The High Court · 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 to suspend and stay the operation of the order dated 10.01.2025 of the Ld, DRAT in Appeal No.56 of 2022, pending disposal of the Writ Petition. Counsel for the Petitioner: SRI N.MEHER PRASAD Counsel for the Respondent No.1: SMT JHANSI.Y, REP. FOR SRI GADI PRAVEEN KUMAR, DEPUTY SOLICITOR GENERIAL OF INDIA Counsel for the Respondent No.3: SRI S.LOHIT Counsel for the Respondent No.4: SRI RAGHU GURRAM The Court made the following: COMMON ORDER THE HON'BLE WSTICE MOUSHUMI BHATTACHARYA THE HON'BLE JUSTICE B.R.MADTIUSUDHAT{ RAO AND WP.No.4623 OF 2025 And WP.No.4373 OF 2025 COMMON ORDER: (per Justice B.R.Madhusudhan Rao) I[P.No.4623 of 2O2S 1 . This Writ Petition is filed by the aucti<: n purchaser (M/S Classic Chemicals Limited) in the nature of Writ of Certiorari for setting aside the impugned order, dated lO.OI.2C25 passed by the Debts Recovery Appellate Tribunal (DRAT) at Kolk.ata in Appeal No.29 of 2O2l and to quash the same, conhrm the auction sale conducted on 22.03 .2013 as valid and in accordance with The Securitisation and Reconstruction of Financial Assets and Enforcement of Securit5r Interest Act, 2OO2 (for short 'the SARFAESI Act,2OO2') and the Rules made thereunder [tP.No.4373 of 2o25

2. This Writ Petition is fiied by State Bank of India, Stressed Assets Management Branch, Hyderabad to issue a Writ in the nature of Writ of Certiorari and to call for the records of the order date$ 1O.O1.2025 passed by the Debts Recovery Appellate Tribunal ) . MB,J & I]RMR,J WP Nos 4623 & 4373-2025 (DRAT), Kolkata in Appeal No.56 of 2022 against the order dated

05.03.202 I made in S.A.No. 1115 of 2017 passed by the DRT-II, Hyderabad contrary to the provisions of the SARFAESI Act, 2OO2 and to set aside the same.

3.1 Learned counsel for auction purchaser in W.P.No.4623 of 2025 submits that on 14.02.2013 respondent No.2-Bank has issued e-auction sale notice. On 15.O2.2013 e-auction was published in news paper. On 15.O3.2O 13, the auction purchaser has remitted Earnest Money Deposit (EMD) of Rs.51,50,000/- by RTGS. On 22.03.2013, the petitioner was declared as highest bidder at Rs.5,16,00,000/-. On 22.O3.2013, a cheque for Rs.77,50,000/- towards 25ok of the sale consideration was deposited with the Bank as per Rule 9(3) of the Security Interest (Enforcement) Rules, 2002 (hereinafter referred to as the Rules, 2oo2).

3.2 The deposit of cheque towards 25%o of sale consideration is not contrary to Rule 9(3) of the 2002 Rules. As can be seen from the terms and conditions of the e-auction notice at ciause- 1O which specifies that the cheque will not be accepted for EMD. This presupposes that a cheque is a bar only to the extent of EMD. Bank has accepted the payment of EMD and 25Vo of sale 3127 MI],J & BRMR,J WP Nor; 4623 & 4373 2025 consideration by mode of cheque payment cannot be said as irrational or arbitrary or malafide

3.3 Rule 9(3) and Rule 9(a) of the Rules, 2OO2, borrower has waived his rights under the said provision

3.4 [earned DRT-II, Hyderabad has erroneously observed in its order dated 05.03.2021 that after remand, no additional reply has been hled by the auction purchaser and further inccrrectly stated that the auction purchaser merely adduced oral evid(lnce to speak of various amounts spent by him towards improvement made over the schedule property. After remand by the DRAI', Kolkata in Appeal Nos. 188 and 191 of 2018, the auction purchirser has liled his counter afhdavit along with chief-examination affi<lavit of RW. 1, RW.2. The borrower did not cross-examine RW.1 ancl RW.2 which amounts to a deemed admission of the contents of their testimonies and their documents placed on record.

