, 2002′) and the Rules made thereunder.
Conclusion- Held that the petitioners have not made out any case for Writ of Certiorari and as rightly held by learned DRAT that the auction was done blatantly in violation of Rule 9(3) and Rule 9(4) of the un-amended Rules which vitiates the whole action proceedings and we also concur with the findings of the DRAT that the actions of the auction purchaser were subject to the doctrine of Lis Pendence and the auction purchaser cannot take advantage of the amounts spent by him on the secured assets, which finding is fortified by the judgment of the Supreme Court in Shanmugavelu’s case.
FULL TEXT OF THE JUDGMENT/ORDER OF TELANGANA HIGH COURT
1. This Writ Petition is filed by the auction purchaser (M/S Classic Chemicals Limited) in the nature of Writ of Certiorari for setting aside the impugned order, dated 10.01.2C25 passed by the Debts Recovery Appellate Tribunal (DRAT) at Kolkata in Appeal No.29 of 2021 and to quash the same, confirm the auction sale conducted on 22.03.2013 as valid and in accordance with The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short the SARFAESI Act, 2002′) and the Rules made thereunder.
WP.No.4373 of 2025
2. This Writ Petition is filed by State Bank of India, Stressed Assets Management Branch, Hyderabad to issue a Writ in the nature of Writ of Certiorari and to call for the records of the order dates’ 10.01.2025 passed by the Debts Recovery Appellate Tribunal (DRAT), Kolkata in Appeal No.56 of 2022 against the order dated 05.03.2021 made in S.A.No.1115 of 2017 passed by the DRT-II, Hyderabad contrary to the provisions of the SARFAESI Act, 2002 and to set aside the same.
3.1 Learned counsel for auction purchaser in W.P.No.4623 of 2025 submits that on 14.02.2013 respondent No.2-Bank has issued e-auction sale notice. On 15.02.2013 e-auction was published in news paper. On 15.03.2013, the auction purchaser has remitted Earnest Money Deposit (EMD) of Rs.51,50,000/- by RTGS. On 22.03.2013, the petitioner was declared as highest bidder at Rs.5,16,00,000/-. On 22.03.2013, a cheque for Rs.77,50,000/- towards 25% of the sale consideration was deposited with the Bank as per Rule 9(3) of the Security Interest (Enforcement) Rules, 2002 (hereinafter referred to as the Rules, 2002′).
3.2 The deposit of cheque towards 25% of sale consideration is not contrary to Rule 9(3) of the 2002 Rules. As can be seen from the terms and conditions of the e-auction notice at clause-10 which specifies that the cheque will not be accepted for EMD. This presupposes that a cheque is a bar only to the extent of EMD. Bank has accepted the payment of EMD and 25% of sale consideration by mode of cheque payment cannot be said as irrational or arbitrary or malafide.
3.3 Rule 9(3) and Rule 9(4) of the Rules, 2002, borrower has waived his rights under the said provision.
3.4 Learned DRT-II, Hyderabad has erroneously observed in its order dated 05.03.2021 that after remand, no additional reply has been filed by the auction purchaser and further incorrectly stated that the auction purchaser merely adduced oral evidence to speak of various amounts spent by him towards improvement made over the schedule property. After remand by the DRAT, Kolkata in Appeal Nos.188 and 191 of 2018, the auction purchaser has filed his counter affidavit along with chief-examination affidavit of RW.1, RW.2. The borrower did not cross-examine RW.1 and RW.2 which amounts to a deemed admission of the contents of their testimonies and their documents placed on record.
