Allowed

Thamminedi Gangadhar Rao v. Union Bank of India

DRT31 Jul 2026SA/205/2022

Case brief

AI extract

What is this about?

The Debts Recovery Tribunal allowed an application challenging an auction sale under the SARFAESI Act. The Tribunal held the sale void due to contemptuous confirmation during an interim stay and procedural violations regarding notice and reserve price fixing, ordering the return of proceeds.

What did the court decide?

Sale proceedings quashed; sale certificate set aside; refund of sale consideration with interest; return of possession; disciplinary action recommended.

Thamminedi Gangadhar Rao versus Union Bank of India — Intellectual Property | DRT (2026)

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RAMESHWAR^KOTHE Prcsiding^ollicet Govt^ollndra

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"*;#m!df:'iT"8"m:'

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IN THE DEBTS RECOVERY TRIBUNAL-II AT HYDERABAD

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DATED THrs rHE 3tsr DAy oF JULY, 2026

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PRESENT: SH. RAMESHWAR KOTHE,B.Com, L.LB,(Hons.), M,A. PRESIDING OFFICER

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Securitization Application No.205 OF 2O22

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Thamminedi Gangadhar Rao

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S/o T. Nageshwar Rao Aged Major, Occ:Business

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Flt A-2, R/o 8-2-674/B/2/23A/tsA

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Landmark Enclave, Happy Valley Road No.134, Banjara Hills Hyderabad 500034

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Thamminedi Krishna Kumari

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W/o T. Ga ngadhar Rao

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Aged Major, Occ:Business

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Flt A-2, R/o 8-2-674/B/2/23A/r5A Landmark Enclave, Happy Valley Road No.134, Banjara H ilts Hyderabad 500034

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Versus

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.......Applicants.

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Union Bank of India Rep by its Authorized Officer Stressed Assets Management Branch 3'o Floor, Andhra Buildings Sultan Bazar, Koti, Hyderabad 500095

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Mr, Bhupinder Singh cill S/o IS Gill, Aged about 69^years

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Occ: Retd Service, R/o H.No.1-17-40 Gill Villa, Ramnagar Colony

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Post Office, Alwal, Secunderabad

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Mrs Vidya cill w/o Mr. Bhupinder singh cill Aged about 69 Years

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Occ:Retd Service, R/o H. No.1- 17-40 Gill Villa, Ramnagar Colony Post Office, Alwal, Secundera bad

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SA No.205/2022 .

Mr Nihal Singh^Gill S/o Bhupinder^SinghGill Aoed about³⁵ Years o;c: Retd Service,^{R/o H.No.1-17-40} Gill Villa,^{RamnagarColony} Post Office,^{Alwal, Secunderabad}

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....,..Res7ondents.

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:Mr.T. VUaY^Kumar :Mr.N.V. Subba^Raju :Mr. 5ai Sri^Harsha

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Counsel^{for the APPlicants} Counsel^{for Res7ondent 1 Bank} Counsel for^{Reslondents 2 to 4}

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-:9-B-9-E-B:-

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The Applicants^{filed the present Securitisation Applicationu/s'17} of the Securitization^{and Reconstruction of FinancialAssetsand} Enforcement^{of Security Interest Act, 2OO2 (hereinafter "the Act" for} short) with^{a prayer to set aside the proceedings initiated by the 1't} respondent^{bank againstthe SA schedule proPertiesunder Sec'13(4)} of the Act^{including possessionnoticeand sale notice dated} 02.0r.2023

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2.Thecaseoftheapplicantsasperavermentsoftheapplication, in brief, is^{that they are guarantors for the loan of Rs'54'5crores} underMSME.Duetocircumstancesbeyondcontrolthebusinessof borrowerunderwentdifficulties'Therespondentbankd|dnotconsider request to^{enhancethe limits so as to revive the businessand} suddenlyissueddemandnotice.Withoutconsideringobjectionsraised under Sec.13(3A),^{respondentbank directly publishedpossession} notice with^{no service on aPplicants'Respondentbank failed to follow} RBI^{guidelines issued during Covid-19 pandemicperiod in respect of} MsMEunits.Furtherthebankdirectlypublishedthesalenotice withoutservingthesameeitheronapplicantsorotherguarantors. Earlier auction^{was cancelled with interventionof Hon'ble High Court} in WP^No.7529 l2O2i..^{Bank aqain published-Sale notlcedated} //IV/^-,* (7',t"