3.5. DRAT, Kolkata in its order dated 10.01.2O25 in Appeal No.29 of 2O2l erroneously held Rs. 13,29,48,643 / - was taken that no plea of spending in the pleadings. Counsel to substantiate his contention has relied on the decisionr; in the cases ) of (|) Varimadugu Obi Reddy Vs. B.Sreenivasulu &. Othersr, (2) I (2ozi) z scc 168 MB,J & BRMR,J wP Nos 4623 & 4373 2025 . YaE L'.,. '.X6A*i Manager' Sri Siddeshwara Cooperative Bank Limited Vs' Arun Kumar Jain & Others Vs' Presiding !Ftar..;& others2' (3) ' (4) Pahwa Buildtech Pvt' Ltd Vs' Jagmohan . Oftceq,DRI & Ors 3 hrora & Ors.a, (5) Sanjay Sharma Vs Kotak Mahindra Bank rs.s, (6) K.Sahaja Rao Vs. Assistant General Manager, SBI 17) Poddar Steel Corporation Vs. Ganesh Engineering & Ors.z ed counsel for the petitioner in WP.No.4373 ol 2025 ank of India) submits that the Petitioner 15a secured d there is a serious travesty of justice in the order dated 2,Q25 of the DRAT, Kolkata passed in Appeal No-56 of 2022. ppeals filed by the auction purchaser and secured creditor *ip-*S out of an order dated O5.O3.2O2L of the DRT-II Hyderabad passed in SA.No. 1115 of 2Ol7 (Old SA.No.259 of 2Ol3 of DRT-I) dismissing the Appeals by a common order without following the principles of natural justice a-nd contrary to the provisions of the SARFAESI Act,2OO2. . ...i 42 tioner-Bank has invoked the provisions of SARFAESI issued Demand Notice, dated 16.05.2011 to the ,r'... ::...:. 703 Cases (Del) 482 635 of 2017 of Supreme Court of India dated 10.10.2024 o MB,J & BRMR.J wP Nos 4623 e,4373 2025 respondent No.3-borrower under Section 13(21 of the Act demanding a sum of Rs.2,81 ,74,785.O5 paisa followed by Possession Notice, dated 15.09.2011 under Section 13(4) of the SARFAESI Act, 2OO2. In February, 2013, a Sak: Notice was published and pursuant to the same on 22.03.2013 an auction sale of secured assets was conducted by the Authorised Officer of the petitioner-Bank which was confirmed on 22.O3.2tf 13 in favour of respondent No.4 (auction purchaser) at Rs.516 Lakhs, reserve price being Rs.S15 Lakhs.

4.3 Counsel submits th,at 25o/o of the sale price less earnest deposit (Rs.S 1.5 Lakhs) amounting to Rs.77 .7 Lakhs rvas deposited before the Authorized Officer ort 22.C3.2013 by way of cheque No.569687 drawn on ING Vysya Limited as per Rute 9(3) of the Rules, 2OO2 which was credited to the Bank's Account on

27.O4.2023.

4.4 Balance of the 7 5o/o bid amount was to be paid by the auction purchaser within 15 days from the date of cc,nfirmation of sale (i.e., 22.O3.2OL3). At the request of the auction purchaser/ respondent No.4, the Authorised Ofhcer extended time up to 30.06.2O13 for payment of balance 7 5o/o of the sale price amounting to Rs.387 Lakhs. The amount was paid 'by the pu.bhrs.. within the extended period in the form ,rf cheque on 6121 MB,J & BRMR,J wP Nos 4623 & 4373 2025 27 .06.2013 arrd' 28.06.2013 and Sale Certihcate was issued on

29.06.2013

4.5 Respondent Equipments) filed No.3-borrower (M/S Vasantha Surgical SA.No.259 of 2013 under Section i7 of the SARFAESI Act, 2OO2 on 18.04'2013 (subsequently renumbered as SA.No. 1 115 of 2O17) before DRT alleging amongst others that the Sale Notice was not served and the auction was not validly conducted and the property was under valued'

4.6 Bank has complied with Rule 9(3) and Rule 9(4) of the Rules' 2OO2. Rule 9(3) refers to deposit and does not bar/restrict receiving payment by cheque. Once the cheque is honored' the deposit of cheque is a compliance of Law' In Siddeshwara Bank Cooperative Bank Limited's case2 which however has not laid down any ratio that consent of the borrower is required' It has been held that it is not mandatory and it can be waived by the parties' it is for the benefit of the secured creditor. No prejudice is caused to the borrower and there is no material irregularity to set aside the same.Counselhasalsoreiiedonthedecisionsin(1)Varimadugu Obi Reddy Vs. B.Sreenivasulu & Othersl, (2) General Manager' Sri Siddeshwara Cooperative Bank Limited Vs' Ikbal & Others2' (3) '/ / ) 7 127 MB,J & BRMR,J WP_Ncs 4623 & 4373 2025 Sanjay Sharma Vs. Kotak Mahindra Bank Ltd. & Ors.s, 141 K.Sahaja Rao Vs. Assistant General Manager, SBI & Ors.6

5. 1 karned counsel for respondent No.3 borrower (M/S Va santha Surgical Equipments) submits that sale confirmation letter was issued on 22.03.2013 prior to the realization of the cheque amount. Cheque was cleared on 27.O3.2O13 (25%), this clearly indicates that the mandatory requirement of r,he immediate payment of 25o/o deposit was not fulhlled, consequently upon such non-compliance, the Bank was obliged to re-initiate t.he sale of the property. Therc was material irregularity concerninll the payment of 25o/o of the sale price, furthermore no justification has been provided by the Bank for its failure to present tLLe cheque for encashment until 5 days after the date of auction.

