The auction sale is invalid if not compliant with SARFAESI Act rules on property valuation, requiring distinct treatment of movable and immovable assets without collusion.

JUDGMENT :

Nitin Jamdar, C.J.

These two appeals are filed by the Creditor Bank and the Auction Purchaser challenging the judgment of the learned Single Judge by which the writ petition filed by the Borrower was allowed setting aside the orders passed by the Debt Recovery Tribunal and Debt Recovery Appellate Tribunal, and the sale of the secured assets.

2. W.A. No. 2124 of 2024 is filed by the Creditors, the Authorised Officer and the Deputy General Manager of the State Bank of India, (hereinafter referred to as 'the Bank'), and W.A. No. 2005 of 2024 is filed by the Auction Purchaser, M/s. Everspace Realty LLP., (hereinafter referred to as 'the Auction Purchaser').

3. These Appeals are against the judgment of the learned Single Judge dated 19 November 2024 in W.P.(C) No.23464 of 2024 filed by M/s. Vasu Coco Resorts Pvt. Ltd., and its Managing Director (hereinafter referred to as ‘the Borrower’). The learned Single Judge set aside the proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act, 2002) against the Borrower, which was confirmed in S.A. No.530 of 2022 of the Debt Recovery Tribunal, Ernakulam and affirmed in R.A.(SA) No.49 of 2023 of the Debt Recovery Appellate Tribunal, Chennai.

4. The Borrower is a private limited company. It approached the erstwhile State Bank of Travancore for financial assistance to construct and run a five star resort at Cherthala in Alappuzha District under the name and style “Vasundhara Resorts”. The State Bank of Travancore later merged with the State Bank of India, the Bank. The Borrower defaulted in repayment of the loan and the account was classified as a Non-Performing Asset (NPA). On 12 February 2018, a demand notice for a sum of Rs.55,02,30,564/- was issued under Section 13(2) of the SARFAESI Act, 2002, and it was recalled after the Borrower submitted objections. Again, a notice was issued on 18 August 2020 demanding a sum of Rs.72,13,29,826.37. The Bank withdrew that notice also on the basis of the objection submitted by the Borrower. On 7 December 2021, another demand notice for a total sum of Rs.82,76,71,281.45 was issued and the Borrower raised objection through a representation dated 10 February 2022. The Bank initiated measures under Section 13(4) of the SARFAESI Act, 2002 and the symbolic possession of the secured assets was taken on 6 July 2022.

5. On 15 September 2022, sale notice was published by the Bank proposing to conduct an e-auction of the properties described in the demand notice. Fresh sale notice was issued on 29 October 2022 as the sale could not be conducted pursuant to the notice dated 15 September 2022. The Bank also approached the Chief Judicial Magistrate, Alappuzha, seeking assistance to take over physical possession of the secured assets. Sale was conducted on 30 November 2022 and the Auction Purchaser became the successful bidder. The Auction Purchaser has deposited the entire sale consideration. The Borrower has deposited an amount of Rs.50 Crores pursuant to the order of the Hon’ble Supreme Court and statuo quo is maintained by which the Borrower is in possession.

6. There were several proceedings between the parties, however, for the purpose of this judgment, we will refer only to those which are directly relevant.

7. The Borrower instituted S.A. No.530 of 2022 under Section 17 of the SARFAESI Act, 2002 challenging the possession notice and later amended it to challenge