As per case facts, a partnership firm availed credit from Union Bank of India, mortgaging property. Default led to SARFAESI Act measures and a public auction of the secured asset ...
IN THE HIGH COURT OF ANDHRA PRADESH: AT AMARAVATI
*****
Writ Petition Nos.27786 and 28572 of 2025
Between:
1. DUKKALA LAKSHMANA RAO @ DUKKOLA LAKSHMANA RAO, S/o, D.
Mallayyaa, Aged about 46 Years, R/o. 18-27-14, RH Colony, Balacheruvu,
Pedagantyada, Vishakhapatnam. Presently residing at, 9438 Abbey Rd,
Irving Texas, ZIP Code 75063, United States of America.
...Petitioner
AND
1. SUDULANGUNTA RAMA RAO, F S/o. Kesavulu, Aged about 50 Years
R/o.31-3-3/1, Ashok Nagar, Kurmannapalem, Vishakhapatnam and others
...Respondents
Date of Reserve : 13-02-2026
Date of pronouncement : 01-05-2026
Date of Upload : 19-05-2026
HONOURABLE SRI JUSTICE CHEEKATI MANAVENDRANATH ROY
HONOURABLE SRI JUSTICE VENUTHURUMALLI GOPALA KRISHNA
RAO
1 Whether Reporters of Local
newspapers may be allowed to see
the Judgments?
Yes/No
2 Whether the copies of judgment may
be marked to Law Reports/Journals
Yes/No
3 Whether Their Ladyship/Lordship
wish to see the fair copy of the
Judgment?
Yes/No
___________________________________
CHEEKATI MANAVENDRANATH ROY, J.
2
* HONOURABLE SRI JUSTICE CHEEKATI MANAVENDRANATH ROY
HONOURABLE SRI JUSTICE VENUTHURUMALLI GOPALA KRISHNA
RAO
+ Writ Petition Nos.27786 and 28572 of 2025
% 01-05-2026
# DUKKALA LAKSHMANA RAO @ DUKKOLA LAKSHMANA RAO, S/o,
D. Mallayyaa, Aged about 46 Years, R/o. 18 -27-14, RH Colony,
Balacheruvu, Pedagantyada, Vishakhapatnam. Presently residing at,
9438 Abbey Rd, Irving Texas, ZIP Code 75063, United States of America
...PETITIONER
vs.
$ SUDULANGUNTA RAMA RAO, F S/o. Kesavulu, Aged about 50 Years
R/o.31-3-3/1, Ashok Nagar, Kurmannapalem, Vishakhapatnam and
others
...RESPONDENTS
! Counsel for the Petitioners: M/s. CKR Associates and Smt.V.Dyumani
Counsel for Respondents: Sri S.Satyanarayana Moorthy
< Gist:
> Head Note:
? Cases referred:
1. 2024 SCC Online Cal 1065
2. 2010 SCC Online Ker 4745
3. MANU/DE/0265/2022
4. 2009 SCC Online Mad 1230
3
APHC010537192025
IN THE HIGH COURT OF ANDHRA PRADESH
AT AMARAVATI
(Special Original Jurisdiction)
FRIDAY,THE FIRST DAY OF MAY
TWO THOUSAND AND TWENTY SIX
PRESENT
THE HONOURABLE SRI JUSTICE CHEEKATI MANAVENDRANATH ROY
THE HONOURABLE SRI JUSTICE VENUTHURUMALLI GOPALA
KRISHNA RAO
Writ Petition Nos.27786 and 28572 of 2025
WRIT PETITION NO: 27786 OF 2025
Between:
1. DUKKALA LAKSHMANA RAO @ DUKKOLA LAKSHMANA RAO, S/o, D.
Mallayyaa, Aged about 46 Years, R/o. 18-27-14, RH Colony, Balacheruvu,
Pedagantyada, Vishakhapatnam. Presently residing at, 9438 Abbey Rd,
Irving Texas, ZIP Code 75063, United States of America.
...Petitioner
AND
1. SUDULANGUNTA RAMA RAO, F S/o. Kesavulu, Aged about 50 Years
R/o.31-3-3/1, Ashok Nagar, Kurmannapalem, Vishakhapatnam. 2.
2. Sudulangunta Kishore, S/o. S. Rama Rao, Aged about 48 Years R/o.31-3-
3/1, Ashok Nagar, Kurmannapalem, Vishakhapatnam. 3.
3. Union Bank of India erstwhile Andhra Bank, Represented through its
Authorized Officer, Gajuwaka, Visakhapatnam. 4.
