Regaliaa Buildtech and Services Private Limited Vs LIC Housing Finance Limited

HAVING ITS REGISTERED OFFICE AT 2A (PART), 1ST FLOOR, SUNIL NIWAS CHSL, PLOT NO 89-90, LOKHANDWALA ROAD, FOUR BUNGALOWS, NEAR KOKILABEN HOSPITAL, MODEL TOWN ROAD ENTRANCE, ANDHERI WEST, MUMBAI, MAHARASHTRA, INDIA, 400053.

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ALSO HAVING ITS OFFICE/S AT

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Digitally signed by PREMCHANDRA M R Location: HIGH COURT OF KARNATAKA

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NO.301, SHALAKA, 3RD FLOOR, PLOT NO.32, JUHU ROAD, NEAR SANTACRUZ POLICE STATION, SANTA CRUZ WEST, MUMBAI-400 054. "MSR REGALIAA ELEMENTS MALL" SITUATED AT NAGAVARA, THANNISANDRA MAIN ROAD, BENGALURU - 560 045, KARNATAKA.

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REPRESENTED BY ONE OF ITS DIRECTORS MR. ANUP SHYAM KARNANI.

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…PETITIONER

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(BY SRI. A.VELAN, ADVOCATE FOR SRI. JIDESH KUMAR M.D., ADVOCATE)

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HC-KAR

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AND:

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LIC HOUSING FINANCE LIMITED A COMPANY INCORPORATED UNDER THE COMPANIES ACT, 1956 AND HAVING ITS REGISTERED OFFICE AT BOMBAY LIFE BUILDING, 2ND FLOOR, 45/47, VEER NARIMAN ROAD, MUMBAI - 400001. REPRESENTED BY ITS AUTHORIZED OFFICER

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ALSO HAVING ITS OFFICE AT NO.15/1, 2ND FLOOR, HAYES CENTRE, HAYES ROAD, BENGALURU-560025 ALSO HAVING ITS HEAD OFFICE AT LIC HOUSING FINANCE LIMITED, 131, MAKER TOWER-F, CUFFE PARADE, MUMBAI-400005.

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THE NATIONAL HOUSING BANK CORE 5A, INDIA HABITAT CENTRE, LODHI ROAD, NEW DELHI - 110003 REPRESENTED BY IT IS SUBMITTED THAT AUTHORIZED OFFICER/MANAGING DIRECTOR.

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RESERVE BANK OF INDIA CENTRAL OFFICE, SHAHID BHAGAT SINGH ROAD, FORT, MUMBAI-400001. REPRESENTED BY ITS AUTHORISED OFFICER.

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…RESPONDENTS (BY SRI. DHYAN CHINNAPPA, SENIOR COUNSEL FOR SRI. MATHEW S. MATHEW, ADVOCATE FOR R1)

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HC-KAR

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THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA, SEEKING CERTAIN RELIEFS.

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THIS WRIT PETITION HAVING BEEN HEARD AND RESERVED FOR ORDERS ON 06.07.2026, THIS DAY, AN ORDER IS PRONOUNCED AS UNDER:

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CAV ORDER

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Sri.A.Velan., counsel on behalf of Sri.Jidesh Kumar.M.D., for the petitioner and Sri.Dhyan Chinnappa., Senior counsel on behalf of Sri.Mathew S Mathew., for the caveator/respondent No.1, appeared in person.

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This petition is filed seeking the following reliefs:

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(a) Issue a Writ of Certiorari and/or any other appropriate writ, order or direction quashing the impugned Web Notice dated 29.05.2026 at Annexure-M issued by Respondent No.1 proposing transfer/assignment of the Petitioner's loan exposure through Swiss Challenge Process/E-Auction; and/or

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(b) Issue a Writ of Mandamus and/or any other appropriate writ, order or direction restraining the Respondents, their servants, agents or anybody claiming through or under them from proceeding with the

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proposed Swiss Challenge Process/E-Auction scheduled on 15.06.2026 pursuant to the impugned Web Notice dated 29.05.2026 at Annexure-M; and/or

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(c) Restrain the Respondents from transferring, assigning, novating, securitising or otherwise creating any third-party rights, interests or equities in respect of Loan Account Nos. 411900012004 and 411900013088 and/or the secured assets connected thereto; and/or vide Annexure-D.

