LexVARIMADUGU OBI REDDY versus B. SREENIVASULU & ORS.
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A B C D E F G H 1108 SUPREME COURT REPORTS [2022] 16 S.C.R. VARIMADUGU OBI REDDY v. B. SREENIVASULU & ORS. (Civil Appeal No(s). 8470 of 2022) NOVEMBER 16, 2022 [AJAY RASTOGI AND C.T. RAVIKUMAR, JJ.] Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002: ss. 13(2), 13(4), 14, 17(1), 18 – e-auction sale - Respondent availed three loan facilities after executing necessary security documents - Another Respondent stood as guarantor and created an equitable mortgage over her immovable property as security for due repayment of the said loan amount - Respondent borrowers committed default in repaying the outstanding loan amount as also the interest - Loan accounts classified as non-performing assets-NPA – Initiation of recovery proceedings by the respondent Bank-secured creditor under the provisions of the SARFAESI Act – Issuance of demand notice calling upon the respondent borrowers/guarantor to repay and discharge the outstanding loan amount – Bank then took physical possession of the property from the borrowers - Possession challenged by the respondent borrowers by filing a Securitization Application before the Debts Recovery Tribunal – Same was dismissed and the order attained finality - Bank issued notice prior to e-auction to the respondent borrowers calling upon the borrowers/ guarantor to repay the outstanding loan amount as demanded – Thereafter, issuance of e-notice by the Bank – Challenged by the respondents - By interim order Tribunal directed the respondent Bank to proceed with the auction sale of the secured asset scheduled with a further direction not to issue the sale certificate provided the respondent deposits certain amount within 15 days, however, the respondent failed to deposit the same – Bank then proceeded with the auction sale - Appellant declared the highest bidder, and sale certificate was issued in his favour - Before tribunal, respondent borrowers raised two primary objections that there was an error in the description of mortgaged property indicated in the e-auction [2022] 16 S.C.R. 1108 1108 A B C D E F G H 1109 sale notice resulting in low value in auction; and that the auction purchaser did not deposit the auction price within the specified time, as such breach of r. 9(4) of the Rules 2002 - Tribunal dismissed the applications filed by the respondents - Respondent borrowers then filed writ petition before the High Court u/Art. 226 - Division Bench of the High Court set aside the order passed by the tribunal holding that error in the description of the scheduled property in e- auction sale notice was a serious infirmity in the process and cannot be sanctified; and that the auction purchaser failed to deposit balance bid amount within the stipulated time - Proceedings initiated from the stage of s. 13(2) of the SARFAESI Act, 2002 till the delivery of physical possession of the scheduled property set aside – On appeal, held: No documentary evidence placed on record to substantiate the kind of prejudice in value of property - Mere typographical error due to inadvertence which has not caused any prejudice to the borrowers, could not be considered to be the ground to annul the process held by the secured creditor - Four days’ delay which was caused in terms of the original auction notice, in no manner, would frustrate or annul the auction proceedings – Finding returned by the tribunal was well reasoned and duly supported with the material on record - Interference made by the High Court under the judgment while recording a finding that it was in breach of Rule 9(4) of the Rules, 2002 is not legally sustainable in law and is set aside – Practice of entertaining the writ application by the High Court in exercise of jurisdiction u/Art 226 without exhausting the alternative statutory remedy available under the law is deprecated – Respondent borrowers initially approached the Debts Recovery Tribunal by filing an application u/s. 17, but the order of the tribunal indeed was appealable u/s. 18 subject to the compliance of condition of pre - deposit and without exhausting the statutory remedy of appeal, the respondent borrowers approached the High Court by filing the writ application u/Art. 226 of the Constitution - This was to avoid the condition of pre-deposit - Security Interest (Enforcement) Rules 2002 – rr. 8(5), 8(6) & 9(4) – Judicial deprecation. Allowing the appeal, the Court HELD :1.1 The practice of entertaining the writ application by the H
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