Ms Patil Constructions And Infrastructure Limited vs Ifci Venture Capital Funds Ltd.
- Court
- Delhi High Court
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Judgment Reserved on: 12.08.2026
% Judgment Delivered on: 03.09.2026
# CNR No. DLHC010353412026
+ LPA 604/2026 & CM APPL. 59747/2026, CM APPL. 53154/2026
MS PATIL CONSTRUCTIONS AND INFRASTRUCTURE
LIMITED .....Appellant
Versus
IFCI VENTURE CAPITAL FUNDS LTD.
& ANR. .....Respondents
Advocates who appeared in this case
For the Appellant : Mr. Jayant Mehta, Sr. Adv. with
Mr. Sidhika Nagrath, Mr. Jaivardhan
Jeph, and Mr. Kishore Bhandari,
Advs.
For the Respondents : Mr. Nitin Dahiya & Mr. Muzammil
Ahmed, Advs.
Mr. Samar Bansal, Sr. Adv with Mr.
Pushkar K. Sinha, Mr. Rajat Mahi,
Ms. Anshuka Saxsena and M. Vedant
Kapur, Advs.
CORAM:
HON'BLE THE CHIEF JUSTICE
HON'BLE MR. JUSTICE TEJAS KARIA
JUDGMENT
TEJAS KARIA, J
CM APPL. 53153/2026
1. This is an Application filed under Order 1 Rule 10 read with Section
151 of the Code of Civil Procedure, 1908 (“ CPC ”) by M/s United Traders, a
Signature Not Verified
Signed By:NEELAM
SHARMA
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LPA 604/2026 Page 1 of 22
proprietorship concern (“ Auction Purchaser ”) seeking impleadment in the
present Appeal.
2. Having regard to the reliefs sought by the Appellant in the present
Appeal, we are of the view that, in the interest of justice, the Auction
Purchaser is a necessary party and ought to be heard in these proceedings.
Accordingly, the Auction Purchaser is directed to be impleaded as
Respondent No. 2.
3. The Application stands disposed of.
LPA 604/2026
4. The present intra court Appeal assails the Order dated 23.07.2026
(“ Impugned Order ”) passed in W.P. 12086/2025 titled ‘ M/s Patil
Constructions Infrastructure Ltd. vs. IFCI Venture Capital Funds Ltd. ’
(“ Writ Petition ”).
5. The Appellant is a company incorporated under the Companies Act,
engaged in construction and infrastructure development. Respondent No. 1
is a company promoted and controlled by the Industrial Finance Corporation
of India Limited, a Government of India undertaking.
6. The Appellant, vide agreements dated 29.09.2015 and 04.10.2017,
availed loan facilities of ₹15 crores and ₹10 crores (“ Loans ”), from
Respondent No. 1 against the mortgage of properties situated at Padegaon
and Divanshi, Aurangabad, Maharashtra (“ Secured Assets ”).
7. The accounts pertaining to the Loans, were classified as a Non-
Performing Asset (NPA) on 31.07.2019 by Respondent No. 1. Thereafter,
Respondent No. 1, under Section 13(2) of the Securitisation and
Reconstruction of Financial Assets and Enforcement of Security Interest
Act, 2002 (“ SARFAESI Act ”), issued a demand notice dated 25.11.2019 to
Signature Not Verified
Signed By:NEELAM
SHARMA
Signing Date:03.09.2026
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LPA 604/2026 Page 2 of 22
the Appellant, demanding payment of outstanding amount of the Loans
amounting to ₹14,28,27,343/-.
8. Pursuant to the demand notice dated 25.11.2019, Respondent No. 1
further issued possession notices on 04.03.2021, under Section 13(4) of the
SARFAESI Act for the Secured Assets, and sale notice on 29.06.2021 under
Rule 8(6) of the Security Interest (Enforcement) Rules, 2002 (“ Rules ”), for
an auction of the Secured Assets, scheduled for 02.08.2021.
9. In 2021, the Appellant challenged the measures taken by Respondent
No. 1 for recovery of the Loans by filing S.A. No. 80/2021 (“ Securitisation
Application ”) under Section 17 of the SARFAESI Act, before the learned
Debts Recovery Tribunal, Aurangabad (“ DRT ”).
10. The learned DRT, vide order dated 29.07.2021, halted the auction of
the Secured Assets scheduled for 02.08.2021 subject to deposit of ₹1.0 crore
by the Appellant, which was deposited by the Appellant on 30.07.2021.
