Allowed

Smt G Kavitha Rajagopal v. the Authorised Officer

Karnataka HC13 Mar 2026WP/28218/2025

Case brief

AI extract

What is this about?

Two successful SARFAESI auction purchasers challenged the bank's cancellation of auctions held on pending litigation while they were prevented by interim orders from depositing the balance bid amount. Holding that pending litigation alone cannot justify cancellation and that an unconfirmed purchaser still has rights against arbitrary action, the High Court set aside the cancellation letters and al

What did the court decide?

Cancellation letters dated 10.09.2025 set aside; bank directed to proceed from that stage in accordance with law; Registrar Judicial ordered to send copy of order to RBI.

Smt G Kavitha Rajagopal Vs the Authorised Officer — Banking and Recovery | Karnataka HC (2026)

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NC: 2026:KHC:15039 WP No. 28218 of 2025 C/W WP No. 29083 of 2025

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HC-KAR

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 13^TH DAY OF MARCH, 2026

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BEFORE

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THE HON'BLE SMT. JUSTICE LALITHA KANNEGANTI

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WRIT PETITION NO. 28218 OF 2025 (GM-DRT)

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C/W

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WRIT PETITION NO. 29083 OF 2025 (GM-DRT)

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IN WP No. 28218/2025

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BETWEEN:

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Digitally signed by SUVARNA T Location: HIGH COURT OF KARNATAKA

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SMT. G.KAVITHA RAJAGOPAL AGED ABOUT 40 YEARS C/O. G.K. RAJAGOPAL NAIDU, NO. 81, FERNS MEADOWS, BILESHIVALE MAIN ROAD, SSR GROUP OF INSTITUTIONS, KOTHANUR, BENGALURU NORTH – 560 077

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(BY SRI. VIKRAM HULIGO SR.COUNSEL A/W SRI. H.N VASUDEVAN.,ADVOCATE)

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…PETITIONER

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AND:

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THE AUTHORISED OFFICER

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CANARA BANK

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ASSET RECOVERY MANAGEMENT-1 BRANCH, 2^ND FLOOR, NO.86, SPENCER TOWER MG ROAD, BENGALURU - 560 001 EMAIL. [email protected].

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NC: 2026:KHC:15039 WP No. 28218 of 2025 C/W WP No. 29083 of 2025

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HC-KAR

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THE MANAGING DIRECTOR AND CEO CANARA BANK NO.112, JC ROAD, BENGALURU - 560 002. EMAIL. [email protected]

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…RESPONDENTS

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(BY SRI. K.G.RADHAVAN, SR.COUNSEL A/W SRI. VIGNESH SHETTY, ADVOCATE FOR R1 AND R2; SRI. D.R.RAVISHANKAR, SR.COUNSEL FOR SRI.V.R.VINAYAKUMAR ADVOCATE FOR IMPLEADING APPLICANT ON IA2/25)

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THIS WP IS FILED UNDER ARTICLE 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO ISSUE A WRIT OF CERTIORARI AND QUASH THE CANCELLATION LETTER DATED 10.09.2025 BEARING REF- ARM-1/CR-435/395/202526 ISSUED BY THE RESPONDENT BANK AT ANNEXURE – A AND ISSUE A WRIT OF MANDAMUS DIRECTING THE RESPONDENT BANK TO CONSIDER THE PETITIONERS REQUEST DATED 29.08.2025 TO ISSUE SALE CERTIFICATE AT ANNEXURE K, AND TO PASS APPROPRIATE ORDERS IN ACCORDANCE WITH THE LAW AND ETC.,

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IN WP NO. 29083/2025

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BETWEEN:

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M/S. GAJANANA BUILDERS AND DEVELOPERS A PARTNERSHIP FIRM DULY REGISTERED UNDER THE PROVISIONS OF THE PARTNERSHIP ACT, HAVING ITS OFFICE AT NO.07, 2^ND FLOOR, N L ENCLAVE, KEMPEGOWDA ROAD, NEAR UTTAM SAGAR HOTEL, RAMAMURTHYNAGAR BENGALURU NORTH – 560 016

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REPRESENTED BY ITS GPA HOLDER MR. G K RAJAGOPAL NAIDU S/O G KRISHNA NAIDU, AGED ABOUT 43 YEARS, RESIDING AT NO.88, FERNS MEADOWS,

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HC-KAR

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BILESHIVALE MAIN ROAD, BENGALURU – 560 077

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...PETITIONER

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(BY SRI.UDAY HOLLA, SR.COUNSEL A/W SRI. MANJUNATH.S, ADVOCATE) AND:

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THE AUTHORIZED OFFICER CANARA BANK

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ASSET RECOVERY MANAGEMENT-1 BRANCH, 2^ND FLOOR, NO.86, SPENCER TOWER MG ROAD, BENGALURU – 5600 01 [email protected]

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THE MANAGING DIRECTOR AND CEO CANARA BANK NO.112, J.C.ROAD, BENGALURU – 56 0002 [email protected]]

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...RESPONDENTS

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(BY SRI. K.G.RADHAVAN, SR.COUNSEL A/W SRI. VIGNESH SHETTY, ADVOCATE FOR R1 AND R2; SRI. D.R.RAVISHANKAR, SR.COUNSEL FOR SRI.V.R.VINAYAKUMAR ADVOCATE FOR IMPLEADING APPLICANT ON IA1/25)

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THIS W.P. IS FILED UNDER ARTICLE 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE CANCELLATION LETTER DTD. 10.09.2025 BEARING REF.ARM-1/CR-435/394/2025 ISSUED BY THE RESPONDENT BANK AT ANNX-A AND DIRECT THE RESPONDENT BANK TO ISSUE SALE CERTIFICATE AND TO PASS APPROPRIATE ORDERS IN ACCORDANCE WITH THE LAW AND ETC,

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THESE WRIT PETITIONS HAVING BEEN HEARD AND RESERVED ON 09.12.2025, COMING ON FOR PRONOUNCEMENT OF ORDER THIS DAY, THE COURT PRONOUNCED THE FOLLOWING:

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CORAM: HON'BLE SMT. JUSTICE LALITHA KANNEGANTI

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NC: 2026:KHC:15039 WP No. 28218 of 2025 C/W WP No. 29083 of 2025

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HC-KAR

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CAV ORDER

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The writ petition No.28218/2025 is filed seeking the

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following prayer:

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"PRAYER

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Wherefore, it is most respectfully prayed that this Hon'ble Court be pleased to;

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a. Issue a Writ of Certiorari and Quash the cancellation letter dated 10.09.2025 bearing Ref:ARM-1/CR435/395/202526 issued by the Respondent Bank at Annexure A.

