Telangana High Court
M/S Classic Chemicals Limited vs Debts Recovery Appellate Tribunal At … on 16 June, 2025
*THE HON'BLE JUSTICE MOUSHUMI BHATTACHARYA
AND
THE HON'BLE JUSTICE B.R.MADHUSUDHAN RAO
+ WP.NOs.4623 AND 4373 OF 2025
% Dated 16.06.2025
WP.No.4623 of 2025
BETWEEN
# M/s Classic Chemicals Limited ... Petitioner
And
$ Debts Recovery Appellate Tribunal and others ... Respondents
WP.No.4373 of 2025
BETWEEN
# State Bank of India,
Kachiguda, Hyderabad. ... Petitioner
And
$ Union of India and others. ... Respondents
! Counsel for Petitioner: 1. Sri Raghu Gurram in
WP.No.4623 of 2025
2. Sri N.Meher Prasad in
WP No.4373 of 2025
^ Counsel for respondent No.2: 1. Sri N.Meher Prasad in
WP.No.4623 of 2025
^ Counsel for respondent No.3 & 4 2. Sri S.Lohit in WP.No.4623 of 2025
^ Counsel for respondent No.1: 4. Ms. Jhansi representing Gadi Praveen
Kumar, Deputy Solicitor General
of India in WP.No.4373 of 2025
^ Counsel for respondent No.3: 5. Sri S.Lohit in WP.No.4373 of 2025
^ Counsel for respondent No.4: 6. Sir Raghu Gurram in
WP.No.4373 of 2025
<GIST:
> HEAD NOTE:
? Cases referred
1. (2023) 2 SCC 168
2. 2013 10 SCC 83
3. 2023 SCC OnLine All 703
4. (2022) 3 High Court Cases (Del) 482
5. SLP (Civil) No.330 of 2017 of Supreme Court of India dated 10.10.2024
6. 2013 SCC OnLine TS 635
7. (1991) 3 SCC 273
8. 2014 (5) SCC 660 Paras 16 & 25
9. 2014 (5) SCC 610 Para Nos.42 & 43
10. (1976) 3 SCC 37
11. (2021) 7 SCC 369
12. (2024) 6 SCC 641
2/27 MB,J & BRMR,J
WP_Nos_4623 & 4373_2025
HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD
*****
WP.Nos.4623 & 4373 of 2025
WP.No.4623 of 2025
BETWEEN
M/s Classic Chemicals Limited
... Petitioner
And
Debts Recovery Appellate Tribunal and others
... Respondents
WP.No.4373 of 2025
BETWEEN
State Bank of India,
Kachiguda, Hyderabad
.... Petitioner
And
Union of India and others.
... Respondents
Date of Judgment Pronounced: 16.06.2025
THE HON'BLE JUSTICE MOUSHUMI BHATTACHARYA
AND
THE HON'BLE JUSTICE B.R.MADHUSUDHAN RAO
1. Whether Reporters of Local newspapers
may be allowed to see the Judgments? : No
2. Whether the copies of judgment may be
Marked to Law Reporters/Journals? : Yes
3. Whether His Lordship wishes to
see the fair copy of the Judgment? : Yes
_____________________
B.R.MADHUSUDHAN RAO,J
3/27 MB,J & BRMR,J
WP_Nos_4623 & 4373_2025
THE HON'BLE JUSTICE MOUSHUMI BHATTACHARYA
AND
THE HON'BLE JUSTICE B.R.MADHUSUDHAN RAO
WP.No.4623 OF 2025
And
WP.No.4373 OF 2025
COMMON ORDER:
(per Justice B.R.Madhusudhan Rao)
WP.No.4623 of 2025
1. This Writ Petition is filed by the auction purchaser
(M/S Classic Chemicals Limited) in the nature of Writ of Certiorari
for setting aside the impugned order, dated 10.01.2025 passed by
the Debts Recovery Appellate Tribunal (DRAT) at Kolkata in Appeal
No.29 of 2021 and to quash the same, confirm the auction sale
conducted on 22.03.2013 as valid and in accordance with The
Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 (for short ‘the
SARFAESI Act, 2002‘) and the Rules made thereunder.
WP.No.4373 of 2025
2. This Writ Petition is filed by State Bank of India, Stressed
Assets Management Branch, Hyderabad to issue a Writ in the
nature of Writ of Certiorari and to call for the records of the order
dated 10.01.2025 passed by the Debts Recovery Appellate Tribunal
4/27 MB,J & BRMR,J
WP_Nos_4623 & 4373_2025
(DRAT), Kolkata in Appeal No.56 of 2022 against the order dated
05.03.2021 made in S.A.No.1115 of 2017 passed by the DRT-II,
Hyderabad contrary to the provisions of the SARFAESI Act, 2002
and to set aside the same.