11. During 30.07.2021 to 30.03.2023, the Appellant submitted One-Time
Settlement (“ OTS ”) proposals of ₹8.00 crores and a subsequent OTS
proposal of ₹11.03 crores.
12. The learned DRT vide order dated 22.02.2023 passed in the
Securitisation Application, recorded the submission made on behalf of
Respondent No. 1 that 10% of the amount of OTS proposal of ₹11.03 crores
has to be deposited so that the Appellant’s OTS proposal of ₹11.03 crores
can be processed.
13. The learned DRT vide order dated 18.04.2023 passed in the
Securitisation Application recorded that 10% of the amount of OTS
Proposal of ₹11.03 crores is deposited.
14. In the meanwhile, Respondent No. 1, on 23.05.2025, filed a company
petition bearing C.P.(IB) No. 860/2025 (“ Company Petition ”) under
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Signed By:NEELAM
SHARMA
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Section 7 of the Insolvency and Bankruptcy Code, 2016 (“ IBC ”) before the
learned National Company Law Tribunal, Mumbai (“ NCLT ”) against the
Appellant and further issued a sale notice dated 23.05.2025, by way of e-
auction of the Secured Assets scheduled for 13.08.2025.
15. Aggrieved by the sale notice dated 23.05.2025, the Appellant
instituted the Writ Petition, inter alia , praying for quashing of the sale notice
dated 23.05.2025 and staying auction proceedings in respect of the Secured
Assets.
16. Learned Single Judge vide order dated 12.08.2025 passed in the Writ
Petition recorded Respondent No. 1’s agreement to settle the account of the
Appellant pertaining to the Loans for OTS of ₹15 crore, subject to approval
of the competent authority of Respondent No. 1 and also recorded the
handing over of the cheque dated 18.08.2025 for ₹9.92 crore (“ Cheque ”)
and further directed the Appellant to make the payment of the balance
amount of ₹4.08 crore by 15.09.2025. The order dated 12.08.2025 passed in
the Writ Petition directed Respondent No. 1 to verify the adjustability of ₹1
crore, while the Appellant was directed to submit a formal proposal setting
out the amounts paid and the balance payable. Vide order dated 12.08.2025,
passed in the Writ Petition, the auction proceedings in respect of the Secured
Assets scheduled for 13.08.2025 were also kept in abeyance.
17. Thereafter, Respondent No. 1 issued a Letter of Approval dated
22.09.2025 (“ Letter of Approval ”), conveying its agreement to the OTS of
₹15 crore. The Letter of Approval stipulated that the Cheque would be
encashed upon issuance of the Letter of Approval in terms of the order dated
12.08.2025 passed in the Writ Petition and that the balance amount would be
paid within 30 days from the date of the Letter of Approval.
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SHARMA
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18. On 22.09.2025 / 23.09.2025, Respondent No. 1 presented the Cheque
for encashment, however, the same was returned due to insufficient funds.
Subsequently, Respondent No. 1 instituted the CONT. CAS(C) 1610/2025
titled ‘ IFCI Venture Capital Funds Ltd. vs M/s Patil Constructions
Infrastructure Ltd. ’ (“ Contempt Petition ”) before the learned Single Judge
of this Court.
19. The learned DRT, upon observing that the bid has been received, vide
order dated 13.03.2026 passed in the Securitisation Application, directed
Respondent No. 1 to proceed with the sale of the Secured Assets, but not to
register the Sale Certificate without permission of the learned DRT.
Pursuant to the said order, Respondent No. 1 accepted a bid in respect of one
of the Secured Assets for a sale amount of ₹9.09 crores in favour of the
successful bidder (“ Auction Purchaser ”) and issued a Sale Certificate dated
06.04.2026 (“ Sale Certificate ”) in respect of the Secured Asset at
Padegaon, Aurangabad, Maharashtra (“ Auctioned Asset ”).
20. Respondent No. 1 vide reply dated 21.04.2026 filed in the Company
Petition, stated that the sum of ₹3.09 crores paid by the Appellant has been
adjusted by Respondent No. 1 upon failure of the OTS proposal of ₹15
crores. On 15.06.2026, the Appellant made an OTS proposal of ₹15 crore to
Respondent No. 1 proposing that Respondent No. 1 shall adjust the advance
of ₹3.09 crore against the OTS amount and that payment of the balance
₹11.91 crores was to be made by the Appellant in two tranches namely,
₹2.00 crores was to be paid on or before 19.06.2026 and ₹9.91 crores was to
be paid on or before 29.06.2026, subject to reversal of sale of the Auctioned
Asset (“ Impugned Sale ”).
