Back
2025 Supreme(Telangana) 1359
IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD
MOUSHUMI BHATTACHARYA, B.R. MADHUSUDHAN RAO, JJ.
M/s Classic Chemicals Limited - Petitioner
Versus
Debts Recovery Appellate Tribunal and others – Respondents
WP. Nos.4623 and 4373 of 2025
Decided On : 16-06-2025
Sri Raghu Gurram, Sri N. Meher Prasad, Sri S.Lohit, Ms. Jhansi representing Gadi Praveen Kumar, Deputy Solicitor General of India, Sri S. Lohit.
The auction sale was invalid due to the bank's acceptance of cheque payments contrary to auction terms, constituting a procedural irregularity.
Headnote:(A) The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - Rule 9(3) and Rule 9(4) - The validity of the auction sale conducted on 22.03.2013 was challenged, focusing on procedural compliance regarding payment terms. The bank accepted cheque payment contrary to auction terms, thus vitiating the sale process. The controversy involved a claim by an auction purchaser against a debtor over compliance with statutory auction procedures. The court examined whether there was a procedural irregularity that warranted the nullification of the sale. (Paras 16-17, 37)
Findings of Court:
The court held that the auction sale was conducted in blatant contravention of Rule 9(3) and Rule 9(4) of the Rules, therefore, the auction proceedings were rendered invalid.
Issues: Whether there was any illegality or perversity in the order passed by the DRAT regarding auction validity?
Ratio Decidendi: The court ruled that deviations from statutory requirements impacting the rights of parties cannot be overlooked, thereby invalidating the auction sale.
Result: Writ petitions dismissed.
ORDER :
B.R. Madhusudhan Rao, J.
WP.No.4623 of 2025
1. This Writ Petition is filed by the auction purchaser (M/S Classic Chemicals Limited) in the nature of Writ of Certiorari for setting aside the impugned order, dated 10.01.2025 passed by the Debts Recovery Appellate Tribunal (DRAT) at Kolkata in Appeal No.29 of 2021 and to quash the same, confirm the auction sale conducted on 22.03.2013 as valid and in accordance with The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short ‘the SARFAESI Act, 2002’) and the Rules made thereunder.
WP.No.4373 of 2025
2. This Writ Petition is filed by State Bank of India, Stressed Assets Management Branch, Hyderabad to issue a Writ in the nature of Writ of Certiorari and to call for the records of the order dated 10.01.2025 passed by the Debts Recovery Appellate Tribunal (DRAT), Kolkata in Appeal No.56 of 2022 against the order dated 05.03.2021 made in S.A.No.1115 of 2017 passed by the DRT-II, Hyderabad contrary to the provisions of the SARFAESI Act, 2002 and to set aside the same.
3.1 Learned counsel for auction purchaser in W.P.No.4623 of 2025 submits that on 14.02.2013 respondent No.2-Bank has issued e-auction sale notice. On 15.02.2013 e-auction was published in news paper. On 15.03.2013, the auction purchaser has remitted Earnest Money Deposit (EMD) of Rs.51,50,000/- by RTGS. On 22.03.2013, the petitioner was declared as highest bidder at Rs.5,16,00,000/-. On 22.03.2013, a cheque for Rs.77,50,000/- towards 25% of the sale consideration was deposited with the Bank as per Rule 9(3) of the Security Interest (Enforcement) Rules, 2002 (hereinafter referred to as ‘the Rules, 2002’).
3.2 The deposit of cheque towards 25% of sale consideration is not contrary to Rule 9(3) of the 2002 Rules. As can be seen from the terms and conditions of the e-auction notice at clause-10 which specifies that the cheque will not be accepted for EMD. This presupposes that a cheque is a bar only to the extent of EMD. Bank has accepted the payment of EMD and 25% of sale consideration by mode of cheque payment cannot be said as irrational or arbitrary or malafide.
3.3 Rule 9(3) and Rule 9(4) of the Rules, 2002, borrower has waived his rights under the said provision.
3.4 Learned DRT-II, Hyderabad has erroneously observed in its order dated 05.03.2021 that after remand, no additional reply has been filed by the auction purchaser and further incorrectly stated that the auction purchaser merely adduced oral evidence to speak of various amounts spent by him towards improvement made over the schedule property. After remand by the DRAT, Kolkata in Appeal Nos.188 and 191 of 2018, the auction purchaser has filed his counter affidavit along with chief-examination affidavit of RW.1, RW.2. The borrower did not cross-examine RW.1 and RW.2 which amounts to a deemed admission of the contents of their testimonies and their documents placed on record.
3.5. DRAT, Kolkata in its order dated 10.01.2025 in Appeal No.29 of 2021 erroneously held that no plea of spending Rs.13,29,48,643/- was taken in the pleadings. Counsel to substantiate his contention has relied on the decisions in the cases of (1) Varimadugu Obi Reddy Vs. B.Sreenivasulu & Others, [ (2023) 2 SCC 168 ], (2) General Manager, Sri Siddeshwara Cooperative Bank Limited Vs. Ikbal & Others, [ (2013) 10 SCC 83 ], (3) Arun Kumar Jain & Others Vs. Presiding Officer, DRT & Ors., [2023 SCC OnLine All 703], (4) Pahwa Buildtech Pvt. Ltd. Vs. Jagmohan Singh Arora & Ors., [(2022) 3 High Court Cases (Del) 482], (5) Sanjay Sharma Vs. Kotak Mahindra Bank Ltd. & Ors., SLP (Civil) No.330 of 2017 of Supreme Court of India dated 10.10.2024. (6) K.Sahaja Rao Vs. Assistant General Manager, SBI & Ors., 2013 SCC OnLine TS 635, (7) Poddar Steel Corporation Vs. Ganesh Engineering Works & Ors., (1991) 3 SCC 273 .
4.1 Learned counsel for the petitioner in WP.No.4373 of 2025 (State Bank of India) submits that the petitioner is a secured creditor and there