3.5 DRAT, Kolkata in its order dated 10.01.2025 in Appeal No.29 of 2021 erroneously held that no plea of spending Rs. 13,29,48,643/- was taken in the pleadings. Counsel to substantiate his contention has relied on the decisions in the cases of (I) Varimadugu Obi Reddy Vs. B.Sreenivasulu & Others’, (2) Manager, Sri Siddeshwara Cooperative Bank Limited Vs. bal:86 Others2, (3) Arun Kumar Jain & Others Vs. Presiding Officer; DRT 8s Ors.3 , (4) Pahwa Buildtech Pvt. Ltd. Vs. Jagmohan Arora 8s Ors.4, (5) Sanjay Sharma Vs. Kotak Mahindra Bank ors.5, (6) K.Sahaja Rao Vs. Assistant General Manager, SBI (7) Poddar Steel Corporation Vs. Ganesh Engineering s Ors.7
4.1 Learned counsel for the petitioner in WP.No.4373 of 2025 ank of India) submits that the petitioner is a secured d there is a serious travesty of justice in the order dated .2025 of the DRAT, Kolkata passed in Appeal No.56 of 2022. .,appeals filed by the auction purchaser and secured creditor arising out of an order dated 05.03.2021 of the DRT-II Hyderabad passed in SA.No.1115 of 2017 (Old SA.No.259 of 2013 of DRT-I) dismissing the Appeals by a common order without following the principles of natural justice and contrary to the provisions of the SARFAESI Act, 2002.
4.2 Petioner-Bank invoked the provisions SARFAESI d issued Demand Notice, dated 16.05.2011 to the respondent No.3-borrower under Section 13(2) of the Act demanding a sum of Rs.2,81,74,785.05 paisa followed by Possession Notice, dated 15.09.2011 under Section 13(4) of the SARFAESI Act, 2002. In February, 2013, a Sale Notice was published and pursuant to the same on 22.03.2013 an auction sale of secured assets was conducted by the Authorised Officer of the petitioner-Bank which was confirmed on 22.03.2013 in favour of respondent No.4 (auction purchaser) at Rs.516 Lakhs, reserve price being Rs.515 Lakhs.
4.3 Counsel submits that 25% of the sale price less earnest deposit (Rs.51.5 Lakhs) amounting to Rs.77.7 Lakhs was deposited before the Authorized Officer on 22.03.2013 by way of cheque No.569687 drawn on ING Vysya Limited as per Rule 9(3) of the Rules, 2002 which was credited to the Bank’s Account on 27.04.2023.
4.4 Balance of the 75% bid amount was to be paid by the auction purchaser within 15 days from the date of confirmation of sale (i.e., 22.03.2013). At the request of the auction purchaser/respondent No.4, the Authorised Officer extended time up to 30.06.2013 for payment of balance 75% of the sale price amounting to Rs.387 Lakhs. The amount was paid ‘by the puAaser within the extended period in the form of cheque on 27.06.2013 and 28.06.2013 and Sale Certificate was issued on 29.06.2013.
4.5 Respondent No.3-borrower (M/S Vasantha Surgical Equipments) filed SA.No.259 of 2013 under Section 17 of the SARFAESI Act, 2002 on 18.04.2013 (subsequently renumbered as SA.No.1115 of 2017) before DRT alleging amongst others that the Sale Notice was not served and the auction was not validly conducted and the property was under valued.
4.6 Bank has complied with Rule 9(3) and Rule 9(4) of the Rules, Rule 9(3) refers to deposit and does not bar/restrict receiving payment by cheque. Once the cheque is honored, the deposit of cheque is a compliance of Law. In Siddeshwara Bank Cooperative Bank Limited’s case2which however has not laid down any ratio that consent of the borrower is required. It has been held that it is not mandatory and it can be waived by the parties, it is for the benefit of the secured creditor. No prejudice is caused to the borrower and there is no material irregularity to set aside the same. Counsel has also relied on the decisions in (1) Varimadugu Obi Reddy Vs. B.Sreenivasulu 86 Othersl, (2) General Manager, Sri Siddeshwara Cooperative Bank Limited Vs. Ikbal 86 Others2, (3) Sanjay Sharma Vs. Kotak Mahindra Bank Ltd. & Ors.5, (4) K.Sahaja Rao Vs. Assistant General Manager, SBI & Ors.
5.1 Learned counsel for respondent No.3-borrower (M/S Vasantha Surgical Equipments) submits that sale confirmation letter was issued on 22.03.2013 prior to the realization of the cheque amount. Cheque was cleared on 27.03.2013 (25%), this clearly indicates that the mandatory requirement of the immediate payment of 25% deposit was not fulfilled, consequently upon such non-compliance, the Bank was obliged to re-initiate the sale of the property. There was material irregularity concerning the payment of 25% of the sale price, furthermore no justification has been provided by the Bank for its failure to present the cheque for encashment until 5 days after the date of auction.