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SA No'205/2022

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13.08.2021 fixing auction on 15.09.2021. SA was filed as^{per liberty} granted by the Hon'ble High court in wP No.22054 of 2021. However while the interim orders were in force, the respondent bank^issued impugned auction notice dated 02.01.2023 fixing auction^on 25.01.2023, without following Rules 8(5), 8(6). 8(7) and 9(1) of^the Rules of 2002. The property has been undervalued and the^reserve price fixed at Rs.1.74 crores whereas the SRO value itself is Rs.6.74 crores. Hence this SA to^quash all the measures.

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The Respondent No.1 filed reply statement along with documents. The averments thereof, briefly, are that the loan account was classified as a NPA on 30.06.2016 that is, much prior to the COVID- 19^pandemic, and that despite the lapse of several^years it has been unable to recover its dues on account of the applicants' repeated litigation. It is asserted that the outstanding liability stood at Rs. 97,54,6L,994.20 as on 30.09.2022, besides further interest and other charges. The respondent further contends that all measures under the SARFAESI Act were undertaken strictly in accordance with law by issuing the demand notice, taking symbolic and physical possession of the secured asset, and publishing the requisite notices in compliance with the Rules, 2002. It is denied that the secured asset was undervalued or that any OTS proposal was pending or that the applicants had made any payments warranting regularisation of the account. The respondent asserts that the sale notice dated 02.01.2023 fixing the e-auction on 25.01.2023 was duly issued and published, and that although this Tribunal permitted the auction to proceed subject to confirmation being withheld upon the applicants depositing 300/o of the reserve price, the applicants failed to comply with the said condition, whereupon the sale was confirmed in favour of the successful auction purchaser. In support qf.its contentions, the /.&nvn- -, / /' -.,2,,'>\ ,/ r' "

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respondent^places reliance on^{lJnited Bank of India v. Satyawati} Tondon, State Bank of Travancore v.^{Mathew K.C., s.P} Chengalvaraya Naidu v. lagannath,^{and S. Karthik v. N. Subhash} Chand Jain to contend that^{the applicants are not entitled to equitable} relief, that recovery of^{public money shouldnot be interdictedlightly,} and that the^{present proceedings are devoid of bona fldes and} intended only to delay recovery.^{Accordingly,the respondent praysfor} dismissal of the Securitisation^{Application with costs.}

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The Respondent No.2 to⁴ filed^{replystatement. The averments} thereof, briefly, are that^{the sale notice dated02.01.2023constitutes} a composite notice^{satisfyingthe requirementsof Rules8(6), 8(7)and} 9(1) of the Rules, 2002 and^{that, in view of the amendmentto} Section 13(8) of the^{SARFAESIAct, the ratio in Mathew Varghesev.} M. Amritha Kumar,⁽²⁰¹⁴⁾ 5^{SCC 610, is no longer applicable.} Reliance is^placed on M.^{Raiendran& Ors. v. KPK Oils and Proteins} India Pvt. Ltd., 2025 SCC^{Online SC 2036, to contendthat the Rules} do not mandate issuance^{of separate notices.Therespondentsfurther} deny the allegation of^{undervaluation, contending that the secured} asset was an unfinished^{residentialpropertyand that the reserve} price was fixed on the basis of a^{proper valuation,with the auction} ultimately fetching a^{price higher than the reserve price after three} unsuccessful attempts.^{Relianceis also placed on the decision of the} Hon'ble Telangana High^{Court in Aditya Constructionsand on Celir LLP} v. Sumathi Prasad Bafna,^{2024 SCC OnlineSC 3727, to contendthat} a concluded auction^{conducted in accordancewith law ought not to be} interfered with. It is further^{submittedthat the applicants failed to} comply with the conditional^{interim order directing depositof 30o/o of} the reserve^{price, whereuponthe sale was confirrDgdin favourof} OY'*

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Respondent Nos.2 to 4. on these^grounds, the^{respondentspray for} dismissal of the SA with costs.

