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SUPREME COURT OF INDIA
DIPANKAR DATTA, AUGUSTINE GEORGE MASIH, JJ.
M. R. Vasumathi – Appellant
Versus
The Authorized Officer & Ors. – Respondents
Civil Appeal No. 1606 of 2026
Decided On : 09-06-2026
(A) Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 – Section 13(2) – Security Interest (Enforcement) Rules, 2002 – Rules 3, 4, 5 and 9 – Recovery of debt – Auction sale of secured asset – Validity of auction conducted under statutory regime is not to be tested on equitable considerations but strictly on the ground whether mandate of statute and rules has been breached or not – SARFAESI Rules being subordinate legislation, bind secured creditor as well as auction purchaser with equal rigour – Any deviation therefrom, absent legally sustainable justification, would render process of auction sale vitiated – Failure to repay without being informed of extension being granted to auction purchaser, by itself, cannot validate proceedings that are otherwise vitiated in law – Rights of auction purchaser and sanctity of confirmed sale ordinarily merit due protection, such protection is by no means absolute – It must yield where very process engendering sale is demonstrated to be legally infirm or to be incongruous with statutory framework – Object of proceedings under SARFAESI Act is not mere culmination of sale in a mechanical manner, but lawful realisation of secured asset through a process that is fair, transparent and strictly compliant with prescribed rules. (Paras 24, 28, 35 and 36)
(B) Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 – Section 13(2) – Security Interest (Enforcement) Rules, 2002 – Rules 3, 4, 5 and 9 – Constitution of India – Article 142 – Recovery of debt – Auction sale of secured asset – Non-adherence to timeline that SARFAESI Rules contemplate constitutes material irregularity going to root of matter – Mere factum that sale stood confirmed cannot foreclose judicial scrutiny – Appellant, along with other legal heirs, had instituted multiple miscellaneous applications before DRT, seeking permission to redeem property upon deposit of required amount and to set aside consequences of sale – Appellant was desirous of redeeming property upon being accorded with opportunity to do so – Property belonged to deceased guarantor and upon his demise, vested in his legal heirs – Such heirs cannot be divested of their lawful interest except in accordance with procedure that is fair, just and in strict conformity with governing statute – Auction sale conducted in respect of secured asset quashed and set aside – However, since auction purchaser had participated in the process and deposited bid amount pursuant thereto, interests of equity demand suitable restitution of interests of such purchase – Auction purchaser shall be entitled to refund of entire amount deposited by him together with 7% interest – In exercise of jurisdiction under Article 142 of Constitution, appellant allowed to redeem mortgage and obtain restoration of secured asset upon payment to secured creditor – In the event of failure on part of appellant to avail this one-time opportunity, she will forfeit all her rights to secured asset. (Paras 36, 37, 39, 41, 42, 44 and 46)
Facts of the case:
Present appeal is directed against the judgment and order dated 21.09.20201 passed by High Court of Judicature at Madras in Writ Petition No. 29641 of 2019. Vide impugned judgment, High Court of Judicature at Madras dismissed writ petitions filed by the appellant (daughter) as well as the son of the deceased guarantor, thereby declining to interfere with the measures adopted by the first respondent being the authorised officer of the Indian Bank under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, culminating in the auction sale of the secured asset. Appellant questions the legality of the said proceedings, particularly auction sale held on 11.03.2010, on the ground that statutory procedure governing such sale was not complied with.
Findings of Court:
directions contained in paragraphs 43 to 46 hereinabove are issued in exercise of the jurisdiction of this Court under Article 142 of the Constitution and shall constitute a one-time measure intended to balance the equities of the parties in the peculiar facts of the present case. It is clarified that in the event of failure on the part of the appellant to avail this one-time opportunity, she will forfeit all her rights to the secured asset.
Result : Appeal allowed in part with directions.
Key Points: - The judgment holds that the validity of an auction under SARFAESI is determined by compliance with statutory and regulatory requirements, not equitable considerations. (!) (!) - Rule 9 of the SARFAESI Rules (unamended) mandates 25% deposit immediately and balance within 15 days of confirmation, with potential extension only via written agreement; non-compliance constitutes a material irregularity going to the root of the matter. (!) (!) (!) (!) (!) (!) - Non-adherence to the timeline, without a written extension, can vitiate the sale, even if the sale was later confirmed. (!) (!) - The auction purchaser may be entitled to refund of deposits with interest if the sale is quashed, and the appellant (heir) may be offered an opportunity to redeem and restore the asset upon payment of the due amount. (!) (!) (!) (!) (!) - The court emphasizes that the purpose of SARFAESI is fair, transparent, and legally compliant realisation of the secured asset, not just mechanical sale. (!) (!) - The relief granted includes setting aside the sale but providing restitution to the purchaser and offering the heirs a one-time opportunity to redeem within a specified timeframe, subject to payment of the quantified debt. (!) (!) (!) (!)