5.2 The terms and conditions governing the auction categorically prohibit the acceptance of cheque towards earnest money deposit. The Bank accepted cheques towards payment of 25% deposit and the balance sale consideration, this conduct constitutes a clear and deliberate violation of auction terms, such a breach is not merely procedural but strikes at the root of the sale process and warrants the setting aside of the sale.
5.3 There is a violation of Rule 9(3) of the Rules, 2002 and breach of the terms of the e-auction Notice.
5.4 Counsel submits that pre-amendment Rule 9(4) is applicable to the present case which mandates that the balance amount of the purchased price shall be paid within 15 days from the date of confirmation of the sale of the immovable property or within such extended period as may be mutually agreed upon in writing by the parties.
5.5 In the present case, the sale was confirmed in favour of the auction purchaser on 22.03.2013, the period of 15 days expired on 06.04.2013. However, on 06.04.2013 the Bank in collusion accepted the request of the auction purchaser for an extension of time to deposit remaining 75% of the bid amount till 30.06.2013, an extension of 86 days beyond the stipulated period under Rule 9(4). The extension was granted unilaterally by the Bank without notice to the borrower, thereby violating the procedural safeguards mandated under the applicable Rules.
5.6 Counsel submits that petitioner/auction purchaser is not entitled to relief on the ground of equities merely because they made improvements on the schedule property. The Doctrine of Lis Pendence has been correctly invoked by the DRT, Hyderabad. The SA.IR.No.419 of 2011 has no connection whatsoever with the auction notice in question and was filed solely to challenge the possession of the schedule property by the Bank. The auction purchaser is attempting to conflict two distinct securitisation applications initiated by the borrower at different points of time each seeking entirely different reliefs. Counsel has relied on the decisions in the cases of (i) Sri Siddeshwara Cooperative Bank Ltd. Vs. Ikbal2 (ii) Vasu P Shetty Vs. Hotel Vandana Palace8 (iii) Mathew Verghese Vs. Amritha Kumar9 (iv) Sri Vijayalakshrni Rice Mills,New Contractors Co. Vs. State of Andhra Pradeshifi and (v)
Madras Bar Association Vs. Union of India &Arn”
6. Heard learned counsel for the parties, perused the record.
7. Now the point for consideration is whether the common order passed by the learned DRAT, Kalkata in Appeal No.29 of 2021 with Appeal No.56 of 2022, dated 10.01.2025 suffers from any illegality or perversity?
8.1 The factual background of the case is that respondent No.3 -borrower earlier filed SA.IR.No.419 of 2011 with delay of 32 days vide I.A.No.997 of 2001 questioning the Possession Notice dated 15.09.2011. The Tribunal granted interim stay of further proceedings vide order dated 09.12.2011 subject to deposit of Rs.20 Lakhs. The applicant/respondent No.3 failed to comply the conditional order and consequent thereon, condone delay petition in I.A.No.997 of 2011 ended in dismissal on 16.04.2013. The applicant filed review petition along with delay condone petition seeking review of the order dated 16.04.2013. The said review petition being Review IR Petition No.11 of 2015 ended in rejection on 12.09.2017.
8.2 It is the contention of the petitioner’s counsel in W.P.No.4623 of 2025 that the auction purchaser was not aware of the proceedings initiated by the borrower in SA.IR.No.419 of 2011 and that the borrower is estopped from challenging the e-auction Sale Notice, dated 14.02.2013.
8.3 The dispute with regard to the Possession Notice issued under Section 13(4) of SARFAESI Act, 2002 dated 15.09.2011 set at rest with the dismissal of SA.IR.No.419 of 2011, this fact is referred to in the order dated 17.10.2018 at Paragraph No.18 in SA.No.1115 of 2017.
9.1 Respondent No.3 – M/s. Vasantha Surgical Equipments filed mkt”‘SA.No.259 of 2013 under Section 17 of the SARFAESI Act, 2002 challenging the auction notice dated 14.02.2013 which was published on 15.02.2013 in New Indian Express daily news paper and auction conducted on 22.03.2013 on the ground that Possession Notice dated 15.09.2011 is without issuance of Demand Notice under SARFAESI Act. E-auction sale notice dated 14.02.2013 was not served on the borrower and reverse price was fixed in violation of Rule 8(5) of the Security Interest (Enforcement) Rules, 2002.
