DRAT Quashes Auction Sale for Non-Compliance with Statutory Notice Requirements under SARFAESI Act
- REEDLAW
- Nov 16, 2024
- 2 min read
DRAT quashed the auction sale due to non-compliance with the statutory notice requirements under the SARFAESI Act.
Debts Recovery Appellate Tribunal (DRAT), Kolkata Bench of Justice Anil Kumar Srivastava (Chairperson) reviewed an appeal and held that in cases of subsequent sales under the SARFAESI Act, the authorized officer must comply with the mandatory 30-day notice requirement under Rule 8(6), even when a 15-day notice period is allowed under Rule 9(1) for such sales, ensuring adherence to procedural safeguards for the borrower’s right to redemption. The tribunal quashed the auction sale for non-compliance with these statutory provisions.
The Debts Recovery Appellate Tribunal (DRAT), Kolkata, under the chairmanship of Hon’ble Anil Kumar Srivastava, adjudicated an appeal challenging the dismissal of SARFAESI Application No. 383 of 2017 by the Debts Recovery Tribunal (DRT), Visakhapatnam. The appellant, M/s. ATR Cars Private Limited had contested violations of Rule 8(6) and Rule 9(1) of the Security Interest (Enforcement) Rules, 2002, in the auction sale of secured assets. The DRT had found that the 15-day notice was adequate for a subsequent sale, a conclusion that the appellant disputed, asserting that a 30-day notice was required under Rule 8(6). The respondents, Indian Bank, countered by referencing the Supreme Court’s ruling in Celir LLP v. Bafna Motors (Mumbai) Private Limited & Others, REEDLAW 2023 SC 09201 to argue the sanctity of public auctions and limited grounds for interference.
In its review, the DRAT acknowledged typographical errors in its initial judgment and amended its findings. The DRAT found that the DRT had erred in dismissing the appeal. It ruled that the auction sale on January 31, 2018, did not comply with Rule 8(6) and Rule 9(1), which mandate the issuance of a 30-day notice prior to a sale, including subsequent sales. The DRAT emphasized the importance of these procedural safeguards, particularly the mandatory 30-day notice period under Rule 8(6), even in cases involving subsequent sales where a 15-day notice is allowed under Rule 9(1). This ruling was consistent with the principles set forth in Celir LLP v. Bafna Motors (Mumbai) Private Limited & Others, REEDLAW 2023 SC 09201 and Mathew Varghese v. M. Amritha Kumar, which underscore the borrower’s right to redemption unless explicitly curtailed by statute.
The DRAT’s decision effectively quashed the auction sale, ordered a refund of the auction money with 9% simple interest, and granted the bank the liberty to proceed afresh in accordance with the law. The amended judgment was directed to replace the earlier version, ensuring that all parties adhered to the statutory provisions in the enforcement of security interests.
Mr. Nemani Srinivas, Advocate represented the Appellant.
Mr. Debasish Chakrabarti with Ms. Sharmistha Pal appeared for Respondent No. 1 and Respondent No. 2/Bank.
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