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Heard both learned counsel for the applicants and^learned counsel for the respondent. Perused the written^{argumentsfiled by} the respondent and also^perused the material brought^{on record.}

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At the very outset, learned counsel for^{the Applicants submitted} that the 1't respondent bank conducted the auction^{on 25.01.2023} despite Applicants' compliance of^{conditionalorder and confirmed the} sale in utter disobedience of the orders of the^{Tribunal.He further} contended that^pendency of^present SA was not^{disclosed in the} auction sale notice. He relied upon^{the judgement of Hon'ble Supreme} Cowt in Viney Kumar Sharma v.^{The fmprovement Trust & Anr.} tsLP^{(c) No.24A77 of 20251 whereinit was categorically held that} non-disclosure of material facts vitiates the entire^process' Respondent bank failed to follow^Rules 8(6), 8(7)^{and 9(1) by not} issuing mandatory 30 days notice,^publishing the^{sale notice with 30} days gap, separate notice under Rule 9(1)^{and affixing the sale notice} on the secured asset.

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Learned counsel further contended that the^{respondentbank} also violated Sec.13(8) of the Act by not^{providing opportunityof} redemption. He further submitted that respondent^{bank failed} to^issue separate notices as^per Rule 8(6) and 9(1).^{He relied on judgement of} Hon'ble High Court reported in 2016^{(6) ALD409 and Hon'ble D[{ATin} Appeal No.75 of 2022 and Appeal No.41 of 208. fhe^{sale notice was} published on 02.01.2023 and the auction was conducted on 25.01.2023. Thus, there was no^gap of^{30 days as perRule 9(1).He} further argued that^putting the^property for^auction oX'AS^{IS WHERE} /Y /7f,rrg,'6r,v'''t':'

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IS BASIS AND AS IS WHAT IS BASIS" is against the^principles laid down by the Hon'ble Supreme Court.

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Learned counsel further contended that the^property was worth more than Rs.10 crores in the market and the^guideline value as^per Sub-Registrar, Vallabh Nagar was Rs.6.84 crores. Whereas, the 1st respondent bank fixed the reserve^price fixed at Rs.1.73 crores much below even the CARD value and violated Rule 5 of the Rules, 2002. The property was sold^just for Rs.1,75 ,56,627 / - and the sale consideration was not^paid within time. He referred to the copies of Market Value Assistance certificates dated 07.09.2021 issued by the Registration and Stamps Department, Government of Telangana and placed on record along with SA, which reflect the valuation of land and structure in respect of schedule properties. With regard to contention on undervaluation of the^property, learned counsel^placed reliance on the^judgment of Hon'ble DRAT, Chennai in V, Mathivanan & Others v, Authorized Officer, Indian Overseas Bank & Others in RA(SA) No.g of 2024, decided on O5.O8.2O25 whereby the Hon'ble DRAT set aside the sale conflrmation and sale certificate on the ground of gross and defective undervaluation and improper fixation of reserve price.

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He further stated that the action of the bank is in vlolatlon of the Article 14 and the Article 3004 of the Constitution of India which provides for the Right to Property. It is further contended that respondent bank failed to file proof of service of possession notice and impugned sale notice on the Applicants and also proof of affixture of sale notice. The sale certificate issued in favour of respondents 2 to 4 is wholly illegal as the very substratum of the sale pJoceedings stand

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SA No.205/2022

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vitiated by gross and fundamental violations of the mandatory provisions of the Act and the Rules framed thereunder.

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With the above contentions, learned counsel would pray to set aside the entire Securitization proceedings including auction sale proceedings conducted on as illegal, arbitrary and void ab initio and consequentially set aside the sale certificate.

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Per contra, learned counsel for the 1st respondent bank would submit that the Applicants wilfully disobeyed the conditional order dated 24.07.2023 which resulted in automatic vacation of interim stay and issuance of confirmation letter on 25.05.2023 and sale certificate on 31.05.2023. The 1't respondent bank made multiple attempts to sell the secured asset which failed for want of bidders, and it necessitated a reduction in the reserve price as per bank,s policy. Hence the Bank has meticulously conducted valuation through approved valuer. Learned counsel stated that the SRo/guideline value relied upon by the Applicants are for fiscal purposes and do not reflect the actual market value, especially for a distress sale. The valuation was mainly impacted by the physical and legal deflciencies of the property such as lack of fire permissions, Municipal permissions, BRS, unfinished stage of the building besides the protracted litigation by the parties. These factors reduce the market value of the property. In support of his contention, learned counsel relied upon the judgement of Hon'ble Supreme Court in Keshavtat Khemchand and Sons pvt Ltcl and ors vs. llnion of India and Ors., AIR 2O7S SC tt6a and Standard Chartered Bank vs. Dharminder Bhohi & Ors., AIRONLINE 2073 SC 49 wherein it has been affirmed that the guideline value is not the sole criterion for determining the market value oF secured assets for auction purposes. Further^he relied on

