Back
Borrower Has Under Section 30 Against Auction Confirmation: Allahabad HC
In a significant ruling that clarifies the appellate remedies available to borrowers under the , the has held that a borrower can directly challenge an order of the Recovery Officer confirming an auction sale before the under Section 30(1) of the Act, without first exhausting the remedies under .
A Division Bench comprising Justice Saral Srivastava and Justice Garima Prashad set aside a Single Judge’s order that had dismissed the borrower’s challenge to the auction confirmation on grounds of lack of . The Court restored the orders of the DRT and the , which had earlier set aside the sale due to .
A Concurrent Path: No Need to Exhaust Rule 60/61 Before Invoking Section 30
The case arose from a loan default by , a proprietorship firm, which had availed a cash credit limit of ₹12 lakhs from in . After default, the DRT allowed the bank’s recovery application for ₹38.36 lakhs with interest. The Recovery Officer attached the borrower’s property and conducted an auction on , selling it to Shri Ram Avtar for ₹35.20 lakhs. Despite a stay order from the DRAT, the Recovery Officer confirmed the sale on .
The borrower then filed an appeal under Section 30(1) before the DRT, which set aside the confirmation of sale on , citing multiple irregularities. The DRAT dismissed the auction purchaser’s appeal on . However, a Single Judge of the High Court reversed these orders in March 2024, holding that the appeal was not maintainable for want of under Rules 60 or 61 of the Second Schedule.
The Division Bench rejected this view, emphasising that Section 30(1) begins with a overriding Section 29, which incorporates the Second Schedule provisions. The Court held that the order confirming the sale under Rule 63 draws its legal authority from , making it directly appealable under Section 30(1).
“We hold that the legislature has provided the borrower a ; either to invoke Rule 60 or 61, or to approach the DRT directly by filing an appeal under within thirty days from the date a copy of the order passed by the Recovery Officer confirming the sale is issued to him,” the Bench ruled.
The Court further clarified that no is required for an appeal under Section 30, as the section itself does not prescribe any such condition.
Auction Confirmation Set Aside for
The Court also upheld the DRT’s findings of serious irregularities in the auction process. Notably, the property described in the original application as mortgaged measured only 694 square yards, while the property put to auction measured 4,950 square yards—more than seven times the mortgaged area.
“The area of land put for auction was about more than seven times the area of land that was mortgaged,” the Court observed.
Additionally, the was published in English in a Hindi daily, violating , which requires publication in the language of the district. The Court noted that Bareilly is a Hindi-speaking area.
The valuation report placed the market value of the property at ₹80.55 lakhs and the at ₹56.12 lakhs, yet the property was sold for only ₹35.20 lakhs to a . “The minimum price which the property would have fetched if sold on was ₹56,12,000/- whereas in the instant case, only one bidder participated and the property was sold out at ₹35,20,000/- much below not only the market value, but also the ,” the Court noted.
The Division Bench also rejected the argument that the DRT lacked jurisdiction to set aside the auction proceedings without a specific prayer. It held that the grounds raised in the memorandum of appeal—including the fixation of reserve price, inadequate publication, and single-bidder participation—were sufficient to put the entire auction process in issue. The DRT had framed an issue covering the legality of attachment, proclamation, and auction, and the auction purchaser had not objected to it.
“Once the DRT came to the conclusion that orders of attachment, and auction of immovable property were illegal, the DRT was well within its right and had the jurisdiction under to set aside the order of attachment, and auction of immovable property to secure the ,” the Bench held.
Rights Accrue Only on Confirmation
Relying on the ’s decision in , the Court held that no right accrues to an auction purchaser until the sale is confirmed by the Recovery Officer. Since the confirmation of sale was set aside, the earlier orders in the auction process fell automatically.
The Court also noted that the auction purchaser had not challenged the findings of irregularity before the Single Judge or the Division Bench, and those findings had attained finality.
No Prejudice from Compromise
The Division Bench further held that the Single Judge had acted beyond jurisdiction in declaring invalid the compromise between the borrower and the bank, as the auction purchaser had never challenged that compromise in appropriate proceedings. The bank had issued a ‘’ after the borrower paid the dues, and the remained unregistered with possession still with the borrower.
Court’s Decision
The allowed both appeals, set aside the Single Judge’s order dated , and dismissed the writ petition filed by the auction purchaser. The Court restored the orders of the DRT and DRAT, thereby setting aside the confirmation of sale.
The judgment reinforces the principle that recovery proceedings must be fair and transparent, and that the protection afforded to auction purchasers is not absolute when the sale is vitiated by .
Case Title: | Case No.: Special Appeal No. 339 of 2024 with Special Appeal No. 376 of 2024 Bench: Justice Saral Srivastava and Justice Garima Prashad
