Back
2025 Supreme(Online)(DRAT) 531
DEBT RECOVERY APPELLATE TRIBUNAL
MR. JUSTICE ANIL KUMAR SRIVASTAVA, CJ
Canara Bank, Guntur Branch – Appellant
Versus
M/s Sree Vijayasri Lakshmi Traders – Respondent
Appeal No. 03 of 2025 | S.A. No. 46 of 2019
For the Appellants/Petitioners: Ms. Aparajta Rao
For the Respondents: Mr. Nemani Srinivas
Failure to provide a 30-day notice under Rule 8(6) before auction renders the sale invalid, protecting the borrower's right of redemption.
Headnote:(A) SARFAESI Act, 2002 - Sections 13(2) and 13(8) - Security Interest (Enforcement) Rules, 2002 - Rules 8(6) and 9(1) - Challenge to e-auction sale - Borrower's rights of redemption - Court held that clear notice under Rule 8(6) is mandatory before sale, and failure to do so invalidates the auction process. (Paras 24, 32, 33)
(B) Rights of Borrower - The right to redeem is sacrosanct and cannot be infringed arbitrarily. The proper procedure outlined in the SARFAESI Act must be adhered to, reinforcing the objective of ensuring fair auction processes.
(C) Appeal - DRT proceedings subjected to appellate review reaffirm the standards must be maintained, and procedural errors in notice issuance necessitate dismissal of the appeal.
Result: Appeal dismissed with directives for refund to auction purchaser.
Certainly. Based on the provided legal document, the key points are as follows:
-
The core issue in this case revolves around the validity of the auction sale conducted by the secured creditor. The court emphasized that failure to issue a proper 30-day notice under Rule 8(6) before the auction renders the sale invalid, thereby safeguarding the borrower’s right of redemption (!) (!) .
-
The right of the borrower to redeem the secured asset is considered sacrosanct and must be protected by following the statutory procedures meticulously. Any procedural lapses, especially concerning notice issuance, can lead to the annulment of the auction process (!) (!) .
-
The law mandates that a clear and mandatory 30-day notice must be served on the borrower before any sale of immovable secured assets, and this requirement remains applicable even in the case of subsequent sales. The absence of such a notice invalidates the auction, and the procedure must be followed afresh (!) (!) (!) .
-
The court highlighted that the amended provisions of the relevant law restrict the right of redemption to the period before the publication of the sale notice. Once the notice is published, the borrower’s right to redeem is considered extinguished, unless procedural errors occurred in the notice process (!) (!) .
-
The order underscores that procedural compliance is fundamental to uphold the sanctity of the auction process. Any irregularity, especially in issuing the requisite notices, can lead to the annulment of the sale and the obligation to refund the auction amount with interest (!) (!) .
-
The court directed the refund of the auction amount to the purchaser with interest and ordered that possession of the secured asset be returned to the secured creditor upon receipt of the refund. The sale was quashed due to procedural violations, aligning with the principles of law that emphasize adherence to statutory procedures (!) .
-
The decision reaffirmed that the rights of the borrower, including the right to redemption, are protected by law and cannot be arbitrarily infringed upon by procedural shortcuts or violations. Compliance with statutory notice requirements is essential for the validity of the auction process (!) (!) .
-
The court also clarified that the procedural lapses in this case, particularly the absence of a fresh 30-day notice for the subsequent sale, necessitate the annulment of the auction and the consequent refund, emphasizing the importance of following the prescribed legal procedures for sale of secured assets (!) (!) .
-
The appeal was dismissed, and the directions included the refund of the amount with interest, along with the order to return possession of the assets, thereby reinforcing the principle that procedural correctness is vital for lawful enforcement of security interests (!) (!) .