3.1 Learned counsel for auction purchaser in W.P.No.4623 of
2025 submits that on 14.02.2013 respondent No.2-Bank has
issued e-auction sale notice. On 15.02.2013 e-auction was
published in news paper. On 15.03.2013, the auction purchaser
has remitted Earnest Money Deposit (EMD) of Rs.51,50,000/- by
RTGS. On 22.03.2013, the petitioner was declared as highest
bidder at Rs.5,16,00,000/-. On 22.03.2013, a cheque for
Rs.77,50,000/- towards 25% of the sale consideration was
deposited with the Bank as per Rule 9(3) of the Security Interest
(Enforcement) Rules, 2002 (hereinafter referred to as ‘the Rules,
2002’).
3.2 The deposit of cheque towards 25% of sale consideration is
not contrary to Rule 9(3) of the 2002 Rules. As can be seen from
the terms and conditions of the e-auction notice at clause-10
which specifies that the cheque will not be accepted for EMD. This
presupposes that a cheque is a bar only to the extent of EMD.
Bank has accepted the payment of EMD and 25% of sale
5/27 MB,J & BRMR,J
WP_Nos_4623 & 4373_2025
consideration by mode of cheque payment cannot be said as
irrational or arbitrary or malafide.
3.3 Rule 9(3) and Rule 9(4) of the Rules, 2002, borrower has
waived his rights under the said provision.
3.4 Learned DRT-II, Hyderabad has erroneously observed in its
order dated 05.03.2021 that after remand, no additional reply has
been filed by the auction purchaser and further incorrectly stated
that the auction purchaser merely adduced oral evidence to speak
of various amounts spent by him towards improvement made over
the schedule property. After remand by the DRAT, Kolkata in
Appeal Nos.188 and 191 of 2018, the auction purchaser has filed
his counter affidavit along with chief-examination affidavit of RW.1,
RW.2. The borrower did not cross-examine RW.1 and RW.2 which
amounts to a deemed admission of the contents of their
testimonies and their documents placed on record.
3.5. DRAT, Kolkata in its order dated 10.01.2025 in Appeal No.29
of 2021 erroneously held that no plea of spending
Rs.13,29,48,643/- was taken in the pleadings. Counsel to
substantiate his contention has relied on the decisions in the cases
of (1) Varimadugu Obi Reddy Vs. B.Sreenivasulu & Others 1, (2)
1
(2023) 2 SCC 168
6/27 MB,J & BRMR,J
WP_Nos_4623 & 4373_2025
General Manager, Sri Siddeshwara Cooperative Bank Limited Vs.
Ikbal & Others 2, (3) Arun Kumar Jain & Others Vs. Presiding
Officer, DRT & Ors. 3 , (4) Pahwa Buildtech Pvt. Ltd. Vs. Jagmohan
Singh Arora & Ors. 4, (5) Sanjay Sharma Vs. Kotak Mahindra Bank
Ltd. & Ors. 5, (6) K.Sahaja Rao Vs. Assistant General Manager, SBI
& Ors. 6, (7) Poddar Steel Corporation Vs. Ganesh Engineering
Works & Ors. 7
4.1 Learned counsel for the petitioner in WP.No.4373 of 2025
(State Bank of India) submits that the petitioner is a secured
creditor and there is a serious travesty of justice in the order dated
10.01.2025 of the DRAT, Kolkata passed in Appeal No.56 of 2022.
Both appeals filed by the auction purchaser and secured creditor
arising out of an order dated 05.03.2021 of the DRT-II Hyderabad
passed in SA.No.1115 of 2017 (Old SA.No.259 of 2013 of DRT-I)
dismissing the Appeals by a common order without following the
principles of natural justice and contrary to the provisions of the
4.2 The petitioner-Bank has invoked the provisions of SARFAESI
Act, 2002 and issued Demand Notice, dated 16.05.2011 to the
2
(2013) 10 SCC 83
3
2023 SCC OnLine All 703
4
(2022) 3 High Court Cases (Del) 482
5
SLP (Civil) No.330 of 2017 of Supreme Court of India dated 10.10.2024.
6 2013 SCC OnLine TS 635 7 (1991) 3 SCC 273 7/27 MB,J & BRMR,J WP_Nos_4623 & 4373_2025 respondent No.3-borrower under Section 13(2) of the Act demanding a sum of Rs.2,81,74,785.05 paisa followed by
Possession Notice, dated 15.09.2011 under Section 13(4) of the
SARFAESI Act, 2002. In February, 2013, a Sale Notice was
published and pursuant to the same on 22.03.2013 an auction
sale of secured assets was conducted by the Authorised Officer of
the petitioner-Bank which was confirmed on 22.03.2013 in favour
of respondent No.4 (auction purchaser) at Rs.516 Lakhs, reserve
price being Rs.515 Lakhs.
4.3 Counsel submits that 25% of the sale price less earnest
deposit (Rs.51.5 Lakhs) amounting to Rs.77.7 Lakhs was deposited
before the Authorized Officer on 22.03.2013 by way of cheque
No.569687 drawn on ING Vysya Limited as per Rule 9(3) of the
Rules, 2002 which was credited to the Bank’s Account on
27.04.2023.
