2026 INSC 237 1

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 3362 OF 2026

[Arising out of SLP (C) No. 2122 of 2022]

OM SAKTHI SEKAR … APPELLANT(S)

VERSUS

V. SUKUMAR & ORS. … RESPONDENT(S)

J U D G M E N T

R. MAHADEVAN, J.

Leave granted.

2. This Civil Appeal has been filed against the judgment and order dated

06.02.2020 passed by the High Court of Judicature at Madras

1

in W.P. No.

33872 of 2017, whereby the High Court upheld the conclusion arrived at by the

Debts Recovery Tribunal-I

2

, Chennai and Debts Recovery Appellate Tribunal

3

,

Chennai, while remitting the case to the DRT for reconsideration of the

valuation of Schedule A to E properties in the recovery proceedings, and

accordingly disposed of the writ petition. The High Court further observed that

in the event the properties were found to have been sold for a lower value than

1

Hereinafter referred to as “the High Court”

2

For short, “the DRT”

3

For short, “the DRAT”

2

their actual worth, the appellant herein may be directed to make good the

difference.

3. This Court by order dated 18.02.2022 granted an order of stay on

implementation of the directions issued in paragraph no.166 of the impugned

judgment.

4. During the pendency of this appeal, Respondent No. 9 who was

Respondent No. 4 in the writ petition died and his legal representatives were

brought on record as 9.1 to 9.4 vide order dated 04.03.2024 and cause title was

accordingly amended. Despite service of notice, none appeared on behalf of

Respondent Nos.9.1 to 9.4, 10 to 13 and 15 to 17.

5. The necessary facts leading to the filing of the present appeal are as

follows:

5.1. The appellant is the purchaser of Schedule A to E properties sold through

an auction conducted by the Recovery Officer on 29.10.2010 pursuant to the

order dated 27.01.2010 passed by the DRT, Chennai in O.A. No. 536 of 1998.

5.2. The aforementioned writ petition bearing No. 33872 of 2017 was filed by

Respondent Nos. 1 to 5 (Guarantors) before the High Court to quash the order

dated 24.10.2017 passed by the DRAT, Chennai in R.A. No. 59 of 2012, and

further set aside the order dated 12.01.2010 passed by the DRT, Chennai, in

3

O.A. No.536 of 1998 and the auction proceedings initiated by the Recovery

Officer, pursuant to the same.

5.3. Originally, Respondent No. 6, Indian Bank, Pondicherry, entered into an

agreement dated 30.11.1992 with Respondent No. 7 for 'at par facility' in respect

of the cheques issued by them on the guarantee that Respondent No. 7 would

maintain a cushion fund at all times during the subsistence of the agreement

with the bank. However, Respondent No. 7 was irregular in maintaining the

cushion funds without following the conditions of the agreement. In many

instances there was a shortfall of funds in the account of Respondent No. 7 to

honour the cheques. Even so, the bank continued to honour the cheques

presented.

5.4. Respondent Nos. 3 and 4 represented by the power of attorney holder /

Respondent No. 1 as Document No. 1574 of 1994 dated 26.10.1994 created an

equitable mortgage by depositing title deeds of Schedule A, B and C properties

measuring 12572 sq.ft. situated in Kambuliswamy Madam Street,

Pakkamudayanpet Village, Oulgaret Commune as security for the shortfall of 'at

par facility' enjoyed by Respondent No. 7. Similarly, Schedule D and E

Properties were also deposited for the shortfall. The bank insisted Respondent

No. 7 to make payment of the shortfall arising from the presentation of the

cheques issued by them and accordingly sent a legal notice on 31.01.1998 to

Respondent No. 7 and others. When Respondent No. 7 failed to repay the

amount, the bank filed O.A. No. 536 of 1998 before the DRT, Chennai praying

4

inter alia to recover a sum of Rs. 45,66,923.83 as outstanding balance as on

10.02.1998 and direct to pay interest at 20.91% p.a. with quarterly rests from the

date of filing of the application till realisation.

