LexGOVIND KUMAR SHARMA & ANR versus BANK OF BARODA & ORS
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* Author [2024] 4 S.C.R. 633 : 2024 INSC 326 Govind Kumar Sharma & Anr. v. Bank of Baroda & Ors. (SLP (C) No. 24155 of 2018) 18 April 2024 [Vikram Nath* and Satish Chandra Sharma, JJ.] Issue for Consideration Whether an auction/ sale under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFESI Act) carried out without issuing the mandatory 30-day notice to the borrower under Rules 8(6) and 8 (7) of the Security Interest (Enforcement) Rules, 2002 is liable to be set aside. If so, can the bona fide purchaser, who was originally the tenant, be forced to hand over the physical possession of the premises in order get the refund. Whether the bona fide purchaser would be entitled to refund of the auction money and interest, and compensation for improvement/ investments made by him. Headnotes Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 – Security Interest (Enforcement) Rules, 2002 – Appellants/ Original tenants in physical possession of premises – Appellants were issued sale certificate after auction- Bank admitted to procedural lapse – DRT set aside sale and directed Bank to refund auction money with interest as applicable to fixed deposit only after receiving the possession of the premises – DRT found no proof of improvements/investments – DRAT and High Court confirmed. Held: Supreme Court upheld the setting aside of the auction/sale in view of concurrent findings and Bank’s admission- Supreme Court modified DRT’s directions – Appellants were allowed to retain physical possession in the capacity of tenants and borrower/ landlord could to evict as per law and Bank was directed to return the auction money with 12% per annum compound interest. [Paras 12-15] 634 [2024] 4 S.C.R. Digital Supreme Court Reports List of Acts Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002; Security Interest (Enforcement) Rules, 2002. List of Keywords Rule 8(6), Rule 8 (7) of Security Interest (Enforcement) Rules, 2002; Mandatory notice; Default; Non-compliance of statutory provisions; Setting aside of auction/ sale; Refund; Physical possession. Case Arising From CIVIL APPELLATE JURISDICTION: Civil Appeal No.5028 of 2024 From the Judgment and Order dated 02.07.2018 of the High Court of Judicature at Allahabad in WC No. 20266 of 2018 Appearances for Parties R. P. Shukla, Dhruv Shukla, Ms. Upasena Shukla, Ms. Aeishwarya Sharma, Gaurav Chauhan, Ms. Megha Gaur, Piyush Kumarendra, Vibhav Mishra, Vijay K. Jain, Advs. for the Appellants. Arun Aggarwal, Ms. Anshika Agarwal, Deepti Jain, Shivam Saini, Praful Rawat, Pramod Kumar Singh, Vijay Pal, Shiv Dutt Sharma, Ms. Rekha Agarwal, Rajvir Singh, Bikash Chandra, Rameshwar Prasad Goyal, Advs. for the Respondents. Judgment / Order of the Supreme Court Judgment Vikram Nath, J. Leave granted. 2. The appellants herein have assailed the correctness of the judgment and order dated 02.07.2018 passed by the Allahabad High Court dismissing the Writ Petition of the appellants, confirming the orders passed by the Debt Recovery Tribunal1 as also the 1 DRT [2024] 4 S.C.R. 635 Govind Kumar Sharma & Anr. v. Bank of Baroda & Ors. Debt Recovery Appellate Tribunal2, whereby the auction sale held in favour of the appellants had been set aside and the appeal was dismissed. Brief facts in nutshell are as follows: 3. The firm-respondent no.3, had taken a loan from the respondent no.1- Bank. However, as it went into default, the Bank initiated proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 20023. In the said recovery proceedings, the Recovery Officer conducted an open auction. The appellants were the highest bidder. Their bid was accepted and they made good the deposits as per the terms of this auction. Accordingly, a sale certificate was issued in their favour on 30.03.2009. It may be noted here that the appellants were tenants of the borrower in the premises in question which had been put to auction. As such the status of the appellants changed from that of tenants to that of owners after the sale was confirmed and sale certificate was issued. 4. The borrower-respondent nos.3 and 4 filed a securitization application under Section 17 of the SARFAESI Act for setting aside the sale on the ground that the Bank had not followed the st
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