Composite Sale Notice u/r 8(6) of Security Interest (Enforcement) Rules Validly Served: DRAT Upholds PNB Auction Proceedings

The Debt Recovery Appellate Tribunal (DRAT), Kolkata has upheld auction proceedings initiated by Punjab National Bank (PNB), ruling that a composite sale notice issued under Rule 8(6) of the Security Interest (Enforcement) Rules, 2002 was validly served.

In doing so, the appellate tribunal set aside the order of the Debt Recovery Tribunal (DRT), which had earlier quashed the auction on grounds of alleged procedural irregularity.

The dispute arose from enforcement action taken by PNB under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). The borrower, Vijayalakshmi Raw & Boiled Rice Mill had defaulted on repayment obligations, prompting the bank to classify the account as a non‑performing asset and initiate recovery proceedings.

Pursuant to Rule 8(6), PNB issued a composite sale notice to the borrower, detailing the proposed auction of secured assets.

The borrower Vijayalakshmi Raw & Boiled Rice Mill challenged the auction before the DRT, arguing that the composite notice was defective and that mandatory requirements under Rule 8(6) had not been complied with. The DRT accepted this contention, holding that the sale notice was not properly served and that the auction proceedings were vitiated.

PNB appealed to the DRAT, contending that the composite notice satisfied statutory requirements and had been duly communicated to the borrower. The bank argued that Rule 8(6) permits issuance of a composite notice covering both possession and sale, provided it contains all requisite particulars such as description of property, reserve price, and auction date.

It further submitted that the borrower had full knowledge of the proceedings and had participated in earlier stages, thereby negating any claim of prejudice.

After hearing both sides, the DRAT Kolkata concluded that the DRT had erred in quashing the auction. The appellate tribunal emphasised that the SARFAESI framework is designed to facilitate expeditious recovery of dues by secured creditors, and technical objections cannot be allowed to frustrate legitimate enforcement.

It noted that the composite sale notice issued by PNB contained all essential details mandated under Rule 8(6) and was validly served on the borrower.

Justice Anil Kumar Srivastava observed that the borrower’s challenge was essentially an attempt to delay recovery, rather than a genuine grievance of procedural violation. It reiterated that once statutory requirements are met, courts and tribunals must adopt a pragmatic approach to uphold creditor rights.

The tribunal also underscored that borrowers cannot escape liability by raising hyper‑technical objections when they have defaulted on substantial dues.

By setting aside the DRT’s order, the DRAT restored the validity of PNB’s auction proceedings, thereby enabling the bank to recover outstanding amounts through sale of secured assets.

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