-
Overall, the judgment underscores the importance of strict adherence to the statutory notice provisions, reaffirming that any deviation or procedural error invalidates the auction and protects the borrower’s rights under the law.
| Table of Content |
|---|
| 1. introduction of the case and procedural background. (Para 1 , 2 , 3) |
| 2. factual issues regarding auction notices and borrower rights. (Para 4 , 5 , 6 , 7) |
| 3. discussion on the necessity of 30-day notice compliance. (Para 8 , 9 , 10) |
| 4. court's decision on the invalidity of auction without proper notice. (Para 15 , 30) |
| 5. final determination on the appeal and refund order. (Para 32) |
JUDGMENT :
18th July, 2025 THE APPELLATE TRIBUNAL :
Heard the Learned Counsel for the Appellant as well as Learned Counsel for Respondent No. 3 and perused the records. Despite service none appeared for the Respondent No. 1.
2. Instant Appeal has arisen against a judgment and order dated 6th August, 2024 passed by Learned DRT Visakhapatnam in S.A. No. 46 of 2019 whereby Learned DRT allowed the Securitisation Application.
3. As per pleadings of the parties, a Securitisation Application u/s 17 (1) of the SARFAESI Act, 2002 was filed by the borrower challenging the E-auction Sale Notice dated 13th December, 2018 and the sale conducted on 29th January, 2019 with consequential reliefs that all the steps taken by the secured creditor under Securitisation Act are against law. The Securitisation Applicant was a borrower of the Appellant Bank herein whose payments of the instalment became irregular and account was classified as NPA on 01.11.2017. Notice under Section 13(2) of the SARFAESI Act, 2002 was issued on 16.11.2017. Notice under Rule 8(6) of the Security Interest (Enforcement) Rules, 2002 (hereinafter referred to as the Rules) was received by the Applicant on 07.06.2018 for E-auction sale on 23.07.2018. Thereafter, a notice under Rule 9(1) of the Rules was issued by the Bank on 05.09.2018 fixing the e-auction Sale on 12.12.2018. E-auction sale failed as there was no bidder. Subsequent thereto, fresh e-auction Sale Notice was issued on 13.12.2018 fixing the e-auction Sale on 29.01.2019. It was published on 23.12.2018. No notice under Rule 8(6) of the Rules was issued or served or published on the borrower. The Sale was finalized in favour of Respondent Nos. 2 and 3 for an amount of Rs. 1.33,44,000/- on 29.01.2019. In the meantime, proceedings under Section 14 of the SARFAESI Act were also carried out.
4. Feeling aggrieved a challenge to the e auction sale was made by the Applicant by filing a securitization Application under Section 17(1) of the Act.
5. Respondent Bank filed the reply before the DRT stating that the Securitisation action was taken in accordance with law. 30 days notice was already given to the borrower on 05.09.2018. Thereafter, e-auction Sale Notice was issued fixing the auction Sale on 29.01.2019 and the auction was conducted in favour of the Respondent Nos. 2 and 3 herein. It is further stated the Notices were duly served, published in accordance with law. The bid amount was duly deposited by the Auction Purchaser. Learned DRT after hearing the Learned Counsel for the parties recorded a finding that there is violation of Rule 8(6) and 9(1) of the Rules, 2002.
6. Learned DRT also placed reliance upon the judgment of CELIR LLP -vs- Bafna Motors (Mumbai) Private Limited & Others [(2024) 2 SCC 1] and Sri. Sai Annadhatha Polymers & Anr. Vs. Canara Bank rep. by its Branch Manager, Mandanapalle [2018 SCC OnLine Hyd 178]
7. Learned Counsel for the Appellant would submit that Learned DRT erred in recording the findings as there was compliance of Rule 8(6) and 9(1) of the Rules, 2002. It is further submitted that no fresh Rule 8(6) Notice was required to be issued. Learned Counsel for the Auction purchaser adopted the submissions made by the Learned Counsel for the Bank/ Appellant.
8. Only one issue is to be decided is about the validity of Notice under Rule 8(6) and 9(1) of the Rules?
9. The only controversy in this matter is on the issue as to whether in the case of subsequent sale fresh 30 days notice under Rule 8 (6) is required or not? Rules 8 (6) and 9 (1) of the Security Interest (Enforcement) Rules, 2002 are as under :
“8. Sale