4.4 Balance of the 75% bid amount was to be paid by the
auction purchaser within 15 days from the date of confirmation of
sale (i.e., 22.03.2013). At the request of the auction
purchaser/respondent No.4, the Authorised Officer extended time
up to 30.06.2013 for payment of balance 75% of the sale price
amounting to Rs.387 Lakhs. The amount was paid by the
purchaser within the extended period in the form of cheque on
8/27 MB,J & BRMR,J
WP_Nos_4623 & 4373_2025
27.06.2013 and 28.06.2013 and Sale Certificate was issued on
29.06.2013.
4.5 Respondent No.3-borrower (M/S Vasantha Surgical
Equipments) filed SA.No.259 of 2013 under Section 17 of the
SARFAESI Act, 2002 on 18.04.2013 (subsequently renumbered as
SA.No.1115 of 2017) before DRT alleging amongst others that the
Sale Notice was not served and the auction was not validly
conducted and the property was under valued.
4.6 Bank has complied with Rule 9(3) and Rule 9(4) of the Rules,
2002. Rule 9(3) refers to deposit and does not bar/restrict
receiving payment by cheque. Once the cheque is honored, the
deposit of cheque is a compliance of Law. In Siddeshwara Bank
Cooperative Bank Limited’s case2 which however has not laid down
any ratio that consent of the borrower is required. It has been held
that it is not mandatory and it can be waived by the parties, it is
for the benefit of the secured creditor. No prejudice is caused to
the borrower and there is no material irregularity to set aside the
same. Counsel has also relied on the decisions in (1) Varimadugu
Obi Reddy Vs. B.Sreenivasulu & Others1, (2) General Manager, Sri
Siddeshwara Cooperative Bank Limited Vs. Ikbal & Others2, (3)
9/27 MB,J & BRMR,J
WP_Nos_4623 & 4373_2025
Sanjay Sharma Vs. Kotak Mahindra Bank Ltd. & Ors.5, (4)
K.Sahaja Rao Vs. Assistant General Manager, SBI & Ors.6
5.1 Learned counsel for respondent No.3-borrower (M/S
Vasantha Surgical Equipments) submits that sale confirmation
letter was issued on 22.03.2013 prior to the realization of the
cheque amount. Cheque was cleared on 27.03.2013 (25%), this
clearly indicates that the mandatory requirement of the immediate
payment of 25% deposit was not fulfilled, consequently upon such
non-compliance, the Bank was obliged to re-initiate the sale of the
property. There was material irregularity concerning the payment
of 25% of the sale price, furthermore no justification has been
provided by the Bank for its failure to present the cheque for
encashment until 5 days after the date of auction.
5.2 The terms and conditions governing the auction categorically
prohibit the acceptance of cheque towards earnest money deposit.
The Bank accepted cheques towards payment of 25% deposit and
the balance sale consideration, this conduct constitutes a clear
and deliberate violation of auction terms, such a breach is not
merely procedural but strikes at the root of the sale process and
warrants the setting aside of the sale.
10/27 MB,J & BRMR,J
WP_Nos_4623 & 4373_2025
5.3 There is a violation of Rule 9(3) of the Rules, 2002 and
breach of the terms of the e-auction Notice.
5.4 Counsel submits that pre-amendment Rule 9(4) is applicable
to the present case which mandates that the balance amount of
the purchased price shall be paid within 15 days from the date of
confirmation of the sale of the immovable property or within such
extended period as may be mutually agreed upon in writing by the
parties.
5.5 In the present case, the sale was confirmed in favour of the
auction purchaser on 22.03.2013, the period of 15 days expired on
06.04.2013. However, on 06.04.2013 the Bank in collusion
accepted the request of the auction purchaser for an extension of
time to deposit remaining 75% of the bid amount till 30.06.2013,
an extension of 86 days beyond the stipulated period under Rule
9(4). The extension was granted unilaterally by the Bank without
notice to the borrower, thereby violating the procedural safeguards
mandated under the applicable Rules.
5.6 Counsel submits that petitioner/auction purchaser is not
entitled to relief on the ground of equities merely because they
made improvements on the schedule property. The Doctrine of Lis
Pendence has been correctly invoked by the DRT, Hyderabad. The
11/27 MB,J & BRMR,J
WP_Nos_4623 & 4373_2025
SA.IR.No.419 of 2011 has no connection whatsoever with the
auction notice in question and was filed solely to challenge the
possession of the schedule property by the Bank. The auction
purchaser is attempting to conflict two distinct securitisation
applications initiated by the borrower at different points of time
each seeking entirely different reliefs. Counsel has relied on the
decisions in the cases of (i) Sri Siddeshwara Cooperative Bank Ltd.
Vs. Ikbal2 (ii) Vasu P Shetty Vs. Hotel Vandana Palace 8 (iii) Mathew
Verghese Vs. Amritha Kumar 9 (iv) Sri Vijayalakshmi Rice Mills,
New Contractors Co. Vs. State of Andhra Pradesh 10 and (v)
Madras Bar Association Vs. Union of India & Anr. 11
6. Heard learned counsel for the parties, perused the record.
7. Now the point for consideration is whether the common order
passed by the learned DRAT, Kalkata in Appeal No.29 of 2021 with
Appeal No.56 of 2022, dated 10.01.2025 suffers from any illegality
or perversity?
