The DRT cannot validate an auction sale without hearing the objections of the parties and violating principles of natural justice.

JUDGMENT

U. Durga Prasad Rao, J. - The challenge in this writ petition at the instance of petitioners / borrowers is the following order dated 24.09.2021 in S.A.No.227/2018 passed by the Presiding Officer, Debts Recovery Tribunal, Visakhapatnam (for short, the DRT, VSP'):

'Therefore, considering the facts and circumstances of the case and in view of the Not Press Memo filed by the applicant to settle the matter under OTS, the present SA No.227 of 2018 along with IA.972/2018 is dismissed as not pressed and the applicant is at liberty to approach the respondent bank for settlement of the loan account under OTS and the respondent bank may accept the OTS proposal in accordance with its guidelines to settle the accounts with respect to other properties except item No.1 of schedule mentioned property because it is sold to auction purchaser in e-auction conducted by the respondent bank on 1.12.2018. However, since the bank has conducted e-auction on 1.12.2018 wherein M/s. Heritage Foods Limited has become successful bidder in respect of item No.1 of the SA schedule property and in view of dismissal of SA.227/2018 and IA.972/2018 (stay petition), the respondent bank can take steps to register the item No.1 of the SA schedule property in favour of M/s. Heritage Foods Limited, who is auction purchaser in the auction conducted on 1.12.2018 immediately by receiving the balance of 75% bid amount.

Accordingly, the SA No.227/2018 and IA.972/2018 is dismissed, as not pressed with the above said observation.'

2. The petitioners' case succinctly is thus:

(a) The 1st petitioner company to which the 2nd petitioner is the Managing Director, engaged in manufacturing water proofing membranes and allied products. In the year 2014, the petitioners availed loan facility from the 1st respondent bank. Due to delay in payments, the respondent bank declared the loan account of the petitioners as NPA and issued demand notice under Section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short, 'the SARFAESI Act') on 17.08.2017. The petitioners submitted a reply dated 09.10.2017 requesting the bank to continue the operation of the petitioners' account and reschedule the loan to enable them to discharge the loan. They also represented that the petitioner company comes under the MSME and SSI unit under the RBI guidelines. However, the bank failed to follow the procedure contemplated under Section 13(3)(a) of the SARFAESI Act and proceeded in the matter and issued possession notice dated 20.04.2018 claiming symbolic possession of the properties which was neither served on the petitioners nor affixed on a conspicuous place.

(b) In the above circumstances, the petitioners file SA 227/2018 before the DRT, VSP challenging the demand notice dated 17.08.2017 and possession notice dated 20.04.2018. Along with SA, the petitioners have also filed I.A.No.972/2018 seeking stay of all further proceedings including sale of the property. However, the DRT has not passed any orders in the stay application, but kept the petition pending. Taking advantage of it, the bank proceeded further and issued sale notice fixing the date of auction of the mortgage properties on 01.12.2018 while the I.A.972/2018 stood posted to 06.12.2018 for hearing. Therefore, the petitioners filed I.A.No.2186/2018 to advance the stay application and to grant interim orders. The said application was posted to 03.12.2018 in spite of the fact that the sale was scheduled on 01.12.2018. Hence, the petitioners filed W.P.No.43745/2018 in the High Court of A.P. challenging the inaction of the DRT, VSP. In the said writ petition, an order was passed on 03.12.2018 directing notice to the parties and not to confirm the sale which took place on 01.12.2018. The bank having received notice appeared and writ petition was disposed of by order dated 02.12.2019, wherein the High Court of A.P. was pleased to direct the DRT, VSP to dispose of I.A.No.972/2018 ex