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SUPREME COURT OF INDIA
J.B. Pardiwala, R. Mahadevan, JJ.
Om Sakthi Sekar – Appellant
Versus
V. Sukumar & Ors. – Respondents
Civil Appeal No. 3362 of 2026 [Arising out of SLP (C) No. 2122 of 2022]
Decided On : 13-03-2026
Recovery of Debts Due to Banks and Financial Institutions Act, 1993 – Section 25 – Constitution of India – Article 227 – Recovery of debt – Auction sale of mortgaged property – Fair valuation of property – High Court, while upholding validity of auction sale, directed reconsideration of valuation of properties and remitted the matter to DRT on that limited aspect – While rights of a bona fide auction purchaser deserve due protection and confirmed court sales should not ordinarily be interfered with, such protection is not absolute – Where credible issues are raised regarding adequacy of valuation or fairness of process leading to fixation of reserve price, supervisory jurisdiction of Court may be invoked to ensure that recovery proceedings have been conducted in a manner that secures best possible value of property – Objective of recovery proceedings is not merely to complete sale but to realise maximum value of secured asset so as to balance interests of creditor and borrower – Court is required to exercise its discretion with circumspection so as to safeguard legitimate interests involved in sale process – Remand does not disturb recovery already effected by bank nor does it render auction proceedings void – Such a limited remand for fresh consideration by DRT cannot be said to be legally untenable – Course adopted by High Court upheld. (Paras 15, 16, 17, 18 and 21)
Facts of the case:
Present Civil Appeal has been filed against the judgment and order dated 06.02.2020 passed by High Court of Judicature at Madras in W.P. No. 33872 of 2017, whereby High Court upheld the conclusion arrived at by the Debts Recovery Tribunal and Debts Recovery Appellate Tribunal, Chennai, while remitting case to DRT for reconsideration of valuation of Schedule A to E properties in recovery proceedings, and accordingly disposed of writ petition. High Court further observed that in the event properties were found to have been sold for a lower value than their actual worth, appellant herein may be directed to make good the difference.
The challenge in present appeal is confined only to that part of judgment whereby High Court directed reconsideration of valuation of Schedule A to E properties by DRT, notwithstanding fact that auction sale had already been concluded and confirmed in accordance with law.
Findings of Court:
No error can be found in course adopted by High Court in remitting the matter to the DRT for reconsideration of issue of valuation, which reflects a balanced exercise of jurisdiction and does not require interference by this Court.
Result : Civil Appeal dismissed.
The key points from the legal document are as follows:
The primary objective of recovery proceedings involving the auction sale of mortgaged property is not merely to complete the sale but to realize the maximum possible value of the secured asset, balancing the interests of both the creditor and the borrower (!) .
When credible issues are raised regarding the adequacy of the property's valuation or the fairness of the process that led to the fixation of the reserve price, the supervisory jurisdiction of the court can be invoked to ensure that the proceedings are conducted in a manner that secures the best possible value of the property (!) .
While rights of a bona fide auction purchaser are generally protected and confirmed court sales should not be interfered with, this protection is not absolute. If there are credible concerns about valuation adequacy or procedural fairness, courts may exercise their supervisory jurisdiction to re-examine the process (!) .
The court's role includes ensuring that the recovery process is fair, transparent, and based on a proper assessment of value, with an emphasis on achieving the maximum realization of the secured asset (!) .
A final and confirmed court auction sale is ordinarily binding, and interference is only warranted in cases of material irregularity or fraud. However, the court retains the authority to remand the matter for revaluation if there are substantial reasons to doubt the fairness or adequacy of the valuation at the time of sale (!) (!) .
Remanding for revaluation does not invalidate the auction or disturb the recovery already effected, nor does it imply that the sale was void. Such a remand is a procedural safeguard to ensure fair valuation and does not undermine the finality of the sale unless material irregularities are established (!) (!) .
The process of auction, including the fixation of reserve price and valuation, should be conducted in a manner that ensures transparency, competitiveness, and fairness, with the ultimate goal of securing the highest possible price for the secured assets (!) (!) .
The court's exercise of supervisory jurisdiction to re-examine valuation is limited and should be exercised with caution, primarily to prevent undervaluation and to uphold the integrity of the sale process (!) (!) .
The protection of the rights of a bona fide purchaser is a fundamental principle, but it does not extend to shielding irregularities or procedural flaws that compromise the fairness of the sale process (!) .