5.2 The terms and conditions governing the auction categorically prohibit the acceptance of cheque towards earnest rrroney deposit. The Bank accepted cheques towards pa5rment of 259'o deposit and the balance sale consideration, this conduct constitutes a clear and deliberate violation of auction terms, such a ltreach is not merely procedural but strikes at the root of the salt process and warrants the setting aside of the sale. \ 8127 MB,J & BRMR.J wP-Nos 462J &,4373 2O2S

5.3 There is a violation of Rule 9(3) of the Rules, 2OO2 and breach of the terms of the e_auction Nodce.

5.4 Counsel submits that pre_amendment Rule 9(4) is applicable to the present case which mandates that the balance amount of the purchased price shalr be paid within ls days from the date of conhrmation of the sale of the immovable property or within such extended period as may be mutually agreed upon in writing by the partles

5.5 In the present case, the sale was confirmed in favour of the auction purchaser on 22.03.2013, the period of 15 days expired on 06.04.2013. However, on O6.04.2013 the Barrk in coilusion accepted the request of the auction purchaser for an extension of time to deposit remaining z so/o of the bid amount tllr 30.06.2013, an extension of g6 days beyond the stipulated period under Rure 9(a). The extension was granted unilaterally by the Bank without notice to the borrower, thereby violating the procedural safeguards mandated under the applicable Rules.

5.6 Counsel submits that petitioner/auction purchaser is not entitled to relief on the ground of equities merely because they made iqprovements on the schedule properqr. The Doctine of Lis Pendence has been correctly invoked by the DRT, Hyderabad. The MB,J & BRMR,J WP-.Nos 4623 8a 4373 2025 SA.IR.No.419 of 2Ol1 has no connection whatso,:ver with the auction notice in question and was filed solely to challenge the possession of the schedule property by the Bank. The auction purchaser is attempting to conflict two distinct securitisation applications initiated by the borrower at different l)oints of time each seeking entirely different reliefs. Counsel has relied on the decisions in the cases of (i) Sri Siddeshwara Cooperative Bank Ltd. Vs. Ikbal2 (ii) Vasu P Shetty Vs. Hotel Vandana Palacr:8 (iii) Mathew Verghese Vs. Amritha Kumare (iv) Sri Vijayalakshrni Rice Mills, New Contractors Co. Vs. State of Andhra Pradeshro and (v) Madras Bar Association Vs. Union of India & Anr. I I

6. Heard learned counsel for the parties, perused the record.

7. Now the point for consideration is whether the common order passed by the learned DRAT, Kalkata in Appeal No.29 of 2021 with Appeal No.56 of 2022, dated 10.O 1.2O25.suffers from any illegaliry or perversity?

8.1 The factual background of the case is that respondent No.3 - borrower earlier hled SA.lR.No.419 of 2O 1 1 with deleLy of 32 days vide I.A.No.997 of 2OOl questioning the Possession Notice dated 8 zotn is; scc 660 Paras 16 & 25 'g 2014 (5) SCC 510 Para Nos.42 &43 'o ltszoy 3 scc 37 " (2021) 7 scc 369 MB,J & BRMR,J WP Nos 4623 & 43732025

15.09.2011. The Tribunal granted interim stay of further proceedings vide order dated 09. l2.2oll subject to deposir of Rs.2O Lakhs. The applicant/respondent No.3 failed to comply the conditional order and consequent thereon, condone delay petition in I.A.No.997 of 2011 ended in dismissal on 16.04.2013. The applicant filed review petition along with delay condone petition seeking review of the order dated 16.O4.2013. The said review petition being Review IR Petition No. 11 of 2015 ended in rejection on 12.09.2017 .

8.2 It is the contention of the petitioner,s counsel in W.p.No.4623 of 2025 that the auction purchaser was not aware of the proceedings initiated by the borrower in SA.IR.No.4L9 of 2O 1 1 and that the borrower is estopped from challenging the e-auction Saie Notice, dated 14.O2.2O13.

8.3 The dispute with regard to the Possession Notice issued under Section 13(a) of SARFAESI Act,2OO2 dated 15.09.2011 set at rest with the dismissal of SA.IR.No.4 19 of 2Ol1, this fact is referred to in the order dated lZ.lO.2OlB at paragraph No. 1g in SA.No. 1ll5 of 2017.