9.2 SA.No.259 of 2013 was allowed by the DRT on 28.01.2014. The auction purchaser i.e., petitioner in WP.No.4623 of 2025 has challenged the judgment dated 28.01.2014 by filing WP.No.7311 of 2014 before the High Court of Judicature at Hyderabad for the State of Telangana which was allowed on 19.06.2014, matter was remanded back to the DRT to implead the auction purchaser (M/s Classic Chemicals Limited).
9.3 IA.No.1340 of 2013 is filed by the borrower/Respondent No.3 in S.A.No.259 of 2013 seeking stay of further proceeding of auction dated 22.03.2013 which was dismissed on 29.04.2013 with an observation that auction shall be subject to SA.No.259 of 2013.
9.4 Auction purchaser (petitioner in WP.No.4623 of 2025) is impleaded in SA.No.1115 of 2017 (Old SA.No.259 of 2013 of DRT-I, Hyderabad). On 17.10.2018, the DRT-II had allowed the SA filed by the borrower by setting aside the e-auction sale held on 22.03.2013 and directed the respondent No.1 /Bank to repossess the scheduled property from respondent No.2/auction purchaser.
9.5 The borrower/respondent No.3 filed W.P.No.24573 of 2019 before the High Court for a direction to the Bank to take steps to repossess the schedule property in view of the orders of the DRT-II, Hyderabad, in SA.No.1115 of 2007, dated 17.10.2018. The High Court directed the Bank to repossess the schedule property and comply with the order dated 17.10.2018 in SA.No.1115 of 2017 (old SA.No.259/2013) in I.A.No.1 of 2019 vide order dated 28.11.2019. The order in IA.No.1 of 2019 dated 28.11.2019 was challenged before the Supreme Court by filing Special Leave to Appeal Civil No.28958 of 2019 by the auction purchaser. The Supreme Court vide order, dated 16.12.2019 disposed of the SLP granting status quo by directing that the proceedings be disposed of within a period of eight weeks from the date of passing the order. W.P.No.24573 of 2019 was dismissed as infructuous on 19.02.2020.
10.1 Aggrieved by the judgment of the DRT, dated 17.10.2018, auction purchaser and secured creditor/Bank have filed Appeal Nos.188,af 2018 and 199 of 2018 before DRAT Kolkata. DRAT, Kolkata vide order dated 14.01.2020 remanded the matter back to DRT for fresh adjudication on the issue of compliance of the provisions of Rule 9(3) and Rule 9(4) of the Rules, 2002 permitting the parties to bring on record the additional pleadings.
10.2 After the matter is remanded to the DRT-II, Hyderabad, borrower has filed application for amendment of pleadings vide I.A.No.544 of 2020. Auction purchaser and the secured creditor/Bank have filed their separate counter affidavit in IA.No.544 of 2020. Amendment application came to be allowed on 01.06.2020. Thereafter, the borrower has amended SA.No.I115 of 2017.
10.3 Affidavit of RW1 is filed on 24.12.2020, affidavit of RW2 is filed on 29.12.2020. DRT-1I Hyderabad has allowed the S.A. on 05.03.2021. Purchaser and secured creditor filed appeals before DRAT Kolkata vide A.No.29 of 2021 and A.No.56 of 2022, which were dismissed on 10.01.2025, which is impugned in the writ petitions.
11. Auction was conducted on 22.03.2013 on the basis of e-auction sale notice dated 14.02.2013 which was published on 15.02.2013. For brevity Clause 5 and Clause 10 are as under:
5. For participating in e-auction intending bidders have to submit auction bids forms online https:// sbi.abcprocure.com mentioning their User ID and details of payment of refundable Earnest Money Deposit of 10% of the reserve price of the property concerned i.e., Rs.51,50,000/- by RTGS/NEFT/Funds Transfer to the credit of A/c No.32669084199 with State Bank of India, SA<Branch, Secunderabad and to the Authorised Officer of State Bank of India, SAM Branch, Secunderabad, through IFSC Code “SBIN0004106” or by demand draft/Pay Order in favour of the Authorised Officer SBI account “M/s Vasantha Surgical Equipments” and submit the print out of online bids form of e-auction along with copies of PAN card and Address Proof, are to be submitted any time on or before 5.00 p.m. 21.03.2013″.