5.5. The DRT, Chennai passed a final order on 12.01.2010 in O.A. No. 536 of

1998 inter alia holding that the bank was entitled for a Recovery Certificate

against Respondent Nos. 1 to 5 and 7 to 13, jointly and severally for a sum of

Rs. 45,68,923.83 at 10% per annum simple interest from 10.02.1998 till

realisation along with costs. Thereafter, the DRT, Chennai passed an order of

attachment on 20.08.2010 and issued the letter of Proclamation of Sale on

21.09.2010 as DRC No. 68/2010. Subsequently, auction was held and the

appellant was the successful bidder and an amount of Rs. 55,00,000/- was paid

as advance payment for the total sale consideration of Rs. 2,10,98,765/- by the

appellant towards the purchase of the aforementioned properties. Pursuant

thereto, the DRT, Chennai, confirmed the sale of the schedule A to E mentioned

properties and a sale certificate dated 01.02.2011 was duly executed in favour of

the appellant by the Recovery Officer, and the same was registered as Document

No. 413 of 2011 dated 02.02.2011 on the file of SRO, Oulgaret.

5.6. Aggrieved by the order dated 12.01.2010 passed by the DRT, Chennai, in

O.A. No. 536 of 1998, Respondent Nos. 1 to 5 filed an appeal before the DRAT,

Chennai in R.A. No. 59 of 2012. The DRAT after contest, passed an order dated

12.11.2010 restraining the Recovery Officer in DRC No.68 of 2010 from

confirming the auction sale that had taken place on 29.10.2010 and by order

5

dated 11.11.2014, disposed R.A. No. 59 of 2012 and remanded the case in O.A.

No. 536 of 1998 to the DRT, Chennai for fresh consideration.

5.7. Subsequently, the aforesaid order dated 11.11.2014 passed in R.A. No. 59

of 2012 was set aside and the matter was remitted to the DRAT for

re-appreciation of the evidence, by order dated 24.04.2017 passed by the High

Court in W.P. Nos. 32008 and 34693 of 2014 and W.P. No. 32723 of 2015.

With regard to W.M.P. No. 7111 of 2017 filed by the appellant for return of

money paid by them in the auction proceedings, the High Court granted liberty

to the appellant to approach the DRAT with similar prayer and the DRAT was

directed to dispose of the same.

5.8. On remand, the DRAT by order dated 24.10.2017, dismissed R.A. No. 59

of 2012 and affirmed the order of the DRT, Chennai dated 12.01.2010, holding

that the defaulters cannot take advantage of their internal disputes and that, the

banks are custodians of public money, and interest of the third-party bidder

purchaser should also be protected who had spent more than Rs. 2 crores in the

year 2010 as a bona fide purchaser. Challenging the same, Respondent Nos. 1 to

5 filed W.P. No. 33872 of 2017 before the High Court.

5.9. By the impugned judgment dated 06.02.2020, the High Court disposed of

the aforesaid W.P. No. 33872 of 2017 holding that there was an equitable

mortgage and since the amounts were not repaid, the bank was entitled to

recover the due from Respondent Nos. 1 to 5 along with others jointly and

severally and liquidate the assets to satisfy the dues. The High Court further

6

held that the issue regarding the valuation adopted for Schedule A to E

properties in the recovery proceedings has to be decided by the DRT afresh and

in case, the properties have been sold for a lower value, the appellant may be

directed to pay for the same. Thus, the High Court upheld the conclusion arrived

at by the DRT and DRAT while remitting the case to the DRT for the limited

purpose of valuation of Schedule A to E properties in the recovery proceedings.

5.10. It is in these circumstances that the appellant has come up with the

present appeal.