8.1 The factual background of the case is that respondent No.3 –
borrower earlier filed SA.IR.No.419 of 2011 with delay of 32 days
vide I.A.No.997 of 2001 questioning the Possession Notice dated
8
2014 (5) SCC 660 Paras 16 & 25
9
2014 (5) SCC 610 Para Nos.42 &43
10
(1976) 3 SCC 37
11
(2021) 7 SCC 369
12/27 MB,J & BRMR,J
WP_Nos_4623 & 4373_2025
15.09.2011. The Tribunal granted interim stay of further
proceedings vide order dated 09.12.2011 subject to deposit of
Rs.20 Lakhs. The applicant/respondent No.3 failed to comply the
conditional order and consequent thereon, condone delay petition
in I.A.No.997 of 2011 ended in dismissal on 16.04.2013. The
applicant filed review petition along with delay condone petition
seeking review of the order dated 16.04.2013. The said review
petition being Review IR Petition No.11 of 2015 ended in rejection
on 12.09.2017.
8.2 It is the contention of the petitioner’s counsel in W.P.No.4623
of 2025 that the auction purchaser was not aware of the
proceedings initiated by the borrower in SA.IR.No.419 of 2011 and
that the borrower is estopped from challenging the e-auction Sale
Notice, dated 14.02.2013.
8.3 The dispute with regard to the Possession Notice issued
under Section 13(4) of SARFAESI Act, 2002 dated 15.09.2011 set
at rest with the dismissal of SA.IR.No.419 of 2011, this fact is
referred to in the order dated 17.10.2018 at Paragraph No.18 in
SA.No.1115 of 2017.
9.1 Respondent No.3 – M/s. Vasantha Surgical Equipments filed
SA.No.259 of 2013 under Section 17 of the SARFAESI Act, 2002
13/27 MB,J & BRMR,J
WP_Nos_4623 & 4373_2025
challenging the auction notice dated 14.02.2013 which was
published on 15.02.2013 in New Indian Express daily news paper
and auction conducted on 22.03.2013 on the ground that
Possession Notice dated 15.09.2011 is without issuance of Demand
Notice under SARFAESI Act. E-auction sale notice dated
14.02.2013 was not served on the borrower and reverse price was
fixed in violation of Rule 8(5) of the Security Interest (Enforcement)
Rules, 2002.
9.2. SA.No.259 of 2013 was allowed by the DRT on 28.01.2014.
The auction purchaser i.e., petitioner in WP.No.4623 of 2025 has
challenged the judgment dated 28.01.2014 by filing WP.No.7311 of
2014 before the High Court of Judicature at Hyderabad for the
State of Telangana which was allowed on 19.06.2014, matter was
remanded back to the DRT to implead the auction purchaser
(M/s Classic Chemicals Limited).
9.3. IA.No.1340 of 2013 is filed by the borrower/Respondent No.3
in S.A.No.259 of 2013 seeking stay of further proceeding of auction
dated 22.03.2013 which was dismissed on 29.04.2013 with an
observation that auction shall be subject to SA.No.259 of 2013.
9.4. Auction purchaser (petitioner in WP.No.4623 of 2025) is
impleaded in SA.No.1115 of 2017 (Old SA.No.259 of 2013 of DRT-I,
14/27 MB,J & BRMR,J
WP_Nos_4623 & 4373_2025
Hyderabad). On 17.10.2018, the DRT-II had allowed the SA filed
by the borrower by setting aside the e-auction sale held on
22.03.2013 and directed the respondent No.1/Bank to repossess
the scheduled property from respondent No.2/auction purchaser.
9.5. The borrower/respondent No.3 filed W.P.No.24573 of 2019
before the High Court for a direction to the Bank to take steps to
repossess the schedule property in view of the orders of the DRT-II,
Hyderabad, in SA.No.1115 of 2007, dated 17.10.2018. The High
Court directed the Bank to repossess the schedule property and
comply with the order dated 17.10.2018 in SA.No.1115 of 2017
(old SA.No.259/2013) in I.A.No.1 of 2019 vide order dated
28.11.2019. The order in IA.No.1 of 2019 dated 28.11.2019 was
challenged before the Supreme Court by filing Special Leave to
Appeal Civil No.28958 of 2019 by the auction purchaser. The
Supreme Court vide order, dated 16.12.2019 disposed of the SLP
granting status quo by directing that the proceedings be disposed
of within a period of eight weeks from the date of passing the order.
W.P.No.24573 of 2019 was dismissed as infructuous on
19.02.2020.
10.1. Aggrieved by the judgment of the DRT, dated 17.10.2018,
auction purchaser and secured creditor/Bank have filed Appeal
Nos.188 of 2018 and 199 of 2018 before DRAT Kolkata. DRAT,
15/27 MB,J & BRMR,J
WP_Nos_4623 & 4373_2025
Kolkata vide order dated 14.01.2020 remanded the matter back to
DRT for fresh adjudication on the issue of compliance of the
provisions of Rule 9(3) and Rule 9(4) of the Rules, 2002 permitting
the parties to bring on record the additional pleadings.
