Summary
A bank auctioned a mortgaged house in Anantapur under the SARFAESI Act in March 2015 for Rs 64.23 lakh. The Debts Recovery Tribunal had allowed the auction and given the borrowers time to deposit Rs 6 lakh, which they never paid. The buyer paid the balance 75% four days late, at the bank's request while the borrowers negotiated. The Tribunal upheld the sale, but in a writ petition the Telangana High Court set it aside for breach of Rule 9(4) and because the door number appeared as '12-3-393' instead of '12-3-39'. The Supreme Court restored the sale. The borrowers had bypassed the Section 18 appeal, apparently to avoid its pre-deposit. The door-number slip caused no prejudice when the property was otherwise fully described. The unamended fifteen-day period in Rule 9(4) is not sacrosanct, and the short delay arose amid the borrowers' own litigation.
Issues
- Whether the High Court should have entertained a writ petition against a DRT order appealable under Section 18 of the SARFAESI Act.
- Whether a typographical error in the door number of the auctioned property and a four-day delay in depositing the balance price under Rule 9(4) vitiated the auction sale.
Provisions considered
- Sections 17 and 18, Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002Where an effective statutory appeal exists, the High Court should insist on its exhaustion before entertaining an Article 226 petition (Satyawati Tondon); bypassing the appeal avoided the pre-deposit under the second proviso to Section 18. (¶¶ 32, 33, 34)
- Rule 9(4) and (5) (pre-2016), Security Interest (Enforcement) Rules, 2002The fifteen-day period for paying the balance price could be extended by written agreement and was not sacrosanct (Sri Siddeshwara Cooperative Bank); the 2016 amendment fixing a three-month outer limit did not apply to a 2015 auction. (¶¶ 38, 39, 40, 41)
Held
- The High Court should not have entertained the borrowers' writ petition against an appealable order of the Tribunal; this circuitous route to avoid the pre-deposit condition is deprecated. (¶¶ 32, 34)
- The door number had been misstated from the Section 13(2) notice onwards, no property bearing that number existed, the boundaries and measurements were correct, and no prejudice or effect on price was shown; the inadvertent error does not vitiate the auction. (¶¶ 36, 37)
- Though there was no written tripartite consent, the four-day delay occurred while the borrowers' Tribunal proceedings created a state of flux and at the bank's request; it did not frustrate the sale, especially given the borrowers' repeated failure to deposit Rs 6 lakh. (¶¶ 42, 43, 44, 45)
Result
Civil Appeal No. 8470 of 2022 allowed; the Telangana High Court judgment dated 20.11.2019 in Writ Petition No. 17702 of 2019 set aside and the sale restored; the surplus of Rs 16,30,000 with accrued interest (about Rs 18.80 lakh) to be paid to the borrowers/guarantor within eight weeks; no costs.