Ultimately, the court emphasizes that the remand for revaluation is a procedural step to ensure fairness and proper valuation, and it should not be construed as a challenge to the legality of the auction or the finality of the sale unless significant irregularities are proven (!) (!) .
These points encapsulate the principles governing auction sales, the scope of judicial review, and the balance between finality and fairness in recovery proceedings involving secured assets.
JUDGMENT :
R. MAHADEVAN, J.
Leave granted.
2. This Civil Appeal has been filed against the judgment and order dated 06.02.2020 passed by the High Court of Judicature at Madras1[Hereinafter referred to as “the High Court”] in W.P. No. 33872 of 2017, whereby the High Court upheld the conclusion arrived at by the Debts Recovery Tribunal-I2[For short, “the DRT”], Chennai and Debts Recovery Appellate Tribunal3[For short, “the DRAT”], Chennai, while remitting the case to the DRT for reconsideration of the valuation of Schedule A to E properties in the recovery proceedings, and accordingly disposed of the writ petition. The High Court further observed that in the event the properties were found to have been sold for a lower value than their actual worth, the appellant herein may be directed to make good the difference.
3. This Court by order dated 18.02.2022 granted an order of stay on implementation of the directions issued in paragraph no.166 of the impugned judgment.
4. During the pendency of this appeal, Respondent No. 9 who was Respondent No. 4 in the writ petition died and his legal representatives were brought on record as 9.1 to 9.4 vide order dated 04.03.2024 and cause title was accordingly amended. Despite service of notice, none appeared on behalf of Respondent Nos.9.1 to 9.4, 10 to 13 and 15 to 17.
5. The necessary facts leading to the filing of the present appeal are as follows:
5.1. The appellant is the purchaser of Schedule A to E properties sold through an auction conducted by the Recovery Officer on 29.10.2010 pursuant to the order dated 27.01.2010 passed by the DRT, Chennai in O.A. No. 536 of 1998.
5.2. The aforementioned writ petition bearing No. 33872 of 2017 was filed by Respondent Nos. 1 to 5 (Guarantors) before the High Court to quash the order dated 24.10.2017 passed by the DRAT, Chennai in R.A. No. 59 of 2012, and further set aside the order dated 12.01.2010 passed by the DRT, Chennai, in O.A. No.536 of 1998 and the auction proceedings initiated by the Recovery Officer, pursuant to the same.
5.3. Originally, Respondent No. 6, Indian Bank, Pondicherry, entered into an agreement dated 30.11.1992 with Respondent No. 7 for 'at par facility' in respect of the cheques issued by them on the guarantee that Respondent No. 7 would maintain a cushion fund at all times during the subsistence of the agreement with the bank. However, Respondent No. 7 was irregular in maintaining the cushion funds without following the conditions of the agreement. In many instances there was a shortfall of funds in the account of Respondent No. 7 to honour the cheques. Even so, the bank continued to honour the cheques presented.
5.4. Respondent Nos. 3 and 4 represented by the power of attorney holder / Respondent No. 1 as Document No. 1574 of 1994 dated 26.10.1994 created an equitable mortgage by depositing title deeds of Schedule A, B and C properties measuring 12572 sq.ft. situated in Kambuliswamy Madam Street, Pakkamudayanpet Village, Oulgaret Commune as security for the shortfall of 'at par facility' enjoyed by Respondent No. 7. Similarly, Schedule D and E Properties were also deposited for the shortfall. The bank insisted Respondent No. 7 to make payment of the shortfall arising from the presentation of the cheques issued by them and accordingly sent a legal notice on 31.01.1998 to Respondent No. 7 and others. When Respondent No. 7 failed to repay the amount, the bank filed O.A. No. 536 of 1998 before the DRT, Chennai praying inter alia to recover a sum of Rs. 45,66,923.83 as outstanding balance as on 10.02.1998 and direct to pay interest at 20.91% p.a. with quarterly rests from the date of filing of the application till realisation.
5.5. The DRT, Chennai passed a final order on 12.01.2010 in O.A. No. 536 of 1998 inter alia holding that the bank was entitled for a Recovery Certificate against Respondent Nos. 1 to 5 and 7 to 13, jointly and severally for a sum of Rs. 45,68,923.83 at 10% per annum simple interest from 10.02.1998 till realisation al
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