21. The learned NCLT vide order dated 15.06.2026 passed in the
Company Petition recorded the statement made on behalf of Respondent
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Signed By:NEELAM
SHARMA
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LPA 604/2026 Page 5 of 22
No. 1 that there is no OTS which had been accepted by Respondent No. 1
and that the amount of ₹3.09 crores paid by the Appellant, has been
appropriated by Respondent No. 1 towards the outstanding amount of the
Loans and further permitted the Appellant to deposit ₹2.00 crores with
Respondent No. 1 in a No Lien Account. Pursuant to which, the Appellant,
between 16.06.2026 and 18.06.2026, made written requests to Respondent
No. 1 seeking particulars of the No Lien Account.
22. On 30.06.2026, Respondent No. 1 communicated its decision to reject
the OTS proposal dated 15.06.2026 to the Appellant. The learned NCLT
vide order dated 02.07.2026 passed in the Company Petition, recorded that
the Appellant had been unable to make the deposit for want of the
particulars of the No Lien Account.
23. The learned Single Judge, vide the Impugned Order dismissed the
Writ Petition observing that the Appellant misled the Writ Court and
furnished the Cheque which was not good for encashment on the date it was
tendered for payment. The Impugned Order further granted liberty to
Respondent No. 1 to pursue a claim for damages and disposed of the
Contempt Petition upon unconditional and unqualified apology tendered on
behalf of the Appellant.
24. Aggrieved by the Impugned Order passed in the Writ Petition the
Appellant has preferred the present Appeal.
SUBMISSIONS ON BEHALF OF THE APPELLANT
25. The following submissions were made by learned Senior Counsel on
behalf of the Appellant:
25.1.The Writ Petition and the pending applications therein including the
application under Section 151 CPC dated 22.05.2026 by which the
Appellant tendered ₹11.91 crores and sought stay of confirmation
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SHARMA
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LPA 604/2026 Page 6 of 22
and registration of the Sale Certificate, assailed the measures taken
by Respondent No. 1 under the SARFAESI Act, inter alia , on
grounds of non-compliance with Rules 8(5), 8(6), 9(1), 9(3) and 9(4)
of the Rules, the Impugned Sale allegedly being at gross undervalue,
non-adjustment of ₹3.09 crores and ₹1 crore admittedly received, and
the subsistence of an OTS. However, the learned Single Judge
dismissed the Writ Petition without adjudicating any substantive
ground raised in the Writ Petition.
25.2.Under the express terms of the Letter of Approval, the operative date
for the encashment of the Cheque was the issuance of the Letter of
Approval, which took place only on 22.09.2025, more than five
weeks after the Cheque had been handed over. The finding in the
Impugned Order that the Cheque was not good for encashment on the
date it was tendered for payment proceeds on a premise contrary to
the record.
25.3.The dishonour of the Cheque was the direct consequence of the
Respondent’s own conduct wherein Respondent No. 1 failed to reply
to the Appellant’s emails dated 23.08.2025 and 20.09.2025, carry out
the verification of ₹1 crore directed under order dated 12.08.2025
passed in the Writ Petition and issued the Letter of Approval after a
five-week delay; and presented the Cheque within 24 hours of the
Letter of Approval, without intimation, in which interregnum the
Appellant had been compelled to pay approximately ₹3.37 crores
under orders of the learned NCLT in the ‘ Omkara Assets
Reconstruction ’ proceedings. In these circumstances, the attribution
of an intention to mislead the Court to the Appellant is unsustainable.
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Signed By:NEELAM
SHARMA
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LPA 604/2026 Page 7 of 22
25.4.The learned Single Judge did not consider the order dated 12.08.2025
passed in the Writ Petition, which left the quantum payable by the
Appellant expressly unascertained and cast upon Respondent No. 1
an obligation of verification, which Respondent No. 1 admittedly
never discharged. The Appellant’s obligation under the arrangement
recorded in the order dated 12.08.2025 passed in the Writ Petition
was to pay ₹9.92 crores through the Cheque and a further ₹4.08
crores, with the ₹1 crore already paid by the Appellant to be verified
for adjustment against the OTS amount of ₹15 crores.