6. The learned senior counsel for the appellant at the outset, submitted that

the appellant is aggrieved only by the limited portion of the impugned judgment

whereby the High Court, despite upholding the validity of the auction and the

rights of the appellant as a successful auction purchaser, remanded the matter to

the DRT for revaluation of the properties nearly ten years after the auction sale

had been concluded. It was contended that while the High Court affirmed the

orders of the DRT and DRAT insofar as they recognized the Bank’s right to

recover its dues from Respondent No. 7 by sale of Schedule A to E properties

mortgaged by Respondent Nos. 1 to 5 and upheld the legality of the auction

proceedings, it erred in directing revaluation without assigning any cogent

reasons.

6.1. It was submitted that the Engineers’ Valuation Report Summary dated

08.09.2010, pertaining to Schedule A to E properties, was prepared in

7

accordance with law and reflected prevailing market rates in the year 2010. The

DRT, Chennai, acting on the said valuation of Rs. 4,34,45,400/-, issued the

proclamation of sale and conducted the auction. The valuation report was placed

on record and was never challenged by the respondents.

6.2. The learned senior counsel further submitted that pursuant to recovery

proceedings initiated by the bank, the mortgaged properties were brought to sale

in DRC No. 68 of 2010. The public auction was conducted on 29.10.2010 at

Indian Bank, Circle House, Puducherry, at an upset price of Rs. 2 crores. The

appellant emerged as the highest bidder with a bid of Rs. 2,10,98,765/- and paid

25% of the sale consideration immediately. Upon seeking extension of time

from the DRT, which was duly granted, the appellant paid the entire balance

consideration. The sale was confirmed by the DRT on 31.01.2011, a Sale

Certificate dated 01.02.2011 was issued by the Recovery Officer, and the same

was registered on 02.02.2011 as Document No. 413 of 2011 before the SRO,

Oulgaret. Accordingly, the title stood transferred in favour of the appellant.

6.3. It was emphasized that none of the steps including the proclamation,

auction, confirmation of sale, or issuance of Sale Certificate, were ever

challenged by the respondents at the relevant time. The appellant thereafter took

possession and invested substantial amounts in maintenance and improvements,

including construction of an additional floor, payment of property taxes from

2011 onwards, securing electricity, gas and water connections, obtaining

8

necessary approvals and licenses, and deploying security for safeguarding the

property. Though the respondents preferred an appeal after considerable delay

challenging the recovery proceedings, neither the proclamation nor the auction

sale was specifically assailed. Both the DRT and DRAT concurrently upheld the

legality and validity of the auction and recognised the appellant as a bona fide

purchaser. The DRAT, by order dated 24.10.2017 in R.A. No. 59 of 2012

categorically held that defaulters cannot take advantage of internal disputes, that

banks are custodians of public money, and that interest of the third-party bona

fide auction purchaser who had invested over Rs. 2 crores in 2010 must be

protected.

6.4. Relying upon the settled principle that the rights of a bona fide auction

purchaser deserve protection, the learned counsel placed reliance upon the

decisions of this Court in Janatha Textiles v. Tax Recovery Officer

4

and

Sadashiv Prasad Singh v. Harendar Singh and others

5

to contend that the

interest of a stranger purchaser is protected even if the underlying decree is

subsequently set aside or otherwise. It was submitted that courts have

consistently distinguished between a decree-holder purchaser and an

independent third-party purchaser, and that unless such protection is extended,

court sales would not fetch market value or fair price of the property.

4

(2008) 12 SCC 582

5

(2015) 5 SCC 574

9

6.5. Reliance was also placed on Valji Khimji and Co. v. Official Liquidator

of Hindustan Nitro Product (Gujarat) Ltd.

6

to contend that once a sale is

confirmed by the authority, certain rights accrue in favour of the auction

purchaser which cannot be lightly disturbed except in exceptional cases such as

fraud. In the present case, there has been concurrent factual determination by the

DRT and DRAT upholding the validity of the auction, and no finding of fraud

has been returned. The High Court itself upheld the auction, and therefore

remanding the matter for revaluation without disturbing the sale was legally

untenable.

