The DRAT set aside the DRT order and upheld the validity of the auction sale, ruling that procedural adjustments do not violate statutory notice requirements.
The Debts Recovery Appellate Tribunal (DRAT), Allahabad Bench of Justice R.D. Khare (Chairperson) reviewed a regular appeal and observed that compliance with the mandatory 30-day notice period under Rules 8(6) and 9(1) of the Security Interest (Enforcement) Rules, 2002, is satisfied when the original auction notice meets statutory requirements, and procedural adjustments like a corrigendum for rescheduling due to a public holiday do not amount to a breach, provided they do not compromise the rights of the borrower or the auction's integrity.
The Debt Recovery Appellate Tribunal (DRAT) adjudicated an appeal under Section 18 of the SARFAESI Act, 2002, brought by the appellant against the order of the Tribunal below, which had set aside the auction sale conducted by the respondent bank. The case stemmed from a financial assistance agreement wherein the borrower’s property had been mortgaged. Following default and classification of the account as a Non-Performing Asset (NPA) notices under Sections 13(2) and 13(4) of the SARFAESI Act were issued, leading to the possession and eventual auction sale of the property. The borrowers contested the process, arguing non-compliance with statutory requirements, including the mandatory 30-day notice for sale under Rules 8(6) and 9(1) of the Security Interest (Enforcement) Rules, 2002.
The Tribunal below allowed the borrower’s plea, holding that the 30-day notice period was not properly observed when the auction was rescheduled from September 17, 2010, to September 27, 2010, due to a public holiday. The appellants contended that the corrigendum issued on September 18, 2010, merely postponed the opening of bids without reopening the auction process and that a clear 30-day notice had been served. They argued that the Tribunal's finding of non-compliance with statutory provisions was erroneous. The appellant also raised issues regarding the delay condonation application initially allowed by the Tribunal below, asserting a lack of opportunity to be heard on that matter.
The DRAT rejected the appellants’ contentions on delay, affirming that the order condoning the delay had attained finality as it was not challenged further. However, it held that the finding of the Tribunal below regarding the 30-day notice was unsustainable. It was observed that the auction notice dated August 14, 2010, provided the required notice period, and the corrigendum merely adjusted the procedural timeline due to a declared holiday. The DRAT clarified that the statutory notice requirements were met since the auction proceedings continued as scheduled, barring the administrative rescheduling of the bid opening date
.
In conclusion, the DRAT allowed the appeal, setting aside the order of the Tribunal below and upholding the validity of the auction sale. It emphasized that procedural adjustments like the corrigendum did not constitute a breach of statutory requirements, particularly when they did not impact the fundamental rights of the borrower or the integrity of the auction process.
Mr. S.K. Gupta, Advocate represented the Appellant.
Mr. Kushal Kant, Advocate for appeared Respondent No. 1 & Respondent No. 2.
Mr. P.K. Gupta, Advocate for appeared for Respondent No. 3 & Respondent No. 4/Bank.
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