An e-auction sale conducted under the SARFAESI Act is void if the authorized officer fails to record written consultation regarding reserve price valuation below distress levels, ignores mandatory notice requirements under Rule 8(6), or auctions an entire property when partial sale would satisfy the secured debt.

THE APPELLATE TRIBUNAL :

Instant appeal No. 103 of 2024 has arisen against the judgement and order dated 23.07.2024 passed by learned DRT-II Hyderabad allowing the S.A. 165 of 2020.

2. As per pleadings of the parties securitization application u/s 17 of the SARFAESI Act, 2002 (hereinafter referred to as Act) was filed by the respondent no.1, herein, Mr. Killamsetty Venkata Prasad Rao, challenging the measures initiated by the bank including e-auction held on 22.03.2021 pursuant to the sale notice published on 05.03.2021. Securitization applicant was a borrower of the appellant bank, who availed Housing Loan of Rs.04.70 lakhs in the year 2002 and Rs.24.00 lakhs in 2016 by creating equitable mortgage of the schedule property. It is stated that certain wrong entries were created in the statement account wherein certain amounts were paid, but the bank did not, despite assurances, rectify the entries. No Notice u/s 13(2) and 13(4) of the Act was served upon the securitization applicant. Notice under Rule 8(1) and 8(2) of Security Interest (Enforcement) Rules, 2002 (hereinafter referred to as Rules) were neither affixed nor published in accordance with law. There is also violation of Rule 8(6) of Rules since 30 days time limit was not given. Property was undervalued violating Rule 8(5) and 8(7) of the Rules.

3. Bank filed objection before the learned DRT stating that applicant is a borrower of the bank who had availed Housing Loan, additional housing loan and Top-up loan of Rs.4.70 lakhs, Rs.50,000/- and 24.00 lakhs respectively. Equitable mortgage was created by the borrower. Applicant’s daughter is a co-borrower. There is default in repayment of the loan amount. Accordingly, loan account was classified as NPA. Demand Notice u/s 13(2) dated 02.11.2019 was served upon the applicant. Thereafter, notice u/s 13(4) of the Act was issued on 10.03.2020 which was returned unserved with a remark “unclaimed”. The same was published in ‘The New Indian Express’ and ‘The Nava Telangana’ on 15.03.2020 and also affixed on the secured asset. Earlier, e-auctions were held on 11.11.2020, 30.12.2020, 10.02.2021 and 05.03.2021, but all the attempts got frustrated for want of bidder. Fresh e-auction sale notice was issued fixing auction date on 22.03.2021 and was published in ‘The Hans India’ and ‘The Mana Telangana’ on 05.03.2021. The same was also affixed on the secured asset. The sale notice also sent to the applicant. One Dasari Sunil was the highest bidder in the auction held on 22.03.2021 for an amount of Rs.1.04 crore. 25% of the bid amount was paid. Auction sale was confirmed on 23.03.2021. Time for payment of 75% of the bid amount was extended. Valuation report was also obtained before the e-auction sale. Surplus sale proceeds were deposited in the loan account of the borrower.

4. I.A. 1988 of 2023 was filed by the securitization applicant praying for a direction upon the respondent bank to accept the entire outstanding amount due in the loan account on the ground that he is ready with the outstanding amount for re-payment, since the sale certificate has not yet been released and his right of redemption is still available.

5. Per contra, respondent bank filed the objection stating that the judgement of the Hon’ble High Court at Telangana in Amme Srisailam Vs. Union Bank of India [2022 SCC OnLine AP 3484] was set aside by the Hon’ble Supreme Court in Celir LLP Vs. Bafna Motors (Mumbai) Pvt Ltd. & Ors. [(2024)2 SCC 1] holding that the right of redemption of the bor