4. The Debts Recovery Appellate Tribunal DRAT, Kolkata, West Bengal.
Represented by its Chairperson
...Respondents
4
Petition under Article 226 of the Constitution of India praying that in the
circumstances stated in the affidavit filed therewith, the High Court may be
pleased topleased to issue a writ, order or direction more particularly one in
the nature of the WRIT OF MANDAMUS to set aside the judgement dated
25.08.2025 in Appeal No. 149 of 2023 before Debt Recovery Appellate
Tribunal, Kolkata by confirming the judgement dated 01.07.2023 in S.A.
No.212 of 2023 before the Debt Recovery Tribunal Vishakhapatnam as
arbitrary, illegal, unjust, contrary to the provisions of The SARFAESI Act,
2002 and The Security Interest (Enforcement) Rules, 2002 besides being
unconstitutional and consequently set aside the judgement dated 25.08.2025
in Appeal No. 149 of 2023 by confirming the judgement dated 01.07.2023 in
S.A. No.212 of 2023 before the Debt Recovery Tribunal Vishakhapatnam and
quash the same and pass
IA NO: 1 OF 2025
Petition under Section 151 CPC praying that in the circumstances stated
in the affidavit filed in support of the petition, the High Court may be pleased
pleased to STAY the operation of judgement dated 25.08.2025 in Appeal No.
149 of 2023 before Debt Recovery Appellate Tribunal, Kolkata and pass
Counsel for the Petitioner: CKR ASSOCIATES
Counsel for the Respondents: S SATYANARAYANA MOORTHY
Counsel for the Respondents:V DYUMANI
5
APHC010545602025
IN THE HIGH COURT OF ANDHRA PRADESH
AT AMARAVATI
(Special Original Jurisdiction)
FRIDAY,THE FIRST DAY OF MAY
TWO THOUSAND AND TWENTY SIX
PRESENT
THE HONOURABLE SRI JUSTICE CHEEKATI MANAVENDRANATH ROY
THE HONOURABLE SRI JUSTICE VENUTHURUMALLI GOPALA
KRISHNA RAO
WRIT PETITION NO: 28572 OF 2025
Between:
1. Union Bank of India, (Erstwhile Andhra Bank), Gajawaka, Visakhapatnam,
Now the account transferred to Asset Recovery Branch, D. No. 26-15-150,
Andhra Bank Building, Changalraopeta, Visakhapatnam of A.P. - 530001
Represented through the Authorized officer
...Petitioner
AND
1. Sri Sudulangunta Rama Rao, S/o Kesavulu R/o H. No. 31 -3-3/1,
AshokNagar, Kurmannapalem, Visakhapatnam
2. Sri Sudulangunta Kishore, S/o Rama Rao R/o H. No. 31 -3-3/1,
AshokNagar, Kurmannapalem, Visakhapatnam
3. Sri Dukkala Lakshmana Rao, S/o Mallaya, R/o H. No. 18-27-14, R.H.
Colony, Balacheruvu, Pedagantyada, Vusakhapatnam
...Respondents
Petition under Article 226 of the Constitution of India praying that in the
circumstances stated in the affidavit filed therewith, the High Court may be
pleased topleased to grant an order, direction or writ, more so in the nature of
Writ Of Certiorari calling for the records pertaining to the orders dated
25.08.2025 passed in Appeal No. 122 of 2023 on the file of the Hon'ble Debts
6
Recovery Appellant Tribunal, Kolkata confirming the orders dt. 01.07.2023 of
Debts Recovery Tribunal, Visakhapatnam in S.A. No. 212/2023 and quash
the same and consequentially allow the Appeal No. 122 / 2023 on the file of
Debts Recovery Appellate Tribunal, Kolkata by setting aside the orders dt
01.07.2023 passed in S.A. No. 212/2023 on the file of Debts Recovery
Tribunal, Visakhapatnam
IA NO: 1 OF 2025
Petition under Section 151 CPC praying that in the circumstances stated
in the affidavit filed in support of the petition, the High Court may be pleased
pleased to suspend all further proceedings pursuant to orders 01.07.2023
passed in S.A. No. 212 of 2023 on the file of Debts Recovery Tribunal,
Visakhapatnam as confirmed by the Debts Recovery appellate Tribunal,
Kolkata vide dated 25.08.2025 in Appeal No. 122 of 2023, pending disposal
of the above Writ Petition
Counsel for the Petitioner: V DYUMANI
Counsel for the Respondents: S SATYANARAYANA MOORTHY
The Court made the following order:
Date of Reserve : 13-02-2026
Date of pronouncement : 01-05-2026
Date of Upload : 19-05-2026
The Court made the following:
7
Common Order: (per Ch. Manavendranath Roy, J.)