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b. Issue a Writ of Mandamus directing the Respondent Bank to consider the Petitioner's request dated 29.08.2025 to issue sale certificate at Annexure J, and to pass appropriate orders in accordance with the law.

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c. Pass such other orders as this Hon'ble Court deems fit to grant, including cost of the proceedings, in the interest of justice and equity."

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The writ petition No.29083/2025 is filed seeking the

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following prayer:

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"PRAYER

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Wherefore, it is most respectfully prayed that this Hon'ble Court be pleased to;

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a. Issue a Writ of Certiorari and Quash the cancellation letter dated 10.09.2025 bearing Ref:ARM-1/CR435/394/2025 issued by the Respondent Bank at Annexure A.

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b. Issue a Writ of Mandamus directing the Respondent Bank to issue sale certificate and to pass appropriate orders in accordance with the law.

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c. Pass such other orders as this Hon'ble Court deems fit to grant, including cost of the proceedings, in the interest of justice and equity."

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HC-KAR

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The facts of the case in WP.No.28218/2025 are:-

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It is the case of the petitioner that the petitioner is the successful bidder and auction purchaser of the property and remitted an amount of Rs.4,01,64,250/- being 25% of the bid amount with the respondent/Canara Bank on 24.02.2025 and was awaiting the respondent Bank to issue the sale certificate after accepting remaining 75% of the amount i.e., Rs.12,04,92,750/- of the bid amount. The respondent/Bank also issued sale intimation letter dated 24.02.2025 confirming the petitioner as the successful bidder. It is the case of the petitioner that she was making arrangements to remit the remaining 75% of the bid amount to be deposited with the respondent/Bank within the timeline mentioned under the sale intimation letter. However, she came to know that the original borrower approached this Court and filed WP.No.6510/2025 on 04.03.2025 challenging the entire auction proceedings and a Co-ordinate Bench of this Court granted interim order of status quo on 14.03.2025. The respondent/Bank purportedly issued an intimation letter dated 12.03.2025 which however, was not communicated contemporaneously to the petitioner but was

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HC-KAR

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sent only on 18.03.2025 through e-mail which was sent during the subsistence of the interim order of stay dated 14.03.2025 granted in WP.No.6510/2025. The petitioner had responded to the said communication vide e-mail dated 19.03.2025 highlighting that in view of the subsisting status quo order of this Court, the intimation dated 12.03.2025 carries no legal efficacy and cannot be acted upon unless and until the said interim order is vacated by this Court. It is the case of the petitioner that she was unable to deposit the remaining 75% of the amount due to the operation of the status quo order in WP.No.6510/2025. The said writ petition was disposed of on 22.07.2025. The Co-ordinate Bench of this Court had granted three weeks' time to the borrower to approach the Debts Recovery Tribunal. Consequently, the interim order continued to remain in force till 13.08.2025.

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It is stated that the petitioner commenced making arrangements to remit the remaining 75% of the bid amount. In the meanwhile, another guarantor approached the DRT on 11.08.2025 by initiating proceedings vide Diary No.2217/2025. The Tribunal was pleased to grant an interim stay restraining

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HC-KAR

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the respondent/Bank from issuing the Sale Confirmation Letter,

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if not already issued. It is stated that the said proceedings are still pending adjudication and the matter has been reserved for orders. It is stated that the original borrower filed a writ appeal challenging the rejection order dated 22.07.2025 in WA.No.1324/2025 pending before this Court. The petitioner herein filed an impleading application in the said appeal proceedings and the same is pending consideration. It is during the hearing of the appeal proceedings, the respondent No.4 informed the Court that it has submitted the OTS request to the respondent/Bank and the same has been forwarded by the respondent/Bank to its head/central office. The petitioner challenged the said OTS proposal in WP.FR.No.27499/2025 and the same is pending consideration as the entire action of the respondent/Bank accepting the OTS request and internally forwarding the same to its head office for confirmation is opposed to the principles enunciated by the Hon'ble Apex Court in Celir LLP Vs. Bafna Motors (Mumbai) Pvt and Others¹ .

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The petitioner had sent the copies of the writ petition

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to the respondent/Bank vide an email dated 08.09.2025 and

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1 (2024) 2 SCC 1

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HC-KAR

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the respondent/Bank thereafter issued the impugned letter dated 10.09.2025 cancelling the auction held on 24.02.2025 while an interim order of stay has been granted by the DRT-1 challenging the auction proceedings is pending before the DRT in Diary No.2217/2025. It is stated that the respondent/Bank being fully aware of subsistence of the interim order passed by DRT, issued another letter dated 28.08.2025 to the petitioner requesting to make the balance payment of 75% of the bid amount. The petitioner vide her letter dated 29.08.2025 responded to the Bank stating that she is even ready to remit the remaining amount but she is prevented to deposit the remaining amount due to the operation of stay granted by the DRT in Diary No.2217/2025 and further stated that she is ready to deposit the remaining amount and close the transaction simultaneously.

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It is the case of the petitioner that she did not default in payment of the balance bid amount but was prevented from paying the balance bid amount first due to the operation of the interim order in WP.No.6510/2025 which continued till 13.08.2025 and the interim order of stay dated 11.08.2025

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granted by the DRT-1 in the Diary No.2217/2025. Due to this legal embargo, the petitioner was not able to deposit the remaining bid amount. It is stated that the impugned communication from the respondents in cancelling the sale is contrary to the provisions of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as 'SARFAESI Act') and Security Interest (Enforcement) Rules, 2002 (hereinafter referred to as 'Rules'). It is submitted that the petitioner has not violated any of the provisions of Rule 9 of the Rules specifically Rule 4 warranting the respondent/Bank to cancel the auction. The petitioner was always ready and willing to deposit the remaining 75% of the bid amount. However, the operation of interim order prevented her from depositing the amounts which cannot be a reason for the respondent/Bank to cancel the auction proceedings in which the petitioner emerged as a successful bidder.