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judgement in the matter of Saniay^{Sharma vs' Kotak Mahindra} Bank Ltd and others^{in Civit AppealNo'74284of 2024(Arising} out of SLP(C)^{No.33O/2077)decided on 70'72'2024'wherein} the Hon'ble^{Supreme Court observed that a sale by way of public} auction cannot^{be set asideunlessthere is any material irregularity'} fraud or^{collusion.He refuted the claim of the Applicants that the} property is worth more^{than Rs lO crores, as self-servingand} unsubstantiated^assertion.

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f2. He^{added that, the borrower company M/s Vaishnove Infratech} Ltdavailedcreditfacilities,theApplicantsstoodasguarantorsand mortgaged the^{SA schedule properties as securityDue to defaultsin} repayment,^{the loan account became NPA on 30 06 2016 as perRBI} guidelines. The outstanding^{dues as on30 '09 '2022 was} Rs.07,54,6L,gg4.20^{ps besidesfurther interestand costs'Learned} counsel further^{asserted that the demand notice underSec'13(2)was} issued on^{29.Lf .zOfOfollowedby PossessionNotice on 20 '04'2017} which was duly^{served,atfixed and published in 'Eenadu'and 'The} Indian ExPress'^{newspapers' The impugnedauction sale noticedated} OZ.O!.2O23^{fixing auction on 25 '07 '2023 was published on} 09.01.2023^{in 'Mana Telangana' and 'Financial Express' thereby} maintaining^{sufficient gap requiredfor a subsequent sale'}

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13.^{Learnedcounsel for the Bank relied uponjudgementof Hon'ble} Supreme Court^{in ,r,' Raiendran v' M/s KPK Oil and Proteins} ,ndia Pvt^{Ltd & othersin civil Appeal No'!2!74 of 2025 decidedon} 22.og.2ri25,^{which has been reiterated by the Hon'bleDMT' Kolkata} in Sfi^{RahulMashaharyv' Puniab NationatBank and others'} 2025 IBC^{taw.in27ODRATIin support of his contention that there} is no requirement^{of issuing separate noti."t} 'fro*l,ii.\8(6) and / yv\')'

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9(1). He further added, previous auctions failed due to reasons solely attributable to the Applicants, and it is established legal principle that there is no statutory requirement to issue fresh 30-day notice. The right of redemption of Applicants extinguished with the publication of sale notice dated 09,01.2023 as per amended sec.13(8) of the Act. The Tribunal's order dated 24,07.2023 to communicate pendency of SA to the bidders, was duly complied. Learned counsel further stated that the liability of Applicants being guarantors/mortgagors is coextensive with that of principal borrower under Sec.128 of the Indian Contract Act, 7872 and accordingly the respondent bank is legally entitled to enforce the security interest.

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He further asserted that the respondent bank has meticulously followed the due procedure contemplated under the provisions of the Act and Rules of 2002 and accordingly sought to dismiss the SA with exemplary costs.

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Learned counsel for the respondents 2 to 4 also submitted that since the Applicants failed to comply the conditional order the respondent bank confirmed the same and issued sale certificate. There is no statutory requirement to issue separate notices under Rule 8(6) and 9(1) as also held by the Hon,ble Supreme Court in lr. Raiendran and others vs. M/s KpK Oils and proteins India Private Limited. He denied the contention on undervaluation stating that the Applicants relied on valuation pertaining to commercial properties whereas, the nature of schedule properties is^{,residential,} which is evident from the building permission placed on record. Learned counsel relied on market value certificate issued by the Sub_ registrar for residential purposes as per which the value per square feet is Rs.2,500/-. The auction purchasers finished the unfinished /4t5.,--,,U '7 -'stn