6.6. Reference was made to the decisions in Shaeb Khan v. Mohd.

Yosufuddin and others

7

and Central Bank of India v. C.L. Vimala and others

8

,

wherein, this Court observed that if every confirmed auction sale were to be

reopened on the basis of a higher offer or speculative revaluation, no court sale

would ever attain finality. It was emphasised that particularly where the auction

was conducted with due publicity and no irregularity in the conduct of the sale

is alleged or established, interference after confirmation would undermine

certainty and finality in judicial sales.

6.7. The learned senior counsel submitted that the High Court, while directing

revaluation, assigned no reason for doubting the Engineer’s valuation report

dated 08.09.2010, nor did it record any finding of material irregularity in the

6

(2008) 9 SCC 299

7

(2006) 4 SCC 476

8

(2015) 7 SCC 337

10

conduct of sale. The direction for revaluation nearly 14 years after the auction

would cause grave prejudice, since determining the 2010 market value at this

belated stage would be speculative and inherently uncertain.

6.8. It was urged that the litigation has been pending since 1998 and the

appellant, despite having paid the entire sale consideration in 2010 and

obtaining a registered sale certificate in 2011, has been unable to fully enjoy the

property owing to continuous litigation. Revaluation at the present stage would

only prolong the dispute and cause further injustice to a bona fide purchaser.

6.9. Without prejudice to the above submissions, the learned senior counsel

submitted that if this Court were inclined to unsettle the auction, the appellant

no longer has any commercial interest in retaining the property, having suffered

prolonged financial loss. It was therefore prayed that the appellant be permitted

to return the property to the DRT, and the entire sale consideration paid by him

be refunded together with interest and the expenses incurred thereon.

6.10. In support of the alternative prayer for refund with interest, reliance was

placed on the judgment dated 18.04.2024 passed in SLP (C) No. 24155 of 2018

[Govind Kumar Sharma and another v. Bank of Baroda and others], wherein

this Court directed refund of auction money with 12% per annum compound

interest in view of illegality in the auction process.

6.11. On the aforesaid grounds, the learned senior counsel prayed that the

impugned judgment of the High Court be set aside to the extent it remands the

matter for reconsideration of valuation issue, and that the order dated

11

24.10.2017 passed by the DRAT be restored; or in the alternative, appropriate

direction for refund with interest be issued.

7. Per contra, the learned senior counsel for Respondent Nos. 1 to 5, 7 and

14 submitted that the auction sale conducted pursuant to Recovery Certificate in

DRC No. 68 of 2010 is itself illegal and non est in the eye of law. It was

contended that the appellant / auction purchaser failed to comply with the

mandatory requirements governing auction sales, inasmuch as he neither paid

25% of the bid amount on the date of auction nor remitted the balance 75%

within 15 days. Consequently, no valid sale ever came into existence and the

appellant acquired no right, title, or interest in the subject properties.

7.1. It was further submitted that the validity of the final order passed by the

DRT, Chennai in O.A. No. 536 of 1998 itself is not admitted by the respondents.

Even assuming the said order to be valid for the sake of argument, the Recovery

Certificate in DRC No. 68 of 2010 was withdrawn on 22.12.2014. As on date,

there is no subsisting Recovery Certificate in force. Therefore, the final amount

allegedly due in O.A. No. 536 of 1998 must first be determined afresh through a

valid Recovery Certificate.

7.2. The learned senior counsel emphasised that the jurisdiction of the

Recovery Officer commences only after the issuance of a Recovery Certificate

by the DRT and upon its transmission to the Recovery Officer. In the absence of

12

a subsisting Recovery Certificate, all consequential proceedings, including the

auction and valuation, are vitiated for want of jurisdiction.

7.3. The learned senior counsel further alleged that the appellant has

suppressed material facts and has not approached this Court with clean hands. It

was contended that the appellant had surrendered the original Sale Certificate

dated 01.02.2011 before the Recovery Officer, but thereafter unlawfully

removed the same from the case bundles of the DRT, Chennai and used it to

obtain a loan from Reliance Capital Finance Ltd. Such conduct, it was alleged,

amounts to fraud upon the Court and legal forums, thereby disentitling the

appellant to any equitable relief.

