Under the second proviso to Rule 9(2) of the Security Interest (Enforcement) Rules, 2002, an Authorised Officer cannot confirm the sale of a secured asset at the reserve price unless the consent of the borrower and the secured creditor is obtained, in cases where no bid higher than the reserve price is received.

ORDER :

Ch. Manavendranath Roy, J.

Since these two writ petitions are filed challenging the legal validity of the orders of the Debts Recovery Appellate Tribunal at Kolkata, passed in Appeal No.149 of 2023 and Appeal No.122 of 2023 whereby the Appellate Tribunal has dismissed the appeals, preferred against the orders of the Debts Recovery Tribunal, Visakhapatnam, allowing S.A.No.212 of 2023 setting aside the sale of the secured asset by the bank, these two writ petitions are heard together and they are being disposed of by this common order.

2. W.P.No.28572 of 2025 is preferred by Union Bank of India, which is the secured creditor and W.P.No.27786 of 2025 is preferred by the auction purchaser against the orders of the Appellate Tribunal.

3. Heard Sri S.V.S.S. Siva Ram for M/s. CKR Associates, learned counsel for the petitioner in W.P.No.27786 of 2025, Sri S. Satyanarayana Moorthy, learned counsel for the respondents 1 and 2 and Smt. V. Dyumani, learned Standing Counsel for the 3^rd respondent-Union Bank of India.

4. When the Authorised Officer failed to obtain a price for sale of the secured asset in the public auction higher than the reserve price, whether the sale of the secured asset in the public auction can be confirmed at the reserve price without the consent of the borrower and the secured creditor is the seminal question of law that is involved in this lis for our adjudication in these writ petitions.

5. Brief overview of the facts leading to the lis in these writ petitions may be stated as follows:

(a) A partnership firm in the name and style “M/s. Best Sai Enterprises” (hereinafter called as “principal borrower”) has availed credit facility from Union Bank of India and they have offered their immovable property as security to the bank for repayment of the loan availed by the firm and mortgaged their immovable property in favour of the bank. Thereafter, the principal borrower committed default in repayment of the loan amount due to the bank. Therefore, the bank has initiated measures under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short, the SARFAESI Act) as per the procedure contemplated under law and brought the secured asset for sale in the public auction for recovery of the amount due from the principal borrower. A public notice was issued for sale of the secured asset in the public auction after obtaining valuation report as required under law and fixing the reserve price at Rs.3,48,00,000/-. Bid increment is Rs.3,00,000/-. The auction was held on 12-4-2023. Only one bidder has participated in the auction and the bid was held in his favour exactly for the reserve price fixed at Rs.3,48,00,000/-. Therefore, the sale was confirmed in his favour for the reserve price of Rs.3,48,00,000/- in respect of the secured asset. The secured asset is a school building. At the time of inspecting the said property by the valuer for the purpose of issuing valuation report, the property is classified as a residential property situate in a developed area.

(b) Thus, the Authorised Officer could not obtain a price more than the reserve price in the auction that was held. However, the sale was knocked down in favour of the sole bidder exactly at the reserve price.

(c) Therefore, the sale in the public auction was questioned on various grounds including on the main ground that when the Authorised Officer could not obtain a price more than the reserve price as per the second proviso to Rule 9(2) of the Security Interest (Enforcement) Rules, 2002, he has to confirm the sale only after obtaining the consent of the borrower and the secured creditor and as no such consent of the borrower as required under the second proviso to Rule 9(2) of the Rules to sell the secured asset in the public auction at the reserve price is obtained, the said confirmation of sale in favour of the auction purchaser in the public auction is not valid under law and thereby prayed to set aside the said sale.