25.5.The Impugned Order itself records the admission made on behalf of
Respondent No. 1 that Respondent No. 1 had obtained approval for
the OTS in terms of the order dated 12.08.2025 passed in the Writ
Petition. Upon such approval being granted, the sole condition to
which the arrangement recorded in the order dated 12.08.2025 was
subject stood satisfied, and a concluded OTS came into existence. In
the alternative, if the Letter of Approval did not constitute approval
of the competent authority, particularly since Respondent No. 1’s
own document does not annex any resolution of such competent
authority, the condition precedent for presentation of the Cheque
never validly arose, and the dishonour of the Cheque, which was
itself presented prematurely, could not have been held against the
Appellant. Accordingly, the dismissal of the Writ Petition solely on
the ground of dishonour of the Cheque cannot be sustained.
25.6.The Impugned Order, while granting liberty to Respondent No. 1 to
institute proceedings for damages arising from the dishonour of the
Cheque, itself recognises that the appropriate remedy in respect of
such dishonour lies in damages. The said dishonour could not, in
Signature Not Verified
Signed By:NEELAM
SHARMA
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LPA 604/2026 Page 8 of 22
addition, operate as an automatic forfeiture of the Appellant’s right to
be heard on the legality of the sale of the Secured Assets.
25.7.Respondent No. 1 pleaded in the Company Petition that the amount of
₹3.09 crores was retained as an advance and had not yet been
adjusted. However, in its reply dated 21.04.2026 filed in the
Company Petition, Respondent No. 1 disclosed that the said sum of
₹3.09 crores paid by the Appellant had been adjusted upon failure of
the OTS. Respondent No. 1, therefore, treated the OTS as subsisting
when retention of the amount suited it, and as having failed when
appropriation of the amount suited it, notwithstanding that the alleged
failure of the OTS was brought about by Respondent No. 1’s own
conduct.
25.8.The delay, if any, in completion of the OTS, is in no manner
attributable to the Appellant, and, as held in E.
Muthurathinasabathy v. Sri International , (2026) 6 SCC 749, such
delay “ inures to the benefit of the borrowers and operates against the
finality of the sale ”.
25.9.The Supreme Court in E. Muthurathinasabathy ( supra) further
approved the High Court proceeding therein to focus on the merits of
the writ petition rather than resting its decision on a procedural error
to nip the writ petition in the bud, holding that such an approach did
align with the broader concept of justice. The learned Single Judge,
however, dismissed the Writ Petition upon a solitary lapse,
notwithstanding that the Appellant was prosecuting remedies before
the learned DRT, the learned NCLT and this Court and had paid
substantial amounts including ₹3.09 crores retained by Respondent
No. 1.
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SHARMA
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LPA 604/2026 Page 9 of 22
25.10.The Appellant’s case, therefore, stands on the same footing as that of
the borrowers who were afforded protection in E.
Muthurathinasabathy ( supra ). In that case, the Supreme Court
observed that, “ far from attempting to derive an unfair advantage,
they were, at every stage, prosecuting their remedies before DRT,
DRAT and the High Court, and had already deposited substantial
amounts ”, and held that the singular lapse therein warranted
condonation rather than the denial of adjudication on merits.
25.11.The Supreme Court in E. Muthurathinasabathy ( supra ), relying upon
Mathew Varghese v. M. Amritha Kumar , (2014) 5 SCC 610,
reiterated that the mortgagor’s right of redemption survives until the
sale is completed by the mortgagee through a registered deed, and
that ownership of a secured asset is a constitutional right protected
under Article 300-A of the Constitution of India, 1950
(“ Constitution ”).
25.12.In the present case, the Sale Certificate was issued on 06.04.2026
pursuant to the auction. However, the Sale Certificate has not yet
been registered, and its registration continues to remain pending
before the learned DRT.
25.13.In E. Muthurathinasabathy ( supra ), the Supreme Court observed that
a transaction which proceeds in violation of the statutory timeline
cannot be pressed into service to divest borrowers of their secured
assets, and that a sale which remains inchoate in favour of the auction
purchasers, by reason of non-compliance with the mandatory
timelines prescribed under Rule 9(4) of the Rules, cannot be relied
upon to defeat the borrowers’ right of redemption. It is, therefore,
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Signed By:NEELAM
SHARMA
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LPA 604/2026 Page 10 of 22
submitted that the mortgagor’s right of redemption subsists until
completion of the sale by a registered instrument.