7.4. It was also submitted that the appellant had consistently taken a stand

before the Recovery Officer, DRT, DRAT, and the High Court that he had

abandoned his interest in the subject property, was not in possession thereof,

and sought only refund of the sale consideration. Acting on such representation,

the Recovery Officer passed an order dated 13.11.2015 in CP Nos. 5(A) to 5(D)

of 2015 in DRC No. 68 of 2010 in O.A. No. 536 of 1998, directing the Bank to

refund the amount along with interest. Having taken a categorical position

seeking refund and abandonment of the property, the appellant is now estopped

from asserting any right or title over the subject properties.

7.5. The learned senior counsel reiterated that the appellant has not paid the

entire sale consideration in accordance with law and, therefore, is not entitled to

13

claim any interest in the subject properties. Since the auction sale itself is void

and non est, the appellant lacks locus standi to maintain the present proceedings

or seek any relief before this Court.

7.6. On the aforesaid grounds, the learned senior counsel prayed that the

appeal be dismissed holding that the auction sale is illegal and that the appellant

has no enforceable right in the subject properties.

8. The learned counsel appearing for Respondent No. 6 bank submitted that

the auction sale in the present case, was not conducted under the provisions of

the SARFAESI Act, 2002, but was carried out by the Debts Recovery Tribunal

in accordance with the provisions of the Recovery of Debts Due to Banks and

Financial Institutions Act, 1993 and the procedure prescribed under Rules 38,

and 52(2) of the Second Schedule to the Income Tax Act, 1961, which govern

recovery proceedings before the Recovery Officer. It was submitted that the sale

process was conducted in a transparent and lawful manner strictly in accordance

with the statutory procedure.

8.1. It was submitted that the DRT had ordered attachment of the borrower’s

properties on 20.08.2010 on account of default in repayment of a sum of

Rs.1,03,42,523.91 due to the Bank, in compliance with Debts Recovery

Certificate No. 68/2010 dated 29.06.2010 issued in O.A. No. 536 of 1998.

Thereafter, while issuing the proclamation of sale on 21.09.2010, the Recovery

14

Officer took into consideration the valuation report dated 08.09.2010 in respect

of the secured assets.

8.2. It was further submitted that the auction of the scheduled properties was

conducted on 29.10.2010 at 2.00 PM with an upset price of Rs. 2 crores, which

had been fixed by the Recovery Officer of the DRT against the assessed market

value of Rs. 1,24,60,000/-. Sixteen bidders had expressed interest and

participated in the auction proceedings. Against the upset price of Rs. 2 crores,

the appellant submitted the highest bid of Rs. 2,10,98,765/- which was accepted,

and the appellant was declared the successful bidder. The appellant deposited

Earnest Money of Rs. 55,00,000/- with the DRT on 29.10.2010.

8.3. It was submitted that although there was some delay on the part of the

auction purchaser in depositing the balance sale consideration, such delay was

duly condoned by the DRT by order dated 15.11.2010. Thereafter, upon

payment of the entire bid amount, the sale was confirmed by the DRT by order

dated 31.01.2011, and the sale certificate was subsequently issued in favour of

the auction purchaser in accordance with law. The said sale has thus attained

finality.

8.4. The learned counsel submitted that there was no connivance whatsoever

between the Bank and any bidder, as the auction was conducted under the

supervision of the Recovery Officer of the DRT in a transparent manner with

participation of multiple bidders. In terms of the sale proceeds deposited by the

15

successful bidder, an amount of Rs. 1,03,42,523.91 was released to the Bank

towards satisfaction of its dues, while the surplus amount continues to remain

with the DRT. The Bank has no control over such surplus amount nor any claim

thereto.

8.5. It was further submitted that despite the lapse of nearly fourteen years, the

borrowers have not approached the DRT seeking release of the surplus amount

lying with the Tribunal. The borrowers have thus failed to take appropriate steps

in accordance with law for claiming the said amount.