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It is further submitted that the whole act of the respondent/Bank is contrary to the judgment of the Hon'ble Apex Court in IDBI Bank Ltd. Vs. Ramswaroop Daliya and

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HC-KAR

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Others² , wherein the Hon'ble Apex Court had held that the auction sale cannot be cancelled if default in payment of the balance amount within the period mentioned is not attributable to the auction purchaser. The period of 15 days stipulated in Rule 9 of the Rules for the deposit of the balance sale amount may be extended as may be agreed upon in writing. It is stated that the act of the respondent/Bank in cancelling the auction sale when the petitioner emerged as the successful bidder waiting for the respondent/Bank to issue sale certificate having received 25% of the bid amount from the petitioner is infringing upon her legitimate rights to acquire the property. It is submitted that if the illegal actions of the banks are permitted to perpetrate, then all auctions under the SARFAESI Act would be meaningless and simply rendered otiose and the very object of Section 13 and the overall scheme of the SARFAESI Act enabling the Bank from recovering its dues in a timely manner without intervention of the Courts would be simply defeated.

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The respondent No.1/Bank has filed the statement of

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objections. It is stated that the prayer that is sought in the writ petition amounts to gross misuse of the process of law. The

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2 2024 SCC OnLine SC 2878

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said prayer cannot be sought in the writ petition. The petitioner ought not to be permitted to misuse the process of law. It is stated that the petitioner has an alternative remedy before the Debts Recovery Tribunal and the petitioner cannot come before this Court. It is stated that when there was default on the part of the borrower, the Bank had initiated the proceedings under the SARFAESI Act by issuing demand notice dated 26.06.2020, demanding repayment of outstanding liabilities of Rs.31,96,75,247/-. The respondent/Bank took symbolic possession of the subject property on 22.12.2020 under Section 13(4) of the SARFAESI Act. Being aggrieved by the possession notice dated 22.12.2020, one Mr.K.N.Surya Prakash claiming to be the subsequent purchaser along with his wife has preferred SA.No.264/2025 before the Debts Recovery Tribunal and the same is pending for adjudication. The Bank has put the schedule properties for sale by issuing e-auction sale notice fixing the sale on 03.06.2021. However, the sale did not materialise. The respondent/Bank again issued another sale notice dated 05.12.2024 and one of the guarantors i.e., M. Suresh Kumar challenged the same before this Court in

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HC-KAR

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WP.No.33927/2024 and later withdrew the writ petition and the

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same was dismissed as not pressed on 12.02.2025.

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The respondent/Bank once again issued a sale notice dated 21.01.2025 for the schedule properties and fixed public auction on 24.02.2025 for recovery of an amount of Rs.45,70,00,000/as on 04.12.2024 and successfully conducted the auction on 24.02.2025. The owner of the property namely Mr. Suresh Kumar challenged the very same

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measure/sale notice dated 21.01.2025 before this Court in WP.No.4792/2025 and after hearing the matter, this Court had dismissed the writ petition on 24.02.2025 in view of the alternative remedy available before the Debt Recovery Tribunal. One Mr.D.Ravikumar claiming to be a partner of Corporate

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Guarantor filed the securitisation Application challenging the sale notice dated 21.01.2025 and the Debt Recovery Tribunal granted a conditional interim order dated 20.02.2025, however failed to comply the interim order granted by the Debt Recovery Tribunal and the same is pending for adjudication. One H.M. Manasa, wife of K.N.Surya Prakash also preferred

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HC-KAR

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S.A.No.130/2025 claiming to be the subsequent purchaser for

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setting aside the sale notice dated 21.01.2025.

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The borrower has also filed a writ petition before this Court in WP.No.6510/2025, challenging the sale notice dated 21.01.2025. The Court had granted status quo as regards the property. The said writ petition was disposed of by order dated 22.07.2025, rejecting the contention in respect of jurisdiction and relegating the borrower to avail alternative remedy before the Debts Recovery Tribunal, Bengaluru. Pursuant to the said order, another guarantor approached the Debts Recovery Tribunal by filing Diary No.2217/2025 and on 11.08.2025, the Debt Recovery Tribunal directed that "In the meantime respondent bank is directed not to confirm the sale if it is not done by the respondent bank". it is submitted that the same is pending for adjudication. Subsequently, the borrower filed the SA challenging the sale notice dated 21.01.2025 before the Debt Recovery Tribunal at Bangalore in S.A. i.e., Diary No.2224/2025 on 11.08.2025 and that is also pending consideration.

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It is stated that in view of the circumstances and the pending litigations before the High Court and the Debt Recovery Tribunal, the respondent/Bank issued a letter dated 10.09.2025, informing the petitioner that the auction proceedings held on 24.02.2025 stood cancelled. The respondent/Bank, in the said communication, also requested the petitioner to collect the demand draft representing 25% of the bid amount, which had been deposited with the Bank towards the sale consideration from the concerned branch. The respondent/Bank, acting bonafide and with utmost fairness had already refunded the entire amount. It is further stated that the borrower by letter dated 11.09.2025 approached the respondent/Bank with a proposal for one time settlement. Since no sale was pending, in view of the cancellation of the sale notice dated 21.01.2025 and the refund of the entire bid amount to the auction purchaser, the respondent/Bank found it viable and appropriate to consider the borrower's OTS proposal. The OTS offer submitted by the borrower was brought to the notice of the Court and the Court considered the same on 17.09.2025.

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HC-KAR

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The facts of the case in WP.No.29083/2025 are:-

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It is the case of the petitioner that the petitioner is a firm registered under the Indian Partnership Act and is represented by its GPA Holder, Mr.G.K.Rajagopal Naidu. The petitioner firm was the successful bidder and auction purchaser of the property and also remitted an amount of Rs.2,51,69,000/- being 25% of the bid amount with the respondent/Canara Bank on 24.02.2025 and was awaiting the remaining 75% i.e., Rs.7,55,07,000/ of the bid amount. The respondent/Bank also issued a sale intimation letter confirming the petitioner as the successful bidder. When the petitioner were making arrangements to remit the remaining 75% of the bid amount within the timeline, the borrower approached this Court and filed WP.No.6510/2025 on 04.03.2025 challenging the entire auction proceedings and this Court granted interim order of status quo on 14.03.2025. The said writ petition was disposed of on 22.07.2025. Consequently, the interim order continued to remain in force till 13.08.2025. The petitioner had

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made arrangements to remit the remaining 75% of the bid amount. In the meanwhile, another guarantor M/s. MSK

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HC-KAR

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Shelters approached the DRT on 11.08.2025 by filing proceedings vide Diary No.2217/2025. The DRT had granted interim stay restraining the respondent/Bank from issuing the sale confirmation letter, if not already issued and the matter was reserved for orders. This being the factual situation, the original borrower filed writ appeal challenging the rejection order dated 22.07.2025 in WA.No.1324/2025.

