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Judgment
Heard the Ld. Counsel for the parties.
Instant Appeal has arisen against the order and judgement dated 15.05.2024 passed by Learned Debts Recovery Tribunal - 1 Hyderabad in SA 13/2019 whereby sale conducted by the Appellant Bank was set aside and the bank was directed to refund the amount of sale consideration to the Respondents No. 2 to 5 who are auction purchasers of the schedule property.
As per pleadings of the parties, undisputedly, Respondent No.1 is borrower of the Appellant Bank and Respondents No.2 to 5 are the auction purchasers and Respondents No. 6 & 7 are the subsequent auction purchasers of the secured assets. It is not in dispute that the 1st Respondent borrower availed financial facilities from the Appellant Bank and the loan account became irregular and the same was classified as NPA as per the guidelines of RBI. Notice under Section 13(2) of the SARFAESI Act, 2002 was issued on 21.07.2016, Possession Notice was issued on 29.09.2016 and different sale notices were issued by the bank but sale could not be fructified. Ultimately, sale notice dated 16.02.2019 was issued by the Bank and sale was conducted on 22.03.2019 in favour of Respondents No.2 to
In the meanwhile, SA.13/2019 was filed by the borrower. Auction purchasers i.e. Respondents No. 2 to 5 deposited sale consideration amount of Rs.1,06,25,000/- and sale certificate was issued and the same was also registered. After filing of SA, amendment application was moved by the borrower for amendment of SA which was partly allowed by the Ld. DRT. Writ Petition No.12501/2019 was filed by the borrower before the Hon’ble High Court of Telangana at Hyderabad which was allowed and amendment was carried out. After filing of reply by the bank, Ld. DRT disposed of the SA by passing the impugned order which is under challenge.
As far as the action of the bank under SARFAESI Act, 2002 is concerned, Ld. DRT categorically held that the action of the Bank by issuing notice under Section 13(2), 13(4) of the Act and sale notice was in accordance with law. Those findings are not challenged by the borrower and they attained finality. However, Ld. DRT allowed the SA on the ground of discrepancy in the area of secured asset which was sold by the bank in e-auction. The area of the secured asset is House bearing No.42-463/64/A in Plot No.64A in Sy.No.353/1/city or town, Gayatrinagar, Moula Ali admeasuring 266.66 Sq.yds and the total plinth area of first floor was 1739.02 sq.ft. and the second floor was also the same totaling 3478.04 sq.ft. The same area was mentioned in the Possession Notice dated 29.09.2016. But the approved valuer of the Bank submitted valuation report for an area of 220 Sq.yds. with a plinth area of 2300 sq.ft. Basing on the same, sale was conducted and was finalized. Accordingly Ld.DRT allowed the SA.
Ld. Counsel for the Appellant would submit that mortgage was created by the borrower in favour of the bank by deposit of sale deed. The area in the sale deed of the borrower was 266.66 Sq.yds. but in the valuation report prepared by the approved valuers, the area was found as 220 Sq.yds. with a plinth area of 2300 sq.ft. physical survey of the site was done in the presence of borrower. Accordingly, valuation report was prepared, sale was conducted and sale certificate was also issued. Per contra, Ld. Counsel for the Respondents would submit that the area of secured asset was admittedly 266.66 sq.yds or 3478.04 sq.ft. and the same was mortgaged by the borrower in favour of the Bank and the bank also mentioned the same in the sale certificate issued in favour of the auction purchasers. But the valuation of the secured asset was assessed on the basis of a valuation report wherein the area given is only 220 sq.yds. Apparently, valuation of the secured assets was not correct or under-valued as the area itself was not properly calculated. It is further submitted that there is nothing on record to show that the borrower was present at the time of preparation of valuation report and simply, as there is endorsement by the borrower in the valuation report which cannot be taken into consideration.
The whole controversy in the matter is very short. Undisputedly, Respondent No.1 is the borrower of the bank who committed default and the bank initiated action under the SARFAESI Act in accordance with law. The action of the bank was held to be valid and in accordance with law by the DRT till the stage of issuance of sale notice but the dispute arose when the valuation of the property was under-valued and the measurements of the area was not as per the mortgage deed. Although law is very well settled in Celir LLP Vs. Sumati Prasad Bafna & Ors [2024 SCC OnLine SC 3727] wherein in Para No. 218 it is held that “ Any sale
by auction or other public procurement methods once already confirmed or concluded ought not to be set-aside or interfered with lightly except on grounds that go to the core of such sale process, such as either being collusive, fraudulent or vitiated by inadequate pricing or underbidding. Mere irregularity or deviation from a rule which does not have any fundamental procedural error does not take away the foundation of authority for such proceeding. In such cases, courts in particular should be mindful to refrain entertaining any ground for challenging an auction which either could have been taken earlier before the sale was conducted and confirmed or where no substantial injury has been caused on account of such irregularity.”
But when there is an element of undervaluation, the same can be looked into as has been held by the Hon’ble Apex Court in M. Rajendran &Ors. Vs. KPK Oils & Proteins Ndia Pvt.Ltd.& Ors (2026)3 SCC 505.
Hence now, it is to be seen as to whether any valid ground is made out by the borrower for under-valuation of the secured asset?
Admittedly, mortgage was created for an area of 266.66 sq.yds. or 3478.04 sq.ft. which is in dispute as sale certificate in favour of Respondents No. 2 to 5 was issued by the Bank for the same area. Meaning thereby, that the Bank sold an area of 266.66 sq.yds. in favour of the auction purchasers. Then it was the duty of the authorized officer of the Bank to obtain valuation report for the same area. Even if we assume the extent of the area of the secured asset for the sake of arguments was found less than the area mentioned in the mortgage deed, then the Authorized officer should have taken care of the same and should have issued sale notice for the area which was in possession of the bank. But even in the sale notice, there is no such mention, rather possession notice was also issued for an area of 266.66 sq.yds. So, now, the bank is estopped from challenging the same which is its own document. Valuation report was obtained by the bank, e-auction was conducted by the bank, sale certificate was issued by the bank and sale was registered by the bank, then how the bank can say that the secured asset sold by the Bank was not 266.66 sq.yds. rather, it was 220 sq.yds?
In such circumstances, Ld.DRT has rightly held that valuation of the secured asset was not properly done and so, sale conduced was not valid. Accordingly, I do not find any infirmity or illegality in the impugned order dt.15.05.2024 passed by Ld. DRT-I, Hyderabad allowing the SA. Accordingly, I am of the view that appeal lacks merit and is liable to be dismissed.
O R D E R
Appeal No. 89 of 2024 is dismissed. Impugned order dated 15th May, 2024 passed by Learned DRT-1 Hyderabad in S.A. No. 13 of 2019 is confirmed.
File be consigned to record room.
Copy of the judgement/final Order be uploaded in the Tribunal’s website.
Order dictated, signed and pronounced by me in the open Court on this the 28th day of April, 2026.