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(d) Direct the Respondents to maintain the complete status quo with respect to the subject loan exposure, secured assets, and all connected enforcement and assignment proceedings pending disposal of the present Writ Petition; and/or

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(e) Direct the Respondent No.1 to place on affidavit before this Hon'ble Court the complete papers, file notings, minutes, internal approvals, valuation reports, decision-making records and proceedings relating to:

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i. The settlement negotiations held with the Petitioner;

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ii. the meetings dated 29.04.2026 and 11.05.2026;

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iii. consideration of the Petitioner's OTS proposal of Rs.155 Crores;

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HC-KAR

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iv. the process leading to issuance of the impugned Web Notice dated 29.05.2026; v. the valuation methodology adopted for revising the security valuation and reserve/base value;

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vi. the appointment, selection and participation of the Anchor Bidder in the impugned Swiss Challenge Process; and/or

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(f) Declare that the impugned assignment/Swiss Challenge process initiated pursuant to the Web Notice dated 29.05.2026 is arbitrary, opaque, procedurally unfair and violative of Article 14 of the Constitution of India; and/or

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(g) Award costs of the present Writ Petition and all incidental proceedings in favour of the Petitioner and against Respondent No.1 in view of the arbitrary, opaque and procedurally unfair conduct leading to institution of the present proceedings; and/or

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(h) Pass such other order(s) or direction(s) as this Hon'ble Court may deem fit, proper and necessary in the facts and circumstances of the case, including award of costs, in the interest of justice and equity.

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Counsel for the respective parties urged several

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contentions.

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HC-KAR

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Counsel for the petitioner first urged that the impugned web notice dated 29.05.2026 is vitiated by manifest bad faith. Since the very same General Manager (Recovery) who directed the petitioner to enhance the OTS offer to Rs.155 crores during active settlement negotiations subsequently issued the impugned auction notice without formally rejecting the settlement proposal.

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Next, it is submitted that there has been a breach of legitimate expectation. It was submitted that respondent No.1, by its continued participation in settlement negotiations and investor meetings, created a legitimate expectation that the revised One-Time Settlement (OTS) proposal of Rs.155 crores would receive fair consideration, and that no auction process would be initiated without prior communication or rejection of the proposal.

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Proceeding further, it was vehemently contended that the principle of promissory estoppel squarely applies. Having expressly directed enhancement of the OTS proposal to Rs.155 crores and having thereby induced the petitioner to arrange investor funding and settlement structures, respondent No.1 is

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estopped from abruptly initiating auction proceedings without formally repudiating its earlier representations.

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It was next submitted that the impugned notice dated 29.05.2026 was issued without affording any notice or opportunity to the petitioner, despite subsisting settlement negotiations, compelling the petitioner to learn of the proposed auction only through informal industry channels.

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Counsel then contended that the impugned process is ex facie arbitrary and violative of Article 14 of the Constitution of India. It was pointed out that respondent No.1 simultaneously inflated the alleged dues, reduced the disclosed security valuation, lowered the reserve/base value, and proceeded with the auction despite a higher, fully funded OTS proposal being available.

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It was further urged that the impugned process violates the RBI Master Direction on Transfer of Loan Exposures, owing to opacity in the Swiss Challenge mechanism, non-disclosure of material encumbrances, absence of valuation transparency, and failure to maintain fairness and competitive neutrality in the assignment process. It is argued that the RBI circular has the

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statutory force and if the statute is not followed, the High Court can exercise power under writ jurisdiction.

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Lastly, it was contended that the impugned assignment process stands vitiated by suppression and non-disclosure of material facts. It was also highlighted that during the pendency of the writ petition, the assignment agreement was executed, thereby undermining the judicial process.

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Counsel for the petitioner placed reliance on the following decisions:

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NEERAJ KUMAR SHARMA V/S. THE STATE OF KARNATAKA AND OTHERS IN W.P.NO.36250/2025 DISPOSED OF ON 24.03.2026.

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PHR INVENT EDUCATIONAL SOCIETY V/S. UCO BANK AND OTHERS REPORTED IN 2024 INSC 297.

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Counsel for respondent No.1, at the outset, contended that the petitioner lacks locus standi to assail the assignment process. It was urged that the first respondent, being the owner of the debt, holds the debt as an asset in its capacity as a secured creditor. Consequently, the bank or housing institution is entitled to transfer such an asset at its discretion.

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Proceeding further, it was argued that the assignment does not, in any manner, affect the rights or interests of the borrowers. Lastly, it is submitted that the assignment agreement was executed on the 29^th day of June 2026. On the strength of these submissions, the first respondent prayed that the writ petition be dismissed at the threshold.