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work of the schedule^{properties'Learnedcounsel furtherreferred to} the tabulation at^{page 4 of writtensynopsis, to contend that the} reserve price fixed for^{proposed sale on 30.03.2021 was} Rs.1,37,26,000/-, it was^{Rs.1,45,00,000/-for auction scheduledon} 15.09.2021 and the^{reserve price fixed for the impugned auction sale} on 25.01.2023^{was Rs.1,73,52,6271-Accordingto learnedcounsel,} the reserve^{prlceought to have been reduced insteadof increase, in} view of the^{previous unsuccessfulattemptsat the respectivereserve} prices. However, the^{present sale fetched maximum priceof} Rs.,75,52,627/-.^{After deductingthe TDS @1olo, the sale} consideration has^{been mentionedas Rs 1,73,77,100/- in the sale} certificate which^{cannotbe considered that property was sold below} the reserve^{price. He relied on judgement of Hon'ble High Court of} Telangana in the^{matterof M/s Aditya Constructions v' The Debts} Recovery Appetlate^{Tribunal and others in wP Nos'24552&} 24642 of 2025^{decidedon 28,07'2026 with specific reference to} paragraphs lg lo 22 whereby^{held that statutoryallowance for} gradual reduction of^{reserve prlce for the secured creditor for} successive^{auctions by reason of lack of biddersand is consequently} compelled to mark^{down the reserveprice to ensure successof the} auction.

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Learned^{counsel for the auctionpurchaserswould alsoplace} reliance on the^{judgementof Hon'ble SupremeCouft in Celir LLP v'} Sumati Prasad^{Bafnaand others, 2024 SCC OnlineSC 3727'} wherein it was^{held that sanctityof public auctions shouldbe} protected and confirmed^{or concludedauctions ought not to be set} aside or interfered^{with llghtly.He further submittedthat in the} present case, the^{respondent bankhas strictlyfol!9{'/€dthe.procedure} //I(y-1,1' l'l'- '"

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of law and therefore the SA^{is llable} to^{be dismissed withcosts, in the} interest of iustice.

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17, Now the^polnts that arise^{for consideration are:-}

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(i) Whether the Applicants made out any^valid grounds to set aside the possession notice issued by the lst respondent bank under^{Sec,13(4)of the} Act, 2002 against the SA schedule^{properties on} the^ground of non-service^{of the same?}

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(ii) Whether the Authorized Officer exceeded^his powers in confirming the sale during subsistence of interim stay of confirmation?

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(iii) Whether the auction proceedings dated 25.01.2023^pursuant to e-auction^{salenotice dated} 02.01.2023 and consequential^{salecertificate} issued in favour of respondents 2 to^4-auction purchasers are liable to be set aside, as^prayed for on the^grounds of undervaluation,^{non-service of} impugned auction sale notice, affixture of^the same, illegal confirmation of sale,^possible collusion etc., as contended^{by the Applicants?}

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(iv) Whether any disciplinary action is to^be recommended against the erring^{Authorized Officer} for contempt of the order, for^{accommodatingthe} auction^purchasers to^pay the sale^{consideration} beyond the timelines^provided under^{the Act and} Rules of 2002, and confirming^{the sale and issuing} the sale certificate instead of foffeiting the^25o/o bid amount?

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(v) To what relief?

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I have^given anxious consideration to the contentions^advanced by the learned counsel^for the Applicants, learned counsel for the 1st respondent bank as well as learned cou nsel for the resDondents 2 to 4 auction^purchasers. O'Y-.o

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Point No,(i):

As per record, the 1"t respondent bank earlier issued auction sale notice which had reportedly been falled for want of bidders. The Applicants had also approached the Hon'ble High Court challenging the auction sale notice dated 13.08.2021. Hence, the allegation of non-compliance pertaining to demand notice and^possession notice cannot be entertained at this stage.

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Point No.(ii):

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The serious contention advanced by the Applicants is that the 1't respondent bank confirmed the sale and issued sale certificate during subsistence of interim stay. The 1st respondent bank vehemently opposed the contention stating that with the noncompliance of conditional order in-time, the interim stay order stood automatically vacated and resulted in confirmation of sale followed by issuance of sale certificate. This argument of the respondents is not acceptable as a^perusal of the docket^proceedings confirms that on 24.07.2023 i.e., a day before scheduled auction^{(25.01.2023),} interim stay order was^passed by this Tribunal not to confirm the auction sale on condition of certain^payment. The Applicants moved extension petition and extension was granted till 09.03.2023 and on 10.03.2023, the Applicants filed compliance memo. The respondent bank cannot be permitted to deny knowledge of compliance and resultant interim stay, as a copy of the memo was also served on respondent bank and there was representation for the respondent bank on 09.03.2023 and 10.03.2023. With the compliance of conditional order, sale should not have been confirmed. However, despite having knowledge of interim stay, the 1"r respondent bank