9.1 Respondent No.3 - M/s. Vasantha Surgical Equipments filed SA.No.259 of 2013 under Section 17 of the SARFAtrSI Act, 2OO2 rt /27 MB,J & BRMR.J wP Nos 4{123 & 4373-2025 challenging the auction notice dated 14 'O2 '2013 which was published on 15.O2.2O13 in New Indian Express daily news paper and auction conducted ot 22'03'2013 on the ground that Possession Notice dated 15.09 2011 is without issuanct: of Demand Notice under SARFAESI Act E-auction sale ntltice dated 14.02.2013 was not seryed on the borrower and reverse price was fixed in violation of Rule 8(5) of the Security Interest (F)nforcement) Rules, 2002. g.2. SA.No.259 of 2O13 was allowed by the DRT on 28'Ol'2014' The auction purchaser i-e., petitioner in WP'No'4623 of 2025 has challenged the judgment dated 28'0 I '2014 by hling WP'No'73 1 1 of 2O14 before the High Court of Judicature at Hyderrrbad for the State of Telangana which was allowed on 19'06'2014' matter was remanded back to the DRT to implead the auction purchaser (M/s Classic Chemicals Limited)'

9.3. IA.No. 1340 of 20 13 is filed by the borrower/ Respondent No'3 in S.A.No.259 of 2O13 seeking stay of further proceeding of auction dated 22.03.2O13 which was dismisse d on 29'04'2O13 with an observation that auction shall be subject to SA'No'259 of 2013' 9 .4. Auction purchaser (petitioner in WP' No'4623 of 2025) is impleaded in SA.No.1 l15 oI 2077 (Old SA'No'259 of 2O13 of DRT-I' \ \ t2 /27 MB,J & DRMR,J WP_Nos_4623 & 4373 2025 Hyderabad). On 17.10.2018, the DRT-ll had allowed the SA filed by thc borrower by setting aside the e-auction sale held on

22.03.2013 and directed the respondent No. l/Bank to repossess the scheduled property from respondent No.2/auction purchaser.

9.5. The borrower/ respondent No.3 hled W.P.No.24573 of 2Ol9 before the High Court for a direction to the Bank to take steps to repossess the schedule property in view of the orders of the DRT-II, Hyderabad, in SA.No. 1115 of 2OO7, dated, t7.lO.2Ot9. The High Court directed the Bank to repossess the schedule property and comply with the order dated 17.l}.2}la in SA.No. ll15 of 2Ol7 (old SA.No.259 /2}l3l in I.A.No.1 of 2Ol9 vide order dated 24.11.2019. The order in IA.No. I of 2OI9 dated 28.11.2019 was challenged before the Supreme Court by filing Special l.eave to Appeal Civil No.28958 of 2019 by the auction purchaser. The Supreme Court uide order, dated 16.12.2019 disposed of the SLp granting status quo by directing that the proceedings be disposed of within a period of eight weeks from the date of passing the order. W.P.No.24573 of 2Ol9 was dismissed as infructuous on t9.o2.2020. 1O. 1. Aggrieved by the judgment of the DRT, dated 17.10.2018, auction purchaser and secured creditor/Bank have hled Appeai Nos. 18pof 2O18 and 199 of 2078 before DRAT Koikata. DRAT, -r- t3 /27 MB,J & BRMR,J WP Nos 4623 &4373 2025 Kolkata uide order dated 14.01.202O remanded the rnatter back to DRT for fresh adjudication on the issue of comlrliance of the provisions of Rule 9(3) and Rule 9(4) of the Rules, 2OO2 permitting the parties to bring on record the additional pleading:;. 1O.2. After the matter is remanded to the DRT-I[, Hyderabad, borrower has filed application for amendment of pleadings vide I.A.No.544 of 2O2O. Auction purchaser and the secured creditor/Bank have filed their separate counter alhdavit in IA.No.544 of 2O2O. Amendment application came to be allowed on

01.06.2020. Thereafter, the borrower has amended liA.No.11l5 of 20t7.

10.3. Aflrdavit of RWI is hled on 24.12.202O, affidzivit of RW2 is filed on 29.12.2020. DRT-ll Hyderabad has allowerl the S.A. on

05.O3.2021. Purchaser and secured creditor hled a.ppeals before DRAT Kolkata vide A.No.29 of 2021 and A.No.56 ot'2022, whrch were dismissed on 10.01.2025, which is impugne,l in the writ petitions.

11. Auction was conducted on 22.03.2013 on the basis of e-auction sale notice dated 14.02.2013 which was published .on

15.02.2013. For brevity Clause 5 and Clause 1O are as under: \ For participating in e-auction intending brdders have to submit auction bids forms online https:// sbi.a bcprocure.com \ 5. L4127 MB,J & BRMR,J wP Nos 4623 & 4373 2025 mentioning their User ID and details of payment of refundable Earnest Money Deposit of IO'yo of t1 e reserve price of the property concerned i.e., Rs.51,50,OOO/- by RTGS/NEFT/Funds Transfer to the credit of A/c No.32669O84199 with State Bank of India, SA<Bralch, Secunderabad and to the Authorised O{Iicer of State Bank of India, SAM Brarch, Secunderabad, through IFSC Code "SBIN0OO4106" or by demand draft/Pay Order in favour of the Authorised Officer SBI account "M/s Vasantha SurgicaJ Equipments" and submit the print out of online bids form of e-auction along with copies of PAN card and Address Proof, are to be subrnitted any time on or before 5.O0 p.m. 21.03-2013".

10. The EMD and other payments shall be remitted through Eff/NEF-I/RTGS to the bank account as specified above, cheque will not be accepted".

