Court sets aside DRAT order, affirms compliance with SARFAESI Act and Security Interest Rules by Bank of India
In a significant judgment, the Telangana High Court has upheld an auction sale conducted by the Bank of India, dismissing the Debts Recovery Appellate Tribunal's (DRAT) decision to set aside the auction due to alleged procedural violations. The court ruled that the bank adhered to the mandatory provisions of the SARFAESI Act, 2002, and the Security Interest (Enforcement) Rules, 2002, ensuring a transparent and lawful auction process.
The case arose when borrower Srikanth Reddy Kasu challenged the auction of his property, conducted by the bank following a loan default. The borrower contended that the bank failed to maintain the mandatory 30-day gap between the notice of sale and the auction date as required under Rules 8(6) and 9(1) of the Security Interest Rules. The DRAT had previously ruled in favor of the borrower, citing this alleged non-compliance.
However, the High Court bench, comprising Justices Moushumi Bhattacharya and Gadi Praveen Kumar, rejected the DRAT's interpretation, affirming that the statutory requirements were met. The court clarified that the 30-day period should be calculated from the latest date among the service, publication, or affixture of the sale notice, which was duly complied with in this case. The auction notice was served on May 25, 2022, and the auction took place on June 27, 2022, maintaining the required gap.
The court also dismissed the borrower's claims regarding the right of redemption, stating that such rights are extinguished once the sale notice is issued and published. The court emphasized the rights of bona fide auction purchasers, underscoring that they should not be undermined when the auction adheres to legal standards.
This ruling reinforces the importance of adherence to statutory timelines and procedures in auction sales under the SARFAESI Act, providing clarity on the interpretation of relevant rules. The decision is expected to have significant implications for similar cases involving auction sales and loan defaults.
Bottom line:-
Compliance with mandatory provisions of Rules 8(6) and 9(1) of the Security Interest (Enforcement) Rules, 2002, and Sections 13(2), 13(3A), 13(4) of the SARFAESI Act, 2002, is crucial for validating an auction sale.
Statutory provision(s): Sections 13(2), 13(3A), 13(4), 13(8) of the SARFAESI Act, 2002, Rules 8(6), 9(1) of the Security Interest (Enforcement) Rules, 2002
Sri Jagan Mohan Pyrasani v. Sri Srikanth Reddy Kasu, (Telangana)(DB) : Law Finder Doc id # 2899748
