Om Sakthi Sekar vs. V Sukumar

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IN THE SUPREME COURT OF INDIA
2026 INSC 237
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
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06.02.2020 passed by the High Court of Judicature at Madras in W.P. No.
33872 of 2017, whereby the High Court upheld the conclusion arrived at by the
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Debts Recovery Tribunal-I , Chennai and Debts Recovery Appellate Tribunal ,
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

2
For short, “the DRT”
3
For short, “the DRAT”

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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

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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

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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

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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

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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

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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

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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
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decisions of this Court in Janatha Textiles v. Tax Recovery Officer and
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Sadashiv Prasad Singh v. Harendar Singh and others 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

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6.5. Reliance was also placed on Valji Khimji and Co. v. Official Liquidator
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of Hindustan Nitro Product (Gujarat) Ltd. 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.
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Yosufuddin and others and Central Bank of India v. C.L. Vimala and others ,
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

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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

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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

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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

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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

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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

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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
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Economic Zone Authority v. Manish Agarwal and others , 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

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2024 INSC 839

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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.


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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.


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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
st nd
original. The 1 and the 2 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
nd rd th
from Dr V. Sambhasivam, the 2 defendant, 3 and the 4 respondent herein.
st
Since the amounts were not repaid, the 1 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
th
DRT afresh. In case, the properties have been sold for a lower value, the 9
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

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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.


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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
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Jindal v. BCI Staff Welfare Association , 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. . .”


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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.