10.2. After the matter is remanded to the DRT-II, Hyderabad,
borrower has filed application for amendment of pleadings vide
I.A.No.544 of 2020. Auction purchaser and the secured
creditor/Bank have filed their separate counter affidavit in
IA.No.544 of 2020. Amendment application came to be allowed on
01.06.2020. Thereafter, the borrower has amended SA.No.1115 of
2017.
10.3. Affidavit of RW1 is filed on 24.12.2020, affidavit of RW2 is
filed on 29.12.2020. DRT-II Hyderabad has allowed the S.A. on
05.03.2021. Purchaser and secured creditor filed appeals before
DRAT Kolkata vide A.No.29 of 2021 and A.No.56 of 2022, which
were dismissed on 10.01.2025, which is impugned in the writ
petitions.
11. Auction was conducted on 22.03.2013 on the basis of
e-auction sale notice dated 14.02.2013 which was published on
15.02.2013. For brevity Clause 5 and Clause 10 are as under:
5. For participating in e-auction intending bidders have to
submit auction bids forms online https:// sbi.abcprocure.com
16/27 MB,J & BRMR,J
WP_Nos_4623 & 4373_2025mentioning their User ID and details of payment of refundable
Earnest Money Deposit of 10% of the reserve price of the property
concerned i.e., Rs.51,50,000/- by RTGS/NEFT/Funds Transfer to
the credit of A/c No.32669084199 with State Bank of India,
SA<Branch, Secunderabad and to the Authorised Officer of State
Bank of India, SAM Branch, Secunderabad, through IFSC Code
“SBIN0004106” or by demand draft/Pay Order in favour of the
Authorised Officer SBI account “M/s Vasantha Surgical
Equipments” and submit the print out of online bids form of
e-auction along with copies of PAN card and Address Proof, are to
be submitted any time on or before 5.00 p.m. 21.03.2013″.
10. The EMD and other payments shall be remitted through
EFT/NEFT/RTGS to the bank account as specified above, cheque
will not be accepted”.
12. Rule 9(3) of the Security Interest (Enforcement Rules) 2002 is
as under:
“On every sale of immovable property, the purchaser shall
immediately, i.e., on the same day or not later than next
working day, as the case may be, pay a deposit of twenty five
percent of the amount of the sale price, which is inclusive of
earnest money deposited, if any, to the authorized officer
conducting the sale and in default of such deposit, the
property shall be sold again;”
13. As per Clause-5 of e-auction Sale Notice, dated 14.02.2013,
the petitioner in W.P.No.4623 of 2025 (auction purchaser) has paid
Rs.51,50,000/- as Earnest Money Deposit (EMD) by way of RTGS
on 15.03.2013.
17/27 MB,J & BRMR,J
WP_Nos_4623 & 4373_2025
14.1. Admittedly, the auction purchaser (petitioner in WP.No.4623
of 2025) was declared the highest bidder at Rs.5,16,00,000/- on
22.03.2013 and 25% of the sale price i.e., Rs.77,50,000/- is paid
by way of cheque. Clause 10 of e-auction Sale Notice, dated
14.02.2013 mandates that the other payments shall be remitted
through EFT/NEFT/RTGS to the Bank Account as specified above,
cheques will not be accepted.
14.2. In spite of knowing the fact that cheques will not be
accepted as per clause-10 of e-auction sale notice dated
14.02.2013, secured creditor/Bank has accepted the same in
violation of notice dated 14.02.2013 which is manifest on the face
of the record.
15. Cheque issued by the auction purchaser for Rs.77,50,000/-
on 22.03.2013 was encashed by the Bank on 27.03.2013. It is the
contention of the petitioners’ counsel in W.P.No.4373 of 2025 –
Bank that 23.03.2013 was Saturday and 24.03.2013 was Sunday.
Learned DRAT in its order dated 10.01.2025 observed at paragraph
No.39 that judicial notice of the fact is that ‘in the year 2013,
fourth Saturday of the month was not a Bank holiday’. There is no
explanation from the Bank why the cheque was not encashed on
the very next day i.e., 23.03.2013. Admittedly, cheque was
encashed on 27.03.2013. When the cheque was realized on
18/27 MB,J & BRMR,J
WP_Nos_4623 & 4373_2025
27.03.2013, how-cum the sale was confirmed on 22.03.2013,
which is against the e-auction Sale Notice, dated 14.02.2013.
16. Secured creditor/Bank (petitioner in W.P.No.4373/2025) has
committed illegality in accepting the cheque, which is against
Clause-10 of e-auction Sale Notice, dated 14.02.2013, which has
vitiated the whole exercise of e-auction sale and prejudice is
caused to respondent No.3/borrower.
17.1. The next point is whether there is any violation of Rule 9(4)
of the Rules, 2002. For brevity, Rule 4 is as under:
“Rule 9(4) of the Security Interest (Enforcement Rules)
Pre-amendment reads as under:
“(4) The balance amount of purchase price payable shall be paid by
the purchaser to the authorized officer on or before the fifteenth day
of confirmation of sale of the immovable property or such extended
period as may be agreed upon in writing between the parties.”