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The respondent/Bank thereafter issued the impugned letter dated 10.09.2025 cancelling the auction held on 24.02.2025 while an interim order of stay has been granted in Diary No.2217/2025. It is submitted that the petitioner was prevented from paying the balance bid amount due to the operation of the interim order in WP.No.6510/2025 which continued till 13.08.2025 and the interim order of stay granted by the DRT in Diary No.2217/2025. It is stated that the impugned communication is wholly contrast with the provisions of the SARFAESI Act and Security Interest (Enforcement) Rules 2002. It is stated that the entire action of the respondent/Bank

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is contrary to the judgment in case of IDBI Bank referred supra. It is stated that the petitioners absolutely did not default in

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payment of the remaining bid amount to attract cancellation of the auction, but could not deposit the amount due to operation of interim orders. It is stated that if the illegal actions of the banks are permitted to perpetrate, then all auctions under the SARFAESI Act would be meaningless and simply rendered otiose and the very object of Section 13 and the overall scheme of the SARFAESI Act enabling the bank from recovering its dues in a timely manner without intervention of the Courts would be simply defeated.

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The respondent No.1/Bank has filed the statement of objections in the similar line as stated in WP.No.28218/2025. It is stated that in view of the circumstances and the pending litigations before the High Court and the Debt Recovery Tribunal, the respondent/Bank issued a letter dated 10.09.2025, informing the petitioner that the auction proceedings held on 24.02.2025 stood cancelled. The respondent/Bank, in the said communication, also requested the petitioner to collect the demand draft representing 25% of

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the bid amount, which had been deposited with the Bank towards the sale consideration from the concerned branch. The

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respondent/Bank, acting bonafide and with utmost fairness had already refunded the entire amount. It is further stated that the borrower by letter dated 11.09.2025 approached the respondent/Bank with a proposal for one time settlement. Since no sale was pending, in view of the cancellation of the sale notice dated 21.01.2025 and the refund of the entire bid amount to the auction purchaser, the respondent/Bank found it viable and appropriate to consider the borrower's OTS proposal. The OTS offer submitted by the borrower was brought to the notice of the Court and the Court considered the same on 17.09.2025.

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Learned Senior counsel Sri.Vikram Huligol, appearing for the petitioner in WP.No.28218/2025 had relied on the judgment of the Hon'ble Apex Court in Celir LLP 's case referred supra. He relied on paragraph Nos.64, 69 and 105 which reads thus:

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"64. We are of the view that the failure on the part of the borrower in tendering the entire dues including the charges, interest, costs etc. before the publication of the auction notice as required by Section 13(8) of the SARFAESI Act, would also sufficiently constitute extinguishment of right of redemption of mortgage by the act of parties as per the proviso to Section 60 of the Act 1882. Furthermore, in the case on hand, there was no claim for right of redemption by the borrower either

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before the publication of the auction notice or even thereafter. The borrowers entered into the fray only after coming to know of the confirmation of auction. Be that as it may, once the Section 13(8) stage was over and auction stood concluded, it could be said that there was an intentional relinquishment of his right of redemption under Section 13(8), whereby the Bank declared the appellant as the successful auction purchaser having offered the highest bid in accordance with the terms of the auction notice.

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69. However, with the advent of the 2016 Amendment, Section 13(8) of the SARFAESI Act now uses the expression “before the date of publication notice for public auction or inviting quotations or tender from public or private treaty for transfer by way of lease, assignment or sale of the secured assets” which by no stretch of imagination could be said to be in consonance with the general rule under the Act 1882 that the right of redemption is extinguished only after conveyance by registered deed. Thus, in the light of clear inconsistency between Section 13(8) of the SARFAESI Act and Section 60 of the Act 1882 the former special enactment overrides the latter general enactment in light of Section 35 of the SARFAESI Act. Thus, the right of redemption of mortgage is available to the borrower under the SARFAESI Act only till the publication of auction notice and not thereafter, in light of the amended Section 13(8).

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105. The Bank is duty-bound to follow the provisions of the law as any other litigant. It is to be noted that the Bank i.e., the secured creditor acts under the SARFAESI Act through the authorised officer who is appointed under Section 13(2). Thus, the authorised officer and the Bank cannot act in a manner so as to keep the sword hanging on the neck of the auction purchaser. The law treats everyone equally and that includes the Bank and its officers. The said enactments were enacted for speedy recovery and for benefitting the public at large and does not give any license to the Bank officers to act de hors the scheme of the law or the binding verdicts.

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Learned Senior Counsel placed reliance on the

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judgment of the Hon'ble Apex Court in case of IDBI Bank Ltd.

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referred supra. He had relied on paragraph Nos.3, 12, 16 and

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17 which read as follows:

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"3. The respondents who were the petitioners in the writ petition are the auction purchasers of the property which comprises of 2 guntas of land of Survey No. 121 part, situated at Bogaram village, Keesara Mandal, Medchal Malkajgiri district, Telangana. Pursuant to the e-auction notice dated 17.03.2018, the auction took place on 10.04.2018. The respondents were the highest bidders for a total sum of Rs.1,42,50,000/-. They deposited 25% of the bid amount i.e., Rs. 36,00,000/on the day of the auction itself. The auction was confirmed but the sale certificate was not issued and the sale deed was not executed as the respondents could not deposit the balance sale consideration within 15 days, may be for the reason that the appellant-Bank refused to accept the balance amount for various reasons. Finally, the appellant-Bank vide communication dated 24.12.2019 cancelled the auction and refunded the amount deposited by the respondents by means of four demand drafts which were never encashed by the respondents.

