The Madras High Court has dismissed a civil revision petition under Article 227 of the Constitution, challenging orders of the Debts Recovery Tribunal-II, Chennai and the Debts Recovery Appellate Tribunal (DRAT), upholding the auction of the petitioner’s mortgaged property by Indian Bank under the SARFAESI Act, 2002.
A Division Bench of Chief Justice Manindra Mohan Shrivastava and Justice G. Arul Murugan observed that there was no illegality in the auction process or violation of the mandatory provisions of the Security Interest (Enforcement) Rules, 2002.
The case stemmed from enforcement proceedings initiated by Indian Bank under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002, against M/s Lucky Footwear Components and its partners, following their default on a term loan and cash credit facility sanctioned for their footwear manufacturing business in Tamil Nadu.
After the borrowers failed to regularise their loan account despite repeated reminders, the Bank classified it as a Non-Performing Asset (NPA) in June 2021 and issued a demand notice under Section 13(2), calling upon them to repay outstanding dues exceeding ₹1.65 crore. When the borrowers did not comply, symbolic possession of the secured property was taken under Section 13(4), and the asset was subsequently brought to auction in July 2022.
Challenging the Bank’s actions, the borrowers first approached the Debt Recovery Tribunal (DRT-II, Chennai), alleging procedural irregularities, defective valuation, and inadequate notice. When the DRT rejected their plea, and the Debt Recovery Appellate Tribunal (DRAT) affirmed the sale, the borrowers filed the present civil revision petition before the Madras High Court under Article 227 of the Constitution, seeking to quash the auction and restrain the Bank from confirming the sale.
The petitioner contended that the sale notice dated July 25, 2022, was defective, as it violated the 15-day notice period under Rule 9. They further argued that their objections under Section 13(3A) of the SARFAESI Act were ignored and that their loan account had been wrongfully classified as a Non-Performing Asset (NPA) despite payments.
The Bank countered that all statutory steps had been followed —symbolic possession was duly taken under Section 13(4), objections were replied to on July 31, 2021, and valuation was carried out by an approved valuer registered under Section 34AB of the Wealth-Tax Act, 1957. It also argued that the petitioners’ letter of June 23, 2021, was not a statutory objection but merely a request for extension of time.
The Court agreed with the Bank, holding that the auction notice, published on July 26, 2022, for sale on August 10, 2022, satisfied the 15-day requirement under Rule 9(1), which applies to re-auctions following a failed attempt. The Bench clarified that the object of the rule is to ensure reasonable notice, not a rigid “clear 15 days” standard, and found no prejudice caused to the petitioner.
Rejecting the borrowers’ challenge to the property description, the Court noted that the sale notice contained sufficiently detailed particulars, including location, boundaries, extent, and ownership. As for valuation, it upheld the DRT’s reliance on the Bank’s report by a certified valuer over the petitioner’s private estimate.
On the issue of the classification of the loan as NPA, the Court found no evidence that the bank had erred in declaring the account as NPA. Respondent submitted that the borrowers were eligible for additional Covid-related loan relief, as they were categorised as SMA-2 borrowers, which made them ineligible. The Court held that since the petitioner has not refuted this by filing any rejoinder affidavit before the Tribunal, the same cannot be allowed to be raised at this point.
Citing the Supreme Court’s ruling in Celir LLP v. Sumati Prasad Bafna, 2024 Supreme (SC) 1187, the Bench reiterated that technical irregularities that do not cause prejudice cannot invalidate an otherwise lawful sale.”
Consequently, the High Court dismissed the revision petition, refusing to reopen the sale or grant relief to the petitioner.
Appearances
For Petitioners : Mr.N.Muralikumaran Senior Counsel
For Respondents : Mr.T.Sundar Rajan for R 1 and 2 & Mr.S.Charuhasan & Mr.S.Vanithalakshmi for Mr.P.C.Harikumar & Associates for R-3
