Varimadugu OBI Reddy Vs B. Sreenivasulu & Ors. (Supreme Court of India)
Supreme Court of India has overturned a High Court ruling that had set aside an e-auction sale conducted by a bank under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). The case, Varimadugu OBI Reddy Vs. B. Sreenivasulu & Ors., involved a dispute arising from loan defaults and subsequent recovery proceedings. The respondent borrowers had taken multiple loans from the bank, secured by an equitable mortgage on an immovable property. Upon defaulting on these loans, the bank initiated proceedings under the SARFAESI Act, classifying the accounts as Non-Performing Assets (NPAs).
Following the prescribed procedure, the bank issued demand and possession notices, and eventually proceeded with an e-auction of the secured asset. The borrowers challenged this auction before the Debts Recovery Tribunal (DRT), which issued an interim order permitting the auction to proceed, but with a condition: the sale certificate would not be issued if the borrowers deposited Rs. 6 lakhs within 15 days. The borrowers failed to meet this deadline, and their subsequent request for an extension was granted, but with a status quo order. Despite the interim orders, the auction was conducted, and the property was sold.
