Case Note & Summary
The petitioner, Phoenix ARC Pvt. Ltd., an asset reconstruction company registered under the SARFAESI Act, 2002, filed a writ petition challenging the order of the Debts Recovery Appellate Tribunal (DRAT) dated 30th September 2021, which dismissed its appeal against the confirmation of an auction sale of a property. The property belonged to Splendour Gems Limited (in liquidation) and was sold by the Recovery Officer, DRT-I, Mumbai, in favour of respondent No.3, Prashant Kishor Mehta. The auction sale was confirmed on 30th March 2019 and a sale certificate was issued. The petitioner claimed that it had acquired the debt of Splendour Gems Limited and that the auction sale was fraudulent and at a gross undervalue. The petitioner filed an appeal before the DRAT in 2021, which was dismissed on the ground of limitation and on merits. The High Court considered the issue of whether it should interfere under Article 226. The Court noted that the petitioner had an alternative remedy under Section 18 of the SARFAESI Act, which it had availed, but the appeal was dismissed. The Court found that the DRAT had correctly held that the appeal was barred by limitation as it was filed after two years from the date of confirmation of sale. On merits, the Court observed that the auction sale was conducted by the Recovery Officer after due process, and the petitioner failed to prove any fraud or illegality. The Court also noted that the petitioner had not impleaded the auction purchaser in the proceedings before the DRT. The High Court dismissed the writ petition, holding that there was no ground for interference under Article 226. The Court upheld the DRAT order and confirmed the validity of the auction sale.
Headnote
A) Constitutional Law - Writ Jurisdiction - Article 226 of the Constitution of India - Interference with DRT/DRAT orders - The High Court declined to interfere with the DRAT order dismissing the appeal against confirmation of auction sale, as the petitioner had an alternative remedy under Section 18 of SARFAESI Act and the writ petition was filed after inordinate delay. Held that the High Court should not entertain a writ petition when the petitioner has not availed the statutory remedy of appeal and there is no violation of fundamental rights. (Paras 10-15) B) Securitisation - Auction Sale - Confirmation of Sale - Sections 13, 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - The auction sale in favour of the respondent was confirmed by the Recovery Officer and the sale certificate was issued. The petitioner, an asset reconstruction company, challenged the sale on grounds of fraud and undervaluation. The DRAT dismissed the appeal on merits and on limitation. Held that the sale was valid and the petitioner failed to establish any illegality. (Paras 5-9) C) Limitation - Delay and Laches - Challenge to Auction Sale - The petitioner challenged the auction sale after a delay of over two years from the date of confirmation of sale. The DRAT held the appeal was barred by limitation. The High Court upheld the finding on limitation, noting that the petitioner had knowledge of the sale and did not take timely action. Held that delay and laches disentitle the petitioner to discretionary relief under Article 226. (Paras 12-14)
Issue of Consideration
Whether the High Court should interfere under Article 226 with an order of the Debts Recovery Appellate Tribunal (DRAT) dismissing an appeal against the confirmation of auction sale, and whether the auction sale in favour of the respondent was valid.
Final Decision
The High Court dismissed the writ petition, upholding the DRAT order dated 30th September 2021. The Court held that there was no ground for interference under Article 226 and that the auction sale was valid.
Law Points
- Jurisdiction of High Court under Article 226
- Limitation for challenging auction sale
- Rights of auction purchaser
- Doctrine of merger
- Section 17 of SARFAESI Act
- 2002
- Section 13 of SARFAESI Act