Since these two writ petitions are filed challenging the legal validity of
the orders of the Debts Recovery Appellate Tribunal at Kolkata, passed in
Appeal No.149 of 2023 and Appeal No.122 of 2023 whereby the Appellate
Tribunal has dismissed the appeals, preferred against the orders of the Debts
Recovery Tribunal, Visakhapatnam, allowing S.A.No.212 of 2023 setting aside
the sale of the secured asset by the bank, these two writ petitions are heard
together and they are being disposed of by this common order.
2. W.P.No.28572 of 2025 is preferred by Union Bank of India, which is
the secured creditor and W.P.No.27786 of 2025 is preferred by the auction
purchaser against the orders of the Appellate Tribunal.
3. Heard Sri S.V.S.S. Siva Ram for M/s. CKR Associates, learned
counsel for the petitioner in W.P.No.27786 of 2025, Sri S. Satyanarayana
Moorthy, learned counsel for the respondents 1 and 2 and Smt. V. Dyumani,
learned Standing Counsel for the 3
rd
respondent-Union Bank of India.
4. When the Authorised Officer failed to obtain a price for sale of the
secured asset in the public auction higher than the reserve price, whether the
sale of the secured asset in the public auction can be confirmed at the reserve
price without the consent of the borrower and the secured creditor is the
seminal question of law that is involved in this lis for our adjudication in these
writ petitions.
5. Brief overview of the facts leading to the lis in these writ petitions may
be stated as follows:
(a) A partnership firm in the name and style “M/s. Best Sai Enterprises”
(hereinafter called as “principal borrower”) has availed credit facility from
Union Bank of India and they have offered their immovable property as
security to the bank for repayment of the loan availed by the firm and
mortgaged their immovable property in favour of the bank. Thereafter, the
8
principal borrower committed default in repayment of the loan amount due to
the bank. Therefore, the bank has initiated measures under the Securitisation
and Reconstruction of Financial Assets and Enforcement of Security Interest
Act, 2002 (for short, the SARFAESI Act) as per the procedure contemplated
under law and brought the secured asset for sale in the public auction for
recovery of the amount due from the principal borrower. A public notice was
issued for sale of the secured asset in the public auction after obtaining
valuation report as required under law and fixing the reserve price at
Rs.3,48,00,000/-. Bid increment is Rs.3,00,000/-. The auction was held on
12-4-2023. Only one bidder has participated in the auction and the bid was
held in his favour exactly for the reserve price fixed at Rs.3,48,00,000/-.
Therefore, the sale was confirmed in his favour for the reserve price of
Rs.3,48,00,000/- in respect of the secured asset. The secured asset is
a school building. At the time of inspecting the said property by the valuer for
the purpose of issuing valuation report, the property is classified as a
residential property situate in a developed area.
(b) Thus, the Authorised Officer could not obtain a price more than the
reserve price in the auction that was held. However, the sale was knocked
down in favour of the sole bidder exactly at the reserve price.
(c) Therefore, the sale in the public auction was questioned on various
grounds including on the main ground that when the Authorised Officer could
not obtain a price more than the reserve price as per the second proviso to
Rule 9(2) of the Security Interest (Enforcement) Rules, 2002, he has to
confirm the sale only after obtaining the consent of the borrower and the
secured creditor and as no such consent of the borrower as required under
the second proviso to Rule 9(2) of the Rules to sell the secured asset in the
public auction at the reserve price is obtained, the said confirmation of sale in
favour of the auction purchaser in the public auction is not valid under law and
thereby prayed to set aside the said sale.
(d) An application under Section 17 of the SARFAESI Act was filed
before the Debts Recovery Tribunal, Visakhapatnam, in S.A.No.212 of 2023
9
challenging the validity of the said sale of the secured asset on various
grounds including the above main ground of contravening the second proviso
to Rule 9(2) of the Rules. The Debts Recovery Tribunal, Visakhapatnam,
rejected all other contentions raised in the application questioning the legal
validity of the said sale of the secured asset in the public auction. However,
the contention of the applicants that as the Authorised Officer failed to obtain
price higher than the reserve price that he confirmed the sale without
obtaining the consent of the borrower as required under the second proviso to
Rule 9(2) of the Rules and that the sale was confirmed in contravention of the
second proviso to the said rule found favour with the Debts Recovery Tribunal,
Visakhapatnam. After considering the effect of second proviso to Rule 9(2) of
the Rules, the Debts Recovery Tribunal, Visakhapatnam, held that as the
Authorised Officer did not obtain consent of the borrower to confirm the sale
exactly at the reserve price that the sale is not in accordance with law and
thereby has set aside the said sale, however permitted the bank to proceed
with the sale by following the procedure contemplated under law.