17.2. Rule 9(4) of the Security Interest (Enforcement Rules) was
amended w.e.f. 03.11.2016. The amended Rule is as under:
“(4) The balance amount of purchase price payable shall be paid
by the purchaser to the authorized officer on or before the fifteenth
day of confirmation of sale of the immovable property or such
extended period [as may be agreed upon in writing between the
purchaser and the secured creditor, in any case not exceeding three
months].”
19/27 MB,J & BRMR,J
WP_Nos_4623 & 4373_2025
18. As per un-amended Rule 9(4) of the Rules, the balance
amount of purchase price shall be paid by the purchaser to the
Authorized Officer on or before 15 days of conformation of the sale
of immovable property or such extended period as may be agreed
upon in writing between the parties. In the present case,
confirmation of sale took place on 22.03.2013 on the date of
e-auction itself. Auction purchaser (petitioner in W.P.No.4623 of
2025) made an application on 04.04.2013 seeking 90 days time for
repayment of balance 75% of the e-auction amount. The Bank
(petitioner in W.P.No.4373 of 2025) has extended the time up to
30.06.2013 to pay the balance 75% of the e-auction amount vide
letter dated 06.04.2013 without putting the borrower on notice.
The copy of the letter dated 04.04.2013 of the auction purchaser
and the letter dated 06.04.2013 of the Bank are filed by the
borrower by way of memo.
19.1. Learned counsel for the petitioners in both the writ petitions
contended that amended Rule 9(4) is applicable to the case on
hand which has a retrospective operation.
19.2. Borrower-respondent No.3 has filed Government of India
Notification No.GSR 1046/E, dated 03.11.2016 (pertaining to
amended Security Interest (Enforcement) (Amendment) Rules,
2002). It is mentioned in the Notification that amended Rule shall
20/27 MB,J & BRMR,J
WP_Nos_4623 & 4373_2025
come into force on the date of their publication in the Official
Gazette. Official Gazette is made on 03.11.2016 which goes to
show that amendment is from 03.11.2016.
19.3. In Sri Vijayalakshmi Rice Mills case10 Supreme Court held
that unless a statute expressly provides for retrospective operation,
it may be presumed to apply prospectively only.
19.4. In Madras Bar Association11 Supreme Court held that
supporting legislation cannot be given retrospective effect unless
the parent statute specifically provides for the same. In view of the
judgments of the Supreme Court supra coupled with the
notification dated 03.11.2016 amendment to Rule 9(4) is
prospective in nature, hence the contentions of the petitioner’s
counsel is negatived.
20. In Ikbal case2 Supreme Court held that the parties for the
purpose of Rule 9(4) means the secured creditor, borrower and
auction purchaser. Secured creditor/Bank (petitioner in
W.P.No.4373 of 2025) has not issued any notice for extension of
time to the borrower but instead thereof Bank has extended the
time till 30.06.2013 on 06.04.2013 which is in clear violation of
pre-amended Rule 9(4) of the Rules.
21/27 MB,J & BRMR,J
WP_Nos_4623 & 4373_2025
21. Auction purchaser (petitioner in W.P.No.4623 of 2025) has
deposited Rs.1,80,00,000/- on 27.06.2013 by way of cheque
No.688293, ING Vysya Bank Ltd., S.P.Road, Secunderabad and
Rs.2,07,00,000/- on 28.06.2013 by way of cheque No.644367,
Tamilnad Mercantile Bank (TMB) branch in Park Lane,
Secunderabad. The balance payment made by the auction
purchaser which is received by the bank is also in violation of
clause-10 of e-auction sale notice dated 14.02.2013. On
29.06.2013 Sales Certificate was issued to the auction purchaser
as per Rule 9(6) of the Rules along with delivery of possession.
22. Secured creditors/Bank has executed registered sale deed in
favour of the auction purchaser on 22.08.2014. On 29.09.2014,
Gram Panchayat, Bollaram has issued No Objection Certificate for
setting up of M/s. Classic Chemicals (petitioner in W.P.No.4623 of
2025).
23. Learned counsel for the auction purchaser (petitioner in
W.P.No.4623 of 2015) submits that DRT-II, Hyderabad came to an
erroneous finding in the judgment dated 05.03.2021 that no
additional reply was filed by the auction purchaser in spite of good
number of adjournments. The so called counter affidavit filed by
the auction purchaser on 07.02.2020 is in the amendment
application filed by the borrower in I.A.No.544 of 2020. DRT-II,
22/27 MB,J & BRMR,J
WP_Nos_4623 & 4373_2025
Hyderabad in SA.No.1115 of 2017 of the judgment dated
05.03.2021 observed at Paragraph No.25 that the auction
purchaser failed to file additional reply thereby filing of additional
reply was forfeited as per docket order dated 10.12.2020. The
auction purchaser has filed his reply prior to the remand of
SA.No.1115 of 2017 by DRAT, Kolkata on 14.01.2020. The DRT-II,
Hyderabad has rightly observed that any amount of evidence
without proper pleading is of no avail. The contentions of the
petitioner’s counsel is negatived.
