Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2025 Supreme(Online)(DRAT) 161

DEBT RECOVERY APPELLATE TRIBUNAL
MR. JUSTICE ANIL KUMAR SRIVASTAVA, CJ
Indian Bank, represented by its Chief Manager/Authorized Officer – Appellant
Versus
M/s. Pragna Industries, Sole Proprietor: Mr. C.V. Nagaraju – Respondent
Debts Recovery Appellate Tribunal at Kolkata (Camp-Hyderabad) Appeal No. 47 of 2021 (Arising out of S.A. 81 of 2018 & R.A. 02 of 2020)

Advocates:
For the Appellants/Petitioners: Mr. Debasish Chakrabarti
For the Respondents: Mr. V.V. Ramanna, Mr. Randhir Singh

Procedural violations in auction processes under SARFAESI Act necessitate adherence to natural justice principles, warranting remands for proper hearings.

Headnote:(A) SARFAESI Act, 2002 - Sections 13(2) and 13(4) - Action against loan default - Appeal allowed, and matter remanded for fresh decision due to violations in auction proceedings under Rule 8(5) and principles of natural justice not being followed. (Paras 6, 8, 10)

(B) Principles of Natural Justice - Right to rebut evidence - Respondents entitled to challenge the additional evidence introduced by the Bank before the DRT, necessitating a remand for fair adjudication. (Para 10)

Facts of the case:
The Respondents defaulted on a loan secured through equitable mortgage, leading to auction proceedings undertaken by the Bank, which were contested for procedural violations.

Findings of Court:
Violation of auction rules noted; need for proper opportunity to respond to additional evidence highlighted, leading to the remand for reassessment by DRT.

Issues: Whether the bank's auction process adhered to legal requirements and whether the Respondents were afforded proper hearing rights regarding the additional evidence.

Ratio Decidendi: Court emphasized the necessity of complying with procedural safeguards and principles of natural justice in enforcement actions arising from loan defaults.

Result: Appeal allowed and matter remanded.

Table of Content
1. commencement of appeal against drt judgment. (Para 1 , 2 , 3)
2. loan default leads to auction and procedural disputes. (Para 4 , 5)
3. violation of auction rules acknowledged. (Para 6)
4. right of respondents to challenge evidence in drt. (Para 7 , 8 , 9)
5. court remands for fair proceedings and adherence to natural justice. (Para 10)

1. The instant Appeal has arisen against the judgment and order dated 10.01.2020 passed by Learned DRT, Hyderabad in S.A. 81 of 2018 & R.A. 02 of 2020.

2. Feeling aggrieved, Appellants preferred the appeal.

3. I have heard Learned Counsel for Appellants, as well as the Respondent and Learned Counsel for the auction purchaser and perused the records.

4. As far as the facts of the matter are concerned, Securitization Appellants who are Respondents No.1 to 4 in this appeal filed application under Section 17 of the SARFAESI Act, 2002 stating that they have taken the OCC loan facility of Rs.24.00 lakhs from the Appellant bank by creating the equitable mortgage. Loan could not be repaid as per the terms and conditions and accordingly the loan account was classified as NPA on 19.04.2014. Subsequently notices under section 13(2) and 13(4) of the SARFAESI Act, 2002 are issued on 21.04.2014 and 28.06.2014 respectively. Auction Notice dated 30.07.2014 was issued and published on 02.08.2014. Thereafter, secured assets were auctioned in violation of Rule 8(5), 8(6) and 9(1) of Rules, 2002. Securitization application was filed challenging the action of the Bank.

5. Bank filed opposition stating that due procedure has been followed. Notices under section 13(2) and 13(4) were duly issued and served and they were also affixed and published in accordance with law. The conditional interim orders were obtained by the securitization Applicants which were not complied. Thereafter, auction notice was issued and secured assets were auctioned after obtaining the valuation report. Property was auctioned in favour of the auction purchaser. The auction purchasers also filed opposition before the DRT adopting the statement made by the Bank.

6. Learned DRT, Hyderabad passed the impugned judgment holding that there is violation of Rule 8(5) Security Interest (Enforcement) Rules, 2002. Further it was held that conditional orders passed by the DRT were not complied by the Securitization Applicants, however, Rule 8(6) and 9(1) of Rules, 2002 were complied with. However, Learned DRT has arrived to a conclusion that valuation reports have not been filed by the Appellant Bank and accordingly, S.A. is allowed.

7. In the Appeal, an application, filed under Order 41 Rule 27 of C.P.C., was allowed and the valuation reports filed by the Bank are taken on record. Learned Counsel for the Appellant Bank submits that since the valuation reports have already been taken on record, now the findings recorded by the Learned DRT, Hyderabad are liable to be quashed.

8. Per contra the Learned Counsel for Respondents No.1 to 4 submits that the Respondents have a right to rebut the evidence submitted by the bank which is alleged to be a fabricated document. In the findings recorded by the Learned DRT, as far as violation of Rule 8(5) of Rules, 2002 is concerned; it is in accordance with law. It is further submitted that Respondents No. 1 to 4 have also filed a cross appeal in the matter wherein findings recorded against the Appellants/Securitization Applicants are under challenge.

9. Learned Counsel for Respondents No.5 & 6 submits that the auction purchasers have already paid the entire amount and sale certificate has been issued in their favour. However, the possession is yet not been handed over to them.

10. Additional Evidence, in the form of valuation report, is already taken on record. Principles of natural justice require that an opportunity of hearing and of rebutting the evidence filed by the bank should be given to Respondents No. 1 to 4 which could be done at the level of DRT. Respondents No.1 to 4 have a right to rebut the additio

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