(e) Aggrieved thereby, the bank has preferred an appeal to the Debts
Recovery Appellate Tribunal at Kolkata assailing the order of the Debts
Recovery Tribunal, Visakhapatnam. After considering the second proviso to
Rule 9(2) of the Rules, the Appellate Tribunal also concurred with the finding
of the Debts Recovery Tribunal, Visakhapatnam and held that obtaining
consent of the borrower to confirm the sale exactly at the reserve price when
the Authorised Officer failed to obtain a price higher than the reserve price is
essential requirement of law and as the said consent was not obtained that
the sale is not valid under law and thereby confirmed the order of the Debts
Recovery Tribunal, Visakhapatnam.
(f) Aggrieved thereby, challenging the legal validity of the orders of both
the Debts Recovery Tribunal, Visakhapatnam as well as the Debts Recovery
Appellate Tribunal at Kolkata, these two writ petitions are separately preferred,
one by the bank and the other by the auction purchaser.
10
6. According to the learned counsel for writ petitioners appearing for
both the bank and the auction purchaser, both the Debts Recovery Tribunal
and the Appellate Tribunal did not properly appreciate the law pertaining to the
issue and they failed to properly and correctly interpret the second proviso to
Rule 9(2) of the Rules and arrived at an erroneous conclusion and has
erroneously set aside the sale confirmed at the reserve price. They would
contend that the Authorised Officer cannot confirm the sale at the price lower
than the reserve price and if the price obtained by him in the public auction is
higher than the reserve price and exactly at the reserve price, it is well within
his competence to confirm the said sale even at the reserve price and no
consent of the borrower is required to confirm the said sale. They would
contend that the law in this regard has been well settled and a Division Bench
of the Kolkata High Court in the case of Kaberi Chakraborthy v. UCO Bank
1
and a learned single Judge of the Kerala High Court in the case of Varghese
Ukken v. State Bank of India
2
have after considering the second proviso to
Rule 9(2) of the Rules and interpreting the same clearly held that consent of
the borrower is not required to confirm the sale at the reserve price and it is
not mandatory as the word “may” is used in the second proviso to Rule 9(2) of
the Rules. A Division Bench of the Kolkata High Court in Kaberi
Chakraborthy’s case (1 supra) took a view that consent of the borrower is not
necessary to confirm the sale at the reserve price. It is vehemently contended
by them that the Delhi High Court particularly in the case of Mahipal Singh
Yadav v. Union of India
3
has undertaken an extensive exercise of
interpreting the second proviso to Rule 9(2) of the Rules and held that the
expression “at such price” used in the second proviso means a price lesser
than the reserve price and not exactly the reserve price and they would
contend that both the Debts Recovery Tribunal and the Appellate Tribunal
failed to appreciate the law in this regard as held by both the Delhi High Court
and the Kerala High Court. Therefore, it is vehemently contended by them
1
2024 SCC Online Cal 1065
2
2010 SCC Online Ker 4745
3
MANU/DE/0265/2022
11
that the impugned orders of both the Debts Recovery Tribunal and the
Appellate Tribunal suffer from patent illegality and thereby prayed to set aside
the said orders and to confirm the sale at the reserve price.
7. Per contra, the learned counsel for respondents would contend that
two Division Benches of the Madras High Court in the case of
K. Raamaselvam v. Indian Overseas Bank
4
and in Mahipal Singh Yadav’s
case (3 supra), the Division Bench of the Delhi High Court categorically held
while considering the second proviso to Rule 9(2) of the Rules and interpreting
the same, that the sale cannot be confirmed exactly at the reserve price
without the consent of the borrower and the consent of the borrower as
required under the second proviso to Rule 9(2) of the Rules is mandatory and
as any such consent was not admittedly obtained by the Authorised Officer of
the borrower that the sale is not valid under law and that both the Debts
Recovery Tribunal and the Appellate Tribunal arrived at a right conclusion
while correctly appreciating the law as held by the two Division Benches of the
Madras High Court and the Delhi High Court cited supra. Therefore, they
strongly supported the impugned judgments of the Debts Recovery Tribunal
and the Appellate Tribunal and prayed to dismiss the writ petitions.