10. The EMD and other payments shall be remitted through EFT/NEFT/RTGS to the bank account as specified above, cheque will not be accepted”.
12. Rule 9(3) of the Security Interest (Enforcement Rules) 2002 is as under:
“On every sale of immovable property, the purchaser shall immediately, i.e., on the same day or not later than next working day, as the case may be, pay a deposit of twenty five percent of the amount of the sale price, which is inclusive of earnest money deposited, if any, to the authorized officer conducting the sale and in default of such deposit, the property shall be sold again;”
13. As per Clause-5 of e-auction Sale Notice, dated 14.02.2013, the petitioner in W.P.No.4623 of 2025 (auction purchaser) has paid Rs.51,50,000/- as Earnest Money Deposit (EMD) by way of RTGS on 15.03.2013.
14.1 Admittedly, the auction purchaser (petitioner in WP.No.4623 of 2025) was declared the highest bidder at Rs.5,16,00,000/- on 22.03.2013 and 25% of the sale price i.e., Rs.77,50,000/- is paid by way of cheque. Clause 10 of e-auction Sale Notice, dated 14.02.2013 mandates that the other payments shall be remitted through EFT/ NEFT/ RTGS to the Bank Account as specified above, cheques will not be accepted.
14.2 In spite of knowing the fact that cheques will not be accepted as per clause-10 of e-auction sale notice dated 14.02.2013, secured creditor/Bank has accepted the same in violation of notice dated 14.02.2013 which is manifest on the face of the record.
15. Cheque issued by the auction purchaser for Rs.77,50,000/-on 22.03.2013 was encashed by the Bank on 27.03.2013. It is the contention of the petitioners’ counsel in W.P.No.4373 of 2025 – Bank that 23.03.2013 was Saturday and 24.03.2013 was Sunday. Learned DRAT in its order dated 10.01.2025 observed at paragraph No.39 that judicial notice of the fact is that ‘in the year 2013, fourth Saturday of the month was not a Bank holiday’. There is no explanation from the Bank why the cheque was not encashed .on the very next day i.e., 23.03.2013. Admittedly, cheque was X encashed on 27.03.2013. When the cheque was realized on 27.03.2013, how-cum the sale was confirmed on 22.03.2013, which is against the e-auction Sale Notice, dated 14.02.2013.
16. Secured creditor/Bank (petitioner in W.P.No.4373/2025) has committed illegality in accepting the cheque, which is against Clause-10 of e-auction Sale Notice, dated 14.02.2013, which has vitiated the whole exercise of e-auction sale and prejudice is caused to respondent No.3/borrower.
17.1 The next point is whether there is any violation of Rule 9(4) of the Rules, 2002. For brevity, Rule 4 is as under:
“Rule 9(4) of the Security Interest (Enforcement Rules) Pre-amendment reads as under:
“(4) The balance amount of purchase price payable shall be paid by the purchaser to the authorized officer on or before the fifteenth day of confirmation of sale of the immovable property or such extended period as may be agreed upon in writing between the parties.”
17.2 Rule 9(4) of the Security Interest (Enforcement Rules) was amended w.e.f. 03.11.2016. The amended Rule is as under:
“(4) The balance amount of purchase price payable shall be paid by the purchaser to the authorized officer on or before the fifteenth day of confirmation of sale of the immovable property or such extended period [as may be agreed upon in writing between the purchaser and the secured creditor, in any case not exceeding thriee months].”
18. As per un-amended Rule 9(4) of the Rules, the balance amount of purchase price shall be paid by the purchaser to the Authorized Officer on or before 15 days of conformation of the sale of immovable property or such extended period as may be agreed upon in writing between the parties. In the present case, confirmation of sale took place on 22.03.2013 or the date of e-auction itself. Auction purchaser (petitioner in W.P.No.4623 of 2025) made an application on 04.04.2013 seeking 90 days time for repayment of balance 75% of the e-auction amount. The Bank (petitioner in W.P.No.4373 of 2025) has extended the time up to 30.06.2013 to pay the balance 75% of the e-auction amount vide letter dated 06.04.2013 without putting the borrower on notice. The copy of the letter dated 04.04.2013 of the auction purchaser and the letter dated 06.04.2013 of the Bank are filed by the borrower by way of memo.
