The Supreme Court adjudicated a dispute arising from a public auction under the SARFAESI Act involving Celir LLP (auction purchaser), Sumati Prasad Bafna (borrower), and Greenscape IT Park LLP (subsequent transferee). The primary contention was the alleged contempt of the Court's prior judgment, with challenges to the legality of auction measures and subsequent property transfers during pending litigation.

The Court reasserted the procedural rigor of SARFAESI Rules, emphasizing statutory compliance, borrower rights, and auction purchaser entitlements while disapproving of circumventive acts by respondents.

A. Factual Background

1. Credit Facility and Default

   • The borrower (Mr. Sumati Prasad Bafna) defaulted on a Lease Rental Discounting (LRD) loan of ₹100 crore plus an additional ₹6.77 crore granted by Union Bank of India, secured by mortgaging property in Navi Mumbai.

2. SARFAESI Proceedings

   • After classifying the loan as NPA, the Bank invoked the SARFAESI Act, issued notices under Sections 13(2) and 13(4), and conducted multiple unsuccessful auctions until the 9th auction in June 2023, where Celir LLP emerged as the highest bidder.

3. Property Redemption Attempts

   • The borrower moved the DRT to challenge SARFAESI measures and sought redemption during the auction process. Concurrently, the Bank accepted the auction proceeds.

B. Controversies During Litigation

1. Subsequent Property Transfer

   • Despite the auction, the borrower transferred property rights to Greenscape IT Park LLP, invoking rights purportedly granted by a High Court ruling that allowed redemption of the mortgage, subsequently set aside by the Supreme Court.

2. Multiple Proceedings and Non-Compliance

   • Respondents initiated parallel proceedings in various forums to challenge auction validity and retain possession, raising claims of procedural violations in the auction process.

C. Supreme Court's Analysis

1. Auction Validity Under SARFAESI Act

   • The Court upheld the 9th auction, affirming compliance with SARFAESI Rules. It clarified that subsequent auctions require only 15 days' notice under Rule 9(1), dismissing claims of procedural violations.

2. Borrower’s Rights and Conduct

   • The borrower's acts of transferring the property and invoking litigation during the pendency of Supreme Court proceedings were deemed subversive and contemptuous.

3. Rights of Auction Purchaser

   • The Court reaffirmed Celir LLP's entitlement to the property under the Sale Certificate and ordered compliance with physical possession transfer.

Key Legal Provisions Discussed

1. SARFAESI Act, 2002

   • Section 13: Enforcement of Security Interest
   • Section 14: Assistance from District Magistrate for physical possession.

2. Contempt of Courts Act, 1971

   • Section 2(b): Wilful disobedience of court orders.

3. Transfer of Property Act, 1882 (State Amendment)

   • Section 52: Applicability of lis pendens and mandatory registration for property disputes.

Ratio Decidendi:

1. Procedural Adherence in Auctions

   • Compliance with statutory timelines for auction validity is critical but flexible post the first auction under SARFAESI Rules.

2. Equity vs. Procedure

   • Borrowers cannot misuse procedural rights to frustrate valid auctions and judicial directives.

3. Authority of Court Orders

   • Actions undermining clear judicial orders attract contempt liability, even in the absence of explicit prohibitory injunctions.

Subjects:

• SARFAESI Act
• Mortgage Redemption
• Auction Sale Disputes
• Contempt of Court
• Borrower Rights vs. Secured Creditor Rights