8. We have meticulously gone through the relevant provisions in the
SARFAESI Act and the Rules made therein and we have given our anxious
and thoughtful consideration to the submissions made on the question of law
raised in these writ petitions.
9. Before adverting to the same and adjudicating the lis involved in the
writ petitions, at the outset, it is relevant to note that divergent views were
taken on the important question of law involved in these writ petitions,
as discussed supra by various High Courts. The two Division Benches of the
Madras High Court and the Delhi High Court in K. Raamaselvam’s case
(4 supra) and Mahipal Singh Yadav’s case (3 supra) have taken one view
4
2009 SCC Online Mad 1230
12
while considering and interpreting the second proviso to Rule 9(2) of the
Rules, that the consent of the borrower is necessary and essential to confirm
the sale exactly at the reserve price when the Authorised Officer could not
obtain a price higher than the reserve price in the public auction. The Division
Bench of Kolkata High Court in Kaberi Chakraborthy’s case (1 supra) and
the learned single Judge of the Kerala High Court in Varghese Ukken’s case
(2 supra) have taken one view while considering the second proviso to Rule
9(2) of the Rules and interpreting the same that the consent of the borrower is
not necessary to confirm the sale exactly at the reserve price and the consent
is not mandatory to confirm the sale. Thus, there is cleavage of opinion on the
question of law involved in this case between the Madras High Court and the
Delhi High Court on the one hand and the Kolkata High Court and the Kerala
High Court on the other hand. The two judgments of the Division Benches of
the Madras High Court and the Delhi High Court are in favour of the borrower
that the consent of the borrower is essential to confirm the sale at the reserve
price and the judgments of the Division Bench of the Kolkata High Court and
the judgment of the learned single Judge of the Kerala High Court are in
favour of the bank that the consent of the borrower is not necessary to confirm
the sale at the reserve price.
10. We have meticulously gone through all the aforesaid four judgments
cited by both the parties.
11. After perusing the said judgments and Rule 9(2) of the Rules,
we are of the considered view that the consent of the borrower is required to
be obtained by the Authorised Officer to confirm the sale exactly at the
reserve price when he failed to obtain a price higher than the reserve price.
We agree with the law laid down by the Division Benches of the Madras High
Court in K. Raamaselvam’s case (4 supra) and the Division Bench of the
Delhi High Court in Mahipal Singh Yadav’s case (3 supra).
13
12. In order to appreciate the law relating to the important question of
law raised in the writ petitions, it is apposite to go through Rule 9(2) of the
Rules and the two provisos appended to Rule 9(2) of the Rules. For better
appreciation, the rule is extracted hereunder for ready reference. It reads
thus:
“9. Time of sale, issue of sale certificate and delivery of possession,
etc.—(1) …………………………….
(2) The sale shall be confirmed in favour of the purchaser who has
offered the highest sale price in his bid or tender or quotation or offer to the
authorized officer and shall be subject to confirmation by the secured creditor:
Provided that no sale under this rule shall be confirmed, if the amount
offered by sale price is less than the reserve price, specified under sub-rule
(5) of rule 8:
Provided further that if the authorized officer fails to obtain a
price higher than the reserve price, he may, with the consent of the
borrower and the secured creditor effect the sale at such price.”