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12. The communication dated 24.12.2019, by which the appellant-Bank took a decision to cancel the auction sale and to return the amount deposited by the respondents, is completely silent as regards the default, if any, committed by the respondents in depositing the balance auction amount as per the mandate of Rule 9(4) of the Rules. The said plea was taken by the appellant-Bank for the first time through the counter affidavit filed in the writ petition. It is well recognized that the validity of an order can only be adjudged on the basis of the reasoning contained in the order and the said reasoning cannot be supplemented in any manner much less by means of a counter affidavit or a supplementary affidavit when the parties have entered into a litigation. In Mohinder Singh Gill & Anr. v. Chief Election Commissioner and Ors.4 it has been clearly laid down that the parties are not permitted to raise new pleas not contained in the order impugned while assailing the correctness or the validity of such an order. In view of the law so laid down, the appellant- Bank was certainly not entitled to raise the plea of default under Rule 9(4) of the Rules through the counter affidavit.

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16. In the case at hand, the correspondence between the parties reveals that the respondents only sought extension of time for the reason that the appellantBank itself was not in a position to accept the amount as there was a complaint to the CBI, an advisory of the ED and a stay from the High Court. The silence on part of the appellant-Bank in either immediately revoking the sale confirmation or refusing to extend the time, impliedly amounted to extension of time in writing with consent.

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17. Secondly, the non-deposit of the balance sale consideration within the time limit prescribed under Rule 9(4) was not attributable to the respondents so as to call them defaulters within the meaning of the provisions of Rule 9 (4) and (5) of the Rules."

¶152

Learned Senior counsel submits that the borrower's right of redemption extinguishes once auction notice is published as per Section 13(8) of the SARFAESI Act, the right of the borrower to re-extinguish the moment the auction notice is published by the bank. It is further submitted that the auction sale cannot be cancelled if default in payment of the balance action is not attributable to the auction purchaser. It is argued that the bank cancelled the auction due to pendency of litigation before the High Court and DRT but not stating for default of payment of the amount by the auction purchaser. Basing on the judgments referred supra, it is submitted that as there is no default on the part of the petitioner in paying the amount, he is always ready and willing to pay the amount. But

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for the pending litigation, he could not pay the amount. Just because the litigation is pending, that cannot be the ground for the bank to cancel the auction. It is submitted that to facilitate the borrower, the Bank has cancelled the auction and under the guise of OTS, Bank is trying to favour the borrower.

¶156

Learned Senior Counsel Sri.Uday Holla, appearing for the petitioner in WP.No.29083/2025 relying on the judgments in IDBI Bank 's case and Celir LLP 's case referred supra submits that cancellation of the sale is arbitrary, illegal and contrary to the provisions of the SARFAESI Act. It is submitted that the writ petition may be allowed by setting aside the impugned proceedings.

¶157

Learned Senior Counsel Sri.K.G.Raghavan, appearing for respondent/Bank submits that the bank due to the pending litigation and in the larger interest had cancelled the auction. Learned counsel has relied on the judgement of the Hon'ble Apex Court in case of Agarwal Tracom Pvt. Ltd. Vs. Punjab

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National Bank³ . He had relied on paragraph Nos.34 and 35 which reads thus:

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"34. In the light of foregoing discussion, we are of the considered opinion that the Writ Court as also the Appellate Court were justified in dismissing the appellant's writ petition on the ground of availability of alternative statutory remedy of filing an application under Section 17(1) of SARFAESI Act before the concerned Tribunal to challenge the action of the PNB in forfeiting the appellant's deposit under Rule 9(5). We find no ground to interfere with the impugned judgment of the High Court.

¶163

35. The appellant is, accordingly, granted liberty to file an application before the concerned Tribunal (DRT) under Section 17(1) of the SARFAESI Act, which has jurisdiction to entertain such application within 45 days from the date of this order. In case, if the appellant files any such application, the Tribunal shall decide the same on its merits in accordance with law uninfluenced by any of the observations made by this Court and the High Court in the impugned judgment."

¶164

Relying on the above judgment, it is submitted that the writ petition is not maintainable and the petitioner has to avail the appropriate alternative remedy. Learned Senior counsel had also relied on the judgment of the High Court of Kerala in case of Ajmal K.V. and Another Vs. Union Bank of

¶165

India and Others⁴ . He had relied on paragraph Nos.24, 25, 26 and 27 which reads as follows:

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3 (2018) 1 SCC 626

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4 2024:KER:18508

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"24. When the borrowers offered a One Time Settlement in the meanwhile, the Bank has accepted the proposal. There is nothing which prevents the Bank from entering into a One Time Settlement with the borrowers as long as auction sale of the property is not concluded by issuance of Sale Certificate. In these cases, such One Time Settlements were placed before the Debts Recovery Tribunal. The Debts Recovery Tribunal directed the borrowers to implead the auction purchasers in the SA. The petitioners were thus impleaded in the proceedings before the Debts Recovery Tribunal. The petitioners did not raise any objections against the One Time Settlement.

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25. As long as sale is not confirmed in favour of the petitioners, the petitioners would not acquire any right or interest over the property. As the sale is not confirmed in favour of the petitioners, the petitioners cannot urge that they should be issued with Sale Certificate. In fact, the terms of sale notice itself contain a clause that the sale can be cancelled at any time and it is the discretion of the Bank to cancel the same or proceed with the sale. As the sale is not confirmed in favour of the petitioners herein, the petitioners have not acquired any interest or right over the property auctioned.

¶172

26. It is true that the right of redemption is available to the borrowers will stand extinguished upon publication of notice of auction. However, that will not prevent the parties to a loan agreement from entering into a One Time Settlement. As long as the sale of the mortgaged assets is not confirmed in favour of the auction purchasers and as long as the Sale Certificates are not issued, the auction purchasers cannot be heard to contend that the Bank should not enter into a One Time Settlement with the borrowers. The prayer of the petitioners to issue Sale Certificate in respect of the auctioned property is unsustainable.

¶173

27. However, the fact remains that pursuant to the esale conducted by the Bank, the petitioners in both these writ petitions have deposited substantial amount towards purchase price, with the Bank. The amount is still in deposit with the Bank. Taking into consideration the facts and circumstances of the case, I am of the view that the 1st respondent-Bank should pay reasonsable interest to the petitioners in the writ petitions.

