DRT held that procedural irregularities in SARFAESI auctions did not invalidate sales unless collusion, fraud, or substantial prejudice was demonstrated.
The Debts Recovery Tribunal (DRT), Siliguri Bench, presided over by Mr Rakesh Pati Tiwari, addressed a Securitisation Application (SA) and held that an auction conducted under the SARFAESI Act could not be set aside solely for procedural irregularities, such as a shortened notice period unless it is demonstrated to be collusive, fraudulent, or resulting in substantial prejudice. In the absence of such fundamental errors, the confirmation of the sale to the highest bidder remains valid.
In the present case, the Debts Recovery Tribunal (DRT) adjudicated on a challenge under Section 17(1) of the SARFAESI Act, 2002, to set aside an e-auction sale notice dated May 9, 2024. The applicant, Dipankar Chakraborty, alleged procedural violations in the issuance of notices under Sections 13(4) of the SARFAESI Act and Rules 8(6) and 9(1) of the Security Interest (Enforcement) Rules, 2002. The respondent bank contended that the sale followed due procedure, asserting that the applicant had defaulted on a loan of ₹34 lakhs, which was classified as a non-performing asset (NPA) on March 31, 2021.
The applicant argued that the 15-day statutory notice period was not adhered to, as the sale scheduled for May 28, 2024, was conducted with only 10 days' notice after the service of the sale notice on May 18, 2024. The respondent bank countered by stating that this was the third sale notice for the property, with the previous attempts recorded in Tribunal proceedings. The bank claimed compliance with statutory requirements and affirmed the successful sale of the property to the highest bidder, Randhir Kumar Sinha, with a confirmation certificate issued on May 30, 2024.
The DRT examined the applicant's reliance on precedents, including Supreme Court judgments such as J. Rajiv Subramaniyan v. M/s Pandiyas and Others, REEDLAW 2014 SC 03201 and Vasu P. Shetty v. Hotel Vandana Palace, REEDLAW 2014 SC 04202, which emphasized procedural compliance in auctions under the SARFAESI Act. However, the Tribunal noted that apart from the alleged violation of the notice period, no claims of collusion, fraud, or inadequate pricing were raised. The Tribunal relied on the Supreme Court's judgment in Celir LLP v. Sumati Prasad Bafna, REEDLAW 2024 SC 12201, which underscored that procedural irregularities without substantial prejudice or core procedural errors do not invalidate a sale.
The DRT concluded that the applicant failed to demonstrate any prejudice or substantial injury caused by the shortened notice period. The Tribunal upheld the sale, emphasizing that procedural deviations without material irregularity or harm to the borrower are insufficient to set aside a confirmed auction. Consequently, the applicant’s plea to annul the sale was dismissed, affirming the validity of the e-auction conducted by the respondent bank.
Mr. Mahim Sasmal and Ms Shyamali Sarkar, Advocates represented the Applicant.
Mr. Rajneesh Tripathi, Advocate appeared for the Respondents.
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