The court upheld that the auction conducted under SARFAESI Act was valid, and the petitioner’s claim to clear the loan prior to auction lacked legal merit.

ORDER :

SUBBA REDDY SATTI, J.

The above writ petition has been filed to declare the action of respondent No.2 in not allowing the petitioner to clear the outstanding loan in respect of vehicle loan account No.39127412549; the letter dated 04.04.2024 and notice dated 20.06.2024 issued by respondent No.3 for transfer of ownership of the vehicle, without considering the petitioner’s reply dated 08.07.2024, as illegal and arbitrary.

2. Heard Ms. Priyanka, learned counsel for the petitioner; Sri Rasheed, learned Assistant Government Pleader for Transport, for respondents 1 and 3; Sri S. Satyanarayana Moorthy, learned standing counsel for respondent No.2 and Smt. Sodum Anvesha, learned counsel for respondent No.4.

3. Initially, the writ petition was filed against respondents 1 to 3. Respondent No.4, the auction purchaser, filed I.A.No.3 of 2024 to implead him as a party respondent to the writ petition. The I.A. was allowed on 20.12.2024, and accordingly, the auction purchaser came on record as respondent No.4.

4. The averments of the writ affidavit, in brief, are that the petitioner, after obtaining a loan of Rs.15,00,000/- from respondent No.2 bank, vide loan account No. 39127412549 purchased a vehicle bearing No.AP 39 EA 3699 under ‘hypothecation’. The petitioner made certain payments, and due to pandemic and drought conditions, the petitioner failed to pay the instalments regularly, and hence, the loan account was declared as ‘NPA’ on 01.04.2023.

The vehicle was taken possession of by the bank on 08.08.2023. A sale notice dated 27.02.2024 was issued proposing to conduct an auction on 11.03.2024. Respondent No.2 estimated the value of the vehicle at Rs.7,00,000/-. Challenging the said notice, dated 27.02.2024, the petitioner filed W.P.No.6223 of 2024. On the submission made by learned counsel for the petitioner that it was informed that the auction was not conducted on 11.03.2024, for want of bidders, the writ petition was closed, giving liberty to the petitioner to avail appropriate remedy, if a new cause of action arises.

b) The petitioner approached respondent No.2 with demand drafts, dated 04.03.2024, for Rs.7,00,000/-. Respondent No.2, without accepting the demand draft, is proceeding to conduct an auction. The petitioner made a representation on 03.04.2024, and respondent No.2 sent a reply on 04.04.2024, intimating the petitioner that the auction was conducted on 11.03.2024. However, the said reply was not communicated to the petitioner till notice, dated 30.06.2024 was issued by respondent No.3. Respondent No.3 issued notice under Form 37, calling upon the petitioner to surrender the certificate of registration. Aggrieved by the said action, the above writ petition is filed.

5. A counter affidavit was filed on behalf of respondent No.2. It was contended, inter alia, that the loan was sanctioned on 07.02.2020, and since the petitioner failed to pay the instalments regularly, the account was declared as NPA on 01.04.2023. An auction notice was issued on 27.02.2024, the auction was conducted on 11.03.2024 and knocked down for an amount of Rs. 7,05,000/-. The total due amount is Rs.9,84,924/-. The vehicle bearing No.AP 39 EA 3699 was involved in an accident in the year 2023 and was given for repairs. An amount of Rs.1,20,625/-, incurred to repair the vehicle, has not been paid, and the vehicle is in the custody of the KIA showroom. The officials of the bank informed the showroom about the auction, and the showroom management expressed no objection to handing over the vehicle if the bill is cleared.

b) Regarding W.P.No.6223 of 2024, and the order passed therein, it was contended that, on verification