25.14.Respondent No. 1, thus, acted arbitrarily and in violation of Article 14
of the Constitution by bringing the Secured Asset to sale while the
Letter of Approval for a settlement of ₹15 crores subsisted and while
retaining the Appellant’s sum of ₹3.09 crores without adjustment. As
held in E. Muthurathinasabathy ( supra ), the raison d’être of
proceedings under the SARFAESI Act is not the mechanical
completion of a sale, but the lawful realisation of the secured asset in
a fair and transparent manner, conducive to securing the best possible
value while balancing the interests of all stakeholders. A refusal to
receive payment, not on account of any shortfall or default
attributable to the borrower but solely on the premise that third-party
rights had by then been created, accentuates the disproportionate
consequence sought to be visited upon the borrower.
25.15.The decisions in Celir LLP v. Bafna Motors (Mumbai) Pvt. Ltd.,
(2024) 2 SCC 1, and the line of authorities following the same, are
distinguishable. As explained in E. Muthurathinasabathy ( supra ),
Celir LLP ( supra ) concerned a case where the entire consideration
had been deposited within the prescribed timeframe, and the sale
certificate had been issued and registered without any subsisting
judicial interdiction operating upon the sale process. In the present
case, however, the Sale Certificate remains unregistered, its
completion is sub judice before the learned DRT, and the auction
itself was conducted during the subsistence of an OTS recorded by
this Court. It is also pertinent that the order dated 13.03.2026 passed
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SHARMA
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in the Securitisation Application continues to operate and cannot be
rendered otiose.
25.16.The combined effect of the Impugned Order is to permit Respondent
No. 1 to retain ₹3.09 crores, retain the sale proceeds of the Impugned
Sale, proceed against the unsold Secured Asset, and simultaneously
refuse the tendered settlement of ₹15 crores with interest, thereby
enabling an aggregate recovery far in excess of even its own disputed
demand of ₹14,28,27,343/-. No principle of law countenances such
enrichment of a State instrumentality at the expense of a borrower
who has tendered the entire consideration.
25.17.The OTS proposal placed before Respondent No. 1 on 08.08.2026
contemplates adjustment of the sum of ₹9.09 crores against the OTS
amount, with the balance amount being paid against the value of the
unsold Secured Asset. The Appellant is also willing to pay interest at
the rate of 12% per annum on the amount paid by the Auction
Purchaser towards the Auctioned Asset.
25.18.In view of the above submissions, the present Appeal be allowed and
Impugned Order be quashed and set aside.
SUBMISSIONS ON BEHALF OF RESPONDENT NO. 1:
26. The following submissions were made on behalf of Respondent
No. 1:
26.1.In the present case, the Auctioned Asset was sold to the highest
bidder, namely, the Auction Purchaser, pursuant to proceedings
undertaken under the SARFAESI Act. The entire sale consideration
was received within the period stipulated under Rule 9(4) of the
Rules, whereupon the Impugned Sale stood confirmed and the Sale
Certificate was issued in favour of the Auction Purchaser.
Signature Not Verified
Signed By:NEELAM
SHARMA
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LPA 604/2026 Page 12 of 22
Respondent No. 1 cannot, after confirmation of the Impugned Sale
and issuance of the Sale Certificate, be called upon to refund the
amount received from the Auction Purchaser and recover the
Auctioned Asset from the Auction Purchaser.
26.2.The Impugned Sale was conducted in accordance with the statutory
procedure prescribed under the SARFAESI Act. In any event, a sale
conducted under the SARFAESI Act is amenable to challenge before
the learned DRT under Section 17 of the SARFAESI Act and, where
any gross violation on the part of the secured creditor is established,
such sale may be set aside in proceedings under Section 17. The
question concerning the validity of the Impugned Sale is, therefore,
required to be adjudicated by the learned DRT in the proceedings
under the SARFAESI Act.
26.3.The Auction Purchaser deposited the entire sale consideration within
the period prescribed under Rule 9 of the Rules, whereas the
Appellant’s OTS proposals have been rejected on six occasions. In
such circumstances, no further indulgence can be granted to the
Appellant in respect of the Auctioned Asset, which already stands
sold pursuant to the auction. The Auction Purchaser, having duly
complied with the requirements of Rule 9 of the Rules, has acquired
vested rights in respect of the Auctioned Asset, which cannot be
displaced merely to accommodate a subsequent OTS proposal made
by the Appellant.
26.4.The Cheque issued by the Appellant towards the OTS proposal, as
recorded in the order dated 12.08.2025 passed in the Writ Petition,
was also dishonoured. Insofar as the unsold Secured Asset, valued at
approximately ₹7 crores, is concerned, Respondent No. 1 is willing to
Signature Not Verified
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SHARMA
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LPA 604/2026 Page 13 of 22
consider an OTS proposal. However, as regards the amount of ₹9.09
crores, the entire sale consideration has already been received
pursuant to the Impugned Sale. The sanctity of the Impugned Sale
cannot be disturbed on the basis of a subsequent OTS proposal made
by the Appellant.