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issued confirmation of sale on 25.05.2023^{followedby issuance of sale} certificate on 31.05.2023. This contemptuous^move of^{the Authorized} Officer of the 1st respondent bank renders the entire^{sale proceedings} dated 25.01.2023 void ab initio. Any action taken in^{contravention of} a court's interim order is a nullity in the eyes of the^{law. The Hon'ble} Supreme Coud in lanatha Textiles v,^{Tax RecoveryOtficer,(2008) 12} SCC 582, has held that actions taken in^violation of an^{interim order} are illegal and void ab initio. The conduct^of the^{Authorized Officer of} the Respondent Bank in deliberately disobeying^{a clear and subsisting} order of thls Tribunal is contemptuous and^strlkes at the^{very root of} the rule of law. This single act is sufficient to^render the entire^sale proceeding, from the point of confirmation, a nullity. Hence, the then Authorized Officer is to be held responsible for such^contemptuous action.

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Point No.(iii):

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2L. The other contention of Applicants^{is non-service} of^{auction sale} notice dated 02.07.2023. The respondent bank^made a^feeble argument that, as already Rule 8(6)^{notice was servedin 2021 it is} not required time and again to serve redemption notice.^Rule8(6) mandates the secured creditor to cause service of 15 days^{notice, in} the case of subsequent sale. The^{1st respondent} bank^placedon record^publication and affixture of sale^notice, but^proof of^serviceor at least dispatch of notice is not^placed. In the^absence of^{proof of} service it is to be construed that the^{1st respondent bank failed to} fotlow Rule 8(6). Although it is settled law^(M. Raiendran's^case) that no separate notices are required under^Rules8(6)and 9(1)^{of the} Rules, 2002, the secured creditor cannot escape the duty^mandated under Rule 8(6) to inform the borrower by way of a^{notice/ of the}

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liability to be discharged as a final opportunity to^{make payment} before^publication of sale notice and^redeem the^{property as provided} under^post-amended Sec.13(8) of^the Act.^{The mortgagor cannotbe} deprived of^{property protectedunder Article300A of the Constitution.}

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As regards the contention on undervaluation of^{the property,} Applicants as well as respondents^{relied uponSub-registrar's} valuation certificates. An attempt^has been^{madeby the respondents} to^justify, that the unfinished structure,^lack of fire^{fighting amenities} etc., accompanied by litigation;^{debilitatedthe possibilityof gettlng} bidders for a better^price. In fact, a^{perusal of table} of^{reserveprices} as in the written synopsis of respondents² to 4^{would make lt clear} that the reserve^price has^gradually been^{increased from 2021 to} 2023. lt is a different issue whether such^{reserve pricehad been} sufficient and in conformity with the existing market^{value. A bare} perusal of the Market Value Assistance certificate dated 07.09.2021 issued by the Registration and Stamps Department,^Governmentof Telangana obtained by the Applicants indicates the^propertyas 'Commercial' whereas as^per certificates obtained by the^respondents 2 to 4 from Sub-Registrar, the^property is under category^of 'Residential'. To arrive to a conclusion on nature of the^property,the mortgage deed is essentially required, but the^same is^{not placedon} record.

¶100

Rule 8(5) obligates the secured creditor^to obtain^{valuation from} an approved valuer and thereafter fix reserve^{price reflecting fair} market value. The Applicants have^placed on record^MarketValue Assistance Certificates as^per which, the^government value is^about Rs.6.84 crores and they claim that the^property is worth^{more than} Rs.10 crores in the market. The Respondents merely^{contend that} /M^^r. ,_ -..

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property was unfinished; litigation affected value; guideline value cannot determine market value. While^{guidelinevalue may not be} conclusive, it nevertheless constitutes an important^{contemporaneous} and comparative indicator of^{guidelineprice vis-a-vis marketprice.} The Hon'ble DRAT Chennai in V. Mathivanan v. Authorized Officer, Indian Overseas Bank (supra), held that^gross undervaluation affecting realization of secured assets vitiates the^{sale. Similarly,the} Hon'ble Supreme Court has repeatedly observed that the^secured creditor acts in the capacity of a trustee while selling secured^assets and must endeavour to secure the best^{possible price.Although} distress sale^principles apply, they cannot^{justify arbitrary} undervaluation. The contention of the Bank therefore cannot be accepted.

