The Supreme Court bench comprising of Justices L. Nageswara Rao, Sanjiv Khanna and B.R. Gavai was hearing a case on SARFAESI Act and held that the borrower was estopped from challenging violation of Section 13(3A) of the SARFAESI Act, 2002.
Taking into consideration the entire facts of the case, which perspicuously reflect disingenuous conduct on part of the Borrower to gain the indulgence, unfulfilled assurances and promises, their unwillingness to pay, and in light of the law laid down, the Supreme Court were of the view that the Borrower had waived and was estopped from challenging the violation of Section 13(3A) of the SARFAESI Act and hence, the first issue was decided in favour of the Bank.
The Bench did not think to examine the second point, i.e. whether in an application under Section 17 of the SARFAESI Act, which can be filed when a Borrower is aggrieved by any of the measures referred to in sub-section (4) to Section 13 within forty-five days from the date such measures are taken, the Borrower can challenge other measures, steps and procedures which preceded the ultimate sale even if barred by the limitation period of forty-five days.
With regard to the third issue of the valuation of the machinery and the adverse finding of the High Court on the question of valuation before the machinery was sold in auction, the Apex Court did not agree with the High Court that the machinery should have been separately auctioned or sold. This would be putting fetters and restrictions on the Bank by baring the Bank from selling the machinery along with the building and the land. The law recognises that the lender knows its interests and how to secure the best value of the property given the fact that the mortgaged property had to be sold for recovery of the debts due and payable to the Bank.
The fourth issue relating to the date of the valuation report also does not help the Borrower. The valuation certificate or report is dated 19th February 2018. As held above, attempts to sell the property were made thereafter on 28th March 2018 and 14th June 2018 but without success, as there were no bidders. Accordingly, it was decided to reduce the reserve price from Rs.2,78,10,000/- to Rs.2,60,00,000/-. However, in the fourth auction the successful bid given by Basa Chandramouli was for Rs.2,91,20,000/-, which was much higher than the reserve price of Rs.2,60,00,000/- (Rupees two crores sixty lakhs only) or the fair market value of Rs.2,73,80,000/- in terms of the valuation report.
Resultantly, the Supreme Court allowed the present appeals and set aside the impugned order dated 24th January 2020 passed in Writ Petition No. 13936 of 2019. The writ petition would be treated as dismissed. The order passed by the Debts Recovery Tribunal dated 1st July 2019 upholding the procedure and sale of the Subject Property under the SARFAESI Act was upheld.