12. Rule 9(3) of the Security Interest (Enforcement Rules) 2002 is as under 'On every sale of immovable property, the purchaser shal1 immediately, i.e., on the same day or not later tJlal next working day, as the case may be, pay a deposit of twenty five percent of ttre amount of the sale price, which is inclusive of ea-rnest money deposited, if aly, to the authorized olficer conducting the sale and in default of such deposit, the property shall be sold again;"

13. As per Clause-S of e-auction Sale Notice, dated 14.02.2013, the petitioner in W.P.No.4623 of 2025 (auction purchaser) has paid Rs.51,5O,000/- as Earnest Money Deposit (EMD) by way of dfCS on 15.03.2O13 t5/27 MB,J & BRMR,J wP Nos 4623 & 4373 2025

14.1. Admittedly, the auction purchaser (petitioner irL WP.No.4623 of 2C251 was declared the highest bidder at Rs.5,16,OO,OO0/ - on

22.O3.2OL3 and 25o/o of the sale price i.e., Rs.77,50,t10O/- is paid by way of cheque. Clause 10 of e-auction Sale \otice, dated

14.02.2013 mandates that the other ents shall be remitted through EFT/ NEFT/ RTGS to the Bank Account as specif,red above, cheques will not be accepted. 14 .2. In spite of knowing the fact that cheques will not be accepted as per clause- 1O of e-auction sale notice dated

14.02.2013, secured creditor/Bank has accepted the same in violation of notice dated 14.O2.2O13 which is manifest on the face of the record.

15. Cheque issued by the auction purchaser for R:;.77,5O,0OO/- on 22.03.2013 was encashed by the Bank on 27.O3.2O13. It is the contention of the petitioners' counsel in W.P.No.4373 of 2025 - Bank that 23.03.2013 was Saturday and 24.O3.2O 13 was Sunday- Learned DRAT in its order dated 10.O1.2025 observed at paragraph No.39 that judicial notice of the fact is that 'in the year 2013, fourth Saturday of the month was not a Bank holiday'. There is no explanation from the Bank why the cheque was not encashed .on tht very next day i.e., 23.O3.2O13. Admittedly, cheque was \' encashed on 27 .O3.2O 13. When the cheque was realized on MB,J & BRMR,J \UP_Nos 4623 & 4373 2025

27.03.2013, how-cum the sale was conhrmed ot 22.03.2013, which is against the e-auction Sale Notice, dated 14.02.2O13

16. Secured creditor/Bank (petitioner in W.P.No.4373l2O25l has committed illegality in accepting the cheque, which is against Clause-1O of e-auction Sale Notice, dated 14.02.2O13, which has vitiated the whole exercise of e-auction sale and prejudice IS caused to respondent No.3/borrower.

17.1. The next point is whether there is any violation of Rule 9(4) of the Rules, 2OO2. For brevity, Ruie 4 is as under: 'Rule 9(4) of the Securiry Interest (Enforcement Ruies) Pre-amendment reads as under: "(a) The balance amount of purchase price payable shall be paid by the purchaser to the authorized officer on or before the hfteenth day of confirmation of sale of the immovable property or such extended period as may be agreed upon in writing between the parties."

17.2. Rule 9(a) of the Security Interest (Enforcement Rules) was amended w.e.f. 03.1 l.2016. The amended Rule is as under "l4l The balance arnount of purchase price payable shall be paid by the purchaser to the authorized officer on or before the fifteenth day of confirmation of sale of the immovable property or such extended period [as may be agreed upon in writing between the purchaser and the secured creditor, in arly case not exceeding tbree monthsl." I 17 127 MB,J & BRMR,J WP,No r .+623 &4373 2025

18. As per un-amended Rule 9(4) of the Rules, the balance amount of purchase price shall be paid by the purchaser to the Authorized Offrcer on or before 15 days of conformation of the sale of immovable property or such extended period as nray be agreed upon in writing between the parties. In the ltresent case, con{irmation of sale took place ofi 22.03.2073 on the date of e-auction itself. Auction purchaser (petitioner in W.P.No.4623 of 2025) made an application on O4.O4.2O 13 seeking 90 days time for repa),rnent of balance 75Vo of the e-auction amount. The Bank (petitioner in W.P.No.4373 of 2025) has extended tlre rime. up to

30.06.2013 to pay the balance 7 Soh of the e,auction amount vide Ietter dated 06.04.2013 without putting the borrower on notice. The copy of the letter dated 04.04.2013 of the auction purchaser and the letter dated 06.04 .2013 of the Bank are hled by the borrower by way of memo.

19.1. Learned counsel for the petitioners in both the writ petitions contended that amended Rule 9(a) is applicable to the case on hand which has a retrospective operation.