8.6. It was submitted that the borrowers have made various allegations

regarding the conduct of the Bank, including alleged incorrect valuation of the

property, but such allegations are unsupported by any material evidence. In this

regard, reliance was placed on the decision of this Court in Noida Special

Economic Zone Authority v. Manish Agarwal and others

9

, wherein it was

observed that issues relating to valuation are essentially questions of fact, and

where the valuation is based on relevant material on record, the same ordinarily

does not warrant interference.

8.7. The learned counsel further submitted that the disputes now raised by the

borrowers are illusory and moonshine. Even assuming that the borrowers were

aggrieved by the conduct of the Bank or the auction proceedings, no appeal or

special leave petition has been filed by them challenging the impugned

9

2024 INSC 839

16

judgment. In the absence of any such challenge, it cannot be said that the

borrowers are aggrieved parties before this Court.

8.8. It was submitted that the allegations raised by the borrowers in their

counter affidavit are merely a reiteration of the contentions urged before the

forums below. After due consideration of these submissions, the DRT, DRAT

and the High Court have all upheld the validity of the auction proceedings, and

no ground has been shown to warrant interference with those concurrent

findings.

8.9. The learned counsel clarified that the Bank does not wish to

independently oppose the present petition, as no substantive relief has been

sought against the Bank.

8.10. It was submitted that the Bank shall abide by any direction that may be

passed by this Court in the interest of justice. However, it was pointed out that

continued litigation in respect of the recovery proceedings may result in accrual

of further interest in accordance with banking norms, which would ultimately

increase the financial burden upon the borrowers / mortgagors.

8.11. Accordingly, it was submitted that the Bank has acted strictly in

accordance with law and the recovery already effected pursuant to the auction

proceedings ought not to be disturbed.

17

9. We have heard the learned Senior Counsel for the appellant, the learned

Senior Counsel appearing for Respondents 1 to 5, 7 and 14, the learned counsel

for Respondent No.6 and the learned counsel for Respondent No.8, and also

perused the materials available on record.

10. Admittedly, the DRT initiated recovery proceedings at the instance of

Respondent No. 6 bank against Respondent No. 7 company and its directors and

guarantors for recovery of the outstanding dues. By the final order passed in

O.A. No. 536 of 1998, the DRT held that the bank was entitled to recover the

amounts due. Thereafter, in execution of the said order, the DRT issued Debt

Recovery Certificate No. 68 of 2010 dated 29.06.2010. As the respondents

failed to comply with the terms of the recovery certificate and pay a sum of

Rs.1,03,42,523.91, the DRT passed an order of attachment dated 20.08.2010.

Pursuant thereto, auction of the secured properties was conducted on

29.10.2010, in which, the appellant emerged as the highest bidder. The sale was

thereafter confirmed by the DRT, and a Sale Certificate was issued in favour of

the appellant and duly registered on 02.02.2011. The order of the DRT was

subsequently challenged before the DRAT in R.A. No. 59 of 2012. By its order

dated 24.10.2017, the DRAT affirmed the legality of the auction proceedings

and protected the rights of the auction purchaser, thereby disposing of the

appeal. Aggrieved thereby, the guarantors approached the High Court by filing

W.P. No. 33872 of 2017.

18

11. By the impugned judgment dated 06.02.2020, the High Court, while

upholding the validity of the auction sale and recognising the rights of the

appellant as the auction purchaser, nevertheless directed reconsideration of the

valuation of the properties and remitted the matter to the DRT on that limited

aspect. The relevant operative portions of the impugned judgment are

reproduced below for better appreciation:

“164. Thus, there is no necessity for creation of by deposit of title deed with the

original. The 1

st

and the 2

nd

petitioners had authority to create security which

they did. They had intention to create such security for the outstanding amount.

165. We therefore disagree with the case of the petitioners that there was no

mortgage of Schedule A to E properties or that the securities that were offered

by the petitioners were only for the “At Par Facility” liability in respect of

which there was no dues as on 29.8.1997. The outstanding amount that was due

in the said facility was allowed to be repaid as a “Temporary Overdraft

Facility” after obtaining additional securities in the form of letters of guarantee

from Dr V. Sambhasivam, the 2

nd

defendant, 3

rd

and the 4

th

respondent herein.