26.5.It was, therefore, submitted that the present Appeal is devoid of merit
and is liable to be dismissed.
SUBMISSIONS ON BEHALF OF THE AUCTION PURCHASER:
27. The following submissions were made by learned Senior Counsel on
behalf of the Auction Purchaser:
27.1.The Writ Petition was confined to seeking a direction restraining
Respondent No. 1 from proceeding with the auction scheduled on
13.08.2025 pursuant to the sale notice dated 23.05.2025. The Auction
Purchaser was admittedly not a party to the Writ Petition. The relief
now sought by the Appellant, insofar as it seeks to undo the
Impugned Sale, would have the effect of reopening a sale which
already stands completed upon receipt of the entire sale consideration
and issuance of the Sale Certificate. The proceedings in the present
Appeal cannot be permitted to travel beyond the scope of the reliefs
sought in the Writ Petition. The prayer in the Writ Petition was
directed against the auction proceedings, and insofar as the property
sold for ₹9.09 crores is concerned, the Impugned Sale having already
taken place, the issue sought to be raised in respect thereof does not
survive for consideration in the present Appeal. Rule 9(2) of the
Rules creates a vested right in favour of the auction purchaser.
27.2.Accordingly, the Appellant’s repeated OTS proposals could not
furnish any basis for disturbing the rights accrued in favour of the
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SHARMA
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LPA 604/2026 Page 14 of 22
Auction Purchaser. Respondent No. 1 had already proceeded with the
sale, and the Auction Purchaser had paid the entire sale
consideration. Any OTS which the Appellant may seek to arrive at
with Respondent No. 1 would, therefore, remain a matter inter se
between the Appellant and Respondent No. 1 and could not, by itself,
affect the rights arising from the Impugned Sale.
27.3.The decision of the Supreme Court in E. Muthurathinasabathy
( supra ) is distinguishable on facts. In E. Muthurathinasabathy
( supra ), only 25% of the sale consideration had initially been
deposited, and the balance 75% could not be deposited on account of
an intervening restraining order. In the present case, the Auction
Purchaser deposited the entire sale consideration within the period
stipulated under Rule 9(4) of the Rules. Therefore, E.
Muthurathinasabathy ( supra ) cannot be applied to the present case,
where the only pending step is registration of the Sale Certificate,
subject to permission of the learned DRT. The question of
registration of the Sale Certificate is distinct from the completion and
confirmation of the Impugned Sale and cannot be relied upon to
contend that the Impugned Sale had not attained finality. The
Appellant’s reliance on the fact that the Sale Certificate has not yet
been registered does not alter the position that the Impugned Sale
stood completed.
27.4.The decision of the Supreme Court in Bafna ( supra ) arose in
circumstances where the auction purchaser had acted in accordance
with the statutory requirements and had deposited the entire sale
consideration within the prescribed period. The said decision is,
therefore, squarely applicable to the facts of the present case. The
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SHARMA
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Auction Purchaser, having complied with the statutory requirements,
ought not to be deprived of the benefit of the Impugned Sale on
account of disputes between the Appellant and Respondent No. 1.
ANALYSIS AND FINDINGS
28. We have heard learned Counsel appearing for the parties and have
perused the material placed on record.
29. The principal issue that arises for consideration in the present Appeal
is whether the Writ Petition could have been dismissed on the ground that
the Cheques handed over by the Appellant, pursuant to which the Impugned
Auction was kept in abeyance, were dishonoured on account of insufficiency
of funds on the date on which they were presented for payment and,
consequently, whether the Appellant, having misled the Court by tendering
cheques which were not good for encashment , was disentitled to any relief.
30. The Appellant has sought to justify the dishonour of the cheques on the
ground that the same was a direct consequence of the conduct of Respondent
No. 1, who failed to respond to the Appellant’s emails dated 23.08.2025 and
20.09.2025, failed to undertake the verification of ₹1 crore as directed by the
order dated 12.08.2025 passed in the Writ Petition, issued the Letter of
Approval after a delay of five weeks, and presented the Cheque for
encashment within 24 hours of issuance of the Letter of Approval without
any prior intimation. It is further submitted that, during the intervening
period, the Appellant had been compelled to pay approximately ₹3.37 crores
pursuant to orders passed by the learned NCLT. In these circumstances, the
Appellant contends that the attribution of any intention to mislead the Court
was wholly unsustainable.