19.2. Borrower-respondent No.3 has hled Governnrent of India Notification No.GSR 1046lE, dated 03.11.2016 (pertaining to arrbnded Security Interest (Enforcement) (Amend rnent) Rules, 2OO2). It is mentioned in the Notification that amended Rule shall 18127 MB,J & BRMR,J wP Nos 4623 &,43732025 come into force on the date of their publication in the Official Gazette. Ofhcial Gazette is made on 03. I L2O 16 which goes to show that amendment is from 03.11.2O16.

1.9.3. In Sri Vijayalakshmi Rice Mills caselo Supreme Court held that unless a statute expressly provides for retrospective operation, it may be presumed to apply prospectively only.

19.4. In Madras Bar Associationll Supreme Court held that supporting legislation cannot be given retrospective effect unless the parent statute speci{ically provides for the same. In view of the judgments of the Supreme Court supra coupled with the notification dated 03.1 1.2016 amendment to Rule 9(4) is prospective in nature, hence the contentions of the petitioner's counsel is negatived.

20. In Ikbal c.".' Supreme Court held that the parties for the purpose of Rule 9(4) means the secured creditor, borrower and auction purchaser. Secured creditor/ Bank (petitioner in W.P.No.4373 oI 2025) has not issued any notice for extension of time to the borrower but instead thereof Bank has extended the time till 30.06.20i3 on 06.04.2013 which is in clear violation of Pre-amended Rule 9(4) of the Rules 19127 MB,J & BRMR,J WP Nos 4623 & 4373 2025

21. Auction purchaser (petitioner in W.P.No.4623 of 20251 }ras deposited Rs. 1,8O,OO,O0O/ - on 27 .06.2013 by wiry of cheque No.688293, ING Vysya Bank Ltd., S.P.Road, Secunderabad and Rs.2,07,00,00O1- on 28.06.2013 by way of cheque No.644367, Tamilnad Mercantile Bank (TMB) branch in Park Lale, Secunderabad. The balance payment made by the auction purchaser which is received by the bank is also in violation of clause-10 of e-auction sale notice dated 14.O2.2013. On

29.06.2013 Sales Certificate was issued to the auction purchaser as per Rule 9(6) of the Rules along with delivery of possession.

22. Secured creditors/Bank has executed registered sale deed in favour of the auction purchaser on 22.08.2014. Ot:, 29.09.2014, Gram Panchayat, Bollaram has issued No Objection Certihcate for setting up of M/s. Classic Chemicals (petitioner in \Ar.P.No.4623 of 2O2s).

23. Learned counsel for the auction purchaser (petitioner in W.P.No.4623 of 2O15) submits that DRT-II, Hyderabzrd came to an erroneous lrnding in the judgment dated O5.O3.l;O2l that no additiona.l reply was filed by the auction purchaser irr spite of good number of adjournments. The so called counter affidavit fiied by the Quction purchaser on O7.O2.2O2O is in tht: amendment applicatlon hled by the borrower in I.A.No.544 oI 2O2O. DRT-II, 20 127 MB,J & BRMR,J WP Nos 4623 & 4373 2025 Hyderabad in SA.No. 1Ll5 of 2OI7 of the judgment dated

05.03.2O2 1 observed at Paragraph No.25 that the auction purchaser failed to h1e additional reply thereby liling of additional reply was forfeited as per docket order dated lO.l2.2O2O. The auction purchaser has hled his reply prior to the remand of SA.No.1715 of 2017 by DRAT, Kolkata ot 14.Ol.2O2O. The DRT-II, Hyderabad has rightly observed that any amount of evidence without proper pleading is of no avail. The contentions of the petitioner's counsel is negatived.

24. In Varimadugu Obi Reddy's case' bo..o*.r has challenged e- auction notice dated 23.03.2015. The Tribunal passed interim order on 26.03.2015 that sale certificate shall not be issued in favour of highest bidder subject to the borrower depositing Rs.6,0O,OO0/- on or before 09.04.2015. Borrower filed application on 09.04.2015 for extension of time by 15 days to deposit the amount. As there was no stay in the auction proceedings purchaser deposited 25o/o on 28.03.2015 ar'd 75ok on 15.04.2015 after four days of the due date. The Supreme Court held that depositing the balance of 75Vo of the bid amount would not defeat the rights of the parties. Principles laid down in Sri Siddeshwara Co-operative Bank Limited case2 are reiterated. t I 2t 127 T,IB,J & BRN,IR,J wP_N, s_4623 & 4373 2025

25. In Iqbal ..""' Srp..-e Court held at Paragraph No.19 that no doubt Rule 9 (1) is mandatory but this provision is delinitely for the beneht of the borrower. Similarly Rule 9 (3) and Rule 9 (4) are for the beneftts ol the secured creditors. It is settled l)osition in law that even if a provision is mandatory it can always be waived by the party or parties for whose beneht such provision has been made. The secured creditor and the borrower can lawfully waive their rights.