13. A careful perusal of Rule 9(2) of the Rules makes it manifest that as
rightly held by the Division Bench of the Madras High Court in
K. Raamaselvam’s case (4 supra), three situations arise when the secured
asset is sought to be sold in the public auction -- (1) Obtaining a sale price
higher than the reserve price by the Authorised Officer, (2) obtaining a sale
price less than the reserve price specified under sub-rule (5) of Rule 8 and (3)
obtaining a sale price not higher than the reserve price, which means
obtaining a sale price exactly at the reserve price. There is absolutely no
difficulty in the first two situations. Clause (2) of Rule 9 of the Rules mandates
that if the sale price is obtained higher than the reserve price, then the
Authorised Officer shall confirm the sale in favour of the purchaser, who has
offered the highest sale price above reserve price, subject to the confirmation
by the secured creditor. In the instant case, admittedly the Authorised Officer
could not obtain a sale price higher than the reserve price to confirm the sale
in terms of Clause (2) of Rule 9 of the Rules. The first proviso to Clause (2) of
Rule 9 of the Rules mandates that no sale under this rule shall be confirmed if
14
the amount offered by the sale price is less than the reserve price specified
under sub-rule (5) of Rule 8 of the Rules. In the instant case, admittedly the
sale price offered by the auction purchaser is not less than the reserve price to
apply the embargo contained in the first proviso to Clause (2) of Rule 9 of the
Rules to reject the sale and not to confirm the sale in favour of the auction
purchaser. The second proviso to Clause (2) of Rule 9 of the Rules envisages
that if the Authorised Officer fails to obtain a price higher than the reserve
price, he may, with the consent of the borrower and the secured creditor effect
the sale at such price. The second proviso applies to the facts of the present
case. A true construction and interpretation of the second proviso to Clause
(2) of Rule 9 of the Rules makes it manifest and very clear that if the
Authorised Officer fails to obtain a price higher than the reserve price, which
means if he obtains the sale price exactly at the reserve price, then he can
confirm the sale but all that is required as per the statutory requirement of the
rule is that he has to confirm the said sale with the consent of the borrower
and the secured creditor to effect the sale exactly at the reserve price. In the
instant case, admittedly he did not obtain the consent of the principal
borrower, leave about the consent of the secured creditor, which is the bank,
to confirm the sale exactly at the reserve price. It is not in dispute that the
sole bidder has offered the sale price exactly at the reserve price of
Rs.3,48,00,000/-. Therefore, as per the requirement contemplated under the
second proviso to Rule 9(2) of the Rules, the sale can be confirmed at the
reserve price only with the consent of the borrower and not otherwise. In
other words, the sale of the secured asset in the auction exactly at the reserve
price cannot be confirmed by the Authorised Officer without the consent of the
borrower. There is a purpose behind incorporating the second proviso to Rule
9(2) of the Rules by the Parliament. The secured asset is the property of the
principal borrower or his guarantor. If the Authorised Officer could obtain a
sale price more than the reserve price, it enures to the benefit of the owner of
the property and after clearing the debt, he can enjoy the balance sale
proceeds for his purpose. If the Authorised Officer could not obtain a sale
15
price higher than the reserve price, then the Parliament has given option to
the borrower to give consent either to confirm the sale exactly at the reserve
price or to reject the same. So, when it is the intention of the Parliament that
to confirm the sale exactly at the reserve price with the consent of the
borrower, the same has to be done as prescribed by the statutory rule and not
in contravention of the same. It is settled law that when a provision in the
statute or a rule in the statute mandates that a particular thing is to be done in
a particular way, the same has to be done strictly in conformity with the
requirement of the section or the rule in the statute and not in violation of the
same. In the instant case, the second proviso of the rule clearly enjoins that if
the Authorised Officer fails to obtain price higher than the reserve price, then
he may, with the consent of the borrower, effect the sale for such price i.e.,
the reserve price. As the Authorised Officer failed to obtain a price higher
than the reserve price, he cannot, without the consent of the borrower,
confirm the sale at the reserve price. But, contrary to the mandate of the
second proviso to the rule he has confirmed the sale at the reserve price
without the consent of the borrower. Therefore, it renders that the
confirmation of the sale at the reserve price without the consent of the
borrower wholly invalid.
14. The Division Bench of the Madras High Court in K. Raamselvam’s
case (4 supra) and the Division Bench of the Delhi High Court in Mahipal
Singh Yadav’s case (3 supra) have correctly interpreted the second proviso
to Rule 9(2) of the Rules and arrived at a right conclusion and held that the
consent of the borrower is essential to confirm the sale exactly at the reserve
price. We are in complete agreement with the view taken by the aforesaid two
Division Benches and the law laid down in the said judgments and we concur
with the law laid down by the Division Benches of the Madras High Court and
the Delhi High Court.
16
15. With great respect, we are unable to agree with the view taken by
the Division Bench of the Kolkata High Court in Kaberi Chakraborthy’s case
(1 supra) and the learned single Judge of the Kerala High Court in Varghese
Ukken’s case (2 supra). We are unable to persuade ourselves to agree with
the view taken by the said two Courts after going through the express
language employed in the second proviso to Rule 9(2) of the Rules and the
intention of the Parliament in incorporating the said second proviso to the said
rule. The view taken by the Kolkata High Court that the expression “at such
price” used in the second proviso to Rule 9(2) of the Rules means less than
the reserve price, in our considered view, does not appear to be the correct
interpretation given to the said term. The second proviso to the rule is to be
read as a whole and a holistic view is to be taken. When the second proviso
to Rule 9(2) of the Rules clearly mandates that if the Authorised Officer fails to
obtain a price higher than the reserve price then he may with the consent of
the borrower effect the sale at such price means at the reserve price only and
not less than the reserve price as has been interpreted by the Kolkata High
Court. Accepting such an interpretation that “at such price” means below the
reserve price would amount to interpreting the provision contrary to the
intention of the Parliament. In fact, we do not find any ambiguity in the second
proviso to Rule 9(2) of the Rules and the rule is in fact properly drafted without
any ambiguity. So, we are of the view that the expression “at such price”
means at the reserve price.