31. The Appellant has further contended that the Impugned Sale has not
attained finality, as the registration of the Sale Certificate remains subject to
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SHARMA
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LPA 604/2026 Page 16 of 22
the permission of the learned DRT in view of the order dated 13.03.2026
passed by the learned DRT in the Securitisation Application and, therefore,
the Appellant has the right of redemption upon payment of the OTS
consideration.
32. Per contra , it is contended on behalf of Respondent No. 1 that the
Impugned Sale stood completed upon the Auction Purchaser depositing the
entire sale consideration within the period stipulated under the Rules. It is
further submitted by Respondent No. 1 that registration of the Sale
Certificate is merely a ministerial act and does not detract from the
completion of the Impugned Sale or from the rights that have accrued in
favour of the Auction Purchaser. Respondent No. 1 also contended that any
challenge to the validity of the Impugned Sale is required to be adjudicated
in proceedings under Section 17 of the SARFAESI Act and cannot be
determined in the present Appeal.
33. The learned DRT vide order dated 13.03.2026 passed in Securitisation
Application specifically permitted Respondent No. 1 to proceed with the
sale of the Secured Assets, while directing that the Sale Certificate shall not
be registered without the permission of the learned DRT. Accordingly, the
Auction Purchaser’s bid in respect of the Auctioned Asset was accepted for
a sale consideration of ₹9.09 crores and the Sale Certificate dated
06.04.2026 was issued.
34. The Appellant has placed reliance upon the decision of the Supreme
Court in E. Muthurathinasabathy ( supra ) in support of the borrower’s right
of redemption. However, we are of the considered view that the said
decision does not advance the case of the Appellant, as the facts therein are
materially distinguishable. In that case, the secured creditor had issued a
demand notice under Section 13(2) of the SARFAESI Act, calling upon the
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borrower to discharge the outstanding liability. Upon the borrower’s failure
to do so, the secured creditor took symbolic possession of the secured asset
under Section 13(4) of the SARFAESI Act and thereafter issued a sale
notice under Rule 8(6) of the Rules, fixing the date of e-auction. Pursuant to
the e-auction, the auction purchaser deposited 25% of the bid amount on the
date of the auction. In the interregnum, the High Court, by a restraining
order, directed that no further steps be taken until disposal of the
securitisation application, while permitting the respondent-bank to accept
the balance sale consideration from the auction purchaser. Further, only 25%
of the sale consideration had been deposited by the auction purchaser on the
date of the auction, whereas the balance sale consideration was deposited
nearly fifteen months thereafter.
35. In the aforesaid factual backdrop, the Supreme Court in E.
Muthurathinasabathy ( supra ) examined the issue as to whether the
borrower’s right of redemption survives after the issuance and registration of
a sale certificate under the SARFAESI Act. Learned Senior Counsel for the
Appellant sought to draw an analogy between the restraining order passed
by the High Court in E. Muthurathinasabathy ( supra ) and the order dated
13.03.2026 passed by the learned DRT in the present case to submit that,
much like the restraining order considered in E. Muthurathinasabathy
( supra ), the order dated 13.03.2026 passed by the learned DRT in the
Securitisation Application permitted Respondent No. 1 to proceed with the
sale proceedings subject to the final adjudication of the Securitisation
Application, while further directing that the Sale Certificate shall not be
registered without the permission of the learned DRT.
36. Learned Senior Counsel appearing for the Auction Purchaser,
submitted that the Auction Purchaser has made the entire payment within the
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statutory period of fifteen days and submitted that the principle laid down in
Bafna ( supra ) would apply where the entire consideration had been
deposited within the prescribed time-frame and the sale had attained
statutory finality.
37. Having considered the aforesaid submissions, we are of the view that
the principle emerging from E. Muthurathinasabathy ( supra ) must be
appreciated in the factual context of that case, where the sale had not been
completed within the statutory framework prescribed under Rule 9(4) of the
Rules. In the present case, however, the entire sale consideration was
deposited by the Auction Purchaser within the period stipulated under Rule
9(4) of the Rules, and the Sale Certificate was issued thereafter. We are,
therefore, of the view that the mere pendency of registration of the Sale
Certificate does not, by itself, render the Impugned Sale incomplete, nor can
it be treated as equivalent to non-completion of the sale.