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The writ petitions are disposed of declining the prayer of the petitioners to compel the Bank to issue Sale Certificates. However, there will be a direction to the 1st respondent-Bank to refund the amount deposited by the petitioners along with 12% interest from the date of deposit of the amount till the date of refund."

¶177

Learned Senior counsel had also relied on the judgment of the Hon'ble Apex Court in case of Eastern Coalfields Ltd. Vs. Bajrangi Rabidas⁵ in paragraph Nos.18

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and 19 which reads as follows:

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"18. The question that arises for consideration is that once he had availed the benefit by not stating the correct fact, whether the equitable jurisdiction under Article 226 of the Constitution of India should be extended to him. The Division Bench has recorded a finding the respondent could not have been allowed to participate in the examination without producing the Matriculation certificate. The said finding is based on an assumption and has been arrived at totally being oblivious of the enquiry report which records the statement of the respondent. In this context, we may profitably reproduce a passage from Union of India v. C. Rama Swamy and others[1]: -

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“25. In matters relating to appointment to service various factors are taken into consideration before making a selection or an appointment. One of the relevant circumstances is the age of the person who is sought to be appointed. It may not be possible to conclusively prove that an advantage had been gained by representing a date of birth which is different than that which is later sought to be incorporated. But it will not be unreasonable to presume that when a candidate, at the first instance, communicates a particular date of birth there is obviously his intention that his age calculated on the basis of that date of birth should be taken into consideration by the appointing

¶181

5 (2014) 13 SCC 681

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authority for adjudging his suitability for a responsible office. In fact, where maturity is a relevant factor to access suitability, an older person is ordinarily considered to be more mature and, therefore, more suitable. In such a case, it cannot be said that advantage is not obtained by a person because of an earlier date of birth, if he subsequently claims to be younger in age, after taking that advantage. In such a situation, it would be against public policy to permit such a change to enable longer benefit to the person concerned.”

¶185

19. The controversy can be viewed from another angle. Thereafter, the learned Judges opined that there is no justification in the proposition that principle of estoppel would not apply in such a situation. As is manifest, in the case at hand the respondent stated this on the higher side to gain the advantage of eligibility and hence, we have no trace of doubt that principle of estoppel would apply on all fours. It is well settled in law that jurisdiction of the High Court under Article 226 of the Constitution is equitable and discretionary. The power of the High Court is required to be exercised “to reach injustice wherever it is found”. In Sangram Singh v. Election Commissioner, Kotah and another[2], it has been observed that jurisdiction under Article 226 of the Constitution is not to be exercised whenever there is an error of law. The powers are purely discretionary and though no limits can be placed upon that discretion, it must be exercised along recognized lines and not arbitrarily and one of the limitations imposed by the courts on themselves is that they will not exercise jurisdiction in such class of cases unless substantial injustice has ensued or is likely to ensue. That apart, the High Court while exercising the jurisdiction under Article 226 of the Constitution can always take cognizance of the entire facts and circumstances and pass appropriate directions to balance the justice. The jurisdiction being extraordinary it is required to be exercised keeping in mind the principles of equity. It is a well-known principle that one of the ends of equity is to promote honesty and fair play. If a person has taken an undue advantage the court in its extraordinary jurisdiction would be within its domain to deny the discretionary relief. In fact, Mr. Singh, learned senior counsel for the appellants, has

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basically rested his submission on this axis. In our considered opinion, the Division Bench has erred in extending the benefit to the respondent who had taken undue advantage by not producing the Matriculation Certificate solely on the motive to get an entry into service. It is apt to note here that this Court in G.M., Bharat Coking Coal Ltd., West Bengal v. Shib Kumar Dushad and others[3] has ruled that the decision on the issue of date of birth of an employee is not only important for the employee but for the employer also."

¶189

Relying on these judgments, learned Senior Counsel appearing for the respondent/Bank submits that the respondent/Bank is always at liberty to cancel the auction at any point of time. Considering the pending litigation and also to secure the amount, the auction was cancelled and they have offered the OTS facility to the principal borrower.

¶190

Learned Senior counsel appearing for the impleading applicant/borrower submits that the petitioner cannot come before this Court and the alternative remedy is available before the Debts Recovery Tribunal. It is submitted that the petitioner has no locus to question the cancellation of auction. He had relied on the judgment of the High Court of Andhra Pradesh in

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case of M/s. India Finlease Securities Vs. Indian Overseas

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Bank⁶ . He had relied on the following paragraphs:

¶195

"The appellant, therefore, from time to time is informed that the acceptance of bid or sale shall be subject to confirmation by the secured creditor. Therefore, the acceptance of the bid by the Authorized Officer on 31.3.2012, in our considered view, would not amount to confirmation of sale by the secured creditor. It is a mere acceptance of bid of the appellant by the authorized officer and not confirmation of sale by the secured creditor. The confirmation stated in Rule 9(2) and 9(4) of the Rules is the confirmation by the authorized officer and not the secured creditor i.e banks. Sub-rule (2) of Rule 9 clearly provides that sale shall be "subject to confirmation by the secured creditor". Only after compliance of sub-rule (4), the secured creditor has to confirm the sale. It is only on confirmation of sale by the secured creditor sub-rule (6) of Rule 9 comes into operation and the authorized officer is empowered to issue a certificate of sale of the immovable property in favour of the purchaser in the form given in Appendix V to the Rules and to handover the delivery and possession of the property. Unless these formalities are complete, though the sale may be confirmed by the authorized officer, the property does not vest in the auction purchaser. Property would get transferred only after sale was confirmed by the secured creditor and not by the authorized officer. In the present case, the secured creditor has not confirmed the sale and the cheques issued on 13.4.2012 were received subject to the outcome of the proceedings pending before the DRT. Further, in the document "Details of auction participants" dated 31.3.2012 signed by the Authorized Officers and the authorized signatory of the appellant, it is mentioned as follows:

¶196

"The sale in favour of the highest bidder shall be confirmed on payment of the entire bid amount of Rs.1800.00 lakhs (Rupees Eighteen crores only) and the Bank reserves its right to cancel/modify the sale before confirmation of the same."

