सुप्रीम कोर्ट ने SARFAESI अधिनियम के तहत ऑक्शन रद्द किया, प्रक्रिया का सख्त पालन अनिवार्य

<p>New Delhi: The Supreme Court has held that an auction sale under the SARFAESI Act is illegal if statutory procedures are not strictly followed, particularly when it affects a borrower’s right of redemption.</p><p>A bench of Justices P S Narasimha and Alok Aradhe set aside a 2013 Madras High Court judgment that had upheld the sale of ‘The Fernhill’, a hill resort in Ooty, owned by Sterling Holiday Resorts Ltd. </p><p>The court found multiple procedural violations in the <a href="https://www.deccanherald.com/tags/auction">auction</a> process conducted by the authorised officer of the lenders.</p><p>In its judgment on September 30, 2026, the apex court ruled that any departure from the prescribed manner of sale under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, renders the sale illegal. </p><p>“Parties cannot be permitted to retain advantages secured through the defiance of such orders,” the bench observed, noting that bids were received during a period when the Debt Recovery Tribunal had restrained further proceedings.</p>.BDA to auction 75 sites across key layouts.<p>It emphasised that the 30-day notice period under Rule 9(1) of the Security Interest (Enforcement) Rules, 2002, is mandatory. The period of stay ordered by a court or tribunal must be excluded while computing this notice period, as “an act of court shall prejudice no one.” </p><p>In this case, the auction concluded before the mandatory notice period expired after accounting for the stay.</p><p>The court also held that a sale certificate must be issued only in favour of the highest bidder who participated in the auction. Neither the rules nor the auction notice allow substitution by a nominee or third party who did not exist or bid at the time. </p><p>Here, the certificate was issued to M/s P M Associates, a firm that was not the successful bidder and was not even in existence when bids were submitted by Ms Rukmani Khemchand.</p><p>“Sanctity is the reward of legality, and sales vitiated by material irregularity or non-compliance with mandatory procedure may be set aside even after confirmation,” the bench said. </p><p>The principle of finality applies only to auctions conducted in accordance with law, the court said.</p><p>The dispute dates back to loans of over Rs 5 crore taken by Sterling Holiday Resorts in 1991 from IFCI and Tourism Finance Corporation of India, secured by a mortgage on the Ooty property. </p><p>After default, an auction was held. The full consideration of Rs 20 crore was paid by P M Associates, but the sale was later cancelled and the amount refunded with interest. Possession of the resort remained with the borrower throughout.</p><p>The Madras High Court had in 2013 upheld the sale certificate of September 2011 and ruled that the authorised officer could not unilaterally cancel it. The Supreme Court overturned that view, noting that the purchaser had accepted the refund and that a sale ignoring mandatory procedure does not constitute deprivation of property by authority of law under Article 300A.</p>

<p>New Delhi: The Supreme Court has held that an auction sale under the SARFAESI Act is illegal if statutory procedures are not strictly followed, particularly when it affects a borrower’s right of redemption.</p><p>A bench of Justices P S Narasimha and Alok Aradhe set aside a 2013 Madras High Court judgment that had upheld the sale of ‘The Fernhill’, a hill resort in Ooty, owned by Sterling Holiday Resorts Ltd. </p><p>The court found multiple procedural violations in the <a href="https://www.deccanherald.com/tags/auction">auction</a> process conducted by the authorised officer of the lenders.</p><p>In its judgment on September 30, 2026, the apex court ruled that any departure from the prescribed manner of sale under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, renders the sale illegal. </p><p>“Parties cannot be permitted to retain advantages secured through the defiance of such orders,” the bench observed, noting that bids were received during a period when the Debt Recovery Tribunal had restrained further proceedings.</p>.BDA to auction 75 sites across key layouts.<p>It emphasised that the 30-day notice period under Rule 9(1) of the Security Interest (Enforcement) Rules, 2002, is mandatory. The period of stay ordered by a court or tribunal must be excluded while computing this notice period, as “an act of court shall prejudice no one.” </p><p>In this case, the auction concluded before the mandatory notice period expired after accounting for the stay.</p><p>The court also held that a sale certificate must be issued only in favour of the highest bidder who participated in the auction. Neither the rules nor the auction notice allow substitution by a nominee or third party who did not exist or bid at the time. </p><p>Here, the certificate was issued to M/s P M Associates, a firm that was not the successful bidder and was not even in existence when bids were submitted by Ms Rukmani Khemchand.</p><p>“Sanctity is the reward of legality, and sales vitiated by material irregularity or non-compliance with mandatory procedure may be set aside even after confirmation,” the bench said. </p><p>The principle of finality applies only to auctions conducted in accordance with law, the court said.</p><p>The dispute dates back to loans of over Rs 5 crore taken by Sterling Holiday Resorts in 1991 from IFCI and Tourism Finance Corporation of India, secured by a mortgage on the Ooty property. </p><p>After default, an auction was held. The full consideration of Rs 20 crore was paid by P M Associates, but the sale was later cancelled and the amount refunded with interest. Possession of the resort remained with the borrower throughout.</p><p>The Madras High Court had in 2013 upheld the sale certificate of September 2011 and ruled that the authorised officer could not unilaterally cancel it. The Supreme Court overturned that view, noting that the purchaser had accepted the refund and that a sale ignoring mandatory procedure does not constitute deprivation of property by authority of law under Article 300A.</p>

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