Madras High Court Upholds Auction Sale of Lucky Footwear Components' Secured Assets

Court Dismisses Petition Challenging Auction on Grounds of Procedural Compliance and Absence of Substantial Prejudice  

The Madras High Court, in a significant ruling, dismissed the petition filed by M/s. Lucky Footwear Components challenging the auction sale of their secured assets by the Indian Bank. The Division Bench, comprising Chief Justice Manindra Mohan Shrivastava and Justice G. Arul Murugan, delivered the judgment on October 29, 2025, underlining the court's limited scope of interference in auction sales unless substantial procedural errors or prejudice is demonstrated.

The case revolved around the auction of properties under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act), following the petitioners' default in repaying loans. The petitioners, represented by Senior Counsel Mr. N. Muralikumaran, argued defects in the sale notice, improper property description, and outdated valuation reports. They contended that their account was wrongfully classified as a Non-Performing Asset (NPA), depriving them of additional loan facilities during the COVID-19 period.

The court meticulously examined the objections raised by the petitioners. It found that the sale notice complied with the required 15-day period for subsequent sales as stipulated under Rule 9 of the Security Interest (Enforcement) Rules, 2002. The bench noted that the auction was conducted based on a valuation report from an approved valuer under the Wealth-Tax Act, dismissing claims of inadequate property description and outdated valuation.

Furthermore, the court highlighted the absence of any substantial procedural error or prejudice against the petitioners, emphasizing that objections regarding NPA classification and additional loan facilities were not raised at the appropriate stages before the Debt Recovery Tribunal. The judgment cited the Supreme Court's ruling in Celir LLP v. Mr. Sumati Prasad Bafna, reinforcing that auctions confirmed should not be set aside on mere technical grounds without demonstrating substantial prejudice.

The court's decision underscores the principle that judicial review in auction sales under SARFAESI Act is limited and should not interfere unless fundamental errors or substantial prejudice are evident. The petition was dismissed, and the interim application closed, with no order as to costs.

Bottom Line:

Article 227 of the Constitution of India - Petition challenging auction sale of secured assets under SARFAESI Act dismissed - Court cannot act as an appellate authority to re-appreciate evidence on record - Absence of fundamental procedural error or substantial prejudice does not warrant interference.

Statutory provision(s): Article 227 of the Constitution of India, SARFAESI Act, 2002 Sections 13(2), 13(3A), 13(4), Rule 9 of Security Interest (Enforcement) Rules, 2002, Wealth-Tax Act, 1957 Section 34AB.

Lucky Footwear Components v. Authorized Officer, Indian Bank, (Madras)(DB) : Law Finder Doc Id # 2804556