K. SREEDHAR versus M/S RAUS CONSTRUCTIONS PVT. LTD & ORS.

Citation: [2023] 1 S.C.R. 579 · Decided: 05-01-2023 · Supreme Court of India · Bench: M.R. SHAH · Disposal: Appeal(s) allowed
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Judgment (excerpt)

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579
K. SREEDHAR
v.
M/S RAUS CONSTRUCTIONS PVT. LTD & ORS.
(Civil Appeal Nos. 7402 of 2022)
JANUARY 05, 2023
[M. R. SHAH AND M. M. SUNDRESH, JJ.]
Securitization and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 : s. 31(i) – Provisions of
the Act not to apply to security interest created in agricultural land
– Respondent No. 1-debtor availed credit facilities from the Bank
and owing to default in payment, declared NPA – Bank issued
possession notice of the properties and e-auction held – Challenged
to – One of the property purchased by the appellant-auction
purchaser – DRT confirmed the sale in favour of the appellant – In
writ petition, the High Court set aside the e–auction and sale
certificate – On appeal, held: High Court ought not to have
entertained Writ Petition as there was a remedy of appeal before
the DRAT – By entertaining the writ petition straightway under Art.
226/227 challenging the order passed by the DRT, the High Court
allowed/permitted the borrower to circumvent the provision of appeal
before the DRAT under the provisions of the SARFAESI Act – There
was no breach of r. 8(1) & (2) of 2002 Rules as the possession
notices were published in two leading newspapers and served upon
borrowers – There was no breach of r. 9(3) of the 2002 Rules as the
entire 25% of the sale proceed was deposited the very next day of
sale – Also, no breach of r. 9(4) of the 2002 Rules – Merely because
the secured property is shown to be agricultural property is not
sufficient for s. 31(i) – Properties must actually be used as
agricultural land when the security interest was created – No
evidence was led to show that property was actually put to use as
agricultural land or any activity was going on – Burden was upon
the borrower to prove that the secured properties were agricultural
lands and actually being used as agricultural lands and/or
agricultural activities were going on – Order of the High Court set
aside and that of the DRT restored – Security Interest (Enforcement)
Rules 2002.
   [2023] 1 S.C.R. 579
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SUPREME COURT REPORTS
[2023] 1 S.C.R.
Allowing the appeals, the Court
HELD: 1.1 What was challenged before the High Court by
the borrower in a writ petition under Article 226 of the
Constitution of India was the judgment and order passed by the
DRT-I. Against the judgment and order passed by the DRT-I
dismissing the application, the borrower had a statutory remedy
available by way of appeal before the DRAT. If the borrower would
have preferred an appeal before the DRAT, he would have been
required to deposit 25% of the debt due. To circumvent the
provision of appeal before the DRAT and the pre-deposit, the
borrower straightway preferred the writ petition before the High
Court under Article 226/227 of the Constitution. Therefore, in
view of alternative statutory remedy available by way of appeal
before the DRAT, the High Court ought not to have entertained
the writ petition under Article 226/227 of the Constitution of India
challenging the judgment and order passed by the DRT-I. By
entertaining the writ petition straightway under Article 226/227
of the Constitution of India challenging the order passed by the
DRT-I, the High Court has allowed / permitted the borrower to
circumvent the provision of appeal before the DRAT under the
provisions of the SARFAESI Act. [Para 6][588-F-H; 589-A-B]
1.2 The High Court has set aside the sale in favour of the
auction purchaser with respect to the property at Item No.8 on
the ground that there was a violation of Rules 8(1) & (2) and 9(4)
of the Rules, 2002. However, while observing so, the High Court
has not properly appreciated that. In the present case, the
Possession Notices were published in two leading newspapers
having sufficient circulation in the locality. Even the Possession
Notices were also served upon the borrowers also. Therefore,
the High Court has materially erred in holding that there was a
breach of Rules 8(1) & (2) of the Rules, 2002.[Para 6.2][589-B-
D]
1.3 In the present case, the auction was held on 17.02.2017.
The auction purchaser deposited Rs.26 lakh through RTGS on
14.02.2017 i.e. prior to the auction on 17.02.2017. He deposited
a further sum of Rs.45 lakh again through RTGS on the very
next day of the sale i.e. on 18.02.2017 itself. Therefore, the
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deposit of 25% was permissible not later than next working day
and the entire 25% was deposited on 18.02.2017 i.e. on the ne
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