19.1 Learned counsel for the petitioners in both the writ petitions contended that amended Rule 9(4) is applicable to the case on hand which has a retrospective operation.
19.2 Borrower-respondent No.3 has filed Government of India Notification No. GSR 1046/E, dated 03.11.2016 (pertaining to an/ended Security Interest (Enforcement) (Amendment) Rules, 2002). It is mentioned in the Notification that amended Rule shall come into force on the date of their publication in the Official Gazette. Official Gazette is made on 03.11.2016 which goes to show that amendment is from 03.11.2016.
19.3 In Sri Vijayalakshmi Rice Mills case10 Supreme Court held that unless a statute expressly provides for retrospective operation, it may be presumed to apply prospectively only.
19.4 In Madras Bar Association11 Supreme Court held that supporting legislation cannot be given retrospective effect unless the parent statute specifically provides for the same. In view* of the judgments of the Supreme Court supra coupled with the notification dated 03.11.2016 amendment to Rule 9(4) is prospective in nature, hence the contentions of the petitioner’s counsel is negatived.
20. In Ikbal case2Supreme Court held that the parties for the purpose of Rule 9(4) means the secured creditor, borrower and auction purchaser. Secured creditor/ Bank (petitioner in W.P.No.4373 of 2025) has not issued any notice for extension of time to the borrower but instead thereof Bank has extended the time till 30.06.2013 on 06.04.2013 which is in clear violation of pre-amended Rule 9(4) of the Rules.
21. Auction purchaser (petitioner in W.P.No.4623 of 2025) has deposited Rs.1,80,00,000/- on 27.06.2013 by way of cheque No.688293, ING Vysya Bank Ltd., S.P.Road, Secunderabad and Rs.2,07,00,000/- on 28.06.2013 by way of cheque No.644367, Tarnilnad Mercantile Bank (TMB) branch in Park Lane, Secunderabad. The balance payment made by the auction purchaser which is received by the bank is also in violation of clause-10 of e-auction sale notice dated 14.02.2013. On 29.06.2013 Sales Certificate was issued to the auction purchaser as per Rule 9(6) of the Rules along with delivery of possession.
22. Secured creditors/Bank has executed registered sale deed in favour of the auction purchaser on 22.08.2014. On 29.09.2014, Gram Panchayat, Bollaram has issued No Objection Certificate for setting up of M/s. Classic Chemicals (petitioner in W.P.No.4623 of 2025).
23. Learned counsel for the auction purchaser (petitioner in W.P.No.4623 of 2015) submits that DRT-II, Hyderabad came to an erroneous finding in the judgment dated 05.03.2021 that no additional reply was filed by the auction purchaser in spite of good number of adjournments. The so called counter affidavit filed by the Caution purchaser on 07.02.2020 is in the amendment application filed by the borrower in I.A.No.544 of 2020. DRT-II, Hyderabad in SA.No.1115 of 2017 of the judgment dated 05.03.2021 observed at Paragraph No.25 that the auction purchaser failed to file additional reply thereby filing of additional reply was forfeited as per docket order dated 10.12.2020. The auction purchaser has filed his reply prior to the remand of SA.No.1115 of 2017 by DRAT, Kolkata on 14.01.2020. The DRT-II, Hyderabad has rightly observed that any amount of evidence without proper pleading is of no avail. The contentions of the petitioner’s counsel is negatived.
24. In Varimadugu Obi Reddy’s case’ borrower has challenged e-auction notice dated 23.03.2015. The Tribunal passed interim order on 26.03.2015 that sale certificate shall not be issued in favour of highest bidder subject to the borrower depositing Rs.6,00,000/- on or before 09.04.2015. Borrower filed application on 09.04.2015 for extension of time by 15 days to deposit the amount. As there was no stay in the auction proceedings purchaser deposited 25% on 28.03.2015 and 75% on 15.04.2015 after four days of the due date. The Supreme Court held that depositing the balance of 75% of the bid amount would not defeat the rights of the parties. Principles laid down in Sri Siddeshwara Co-operative Bank Limited case2 are reiterated.