Since the amounts were not repaid, the 1

st

respondent Bank was entitled to

recover the due from the petitioners along with others jointly and severally and

liquidate the asset to satisfy the dues.

166. We however leave the issue regarding the valuation adopted for the

Schedule A to E properties in the Recovery Proceedings to be decided by the

DRT afresh. In case, the properties have been sold for a lower value, the 9

th

respondent may be directed to pay for the same.

167. In the light of the above discussion, we are constrained to uphold the

ultimate conclusion arrived by the DRT and the DRAT while remitting the case

back to the DRT as far as valuation of Schedule A to E properties in the

recovery proceedings…”

12. At the outset, it is pertinent to note that the appellant does not assail the

impugned judgment of the High Court in its entirety. The challenge in the

present appeal is confined only to that part of the judgment whereby the High

19

Court directed reconsideration of the valuation of the Schedule A to E properties

by the DRT, notwithstanding the fact that the auction sale had already been

concluded and confirmed in accordance with law. The findings of the High

Court affirming the liability of the guarantors and upholding the recovery

proceedings are not under challenge herein. Thus, the limited grievance of the

appellant is that after confirmation of the sale, the High Court ought not to have

remitted the issue of valuation for fresh consideration by the DRT, as such a

direction unsettles a concluded auction process and is contrary to the settled

principles governing finality of court-confirmed sales.

13. It is not in dispute that the recovery proceedings in the present case were

initiated pursuant to a recovery certificate issued under the Recovery of Debts

Due to Banks and Financial Institutions Act, 1993 and that the Recovery Officer

conducted the auction sale by following the procedure prescribed under the

Second Schedule to the Income Tax Act, 1961. The record indicates that the

valuation report dated 08.09.2010 was obtained prior to issuance of the

proclamation of sale. Sixteen bidders are stated to have participated in the

auction and the appellant emerged as the successful bidder with a bid of

Rs.2,10,98,765/-. The sale was thereafter confirmed by the DRT on 31.01.2011

upon deposit of the entire sale consideration and a sale certificate came to be

issued.

20

14. It is the specific contention of the learned senior counsel for the appellant

that once the auction sale was confirmed and the purchaser was a bona fide

third-party bidder, the sale ought not to be disturbed except in cases of fraud or

material irregularity. Reliance has been placed upon several decisions of this

Court emphasising the protection ordinarily accorded to confirmed auction sales

and the need to maintain certainty in judicial sales.

15. While there can be no quarrel with the settled proposition that the rights

of a bona fide auction purchaser deserve due protection and that confirmed court

sales should not ordinarily be interfered with, it is equally well established that

such protection is not absolute. Where credible issues are raised regarding the

adequacy of valuation or the fairness of the process leading to the fixation of the

reserve price, the supervisory jurisdiction of the Court may be invoked to ensure

that the recovery proceedings have been conducted in a manner that secures the

best possible value of the property. The objective of recovery proceedings is not

merely to complete the sale but to realise the maximum value of the secured

asset so as to balance the interests of the creditor and the borrower. In this

regard, reference may be made to the decision of this Court in Rajiv Kumar

Jindal v. BCI Staff Welfare Association

10

, wherein, it was observed that the

purpose of an auction is to obtain the most remunerative price for the property

by affording an opportunity to intending purchasers to participate in a process of

competitive bidding, thereby ensuring transparency and fairness in the sale. The

10

(2023) 238 Comp Cas 227 : 2023 SCC OnLine SC 507

21

Court further emphasized that if the process of competitive bidding is curtailed

or compromised, the possibility of underbidding or securing an inadequate price

cannot be ruled out. In such circumstances, the court is required to exercise its

discretion with circumspection so as to safeguard the legitimate interests

involved in the sale process. The following paragraphs are apposite:

“24. The object of the auction is to secure optimum realisable value of the

property by giving opportunity to the potential buyers facing competitive bids

either in open or closed format. The terms “auction” or “bid” are inter-related as

both give the idea of selling the product to the public. Bidding involves the

process where a person offers a price which is known as a bid. The process of

bidding takes place in a situation where large number of people show their

willingness to buy a particular product or a service and bidding in a sealed

envelope is often used by various companies, industries and small businesses for

assessing the needs of the public at large. On the other hand, auction is the

process that involves buying and selling goods and services by offering them for

bids, taking bids and selling the item to the highest bidder and that is possible if

there is a competitive bidding between the bidders.

25. The purpose of auction (open or close format) is to get the most remunerative

price and giving opportunity to the intending bidders to participate and fetch

higher realizable value of the property. If that path is cut down or closed, the

possibility of fraud or to secure inadequate price or underbidding would loom

large. In the given circumstances, it is the duty of the court to exercise its

discretion wisely and with circumspection and keeping in view the facts and

circumstances in each case.

26. The object of auction has been considered by this court in Lakshmanasami

Gounder v. C.I.T. Selvamani as under :-

“…The object of the sale is to secure the maximum price and to avoid

arbitrariness in the procedure adopted before sale and to prevent underhand

dealings in effecting sale and purchase of the debtor's property. Public

auction is one of the modes of sale intending to get highest competitive price

for the property. Public auction also ensures fairness in actions of the public

authorities or the sale officers who should act fairly and objectively. Their

action should be legitimate. Their dealing should be free from suspicion.

Nothing should be suggestive of bias, favouritism, nepotism or beset with

suspicious features of underbidding detrimental to the legitimate interest of

the debtor. . .”

22

16. In the present case, the High Court, upon examining the record, was of

the view that the question relating to valuation of the property and the fixation

of the reserve price warranted closer scrutiny. Significantly, the High Court has

neither set aside the auction sale nor questioned the participation of the auction

purchaser; rather, it has confined its direction to a reconsideration of the issue of

valuation by the DRT.

17. Moreover, the direction issued by the High Court merely remits the

matter to the DRT for examination of the valuation with reference to the

relevant materials on record including the valuation report and the

circumstances in which the reserve price came to be fixed. Such a limited

remand does not prejudge the rights of the auction purchaser, but enables the

DRT to assess whether the valuation and fixation of the reserve price were in

accordance with law. Further, the remand does not disturb the recovery already

effected by the bank nor does it render the auction proceedings void. Therefore,

such a limited remand for fresh consideration by the DRT cannot be said to be

legally untenable.

18. The contention of the learned senior counsel for the appellant that the

confirmation of the sale renders the matter entirely immune from further

scrutiny cannot be accepted in the absolute terms in which it has been urged.

The principle of finality attached to court-confirmed auction sales cannot

operate to shield the process from judicial examination where the question

relates to the adequacy of valuation or fixation of reserve price, particularly

23

when such examination is necessary to ensure that the secured asset has fetched

the best possible price. The requirement that the recovery process be fair,

transparent and based on a proper assessment of value must co-exist with the

principle of finality governing confirmed sales.

19. The submission of the learned counsel for the Bank that the auction was

conducted in accordance with the prescribed statutory procedure and that the

recovery amount has already been realised does not detract from the limited

jurisdiction exercised by the High Court. The remand directed is confined to the

issue of valuation and leaves it open to the Tribunal to examine the matter in

accordance with law.

20. In view of the above, no error can be found in the course adopted by the

High Court in remitting the matter to the DRT for reconsideration of the issue of

valuation, which reflects a balanced exercise of jurisdiction and does not require

interference by this Court.

21. Accordingly, the Civil Appeal stands dismissed. However, there is no

order as to costs.

22. Pending application(s), if any, shall stand disposed of.

.…………………………J.

[J.B. PARDIWALA]

.…………………………J.

[R. MAHADEVAN]

NEW DELHI;

MARCH 13, 2026.