24. In Varimadugu Obi Reddy’s case1 borrower has challenged e-
auction notice dated 23.03.2015. The Tribunal passed interim
order on 26.03.2015 that sale certificate shall not be issued in
favour of highest bidder subject to the borrower depositing
Rs.6,00,000/- on or before 09.04.2015. Borrower filed application
on 09.04.2015 for extension of time by 15 days to deposit the
amount. As there was no stay in the auction proceedings
purchaser deposited 25% on 28.03.2015 and 75% on 15.04.2015
after four days of the due date. The Supreme Court held that
depositing the balance of 75% of the bid amount would not defeat
the rights of the parties. Principles laid down in Sri Siddeshwara
Co-operative Bank Limited case2 are reiterated.
23/27 MB,J & BRMR,J
WP_Nos_4623 & 4373_2025
25. In Iqbal case2 Supreme Court held at Paragraph No.19 that
no doubt Rule 9 (1) is mandatory but this provision is definitely for
the benefit of the borrower. Similarly Rule 9 (3) and Rule 9 (4) are
for the benefits of the secured creditors. It is settled position in law
that even if a provision is mandatory it can always be waived by
the party or parties for whose benefit such provision has been
made. The secured creditor and the borrower can lawfully waive
their rights.
26. In Arun Kumar’s case3, the borrower is provided a 30 day
window to deposit the outstanding dues after the conduct of the
auction but prior to the expiry of 15 days statutory period. The
facts are distinguishable and the same is not applicable to the case
on hand.
27. In Pahwa Buildtech Pvt. Ltd.’s case4, there was ambiguity
regarding the prescribed mode of payment in the tender document
for the e-auction and the corresponding sale notice. Specifically,
while the tender documents stipulated payment through Demand
Draft or RTGS, the sale notice did not prescribe any specific mode
of payment. The facts are not akin to the case on hand, the same
is not applicable.
24/27 MB,J & BRMR,J
WP_Nos_4623 & 4373_2025
28. In Sanjay Sharma’s case5, the Supreme Court has held that
sale by way of public auction cannot be set aside until there is any
material irregularity and/or illegality committed in holding the
auction or if such auction was vitiated by any fraud or collusion.
Respondent No.3 counsel submits that there is fraud and collusion
between the auction purchaser with that of the secured creditor in
accepting the 25% of the amount and 75% of the amount in
violation of 9(3) and 9(4) of the Securitization Rules and in violation
of the auction notice.
29. In K.Sahaja Rao’s case6, the High Court of Telangana at
Hyderabad held that even assuming that the Bank erred in
accepting the payment of EMD towards 25% of sale consideration
by cheques, which was encashed in two days and the borrower
failed to establish any prejudice arising from the irregularity. Some
material irregularity is not a ground to interfere and the Writ Court
need not nullify the auction process unless the borrower satisfies
the Court that prejudice or injustice is caused to him. Counsel for
respondent No.3 submits that the auction purchaser has paid the
EMD by RTGS while 25% was deposited by way of cheque, the
cheque was not realized until 5 days after the auction. Borrower
has suffered prejudice and the DRAT has recorded that the issue of
the sale confirmation letter prior to realization of the cheque
25/27 MB,J & BRMR,J
WP_Nos_4623 & 4373_2025
proceeds rendered the auction sale invalid which caused prejudice
to the borrower.
30. Poddar Steel Corporation’s case7 is pertaining to Railway
Tenders related to drawing of the EMD amount on a particular
Bank and not the mode of payment per se. The facts are not
applicable to the case on hand.
Decisions cited by learned counsel for the respondent No.3.
31. In Vasu P Shetty’s case8, the Supreme Court reaffirmed the
legal position laid down in Sri Siddeshwara Co-operative Bank
Limited2 that where the statutory requirements under the Rules
are not been waived by the borrower and there is a breach of
mandatory provisions, the same must be deemed null and void.
32. In Mathew Verghese’s case9, the Supreme Court held that in
the event of a fundamental procedural error occurred in a sale, the
same can be set aside.
33. In Authorised Officer, Central Bank of India Vs.
Shanmugavelu 12, the Supreme Court has examined the interplay
between the law and equity. Paragraph No.113 of the judgment is
quoted below:
12
(2024) 6 SCC 641
26/27 MB,J & BRMR,J
WP_Nos_4623 & 4373_2025“113. This Court in National Spot Exchange Ltd. v. Dunar Foods
Ltd. (Resolution Professional), (2022) 11 SCC 761 after referring to a
catena of its other judgments, had held that where the law is clear
the consequence thereof must follow. The High Court has no option
but to implement the law. The relevant observations made in it are
being reproduced below: (SCC pp. 774-75, para 15)
“15. … 15.1. In BSNL v. Mishri Lal, (2011) 14 SCC 739, it is observed
that the law prevails over equity if there is a conflict. It is observed
further that equity can only supplement the law and not supplant it.