25. In Iqbal case2Supreme Court held at Paragraph No.19 that no doubt Rule 9 (1) is mandatory but this provision is definitely for the benefit of the borrower. Similarly Rule 9 (3) and Rule 9 (4) are for the benefits of the secured creditors. It is settled position in law that even if a provision is mandatory it can always be waived by the party or parties for whose benefit such provision has been made. The secured creditor and the borrower can lawfully waive their rights.
26. In Awn Kumar’s case3, the borrower is provided a 30 day window to deposit the outstanding dues after the conduct of the auction but prior to the expiry of 15 days statutory period. The facts are distinguishable and the same is not applicable to the case on hand.
27. In Pahwa Buildtech Pvt. Ltd.’s case4, there was ambiguity regarding the prescribed mode of payment in the tender document for the e-auction and the corresponding sale notice. Specifically, while the tender documents stipulated payment through Demand Draft or RTGS, the sale notice did not prescribe any specific mode of payment. The facts are not akin to the case on hand, the same is not applicable.
28. In Sanjay Sharma’s cases, the Supreme Court has held that sale by way of public auction cannot be set aside until there is any material irregularity and/or illegality committed in holding the auction or if such auction was vitiated by any fraud or collusion. Respondent No.3 counsel submits that there is fraud and collusion between the auction purchaser with that of the secured creditor in accepting the 25% of the amount and 75% of the amount in violation of 9(3) and 9(4) of the Securitization Rules and in violation of the auction notice.
29. In K.Sahaja Rao’s case6, the High Court of Telangana at Hyderabad held that even assuming that the Bank erred in accepting the payment of EMD towards 25% of sale consideration by cheques, which was encashed in two days and the borrower failed to establish any prejudice arising from the irregularity. Some material irregularity is not a ground to interfere and the Writ Court need not nullify the auction process unless the borrower satisfies the Court that prejudice or injustice is caused to him. Counsel for respondent No.3 submits that the auction purchaser has paid the EMD by RTGS while 25% was deposited by way of cheque, the cheque was not realized until 5 days after the auction. Borrower has suffered prejudice and the DRAT has recorded that the issue of the sale confirmation letter prior to realization of the cheque proceeds rendered the auction sale invalid which caused prejudice to the borrower.
30. Poddar Steel Corporation’s case/is pertaining to Railway Tenders related to drawing of the EMD amount on a particular Bank and not the mode of payment per se. The facts are not applicable to the case on hand.
Decisions cited by learned counsel for the respondent No.3.
31. In Vasu P Shetty’s cases, the Supreme Court reaffirmed the legal position laid down in Sri Siddeshwara Co-operative Bank Lim ted2that where the statutory requirements under the Rules are not been waived by the borrower and there is a breach of mandatory provisions, the same must be deemed null and void.
32. In Mathew Verghese’s case9, the Supreme Court held that in the event of a fundamental procedural error occurred in a sale, the same can be set aside.
33. In Authorised Officer, Central Bank of India Vs. Shanmugave1u12, the Supreme Court has examined the interplay between the law and equity. Paragraph No.113 of the judgment is quoted below:
“113. This Court in National Spot Exchange Ltd. v. Dunar Foods Ltd. (Resolution Professional), (2022) 11 SCC 761 after referring to a catena of its other judgments, had held that where the law is clear the consequence thereof must follow. The High Court has no option but to implement the law. The relevant observations made in it are being reproduced below: (SCC pp. 774-75, para 15)
“15….. 15.1. In BSNL v. Mishri Lal, (2011) 14 SCC 739, it is observed that the law prevails over equity if there is a conflict. It is observed further that equity can only supplement the law and not supplant it. 15.2. In Raghunath Rai Bareja v. Punjab National Bank, (2007) 2 SCC 230, in paras 30 to 37, this Court observed and held as under: (SCC pp. 24243)
’30.Thus, in Madamanchi Ramappa v. Muthaluru Bojjappa, 1963 SCC Online SC 36 : (2007) 2 SCC 230 (vide AIR para 12) this Court observed : (AIR p. 1637)
“12. … [W]hat is administered in courts is justice according to law, and considerations of fair play and equity however important they may be, must yield to dear and express provisions of the law?