16. The requirement of second proviso to Rule 9(2) of the Rules that the
sale can be confirmed at the reserve price with the consent of the borrower
cannot be ignored. It is a statutory rule framed by the Central Government in
exercise of the powers conferred on it under Section 35 of the SARFAESI Act.
Therefore, the rule has got statutory force and it has to be complied with
strictly. It is settled law that when the main section in the statute or a rule in
the statute contains a proviso, the said proviso is always an exception to the
main section or the rule. Therefore, when the second proviso clearly and in
17
clear terms mandates that the sale can be confirmed at the reserve price with
the consent of the borrower, it has to be followed in its true spirit. No sale can
be confirmed contrary to the said mandate of law. If the interpretation given to
the expression “at such price” used in the second proviso by the Delhi High
Court that it means less than the reserve price is accepted, then it runs
contrary to the first proviso to Rule 9(2) of the Rules that no sale can be
confirmed below the reserve price. Rule 9(2) of the Rules and its two provisos
are to be read together and has to be interpreted in a harmonious way
keeping in mind the object of the rule and the intention of the Parliament in
mind.
17. Therefore, we absolutely do not find any legal flaw or infirmity in the
impugned orders of the learned Debts Recovery Tribunal and the Appellate
Tribunal and they are perfectly sustainable under law. Therefore, the writ
petitions are devoid of any merit and they are liable to be dismissed.
18. Resultantly, the writ petitions are dismissed, confirming the
impugned orders of the Debts Recovery Tribunal and the Appellate Tribunal.
Pending applications, if any, shall stand closed. There shall be no order as to
costs.
___________________________________
CHEEKATI MANAVENDRANATH ROY , J.
__________________________
V. GOPALA KRISHNA RAO , J.
01
st
May, 2026.
Note: LR copy to be marked
(B/o)
Ak
18
HONOURABLE SRI JUSTICE CHEEKATI MANAVENDRANATH ROY
AND
HONOURABLE SRI JUSTICE V. GOPALA KRISHNA RAO
Writ Petition Nos.27786 and 28572 of 2025
(per CMR, J.)
01
st
May, 2026.
(Ak)
The High Court of Andhra Pradesh at Amaravati recently delivered a significant ruling concerning the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act), specifically addressing the intricate process of SARFAESI Act auction sale. This common order, pronounced on May 1st, 2026, consolidates two pivotal writ petitions, Writ Petition Nos. 27786 and 28572 of 2025, meticulously examining the necessity of borrower consent for reserve price confirmation in secured asset auctions. Both of these landmark judgments are now prominently featured on CaseOn, offering comprehensive insights for legal professionals and students alike.
The central question before the Honourable Sri Justice Cheekati Manavendranath Roy and Honourable Sri Justice Venuthurumalli Gopala Krishna Rao was: When an Authorised Officer fails to secure a bid higher than the reserve price in a public auction for a secured asset, can the sale be confirmed at the reserve price without the explicit consent of both the borrower and the secured creditor?
The dispute hinged on the interpretation of Rule 9(2) of the Security Interest (Enforcement) Rules, 2002, which governs the time of sale, issuance of sale certificates, and delivery of possession for secured assets. The relevant portion states:
"9. Time of sale, issue of sale certificate and delivery of possession, etc.-(1)
(2) The sale shall be confirmed in favour of the purchaser who has offered the highest sale price in his bid or tender or quotation or offer to the authorized officer and shall be subject to confirmation by the secured creditor:
Provided that no sale under this rule shall be confirmed, if the amount offered by sale price is less than the reserve price, specified under sub-rule (5) of rule 8:
Provided further that if the authorized officer fails to obtain a price higher than the reserve price, he may, with the consent of the borrower and the secured creditor effect the sale at such price."