38. The learned DRT, vide order dated 13.03.2026 passed in the
Securitisation Application, expressly permitted Respondent No. 1 to proceed
further with the sale proceedings and made only the registration of the Sale
Certificate subject to the permission of the learned DRT. The expression
“ subject to the final decision ”, as employed in the said order, merely renders
the Impugned Sale subject to the final outcome of the Securitisation
Application and preserves the rights and contentions of the parties therein. It
does not, by itself, affect either the validity or the completion of the
Impugned Sale.
39. Thus, the order dated 13.03.2026 passed by the learned DRT in the
Securitisation Application was confined to the registration of the Sale
Certificate and did not operate as a restraint upon Respondent No. 1 from
proceeding with the sale of the Secured Assets or from accepting the sale
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consideration from the Auction Purchaser. In any event, the said issue does
not arise for our consideration in the present Appeal as the Securitisation
Application is still pending before the learned DRT, which is empowered to
pass appropriate directions pursuant to order dated 13.03.2026.
40. We, therefore, find merit in the submissions advanced on behalf of
Respondents that the decision in E. Muthurathinasabathy ( supra ) is
materially distinguishable on facts from the present case and does not give
right to the Appellant to assail the Impugned Order in the present Appeal.
41. The order dated 12.08.2025 passed by the learned Single Judge in the
Writ Petition wherein Respondent No. 1’s agreement to an OTS of ₹15
crores was recorded, subject to approval of the competent authority of
Respondent No. 1, also does not assist the Appellant. The Letter of Approval
conveyed Respondent No. 1’s agreement to the OTS, but the cheque handed
over pursuant thereto was subsequently dishonoured and the amount
contemplated under the OTS for ₹15 crores was not paid by the Appellant.
Thereafter, the Appellant itself made a fresh OTS proposal dated
15.06.2026, which was rejected by Respondent No. 1 on 30.06.2026. In
these circumstances, the Appellant cannot proceed on the basis that any OTS
continued to govern the parties when the Impugned Sale was undertaken.
42. As the Auction Purchaser has paid the entire sale consideration and
has been issued a Sale Certificate, the Appellant now cannot seek to undo
the already completed Impugned Sale to give effect to the Appellant’s OTS
proposal. The Appellant’s stated willingness to pay the amount
contemplated under the OTS proposals appears to be an afterthought.
Despite having made oral submissions before this Court expressing
readiness and willingness to abide by its own offer under the OTS proposal,
the Appellant failed to demonstrate its bona fides by producing or tendering
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a Demand Draft for the amount which, according to the Appellant itself, was
payable under the said OTS proposal. Such conduct does not inspire
confidence and cannot furnish a basis for unsettling the Impugned Sale in
respect of which the Auction Purchaser has already deposited the entire sale
consideration and a Sale Certificate has been issued.
43. In the aforesaid circumstances, we are of the considered view that the
learned Single Judge rightly dismissed the Writ Petition on the ground that
the Appellant had misled the Court by tendering a cheque which was
dishonoured when presented. Such a conduct on the part of the Appellant
was clearly contumacious in nature. However, having regard to the
unconditional and unqualified apology tendered on behalf of the Appellant, the
learned Single Judge adopted a lenient view by taking the apology on record and
cautioning the Appellant against repeating such conduct in future. We find no
infirmity in the said approach. We also concur with the observation of the
learned Single Judge granting liberty to Respondent No. 1 to institute
a suit for damages any loss
appropriate proceedings, including , for recovery of
that may have been occasioned on account of the misrepresentation s by the
Appellant.
44. In view of the foregoing analysis, we are of the considered opinion
that the present Appeal constitutes a gross abuse of the process of law. The
Appellant has failed to demonstrate any legal infirmity in the Impugned
Order that would warrant interference by this Court in the present Appeal.
Accordingly, the present Appeal is devoid of merit and deserves to be
dismissed.
45. We, however, clarify that the observations made in the present
Judgment are confined to the issues arising for consideration in the present
Appeal and shall not prejudice or affect the adjudication of S.A. No.
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80/2021 pending before the learned Debts Recovery Tribunal, Aurangabad,
or any other proceedings between the parties. All such proceedings shall be
considered and decided independently, in accordance with law and on their
own merits, uninfluenced by any observations made hereinabove.
46. The Appeal is, accordingly, dismissed. All pending applications, if
any, stand disposed of in the aforesaid terms. There shall be no order as to
costs.
TEJAS KARIA, J
DEVENDRA KUMAR UPADHYAYA, CJ
SEPTEMBER 3, 2026
Hk
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