¶197

6 AIR 2013 ANDHRA PRADESH 10

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21. Therefore, it is clear that though the bid amount was accepted by the authorized officer, it does not amount to confirmation by the secured creditor and the bank has the right to cancel/modify the sale before confirmation of the same. The auction purchaser was under the impression that the moment it paid the total bid amount, it is deemed that the sale is confirmed. That is not the intention of the Legislature. The intention of the Legislature is that sale has to be confirmed specifically by the "secured creditor" and not by the "authorized officer". There is no dispute that neither the sale was confirmed by the secured creditor by issuing any written communication nor a certificate of sale was issued by the authorized officer as required under subrule (6) of Rule 9 of the Rules and delivery of possession of property was passed on to the auction purchaser."

¶201

Basing on this judgment, it is submitted that the acceptance of the bid by the authorised officer would not amount to confirmation. It is the mere acceptance of the bid and not the confirmation of the sale by the secured creditor. it is stated that as long as the sale is not confirmed, the petitioner will not get any right. He has also relied on another judgment of this Court in case of Laxminarasimhaiah Vs. Karnataka Gramin Bank and Another arising out of WP.No.25628/2024 dated 28.07.2025 . He relied on paragraph No.4, 5 and 6 which reads as follows:

¶202

"4. These rival submissions are considered in the light of Rule 9 [1] to [5] of the Security Interest [Enforcement] Rules, 2002 and the terms of the Sale Notice. This Rule in its material part reads as:

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9. Time of sale, issue of sale certificate and delivery of possession, etc.

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(1) No sale of immovable property under these rules, in first instance shall take place before the expiry of thirty days from the date on which the public notice of sale is published in newspapers as referred to in the proviso to subrule (6) of rule 8 or notice of sale has been served to the borrower:

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Provided further that if sale of immovable property by any one of the methods specified by sub rule (5) of rule 8 fails and sale is required to be conducted again, the authorized officer shall serve, affix and publish notice of sale of not less than fifteen days to the borrower, for any subsequent sale.

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(2) The sale shall be confirmed in favour of the purchaser who has offered the highest sale price in his bid or tender or quotation or offer to the authorized officer and shall be subject to confirmation by the secured creditor: Provided that no sale under this rule shall be confirmed, if the amount offered by sale price is less than the reserve price, specified under subrule (5) of Rule 8. Provided further that if the authorized officer fails to obtain a price higher than the reserve price, he may, with the consent of the borrower and the secured creditor effect the sale at such price.

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(3) On every sale of immovable property, the purchaser shall immediately, i.e. on the same day or not later than next working day, as the case may be, pay a deposit of twenty five per cent of the amount of the sale price, which is inclusive of earnest money deposited, if any, to the authorized officer conducting the sale and in default of such deposit, the property shall be sold again.

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(4) The balance amount of purchase price payable shall be paid by the purchaser to the authorized officer on or before the fifteenth day of confirmation of sale of the immovable property or such extended period [as may be agreed upon in writing between the purchaser and the secured creditor, in any case not exceeding three months.

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(5) In default of payment within the period mentioned in sub-rule (4), the deposit shall be forfeited to the secured creditor and the property

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shall be resold and the defaulting purchaser shall forfeit all claim to the property or to any part of the sum for which it may be subsequently sold.

¶216

The underlining is by this Court

¶217

The relevant term of the Sale Notice reads as hereunder:

¶218

"6. The successful bidder should pay 25% of the bid amount [inclusive of EMD] immediately on the same day by NEFT/RTGS to credit A/C No.105681013050189, Branch IFSC: PKGB0010568 and balance 75% of the bid amount within 15 days thereafter. If the successful bidder defaults in effecting payment or fails to adhere to the terms of Sale in any manner, the amount already deposited will be forfeited and he/she shall not have any claim on such forfeited amount or to the property, which shall be sold subsequently."

¶219

5. These Rules/terms require the auction purchaser to deposit 25% of the sale price offered on the same day. However, if the Rules require the remaining amount, subject to the agreement in writing with the secured creditor, to be paid within the next 15 days but not later than three [3] months from the date of auction, the afore terms contemplate only fifteen days. The Apex Court in SBI v. C. Natarajan, while holding that the Rules are validly made under the Statute, has opined thus in the matter of the Courts interfering with the Secured Creditor’s decision to forfeit the incomplete price offered.

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The upshot of the aforesaid discussion is that whenever a challenge is laid to an order of forfeiture made by an authorised officer under subrule (5) of Rule 9 of the Rules by a bidder, who has failed to deposit the entire sale price within ninety days, the tribunals/courts ought to be extremely reluctant to interfere unless, of course, a very exceptional case for interference is set up. What would constitute a very exceptional case, however, must be determined by the tribunals/courts on the facts of each case and by recording cogent reasons for the conclusion reached.

¶221

6. This Court must opine that the petitioner cannot succeed in this petition because:

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[a] the petitioner, having participated in the auction proceedings being aware of the consequences [and being put on notice thereof], should have offered the entire sale price,

¶225

[b] if there was any default by the first respondent in delivering possession [or otherwise in complying with the terms of the sale requirement], the petitioner should have availed the remedies in law to operate upon tendering the full value offered.

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[c] the petitioner has withdrawn from the auction proceedings without tendering the entire sale price offered, he cannot show cause against forfeiture in the light of the statutory provisions and the terms of the Auction Notice.

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Further, this Court opines that the petitioner has not offered the sale price to his own peril inviting the consequences, and there is no reason to interfere under Article 226 of the Constitution of India only because the first respondent has refunded some part of the price offered. As such, the petition stands rejected."

¶228

Having heard the learned Senior counsels on either side, perused the entire material on record. In the light of the submissions made on either side, the only issue that falls for consideration is "whether the secured creditor after conducting public auction and after accepting 25% of the bid amount cancel the sale on the ground of pending litigation and extend the benefit of OTS to the borrower?"

¶229

The present writ petition raises issues of considerable importance touching up on the sanctity of statutory auctions,

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the rights of an auction purchaser in the light of scope and object of the SARFAESI Act, 2002.

¶233

Before dwelling into the merits of the matter, it is appropriate to look into what is the purport of the SARFAESI Act. The intention behind enacting the Act is for the swift, self contained enforcement mechanism for recovery of dues to the financial institutions. The Act aims at enabling the Banks and financial institutions to realize long term assets and enforce security interests without the intervention of Courts or Tribunal except to a limited extent. The provisions provide for a time bound adjudication for effective enforcement, restricted borrower's rights after certain stages. Sale through transparent public auction with an intent to maximize the value of the property. The SARFAESI Act is a remedy against the delays but not a mechanism to perpetuate it.