¶104

24, In the case on hand, the reserve^price of approximately Rs.1.73 crores is less than one-third of the official^guideline value relied upon by the Applicants. Such enormous disparity needs a satisfactory explanation supported by valuation records. However, the^1st respondent bank has not brought on record the valuation report based on which the reserve^price was fixed for the auction sale scheduled on 25.07.2023. Thus, it is the considered view of this Tribunal that 1't respondent bank has failed to follow Rule 8(5) of the Rules, 2002.

¶105

Another important contention raised by the Applicants is that the sale consideration was not^paid within time limits^prescribed under the Rules, 2002. Admittedly, the respondents 2 to 4-auction purchasers paid the 25% bid amount on 31.01.2023 that is, after six days from the date of auction on 25.01.2023 and Rs.1,06,00,000/towards^part 75olo^{purchase price} was^paid on 23.02.2023 and still the Authorized Officer gave an open time-limit to pay balance

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SA No.20Sl2022

consideration of Rs.9,52,6?7/- for issuance of sale certificate.^The details of^payment of Rs,9,52,627/- has not been^{disclosed.The} Authorized Officer confirmed the sale on 25.05.2023 and lssued sale certificate on 31.05.2023. The Rules^prescribe a strict timeline^for payment of the bid amount. Rule 9(3) requlres the^purchaser to deposit 25olo of the^price immediately^(which can be^extended to^the next working day). Rule 9(4) requires the balance 75% to be^paid within 15 days. The record shows that the auction was held^on 25.07.?023, but the 25olo deposit was made only on 31.01.2023,^six days later. The date of^payment of the^balance amount^{is not even} disclosed. The Hon'ble Supreme Court in General^{Manager, Sri} Siddeshwara Cooperative Bank Ltd. v, Ikbal,^{(2073) 70 SCC43,} has held these timelines to be mandatory. Even^{in the recent} judgement dated 09.06.2026 in M.R. Vasumathi v. The Authorized Officer, 2026 INSC 633, the^{Hon'ble Supreme Court held that -} while it is trite that the rights of an^{auctionpurchaserand the sanctity} of a confirmed sale ordinarily merit due^{protection, such protection is} by no means absolute. It must^yield where the^{very process} engendering the sale is demonstrated to be^{legally lnfirm or to be} incongruous with the statutory framework. The object^of proceedings under the SARFAESI Act is not the mere culmination of a sale in a mechanical manner, but the^{lawful realisationof the secured} asset through a^process that^is fair,^{transparent and strictly compliant} with the prescribed rules. In the^present case, the non-adherence^to the timeline that the SARFAESI Rules contemplate constitutes^a material irregularity^going to the root of the^{matter.The mere factum} that the sale stood confirmed cannot, therefore,^{foreclosejudicial} scrutiny. Any delay, unless mutually agreed upon by the^parties, renders the sale a nulllty, and the deposit ls liable to be forfeited.^The Bank had no authority to extend these statutory^{timelines.Theonus} ' ,7'r9<*L\

('/ 1t', "'

u ol20

SA No.2O5l2022

to prove strict compliance with the mandatory payment timelines under Rules 9(3) and 9(4) rests squarely on the secured creditor and the auction^purchaser. Their failure to^place any evidence on record to demonstrate timely^payment of the balance 75olo of the bid amount leads to an adverse inference against them that the said payment was also delayed. rendering the sale a nullity.

¶114

The decisions in Celir LLP v. Sumati Prasad Bafna, and Saniay Sharma v, Kotak Mahindra Bank Ltd., emphasize the need to protect bona fide auctions conducted in accordance with law. However, those judgments equally proceed on the premise that the sale itself is legally valid. Where mandatory statutory provisions governing sale have been violated or the reserve price has been fixed arbitrarily causing substantial prejudice associated with the contemptuous act of 1st respondent bank in proceeding to confirm the same during subsistence of interim stay and the possible collusion, the sanctity attached to auction sale cannot override statutory illegality. An auction purchaser acquires no better title than that flowing from a valid statutory sale. Accordingly, the sale certificate issued pursuant to an auction vitiated by material procedural violations and accordingly liable to be set aside.