26. In Arun Kumar's case3, the borrower is provided a 30 day window to deposit the outstanding dues after the conduct of the auction but prior to the expiry of 15 days statuton' period. The facts are distinguishable and the same is not applicable to the case on hand. 27 . In Pahwa Buildtech Pvt. Ltd.'s case4, there \ ras ambiguity regarding the prescribed mode of payment in the ten,ler document for the e-aucLion and the corresponding sale notice. Specihcally, while the tender documents stipulated pa5rment thnrugh Demand Draft or RTGS, the sale notice did not prescribe any specific mode of payment. The facts are not akin to the case on hzrnd, the same is not applicable. 22127 MB,J & BRMR,J WP_Nos 4623 & .1373 2025

28. In Sanjay Sharma,s cases, the Supreme Court has held that sale by way of public auction cannot be set aside until there is any material irregularity and/or illegality committed in holding the auction or if such auction was vitiated by any fraud or collusion. Respondent No.3 counsel submits that there is fraud and collusion between the auction purchaser with that of the secured creditor in accepting t}re 25%o of the amount and 7 So/o of the amount in violation of 9(3) and 9(4) of the Securitization Rules and in violation of the auction notice.

29. In K.Sahaja Rao's case6, the High Court of Telangana at Hyderabad held that even assuming that the Bank erred in accepting the payment of EMD towards 2s%o of sale consideration by cheques, which was encashed in two days and the borrower failed to establish any prejudice arising from the irregularity. Some material irregularity is not a ground to interfere and the Writ Court need not nullify the auction process unress the borrower satisfies the Court that prejudice or injustice is caused to him. Counsel for respondent No.3 submits that the auction purchaser has paid the EMD by RTGS while 2io/o was deposited by way of cheque, the cheque was not rea)ized until 5 days after the auction. Borrower has^.suffered prejudice a.d the DRAT has recorded that the issut of the sale conhrmation letter prior to realization of the chgeue /J ,d 23127 MB,J & BRMR,J WP,Nos 4623 & 4373 2025 proceeds rendered the auction sale invalid which caur;ed prejudice to the borrower

30. Poddar Steel CorPoration's case l is pertaining to RailwaY TendersrelatedtodrawingoftheEMDamountonaparticular The facts are not Bank and not the mode of payment per se' applicable to the case on hand' Decisions cr bv learned counsel for the respondent No.3. "a"e8, In Vasu P Shetty's the Supreme Court reaffirmed the 3 1 . legal position laid down in Sri Siddeshwara Co-o1>erative Bank Limitedz that where the statutory requirements unler the Rules are not been waived by the borrower and there is a breach of mandatory provisions, the same must be deemed nu1[ and void' th" Supreme Court held that in 32. In Mathew Verghese's "a""e, the event of a fundamental procedural error occurre<l in a sale' the same can be set aside.

33. In Authorised OfIicer, Central Bank of India Vs' Shanmugavelrrz, the Supreme Court has examine<l the interplay between the law and equity' Paragraph No'113 of the judgment is quoted below q " 1zozt16€cc 641 .1 MB.J & BRMR,J wP-Nos-4623 &, 4373 2025 "113. This Court in National Spot Exchange Ltd. v. Dunar Foods Ltd. (Resolution Professional), (2022l, ll SCC 761 after referring to a catena of its other judgments, had held that where the law is clear the consequence thereof must follow. The High Court has no option but to implement the law. The relevant observations made in it are being reproduced below: (SCC pp. 774-75, para 15) '15. ... 15.1. tn BSNLv. Mishri Lal, (2O11) 14 SCC 739, it is observed that the law prevails over equity if there is a conflict. It is observed further that equity can only supplement the law and not supplant it. 15.2. In Raghunath Rai Bareja v. Punjab National Bank, (2OO7l 2 SCC 230, in paras 30 to 37, this Court observed and held as under: ISCC pp- 2a2431 '3O. Thus, in Madamanchi Ramappa v. Muthaluru Bojjappa, 1963 SCC Online SC 36 : (2007) 2 SCC 23O (vide AIR para l2l this Court observed : (AJR p. 1637) '12. ... [W]hat is administered in courts is justice according to law, and considerations of fair play and equity however important they may be, must yield to clear and express provisions of the law-" 31. In Council for Indian School Certificate Exanination v. [sha Mittal, (2000) 7 SCC 521 (vide para 4) this Court observed : (SCC p. 5221 "4. ... Considerations of equity cannot prevail and do not permit a High Court to pass an order contrary to the law." 32. Similarly, in P.M. tatha v. State of Kerala, (2003) 3 SCC 541 (vide para 13) this Court observed: (SCC p. 5a6) "13. Equity and law are twin brothers and law should be apptied and interpreted equitably but equity cannot override written or settled law." 33. In Laxminarayan R. Bhattad v. State of Maharashtra, (2003) 5 SCC 413 (vide para 73) this Court observed: (SCC p. 436) "73. It is now well settled that when there is a conflict between Iaw and equity the former shall prevail." r34-Similarly, in Nasiruddin v. Sita Ram Agarwal, l2OO3l 2 SCC 577 ' (vide para 35) this Court observed: (SCC p. 588) _", 2s /27 MB,J & BRMR,J WP ilos .1623 & 4373-2025 "35. tn a case where the statutory provision is plain and unambiguous, the court shall not interpret the same i;r a different manner, only because of harsh consequences arising the-efrom." 35. Similarll,, in E. Palanisamy v. Palanisamy, (2003) I SCC 123 (vide para 5 this Court observed: (SCC p. 127) Equitable considerations have no place where the statu:e contained express provrsions. 36- In India House v. Kishan N. Lalu,ani, (2003) 9 SCC 3q3 (vide para 7) this court held that: (scc p. 398) "7. ... T}re period of limrtation statutorily prescribed has lo be strictly adhered to and cannot be relaxed or departed from frrr equitable considerations-"'.. -" (emphasis in original and supplied)"

