TJSB Sahakari Bank Ltd. & Anr. vs M/s. Capitol Fibers Pvt. Ltd. & Ors.

This order shall dispose of the Misc. Appeal No. 51/2026 filed by the Appellant/Bank against the order dated 30.01.2026 passed by the Learned Presiding Officer, DRT-III, Mumbai on the I.A. No. 3140/2025 of the Respondents/Borrowers.

By the impugned order, the DRT-III, Mumbai quashed the auction notice dated 26.09.2025 and set aside the auction conducted on 16.10.2025 and further directed the Appellant/Bank to return the amount paid by the Auction Purchaser within one month from the date of the order failing which the Appellant/Bank would be liable to pay interest at the rate of 8% per annum.

Brief facts necessary for the disposal of the present appeal are that the Respondents/Borrowers had filed S.A. No. 540/2023 challenging the auction proceedings.

In the said S.A., an I.A. No. 3140/2025 was filed seeking the relief, inter alia, quash and set aside the Auction Sale Notice dated 26.09.2025 and the auction scheduled to be conducted on 16.10.2025.

By the impugned order, the Learned DRT-III, Mumbai allowed the said Interim Application. Aggrieved from the same the present appeal by Appellant/Bank is filed.

Heard.

The Learned Counsel for the Appellant/Bank would submit that the Respondents/Borrowers are creating hurdles not only by failing to repay the borrowed amount due to Appellant/Bank, but are also obstructing the process of realization of the legally recoverable dues by way of auction of the secured assets in accordance with law; that, first six attempts to auction the secured assets had failed and that the present auction was the seventh attempt in which the Respondents/Borrowers have raised unnecessary and untenable objections.

He would further submit that the Learned DRT-III, Mumbai has passed the impugned order beyond its jurisdiction and committed an error of law in allowing the Interim Application and quashing the Auction Sale Notice dated 26.09.2025.

The Learned Counsel for the Appellant/Bank would further submit that the Respondents/Borrowers were aware that the secured asset property had already been sold in the auction, therefore, the Auction-Purchaser ought to have been impleaded as a party to the S.A; that, impugned order is bad in law and unsustainable; that, the Appellant/Bank has a good case on merits, therefore, impugned order has caused serious prejudice to the Appellant/Bank; that, the DRT-III, Mumbai failed to appreciate that this was the seventh attempt to auction the secured asset, therefore, the Appellant/Bank was only required to issue a fresh notice of 15 days in advance for the scheduled auction; that, Ld. DRT-III, Mumbai failed to appreciate that the Respondents/Borrowers had not established any prejudice allegedly caused to them on account of the auction proceedings.

The Learned Counsel for the Respondents/Borrowers would support the impugned order and would submit that Respondents/Borrowers have preferred a review application before the Learned DRT-III, Mumbai in respect of the direction contained in the impugned order requiring the Respondents/Borrowers to pay ₹10 crores to the Appellant/Bank.

He would further argue that the valuation conducted by the Appellant/Bank was not in accordance with law; that, a Financial Institution is required to obtain a fresh valuation report of the secured asset before putting the same for auction for realization of the outstanding dues under the loan agreement; that, the auction in the present case was conducted in the year 2025, whereas the valuation report relied upon by the Appellant/Bank was of the year 2023.

However, he would fairly concede at the Bar that the present auction was the seventh attempt made by the Appellant/Bank to auction the secured asset for realization of its outstanding dues.

Considered and perused the records.

As stated above, the prayer made in the S.A., insofar as it relates to the operative relief granted, is to quash and set aside the Auction Sale Notice dated 26.09.2025 and the auction scheduled to be conducted on 16.10.2025.

The prayer contained in paragraph K of the Securitisation Application reads as under: -

The prayer contained in paragraph 25(a) of the Interim Application reads as under: -

The operative part of the impugned order, as contained in paragraph 29 thereof, reads as under:-

From the perusal of these quoted parts i.e. the part of the relief prayed in the Securitisation Application and part of the relief prayed in the Interim Application on which the impugned order is passed, one thing is very clear that both the reliefs are effectively the same and grant of the same in the impugned order shall tantamount to final decision on the that part of the prayer made in S.A. No. 540/2023.

After deciding the main prayer of the S.A. No.540/2023 at the interim stage, nothing remains for the Lower Tribunal to decide on the point of legality and correctness of sale notice and auction notice.

Giving main relief of the main case by way of deciding the interim application shall tantamount final disposal of main case on that point. The same is not permissible under the law.

In the impugned order the DRT-III, Mumbai has even ordered the Appellant/Bank to return the amount deposited by the Auction Purchaser (who was admittedly not even party to the S.A.), within one month from the date of the impugned order and has further directed that, in the event of failure to do so, the Appellant/Bank would be liable to pay interest at the rate of 8% per annum. It is pertinent to note that it was not even prayed in I.A. No. 3140/2025.

Thus, the direction for refund of the amount deposited by the Auction Purchaser has been issued without affording the Auction Purchaser an opportunity of being heard.

Last but not least, on a perusal of the entire impugned order, it is apparent that the Learned DRT-III, Mumbai has not considered which of the rival parties had the prima facie case or in whose favour the balance of convenience lies at the time of passing the impugned order.

The Learned DRT-III, Mumbai has also not considered whether irreparable loss or injury was likely to be caused to either party if the interim relief was granted or refused.

The practice adopted by the Learned DRT-III, Mumbai, if permitted to continue, would result in the S.A. No. 340/2023 remaining pending while the substantive reliefs sought therein are repeatedly being granted at the interim stage through Interim Applications, thereby bringing the substantive proceedings to an end without final adjudication of the S.A. itself. Such practice cannot be sustained in law

In view of the foregoing discussion, the impugned order dated 30.01.2026 passed by the Learned Presiding Officer, DRT-III, Mumbai is hereby set aside.

The matter is remanded back to the Learned DRT-III, Mumbai for de-novo consideration and fresh adjudication in accordance with law. The Learned DRT-III, Mumbai shall consider all the relevant facts, contentions of the parties and the applicable provisions of law and decide the S.A. and the pending Interim Applications afresh, after affording due opportunity of hearing to all concerned parties.

Accordingly, Misc. Appeal No. 51/2026 is disposed of.

All pending, I.As., if any, stand dismissed.