31. In Council for Indian School Certificate Examination v. Isha Mittal, (2000) 7 SCC 521 (vide para 4) this Court observed : (SCC p. 522)
“4.. … Considerations of equity cannot prevail and do not permit a High Court to pass an order contrary to the law.”
32. Similarly, in P.M. Latha v. State of Kerala, (2003) 3 SCC 541 (vide para 13) this Court observed: (SCC p. 546)
“13. Equity and law are twin brothers and law should be applied and interpreted equitably but equity cannot override written or settled law.”
33. In Laxminarayan R. Bhattad v. State of Maharashtra, (2003) 5 SCC 413 (vide para 73) this Court observed: (SCC p. 436)
“7.3. It is now well settled that when there is a conflict between law and equity the former shall prevail.”
34. Similarly, in Nasiruddin v. Sita Ram Agarwal, (2003) 2 SCC 577 (vide para 35) this Court observed: (SCC p. 588)
“35. In a case where the statutory provision is plain and unambiguous, the court shall not interpret the same in a different manner, only because of harsh consequences arising the –efrom.”
35. Similarly, in E. Palanisamy v. Palanisamy, (2003) 1 SCC 123 (vide para 5 this Court observed: (SCC p. 127)
Equitable considerations have no place where the statu :e contained express provisions.
36. In India House v. Kishan N. Lalwani, (2003) 9 SCC 393 (vide para 7) this Court held that: (SCC p. 398)
“7….. The period of limitation statutorily prescribed has to be strictly adhered to and cannot be relaxed or departed from for equitable considerations.” •…”
(emphasis in original and supplied)”
34. Learned DRT in its order, dated 05.03.2021 in SA.No.1115 of 2017 (old SA.No.259 of 2013) observed at Paragraph No.20 that it is only since the 131 September, 2015, 2nd and 4t11 Saturday are declared holidays for Banks. There are two material irregularities committed by the first respondent Bank. Firstly in accepting the cheque towards 25% of the sale price and secondly issuing sale confirmation letter prior to realization of cheque proceeds. Once there is material irregularity in payment of 25% of the sale price, the entire auction proceedings fall to the ground. There is no need for the applicant making out any prejudice because of acceptance of 25% of the sale price by way of cheque from second respondent in contravention of e-auction Sale Notice terms and conditions. Learned DRT further observed at Paragraph No.21 that as. per Rules in force in 2013, consent of the borrower for extension of time for payment of 75% of the sale price is mandatory. There being no consent of the borrower, the acceptance of 75% of the sale price by the first respondent-Bank from second respondent-auction purchaser after the expiry of 15 days from the date of sale confirmation is in contravention of Rule 9(4) of the Rules, 2002 and it vitiates the entire re-auction sale proceedings.
35. Insofar as the compensation claimed by the auction purchaser, the Tribunal observed at Para 25 that the right of filing additional reply by the second respondent-auction purchaser came to be forfeited as per the docket order dated 10.12.2020 and as per the reply filed prior to remand, the second respondent-auction purchaser claims to have spent Rs.5,23,451/- towards cost of the material, Rs.9,79,200/- for payment of Property Tax to Gram Panchayat for the year 2013-14 and 2014-15. The DRT further held that any amount of evidence without proper pleading is of no avail.
36. Learned DRAT in its order, dated 10.01.2025 has elaborately discussed about the Rules, 2002 in Para No.38 to 41, 46 , 49 and 50.
37. We are of the considered view that the petitioners have not made out any case for Writ of Certiorari and as rightly held by learned DRAT that the auction was done blatantly in violation of Rule 9(3) and Rule 9(4) of the un-amended Rules which vitiates the whole action proceedings and we also concur with the findings of the DRAT that the actions of the auction purchaser were subject to the doctrine of Lis Pendence and the auction purchaser cannot take advantage of the amounts spent by him on the secured assets, which finding is fortified by the judgment of the Supreme Court in Shanmugavelu’s case12.
38. WP.No.4623 of 2025 and WP.No.4373 of 2025 are dismissed.
All connected applications, if any, shall stands closed. No order as to costs.
NOTE;
1 (2023) 2 SCC 168
2 2014 (5) SCC 660 Paras 16 & 25
3 2014 (5) SCC 610 Para Nos.42 &43
4 (1976) 3 SCC 37
5 (2021) 7 SCC 369
6 (2024) `BCC 641
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