This rule presents three scenarios for secured asset sales:
The case originated from a default by a partnership firm, "M/s. Best Sai Enterprises," on a credit facility from the Union Bank of India. To recover the debt, the bank initiated proceedings under the SARFAESI Act and put a secured asset (a school building) up for public auction. A reserve price of Rs. 3,48,00,000/- was set. In the auction held on April 12, 2023, only one bidder, Dukkala Lakshmana Rao, participated, and his bid was exactly equal to the reserve price. The Authorised Officer confirmed the sale to him at this price, despite not receiving any higher bids.
The borrower subsequently challenged this sale before the Debts Recovery Tribunal (DRT), Visakhapatnam (S.A.No.212 of 2023), arguing that the sale was invalid because their consent was not obtained, as required by the second proviso to Rule 9(2). The DRT agreed, setting aside the sale. The bank then appealed to the Debts Recovery Appellate Tribunal (DRAT), Kolkata (Appeal Nos. 149 and 122 of 2023), which upheld the DRT's decision, affirming the necessity of borrower consent.
Aggrieved by these decisions, both the Union Bank of India (secured creditor) and Dukkala Lakshmana Rao (auction purchaser) filed separate writ petitions before the Andhra Pradesh High Court.
Petitioners (Bank and Auction Purchaser): They argued that the DRT and DRAT misinterpreted Rule 9(2)'s second proviso. They contended that the Authorised Officer is competent to confirm a sale at the reserve price even without the borrower's consent, especially if no higher bid is received. They cited judgments from the Kolkata High Court (Kaberi Chakraborthy v. UCO Bank) and the Kerala High Court (Varghese Ukken v. State Bank of India), which suggested that borrower consent is not mandatory in such scenarios. Furthermore, they referenced the Delhi High Court's interpretation in Mahipal Singh Yadav v. Union of India, which suggested "at such price" might refer to a price lesser than the reserve price, not exactly at it.
Respondents (Borrowers): They staunchly defended the DRT and DRAT orders, asserting that the second proviso unequivocally mandates borrower consent when the sale is finalized at the reserve price and no higher bid is secured. They relied on judgments from the Madras High Court (K. Raamaselvam v. Indian Overseas Bank) and the same Delhi High Court judgment (Mahipal Singh Yadav v. Union of India), which, in their view, supported the mandatory nature of consent when the sale is at the reserve price.
For legal professionals seeking swift insights into such nuanced rulings, CaseOn.in offers invaluable 2-minute audio briefs that distil the essence of these specific judgments, making complex legal analysis easily accessible and digestible.
The Andhra Pradesh High Court meticulously reviewed the conflicting interpretations of Rule 9(2)'s second proviso. It acknowledged the "cleavage of opinion" among different High Courts but ultimately sided with the view expressed by the Division Benches of the Madras High Court and the Delhi High Court in K. Raamaselvam's case and Mahipal Singh Yadav's case, respectively.
The Court reasoned that the second proviso clearly addresses a situation where the Authorised Officer "fails to obtain a price higher than the reserve price." In such a scenario, the officer "may, with the consent of the borrower and the secured creditor effect the sale at such price." The High Court interpreted "at such price" to mean exactly at the reserve price, not below it. If it meant below the reserve price, it would contradict the first proviso, which prohibits sales below the reserve price.
The Court emphasized that the inclusion of the consent requirement reflects parliamentary intent. The secured asset belongs to the borrower, and while the bank needs to recover its debt, any surplus from the sale benefits the borrower. If a higher price is obtained, the borrower benefits; if only the reserve price is met, the Parliament provides the borrower with the option to consent or reject the sale. This ensures the borrower's rights are protected. Confirming the sale at the reserve price without the borrower's consent, when no higher bid was received, directly contravenes this statutory mandate. Therefore, such a confirmation renders the sale "wholly invalid."
Based on this reasoning, the High Court concluded that the impugned orders of the Debts Recovery Tribunal and the Appellate Tribunal were legally sound and sustainable. Consequently, both writ petitions filed by the Union Bank of India and the auction purchaser were dismissed, affirming that borrower consent is indeed essential for confirming an auction sale exactly at the reserve price if no higher bids are secured.
This judgment is a crucial read for lawyers, bankers, financial institutions, and students specializing in banking law, insolvency, and property law. It clarifies a critical aspect of the SARFAESI Act, reinforcing borrower rights during secured asset auctions.
All information provided in this article is for informational purposes only and does not constitute legal advice. Readers should consult with a qualified legal professional for advice pertaining to their specific circumstances.
Legal Notes
Add a Note....