34. Learned DRT in its order, dated 05.O3.2O2 1 in SA.No.1115 of 2017 (old SA.No.259 of 2013) observed at Paragraph No.20 that it is only since the l"t September, 2015, 2nd and 4tlr Saturday are declared holidays for Banks. There are two material irregularities committed by the first respondent Bank. Firstly in accepting the cheque towards 25%o of the sale price and secondly issuing sale conflrmation letter prior to realization of cheque pr rceeds. Once there is material irregularity in payment of 25o/o of -he sale price, the entire auction proceedings fali to the ground. There is no need for the applicant making out any prejudice because of acceptance of 25o/o of the sale price by way of cheque from second respondent in contravention of e-auction Sale Notice terms ar d conditions. karned DRT further observed at Paragraph No.21 that as per Rules in force in 2013, consent of the borrower for extension of * 26127 MB,J & BRMR,J wP Nos_4623 & 4373 2025 time for payment of 7 5%o of the sale price is mandatory. There being no consent of the borrower, the acceptance of 7 5o/o of the sale price by the hrst respondent-Bank from second respondent-auction purchaser after the expiry of 15 days from the date of sale conlrrmation is in contravention of Rule 9(4) of the Rules, 2OO2 and it vitiates the entire re-auction sale proceedings.

35. Insofar as the compensation claimed by the auction purchaser, the Tribunal observed at Para 25 that the right of frling additional reply by the second respondent-auction purchaser came to be forfeited as per the docket order dated 1O.12.2O2O and as per the reply hled prior to remand, the second respondent-auction purchaser claims to have spent Rs.5,23,451/- towards cost of the material, Rs.9 ,79 ,2OO /- for payment of Property Tax to Gram Panchayat for the year 2Ol3-74 and 2074-15. The DRT further held that any amount of evidence without proper pleading is of no avail.

36. Learned DRAT in its order, dated 10.O1.2025 has elaborately discussed about the Rules, 2002 in Para No.38 to 41, 46 , 49 and 50.

37. We are of the considered view that the petitioners have not made out any case for Writ of Certiorari and as rightly held _by MB,.I & BRMR,J WP N)s 4623 & 4373 -2025 learned DRAT that the auction was done blatantly in violation of Rute 9(3) and Rule 9(4) of the un-amended Rules which vitiates the whole action proceedings and we also concur with the findings of the DRAT that the actions of the auction purchaser rvere subject to the doctrine of Lis Pendence and the auction purchaser cannot take advantage of the amounts spent by him on the s,--cured assets, which finding is fortihed by the judgment of the Supreme Court in Shanmugavelu's casel2.

38. WP.No.4623 of 2025 and WP.No.4373 of 2025 are dismissed. All connected applications, i[ any, shall stan ds closed. No order as to costs //TRUE COPY'/ R R R HATTACHARYA One Fair Copy to the Hon'ble JUSTICE MOUSHU (For Her LadyshiPs Kind Perusal) One Fair Coov to the Hon'ble Sri JUSTIGE B.R.MADHUSUDHAN RAO (For His LordshiPs Kind Perusal) To, High Court for the State of Telangana at Hyderabad [OPL C]

1. One CC to SRI RAGHU GURRAM' Advocate IOPUC] 2. One CC to SRI N MEHER PRASAD, Advocate IOPUC] 3. One CC to SRI S LOHIT, Advocate [OPUC] ;. on; cc io SCt GADI PRAVEEN KIJMAR,'Dv. sollclrt)R GEN. oF lNDlA, 5. 1'1 LR Copies O. ft".UnO.jt Secretary, Union of lndia, Ministry of Law, Justice and Company Z. fne Secretiry, Telangana Advocates Association' L'ibrary, High Court 8. Two CD Copies Buildings, Hyderabad. Affairs, New Delhi. BSR BS HIGH COURT DATED:16 t06t2O2S I COMMON ORDER ,--:-:_'=:i:r t 1,lE r; r,,iJ- (. o e o o 2 E Jul 2g25 WP.Nos.4623 and 4313 ot 2025 . \ DISMISSING BOTH THE WRIT PETITIONS, WTHOUT COSTS