¶234

At this juncture, it is appropriate to look at unamended Section 13(8) of the SARFAESI Act:

¶235

“ 13. Enforcement of security interest. –

¶236

(8) If the dues of the secured creditor together with all costs, charges and expenses incurred by him are tendered to the secured creditor at any time before the date fixed for sale or transfer, the secured asset shall not be sold or transferred by the secured creditor, and

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no further step shall be taken by him for transfer or sale of that secured asset.”

¶240

As per the unamended provision, the borrower can

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redeem the secured asset at any time before the date fixed for sale or transfer. This provision led for last minute interventions, uncertainty in public auction and reduced participation of bidders. In the year 2016, amendment was made to Section 13(8) of the Act which reads as under:

¶242

"13. Enforcement of security interest. –

¶243

(8) Where the amount of dues of the secured creditor together with all costs, charges and expenses incurred by him is tendered to the secured creditor at any time before the date of publication of notice for public auction or inviting quotations or tender from public or private treaty for transfer by way of lease, assignment or sale of the secured assets,—

¶244

(i) the secured assets shall not be transferred by way of lease, assignment or sale by the secured creditor; and

¶245

(ii) in case, any step has been taken by the secured creditor for transfer by way of lease or assignment or sale of the assets before tendering of such amount under this sub-section, no further step shall be taken by such secured creditor for transfer by way of lease or assignment or sale of such secured assets.”

¶246

As per the amended provision, borrower can redeem

¶247

the mortgage only before publication of auction notice. The unamended provision gave the right to the borrower to redeem

¶248

the mortgage till completion of sale after the amendment, it is allowed only before issuance of auction notice. The borrower

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rights are significantly curtailed after the amendment. Once the auction process is set in motion and third party rights are created, neither the borrower nor the secured creditor can be permitted to defeat the statutory sale except in cases of fraud or illegality.

¶252

A public auction under the SARFAESI Act is a statutory sale which is conducted under an authority of law but not a contractual transaction. There should be transparency and fairness in conducting the auctions and there should be finality. Looking at the litigation which is pending in High Courts as well as in the Tribunals shows that the object and purport of the Act could not be achieved in its fullest sense. Auction process is the mode of recovery frame work under the Act. There is no dispute about the fact that sale becomes absolute upon confirmation, but it does not mean that in the interregnum, the Bank can arbitrarily cancel the auction as per the whims and fancies, change the cause of auction in favour of the principal borrower. In this case, admittedly, there is no default on the part of the auction purchaser. The only reason stated by the secured creditor for canceling the auction is the pending litigation. If pending litigation is the only reason to

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cancel the auction, no sale can be taken to its logical conclusion and no one will come forward to participate in the auction.

¶256

The Rules do not give the right of redemption to the borrower once the auction notification is issued. In this case, vide letter dated 10.09.2025, the auction is cancelled and on the very next day the Bank has given the offer of one time settlement. It appears that what cannot be done directly, the Bank wants to do it indirectly. In this process, whenever the principle borrower questions the auction and the secured creditor cancel the same, nobody will come forward to participate and their confidence on the auction process will erode. The auction process once is set into motion and party concludes, it acquires a decree of finality and it cannot be unsettled except on legally sustainable grounds. Otherwise the object of the SARFAESI Act itself is defeated.

¶257

Then coming to the contention of the counsel for respondent/Bank that the auction purchaser has no right to question the auction as the sale is not confirmed is concerned, there is no doubt that auction is not confirmed, petitioner is declared as the highest bidder and he paid 25% of the bid

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amount. The auction purchaser will get a right to question the arbitrary cancellation and he has a right to ask that the sale has to be taken to its logical conclusion. Petitioner has a legitimate expectation and a right against the arbitrary rejection. Though the rights of an auction purchaser may be inchoate but it cannot be at the discretion of the secured creditor. In the auction conditions, there will be a condition that the Bank has a right to cancel the auction and that does not mean that it will give unbridled power to the secured creditor. The rules are framed in such a way where there is protection to the borrower as well as the auction purchaser. In the present case, because of the lapses on the part of the auction purchaser, if the auction is cancelled, the auction purchaser has no case. The impugned proceedings clearly shows that it is because of the pending litigation. The secured creditor acts as a trustee of the auction process, they have an obligation to act transparent, adhere to the declared terms and avoid favouring borrower post auction. This Court has come across several cases where the Banks are taking decision sometimes in favour of the auction purchaser and sometimes in favour of the borrower contrary to the Act, rules and the circulars issued by

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the Reserve Bank of India. When they want to confirm the auction in favour of the auction purchaser it is the argument of the Bank that in the light of amendment to Rule 13(8) of the Rules, the right of redemption is not available once the auction notice is issued. When they want to favour the borrower like in this case, they will cancel the auction and immediately the next day the OTS facility will be given to the borrower.

¶264

Learned Senior counsel had relied on the judgment of the Kerala High Court in case of Ajmal K.V. referred supra and this Court is not able to concur with the view in the light of the above discussion.

¶265

A public auction conducted by the statutory authority must inspire confidence but can not create uncertainty like in this case. The Reserve Bank of India is the regulatory authority for Banks and financial institution, which lays down binding norms governing conduct of Bank in recovery and enforcement proceedings by issuing circulars from time to time and they are binding on Banks. The Reserve Bank of India plays a key role in maintaining financial disciplines. In the considered opinion of this Court, there are still certain grey areas which require

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immediate attention of the Reserve Bank of India. More elaborate guidelines/ circulars needs to be issued governing all steps of auction. There should be an accountability mechanism against the arbitrary action of the officers, audit scrutiny of such decisions are very necessary. The Reserve Bank of India is requested to look into these aspects and issue circulars in strengthening the process for effective recovery of money by the banks and financial institutions.

¶269

In the light of the above discussions, this Court is of the view that the impugned letter deserves to be set aside and the respondent/Bank shall proceed from that stage in accordance with law. Hence, this Court is passing the following:

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ORDER

¶271

i. The impugned letters dated 10.09.202 5 bearing Ref:ARM-1/CR-435/395/2025-26 and Ref:ARM1/CR-435/394/2025 issued by the respondent/ Bank are set aside .

¶272