15.2. In Raghunath Rai Bareja v. Punjab National Bank, (2007) 2
SCC 230, in paras 30 to 37, this Court observed and held as under:
(SCC pp. 24243)
’30. Thus, in Madamanchi Ramappa v. Muthaluru Bojjappa, 1963
SCC OnLine SC 36 : (2007) 2 SCC 230 (vide AIR para 12) this Court
observed : (AIR p. 1637)
“12. … [W]hat is administered in courts is justice according to law,
and considerations of fair play and equity however important they
may be, must yield to clear and express provisions of the law.”
31. In Council for Indian School Certificate Examination v. Isha
Mittal, (2000) 7 SCC 521 (vide para 4) this Court observed : (SCC p.
522)
“4. … Considerations of equity cannot prevail and do not permit a
High Court to pass an order contrary to the law.”
32. Similarly, in P.M. Latha v. State of Kerala, (2003) 3 SCC 541 (vide
para 13) this Court observed: (SCC p. 546)
“13. Equity and law are twin brothers and law should be applied and
interpreted equitably but equity cannot override written or settled
law.”
33. In Laxminarayan R. Bhattad v. State of Maharashtra, (2003) 5
SCC 413 (vide para 73) this Court observed: (SCC p. 436)
“73. It is now well settled that when there is a conflict between law
and equity the former shall prevail.”
34. Similarly, in Nasiruddin v. Sita Ram Agarwal, (2003) 2 SCC 577
(vide para 35) this Court observed: (SCC p. 588)
27/27 MB,J & BRMR,J
WP_Nos_4623 & 4373_2025
“35. In a case where the statutory provision is plain and
unambiguous, the court shall not interpret the same in a different
manner, only because of harsh consequences arising therefrom.”
35. Similarly, in E. Palanisamy v. Palanisamy, (2003) 1 SCC 123
(vide para 5 this Court observed: (SCC p. 127)
Equitable considerations have no place where the statute contained
express provisions.
36. In India House v. Kishan N. Lalwani, (2003) 9 SCC 393 (vide para
7) this Court held that: (SCC p. 398)
“7. … The period of limitation statutorily prescribed has to be strictly
adhered to and cannot be relaxed or departed from for equitable
considerations.” ‘…”
(emphasis in original and supplied)”
34. Learned DRT in its order, dated 05.03.2021 in SA.No.1115 of
2017 (old SA.No.259 of 2013) observed at Paragraph No.20 that it
is only since the 1st September, 2015, 2nd and 4th Saturday are
declared holidays for Banks. There are two material irregularities
committed by the first respondent Bank. Firstly in accepting the
cheque towards 25% of the sale price and secondly issuing sale
confirmation letter prior to realization of cheque proceeds. Once
there is material irregularity in payment of 25% of the sale price,
the entire auction proceedings fall to the ground. There is no need
for the applicant making out any prejudice because of acceptance
of 25% of the sale price by way of cheque from second respondent
in contravention of e-auction Sale Notice terms and conditions.
Learned DRT further observed at Paragraph No.21 that as per
Rules in force in 2013, consent of the borrower for extension of
28/27 MB,J & BRMR,J
WP_Nos_4623 & 4373_2025time for payment of 75% of the sale price is mandatory. There
being no consent of the borrower, the acceptance of 75% of the sale
price by the first respondent-Bank from second respondent-auction
purchaser after the expiry of 15 days from the date of sale
confirmation is in contravention of Rule 9(4) of the Rules, 2002 and
it vitiates the entire re-auction sale proceedings.
35. Insofar as the compensation claimed by the auction
purchaser, the Tribunal observed at Para 25 that the right of filing
additional reply by the second respondent-auction purchaser came
to be forfeited as per the docket order dated 10.12.2020 and as per
the reply filed prior to remand, the second respondent-auction
purchaser claims to have spent Rs.5,23,451/- towards cost of the
material, Rs.9,79,200/- for payment of Property Tax to Gram
Panchayat for the year 2013-14 and 2014-15. The DRT further
held that any amount of evidence without proper pleading is of no
avail.
36. Learned DRAT in its order, dated 10.01.2025 has elaborately
discussed about the Rules, 2002 in Para No.38 to 41, 46 , 49
and 50.
37. We are of the considered view that the petitioners have not
made out any case for Writ of Certiorari and as rightly held by
29/27 MB,J & BRMR,J
WP_Nos_4623 & 4373_2025learned DRAT that the auction was done blatantly in violation of
Rule 9(3) and Rule 9(4) of the un-amended Rules which vitiates the
whole action proceedings and we also concur with the findings of
the DRAT that the actions of the auction purchaser were subject to
the doctrine of Lis Pendence and the auction purchaser cannot take
advantage of the amounts spent by him on the secured assets,
which finding is fortified by the judgment of the Supreme Court in
Shanmugavelu’s case12.
38. WP.No.4623 of 2025 and WP.No.4373 of 2025 are dismissed.
All connected applications, if any, shall stands closed. No
order as to costs.
___________________________________
MOUSHUMI BHATTACHARYA, J___________________________
B.R.MADHUSUDHAN RAO, J
June, 2025
PLV
LR COPY TO BE MARKED