The auction sale under the SARFAESI Act may be annulled on equitable grounds if procedural delays, not attributable to borrowers, prevent confirmation and violate statutory requirements.

JUDGMENT

DIPANKAR DATTA, J.

1. Leave granted.

THE APPEALS

2. The two sets of appeals arise out of proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 [SARFAESI Act]. Appellants [auction purchasers, hereafter] in the lead appeals are the auction purchasers whereas Central Bank of India [secured creditor, hereafter] is the appellant in the connected appeals. They question the correctness and legality of the common judgment and order dated 12.04.2023 passed by the High Court of Judicature at Madras [firm, hereafter] while deciding Writ Petition Nos. 32958 of 2022 and 32016 of 2022. In substance and in gravamen, the High Court allowed two writ petitions instituted by the borrowers and the guarantor with directions, resulting in setting aside of recovery measures undertaken by the secured creditor under the SARFAESI Act including the annulment of an auction sale conducted to enforce a secured debt.

3. Respondent 1 is a partnership firm [borrowers, hereafter], whose partners are respondents 2 and 36. Respondent 4 stood as guarantor for the loan. Since the appeals emanate from the same loan transaction, the same secured assets, and a common judgment of the High Court, they have been heard together and are being disposed of by this common judgment.

FACTUAL PANORAMA

4. The facts, which lie at the very heart of the controversy and are indispensable for the disposal of the present appeals, may now be adumbrated in seriatim.

a. On 03.11.2017, the firm had availed various credit facilities from the secured creditor to the tune of Rs. 4 crore. The secured creditor’s attempt to auction the subject property [secured assets, hereafter] triggered the present lis. Upon failure of the borrowers to adhere to the repayment schedule, the loan account was classified as a non-performing asset on 25.11.2018 in accordance with the applicable regulatory norms.

b. Consequent thereto, the secured creditor initiated proceedings under the SARFAESI Act on 10.02.2020 by issuance of a demand notice under Section 13(2), calling upon the borrowers to discharge the outstanding liability in a sum of Rs. 3,89,31,614/-plus interest and costs within the stipulated period of 60 days from the receipt thereof. As the demand was not complied with, the secured creditor proceeded to take measures under Section 13(4) of the SARFAESI Act vide the issuance of a possession notice dated 21.04.2020.

c. After taking symbolic possession under Section 13(4), the secured creditor proceeded to bring the secured assets to sale. Sale notices for the mortgaged properties were issued to the borrowers and the guarantor, and the cumulative reserve price was fixed at Rs. 3,96,11,000/, culminating in an e-auction held on 04.09.2020 in which the auction purchasers emerged as the highest bidders. While the auction was managed as a unified process for four distinct properties, comprising a 13.17-cent commercial property, a 15-cent vacant land, a 5.28-cent commercial property, and a 5.50-cent residential property, the bidding for each property was handled individually based on their respective reserve prices. The auction purchasers emerged as the successful bidders for these separate properties simultaneously upon the conclusion of the e-auction on the same day. They deposited 25% of the bid amount in terms of Rule 9(3) of the Security Interest (Enforcement) Rules, 2002 [SARFAESI Rules].

d. Aggrieved by the measures adopted by the secured creditor, the borrowers and t