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Counsel for respondent No.1 placed reliance on the following decision:

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ICIC BANK LIMITED V/S. OFFICIAL LIQUIDATOR OF APS STAR INDUSTRIES LIMITED AND OTHERS REPORTED IN (2010) 10 SCC 1.

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Heard the arguments and perused the papers with

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care.

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The point that arises for consideration is whether the borrower, being aggrieved by the measures taken by the first respondent under the SARFAESI Act for non-payment of loan dues, is entitled in law to question the validity of the Swiss e-auction notice hosted on the website and can contend that the first respondent cannot assign the asset.

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The Swiss Challenge method is a specialized

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competitive bidding process. The petitioner availed of credit facilities from the first respondent in 2017. In 2021, the loan accounts were classified as Non-Performing Assets by LICHFL. The petitioner stated that it had initiated settlement discussions with LICHFL, but without success. A Section 13(2) notice was issued, and LICHFL has initiated proceedings before the DRT. It is also argued that there was a proposal for OTS. The Petitioner is the borrower/debtor and not an anchor bidder or challenger in the auction process.

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The Swiss Challenge Method has been judicially acknowledged as a fair and transparent mechanism to ensure value maximization. Once the process of e-auction is initiated, courts have consistently held that borrowers cannot seek to stall such proceedings merely on grounds of dissatisfaction, unless statutory safeguards are demonstrably violated. The locus of the borrower is limited to ensuring compliance with procedural requirements under the governing statute. In the present case, the Petitioner is the borrower and not the anchor bidder. Therefore, its attempt to obstruct the auction cannot be sustained. Whether the auction is conducted under the IBC or

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SARFAESI Act, the principle remains that the borrower cannot interfere with the transparent price discovery mechanism adopted by the authority.

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Accordingly, it is held that the Petitioner, being the borrower, has no right to question the validity and stall the Swiss e-auction notice hosted on the website. Therefore, the contentions raised by the Petitioner that the Web Notice dated:29.05.2026 is vitiated by manifest bad faith, breach of legitimate expectation, promissory estoppel and the impugned process is ex facie arbitrary and violative of Article 14 of the Constitution of India must necessarily fail.

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A good deal of argument is addressed about the assignment agreement. Counsel for the petitioner contended that once the Court is seized of the matter, the first respondent could not have assigned the debt by way of an agreement.

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In reply, counsel for the first respondent first drew the Court’s attention to the decision of the Hon’ble Supreme Court in ICCI BANK LIMITED VS OFFICIAL LIQUIDATOR OF APS STAR INDUSTRIES LIMITED AND OTHERS REPORTED IN (2010) 10 SCC 1 . Relying upon the said precedent, it was contended that

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the secured creditor is the owner of the debt; that the debt constitutes an asset in the hands of the secured creditor; and that, being the owner of such asset, the secured creditor is entitled to transfer it.

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The arguments with respect to the assignment are noted with care.

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The Apex Court, in the case referred to supra, has held that the debt, once created, vests in the secured creditor as its property. The debt is not merely a contractual obligation but is recognized as an asset in the hands of the secured creditor. Being the lawful owner of such an asset, the secured creditor possesses the right to deal with it in accordance with law, including the right to assign or transfer it to a third party. The contention of the petitioner that the assignment was impermissible once the matter was seized by the Court is therefore untenable, as the statutory framework and judicial authority affirm the proprietary rights of the secured creditor over the debt. Furthermore, there was no interim order passed by this Court.

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Accordingly, it is held that the secured creditor, being the owner of the debt, is entitled to treat the debt as its asset and to transfer or assign the same. The objection raised by the petitioner against the assignment is rejected.

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Counsel for the respective parties placed reliance on several decisions, but I do not think the law is in doubt. Each decision turns on its own facts. The present case is also examined, considering the decisions referred to above.

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Resultantly, the writ petition is dismissed at the threshold. As the petition is dismissed at the threshold, hence, there is no need to issue notice to the other respondents.

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Because of dismissal the Writ Petition, interim order granted if any stands discharged and pending interlocutory applications if any are disposed of.

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Sd/(JYOTI M) JUDGE

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MRP List No.: 1 Sl No.: 1

Regaliaa Buildtech and Services Private Limited v. LIC Housing Finance Limited

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Regaliaa Buildtech and Services Private Limited v. LIC Housing Finance Limited

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