¶115

It is also observed from the legal notice dated 31.08.2021 placed at pages 47-51 with reply statement of respondents 2 to 4 that, the 2nd respondent and his wife got developed the entire property where the application schedule properties are situate, into commercial cum residential complex and Applicants herein purchased the same in semi-condition. The material fact discovered out of the record is that the present auction purchaser (R_2) and his wife (R_3) were the original owners of the entire plot, got developed into

¶116

/t'/ V\ryy/-^.\'"\'<sup>|

¶117

18 of 20

¶118

sA No.205/2022 .

¶119

commercial cum residential^{complex, sold first and fourth floors to} Applicants herein; and^{re-purchasedthe same in the impugned} auction conducted by the^{1't respondentbank on 25,07.2023.} Considering this suppressed fact,^{collusion in fixing the lesser reserve} price and conducting the impugned sale cannot^{be ruled out.}

¶120

2A. In the above context, it^is to^{be noted that the SARFAESI Act} confers drastlc^powers upon^{a secured creditorto enforcesecurity} interest without intervention^{of the Court. The Hon'ble Supreme Court} in Viney Kumar Sharma v,^{Improvementfrustcase(supra)} relterated that suppression of^{materialfacts affectingauction} transparency strikes^{at the fairnessof the auctionprocess'}

¶121

29, In the light of the^{foregoing discussion, I find no hesitation to} hold that the auction^{sale conductedby the 1"t respondentbank on} 25.0L.2023 in^{respect of SA schedule propertiesis flrstly vitiateddue} to the contemptuous^{act of confirmingthe sale duringsubsistenceof} interim stay and further^{it is vitiated for failure to followprovisions} under Sec.13(8)^{of the Act, 2002 and Rules 8(s), 8(6), 8(7), 9(3) and} 9(4) of Rules,^{2002. Accordingly SA deservesto be allowed'}

¶122

Point No.(iv)i

¶123

I^{deem it necessaryto reiteratethat the Authorized Officer of} the Respondent^{No.l Bank proceeded to confirm the sale with full} knowledge^{of the subsistingstay orderpassedby this Tribunal which} tantamount^{to disrespectto the Tribunal and underminesthe} authority^{of this Tribunal such actions cannot be countenanced'} While this Tribunal^{sets aside the sale on this ground' it is imperative} that such^{conduct does not go unaddressedA copy of-this ordershall} /w..os t,/

¶124

19^{ot 20}

¶125

SA^No'205/2022

¶126

b"^{mu,k"d,oth" chffi::i* :Iil'[];:*i#itffi"[} lJ,:;l:;^#i:n";

¶127

point No.(v): , r. alro{ed^{bY setting}

¶128

F#n+i+[**

¶129

32.^consequenry, ""^t: ::::::'."1j":il: ; i[:::X::J:fl^{: ::} refund^{the entire'saleconsidera} 4 together^{with simple interest@6010 per annum from the dateof} resplctive^{deposits to the date of final payment;}

¶130

bank is^{furtherdirected to takeback the} 33. The^{1't respondent} the SA schedule^{propertiesfrom the} physical possession of respondents 2 to^4;

¶131

The 1't respondent bank shall be at liberty to issue fresh sale notice strictly in accordance with law;

¶132

A copy of this order shall be marked to the Chairman and Managing Director of the Union Bank of India to initiate appropriate disciplinary proceedings against the then erring Authorized Officer for thdetiberate and contemptuous disobedience or u i"diriut

)%K.** (_/

20 ol20

SA No.2Os/2022 .

No order as to costs.

¶137

37' The Interlocutory Applications pending if any, shall stand closed.

¶138

Communicate a copy of this order to the parties concerned and upload in the official website.

¶139

,:l::i,::;iij:ii,r,!lru;.,n" o"no, corrected, sisned and pronounced by me in the open court on this

¶140

fl$,''u''" (nAffEsHWAR KorHE) PRESIDING OFFICER RAMESHWAR KOTHE Prcsiding Otficer Govt. of lndia Mlnlstry ol Finance DEBTS RECOVERY TRIBUNAL.2 Abids, Hyderabad-5oO Oo1.

Thamminedi Gangadhar Rao v. Union Bank of India

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Thamminedi Gangadhar Rao v. Union Bank of India

Case brief

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