DRAT Quashes Auction Sale Over Violation of Mandatory 30-Day Notice Period; Rejects DCB Bank’s Recovery Action [Read Order]
The Tribunal adhered to principle that if an initial action is contrary to law, all subsequent actions are void
The Debts Recovery Appellate Tribunal (DRAT), Allahabad, has dismissed an appeal filed by DCB Bank Ltd., upholding a lower tribunal's decision to set aside an auction sale. The Tribunal found that the bank had violated the mandatory procedural requirements under the SARFAESI Act, 2002 by failing to provide the statutory 30-day notice period before selling the mortgaged property.
In this case, DCB Bank had extended a loan of approximately ₹93.48 lakhs to Mohd. Ali and others, secured by a mortgage on a residential property in Meerut. After the account was classified as a Non-Performing Asset (NPA) in December 2019, the bank initiated recovery proceedings, culminating in an auction held on December 26, 2022.
The respondents-borrowers challenged the bank’s actions, and the lower Tribunal’s findings revealed several procedural lapses. The auction sale notice was found to be published on December 9, 2022, for a sale scheduled just 17 days later on December 26. The Tribunal, presided over by Justice R. D. Khare, pointed out that Rule 9(1) of the Security Interest (Enforcement) Rules, 2002, explicitly mandates that no sale of immovable property shall take place before the expiry of 30 days from the date of public notice.
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Further, the Bank failed to produce evidence of serving the mandatory possession notice at the property as required by Rules 8(1) and 8(7). The Tribunal observed that several documents submitted by the Bank as proof of service were either illegible or entirely blank.
Justice Khare remarked that the Bank appeared to have proceeded with recovery "in its own way" rather than following the established legal framework.
In adherence to the principle that if an initial action is contrary to law, all subsequent actions are void, the Tribunal affirmed that the entire sale process, including the sale certificate and registered deed, must be set aside. As a result, the appeal was dismissed.
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