Non-Service of Demand Notice and Irregularities in Auction Sale: DRAT Remands Matter for Fresh Decision [Read Order]

The borrower contended that no demand notice under Section 13(2) of the SARFAESI Act was served, and that the auction was conducted at a throw‑away price.

The Debt Recovery Appellate Tribunal (DRAT), Allahabad, has set aside an order of the DRT and remanded the matter back for fresh adjudication, citing irregularities in the service of the demand notice and the conduct of the auction sale.

The appeal was filed by Syed Nazmul Hasan under section 18 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002( SARFAESI) against the judgment and order dated 26.06.2014, whereby the dismissal of Securitisation Application (SA) No. 220/2011.

The borrower had availed a housing loan of ₹6 lakh from Bank of Baroda, mortgaging his Bahadurpur property. After default, the account was classified as a non‑performing asset, and the bank issued demand and possession notices before auctioning the property in March 2011.

The appellant argued that the recovery proceedings were fundamentally flawed because no demand notice under Section 13(2) of the SARFAESI Act had ever been served, nor was any possession notice under Section 13(4) received and maintained; he only became aware of the bank’s move when the auction sale notice appeared in the Hindustan newspaper on 13 February 2011.

It was further contended that the property was sold at a lower price. On these grounds, he submitted that the DRT’s dismissal of his application was perverse and unsustainable, and prayed that the impugned order be set aside and his appeal allowed.

On the other hand, the Bank of Baroda stated that the securitisation application filed by the appellant was delayed, barred by time and therefore rightly dismissed by the DRT. It was argued that all statutory notices under Sections 13(2) and 13(4) of the SARFAESI Act had been duly served upon the borrower, a fact recorded in the impugned order.

Counsel for the auction purchaser further submitted that he was a bona fide buyer, having deposited the entire sale consideration with the bank and obtained a valid sale deed, and therefore, the sale could not be interfered with.

The tribunal observed that the DRT had failed to properly examine the borrower’s plea regarding non‑service of the demand notice and irregularities in the auction process. It is also noted that while the borrower had not raised objections about the possession notice under Section 13(4), the issues of the demand notice and the auction sale were squarely before the DRT but not addressed.

The bench, Justice R.D. Khare, held that the bank’s objection on limitation was untenable, since the DRT had already condoned the delay and the bank had not challenged that part of the order.

Accordingly, the appellate tribunal set aside the impugned order and remanded the matter back to the DRT for a fresh decision in accordance with law, uninfluenced by earlier observations.

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