Sale Was Conducted with Borrower's Consent and Complied with SARFAESI Act: DRAT Restores Property to Auction
The Bank of India was directed to hand over the physical possession of the property in question to the auction purchasers within one month from the date of the judgment.
The Debts Recovery Appellate Tribunal ( DRAT ) in Allahabad has allowed an appeal filed by auction purchasers, setting aside an order of the Debts Recovery Tribunal (DRT) that had cancelled a property auction. The DRAT held that the sale was conducted with the borrower's consent and that the auction purchasers had complied with the relevant provisions of the SARFAESI Act, 2002.
The appellants, Smt. Urmila Jain and others, were the highest bidders in an auction conducted by the Bank of India on March 21, 2009, for a property mortgaged by the borrower, M/S Mukteshwar Fertilizer Ltd. The borrowers challenged the auction, arguing that the purchasers had violated Rule 9(3) of the Security Interest (Enforcement) Rules, 2002, by not depositing 25% of the bid amount on the same day the sale was confirmed. The DRT agreed with the borrowers and set aside the auction sale.
The auction purchaser cannot justify the illegal act of the Bank that it is not mandatory required on behalf of the Bank to issue a letter of confirmation of the bid on the date, when the bid is opened, hence the same stand confirmed on 21.03.2009 itself. The provision of Rule 9(3) is dependent upon Rule 9(2), which specifies what is to be done.
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It was thus contended that the sale stands confirmed when the highest bid is declared and accepted by the secured creditor. In the present case, the bids were opened and the highest bid was declared and confirmed on 21.03.2009 and 25% of the bid amount was deposited on 27.03.2009, which was to be deposited on the date, when the bid was opened i.e. 21.03.2009.
The DRAT, however, found in favour of the auction purchasers. It noted that the borrower had previously consented to the sale before the High Court, undertaking that they would have no objection if the bank proceeded with the auction after they failed to produce a private buyer.
The DRAT also observed that the bank had formally accepted the appellants' bid on March 25, 2009, and the appellants had deposited the required 25% amount within 24 hours of that acceptance, thereby complying with the bank's terms. The tribunal held that any minor delay was caused by the borrower's own litigation and that a party should not be allowed to benefit from its own wrongdoing.
Consequently, the DRAT set aside the DRT's order and allowed the appeal. The Bank of India was directed to hand over the physical possession of the property in question to the auction purchasers within one month from the date of the judgment.
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