The principle of finality in court-confirmed auction sales is not absolute. Judicial authorities retain the power to mandate a re-valuation of property when the fairness of the reserve price or the adequacy of the valuation process is challenged, ensuring transparency and maximum realization of value for the assets.

Headnote:(A) Recovery of Debts and Bankruptcy - Auction proceedings - Finality of court-confirmed sales - Scope of judicial review regarding valuation - The principle of finality attached to court-confirmed auction sales is not absolute; it cannot shield the process from judicial examination where credible issues are raised regarding the adequacy of valuation or the fairness of the reserve price. The objective of recovery proceedings is to realize the maximum value of secured assets to balance the interests of creditors and debtors. (Paras 15, 18)

(B) Auction - Competitive bidding - Remand of matter - When the process of competitive bidding is curtailed or compromised, the court is empowered to exercise its discretion to ensure the fairness of the outcome. A limited remand for re-valuation, without setting aside the entire recovery process, represents a balanced exercise of jurisdiction to uphold transparency in public auction mechanisms. (Paras 15, 17, 20)

Facts of the case:
The appeal originated from an auction sale of secured properties conducted by a recovery authority. Although the auction was concluded, the sale was confirmed, and a certificate was issued, the appellate court directed a fresh valuation of the properties due to concerns over the adequacy of the original valuation. The auction purchaser challenged this limited remand, contending that the auction sale had already attained finality and should not be disturbed.

Findings of Court:
The court held that the high constitutional courts possess the supervisory power to address concerns regarding the transparency and adequacy of the valuation process, even after a sale has been confirmed. A targeted remand for re-valuation serves the interest of justice and protects the integrity of the auction process without necessarily invalidating the underlying sale if the process otherwise stands the test of legality.

Issues: Whether a judicial authority is precluded from ordering the re-valuation of property in an auction sale after the sale has been confirmed and the certificate has been issued.

Ratio Decidendi: The court affirmed that the protection afforded to a bona fide auction purchaser is not absolute when the valuation itself is under challenge. Judicial discretion allows for the reassessment of the reserve price and valuation process to ensure that the recovery proceeds represent the fair market value of the assets, thereby preventing potential underbidding or unfair practices.

Result: Appeal dismissed.

Leave granted.

2. This Civil Appeal has been filed against the judgment and order dated 06.02.2020 passed by the High Court of Judicature at Madras, (1 Hereinafter referred to as “the High Court”) in W.P. No. 33872 of 2017, whereby the High Court upheld the conclusion arrived at by the Debts Recovery Tribunal-I, (2 For short, “the DRT”), Chennai and Debts Recovery Appellate Tribunal, (3 For short, “the DRAT”), Chennai, while remitting the case to the DRT for reconsideration of the valuation of Schedule A to E properties in the recovery proceedings, and accordingly disposed of the writ petition. The High Court further observed that in the event the properties were found to have been sold for a lower value than their actual worth, the appellant herein may be directed to make good the difference.

3. This Court by order dated 18.02.2022 granted an order of stay on implementation of the directions issued in paragraph no.166 of the impugned judgment.

4. During the pendency of this appeal, Respondent No. 9 who was Respondent No. 4 in the writ petition died and his legal representatives were brought on record as 9.1 to 9.4 vide order dated 04.03.2024 and cause title was accordingly amended. Despite service of notice, none appeared on behalf of Respondent Nos.9.1 to 9.4, 10 to 13 and 15 to 17.

5. The necessary facts leading to the filing of the present appeal are as follows:

5.1. The appellant is the purchaser of Schedule A to E properties sold through an auction conducted by the Recovery Officer on 29.10.2010 pursuant to the order dated 27.01.2010 passed by the DRT, Chennai in O.A. No. 536 of 1998.

5.2. The aforementioned writ petition bearing No. 33872 of 2017 was filed by Respondent Nos. 1 to 5 (Guarantors) before the High Court to quash the order dated 24.10.2017 passed by the DRAT, Chennai in R.A. No. 59 of 2012, and further set aside the order dated 12.01.2010 passed by the DRT, Chennai, in O.A. No.536 of 1998 and the auction proceedings initiated by the Recovery Officer, pursuant to the same.

5.3. Originally, Respondent No. 6, Indian Bank, Pondicherry, entered into an agreement dated 30.11.1992 with Respondent No. 7 for 'at par facility' in respect of the cheques issued by them on the guarantee that Respondent No. 7 would maintain a cushion fund at all times during the subsistence of the agreement with the bank. However, Respondent No. 7 was irregular in maintaining the cushion funds without following the conditions of the agreement. In many instances there was a shortfall of funds in the account of Respondent No. 7 to honour the cheques. Even so, the bank continued to honour the cheques presented.

5.4. Respondent Nos. 3 and 4 represented by the power of attorney holder / Respondent No. 1 as Document No. 1574 of 1994 dated 26.10.1994 created an equitable mortgage by depositing title deeds of Schedule A, B and C properties measuring 12572 sq.ft. situated in Kambuliswamy Madam Street, Pakkamudayanpet Village, Oulgaret Commune as security for the shortfall of 'at par facility' enjoyed by Respondent No. 7. Similarly, Schedule D and E Properties were also deposited for the shortfall. The bank insisted Respondent No. 7 to make payment of the shortfall arising from the presentation of the cheques issued by them and accordingly sent a legal notice on 31.01.1998 to Respondent No. 7 and others. When Respondent No. 7 failed to repay the amount, the bank filed O.A. No. 536 of 1998 before the DRT, Chennai praying inter alia to recover a sum of Rs. 45,66,923.83 as outstanding balance as on 10.02.1998 and direct to pay interest at 20.91% p.a. with quarterly rests from the date of filing of the application till realisation.

5.5. The DRT, Chennai passed a final order on 12.01.2010 in O.A. No. 536 of 1998 inter alia holding that the bank was entitled for a Recovery Certificate against Respondent Nos. 1 to 5 and 7 to 13, jointly and severally for a sum of Rs. 45,68,923.83 at 10% per annum simple interest from 10.02.1998 till realisation along with

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2026 Supreme(Online)(SC) 645

2026 INSC 237 IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 3362 OF 2026[Arising out of SLP (C) No. 2122 of 2022] OM SAKTHI SEKAR … APPELLANT(S)VERSUSV. SUKUMAR & ORS. … RESPONDENT(S) J U D G M E N T R. MAHADEVAN, J.

Cases Referred (6)

2026 INSC 237

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 3362 OF 2026
[Arising out of SLP (C) No. 2122 of 2022]

OM SAKTHI SEKAR … APPELLANT(S)
VERSUS
V. SUKUMAR & ORS. … RESPONDENT(S)

J U D G M E N T

R. MAHADEVAN, J.