JUDGMENT :
DIPANKAR DATTA, J.
THE APPEAL
1. This appeal is directed against the judgment and order dated 21.09.20201[impugned judgment] passed by the High Court of Judicature at Madras2[High Court] in Writ Petition No. 29641 of 2019. Vide the impugned judgment, the High Court of Judicature at Madras dismissed the writ petitions filed by the appellant (daughter) as well as the son of the deceased guarantor3[G. Ramanujam] , thereby declining to interfere with the measures adopted by the first respondent being the authorised officer of the Indian Bank4[secured creditor] under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 20025[SARFAESI Act], culminating in the auction sale of the secured asset.
2. Appellant questions the legality of the said proceedings, particularly the auction sale held on 11.03.2010, on the ground that the statutory procedure governing such sale was not complied with.
3. The first respondent is the authorised officer of the secured creditor. The second respondent is the auction purchaser, being the successful bidder in the auction sale of the secured asset. The remaining respondents are the other legal heirs/representatives who were parties to the proceedings before the High Court and have been arrayed as formal parties in the present proceedings.
GENESIS
4. Briefly, the facts triggering this appeal are these:
b. On account of the default committed by the borrower, the secured creditor instituted a suit7[O.S. No. 4067 of 1996] before the City Civil Court, Chennai against the borrower and the guarantor, seeking recovery of the outstanding dues. On 10.09.1997, the said court passed a preliminary decree in favour of the secured creditor for a sum of Rs. 1,87,004.23 [in effect, the total sum was Rs. 1,92,400.23p (inclusive of Court Fee of Rs. 5396/-)] along with interest @ of 18% per annum.
c. G. Ramanujam expired on 26.09.2001 leaving behind his heirs including the appellant. Several attempts were thereafter made by and between the secured creditor and the heirs of G. Ramanujam for an amicable settlement, but the same did not fructify.
d. On 08.09.2009, nearly (12) twelve years after the passing of the preliminary decree, the secured creditor issued a demand notice under Section 13(2) of the SARFAESI Act to the borrower and the heirs of G. Ramanujam. Subsequently, the secured creditor issued a possession notice dated 21.12.2009 and later a sale notice dated 03.02.2010 proposing to sell the secured asset by way of public auction under the Security Interest (Enforcement Rules), 20028[SARFAESI Rules].
e. The secured asset was ultimately put to auction on 11.03.2010, in which the respondent 2 herein emerged as the successful bidder9[auction purchaser] with a bid amount of Rs. 2,11,00,500/-. Admittedly, 25% of the bid amount was paid by the auction purchaser on 10.03.2010/11.03.2010, and the remaining 75% of the sale consideration was paid on 31.03.2010. The sale certificate was issued by the secured creditor on 10.04.2010.
f. The heirs of G. Ramanujam challenged the aforesaid demand notice before the Debts Recovery Tribunal, Chennai10[DRT] by applying under Section 17 of the SARFAESI Act (S.A. No. 28 of 2010). On 28.09.2010, the heirs of G. Ramanujam, including the appellant, further filed S.A. No. (Sr.No.6473 of 2010) seeking to set aside the auction sale, which was held on 11.03.2010 and confirmed in favour of the auction purchaser. During the pendency of the proceedings in S.A. (Sr. No. 6473 of 2010), the legal heirs, including the appellant herein, filed M.A.6504 of 2010 seeking permission to redeem the property; M.A.6505 of 2010 to condone the delay in filing the application No. 6473 of 2010
(1) Auction sale of secured asset – Validity of auction is not to be tested on equitable considerations but strictly on the touchstone of governing statutory regime.(2) Auction sale of secured asset ....
Mandatory compliance with procedural requirements under the SARFAESI Act is essential; failure to adhere prejudices borrowers' rights and invalidates auction proceedings.
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.
Order of the Tribunal it is not discernible as to whether any application for condonation of delay was filed or how the Tribunal dealt with the belated approach of the borrowers.
The auction sale of secured assets was invalid due to violations of statutory procedures, including failure to obtain separate valuations and selling below the reserve price.
Point of Law - Rule 15 of Schedule II Part I of the Income Tax Act, 1961, in the first place it will have to be stated that a reading of the said Rule does not in any way conflict with either Section....
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