Case Note & Summary
The matter arose from SARFAESI proceedings initiated by Andhra Bank against borrowers and guarantors. The account was classified as a non-performing asset on 30.09.1999. The bank took measures between 14.05.2010 and 07.01.2013, culminating in an auction sale and a sale certificate dated 07.01.2013, registered on 08.01.2013. Petitioners, including M/s Delta Printing House, Smt. Ushakiran, A P Mahesh and legal heirs, contended that the SARFAESI proceedings were bad in law and barred by limitation, and that the sale violated Rule 9 of the Security Interest (Enforcement) Rules, 2002. They filed writ petitions under Articles 226 and 227 of the Constitution of India before the High Court of Karnataka, seeking to quash orders passed by the Debts Recovery Appellate Tribunal (DRAT) Chennai dated 27.07.2017 and 24.08.2017, to direct the DRAT to entertain an appeal, to declare that SARFAESI proceedings initiated between 14.05.2010 and 07.01.2013 for an account declared NPA on 30.09.1999 were bad in law, and to cancel the sale certificate. The auction purchasers were arrayed as respondents 3 to 5. The High Court identified the core issue as whether any infraction of the mandate under Rule 9 of the Security Interest (Enforcement) Rules, 2002 vitiates the sale of immovable property secured by the bank. It noted that the law on this point was no longer res integra in view of the Supreme Court decision in M.R. Vasumathi v. Authorized Officer, 2026 SCC Online SC 1103. The court quoted paragraphs 35 to 41 of that decision, which held that any infraction or non-compliance of the mandate under Rule 9 is fatal to an auction sale and that the auction sale conducted in respect of the secured asset must be quashed. The Supreme Court reasoned that the rights of an auction purchaser are not absolute, and a confirmed sale does not foreclose judicial scrutiny where the process is legally infirm. The object of SARFAESI proceedings is lawful realisation through a fair, transparent, and strictly compliant process, not mere mechanical culmination of a sale. The High Court observed that the law was clear on this point. However, the excerpt of the judgment provided ends before the High Court stated its final operative order; therefore, the final decision is not included in the available text.
Headnote
A) SARFAESI - Auction Sale - Rule 9 of Security Interest (Enforcement) Rules, 2002 - Non-compliance with mandate under Rule 9 vitiates auction sale; confirmed sale does not foreclose judicial scrutiny; rights of auction purchaser are not absolute - Security Interest (Enforcement) Rules, 2002, Rule 9 - Petitioners challenged auction sale of secured asset, contending infraction of Rule 9. The Court, relying on M.R. Vasumathi v. Authorized Officer, 2026 SCC Online SC 1103, observed that any infraction of Rule 9 is fatal to auction sale and that the object of SARFAESI proceedings is lawful realisation through a fair, transparent, and strictly compliant process. Held that non-compliance with Rule 9 vitiates auction sale (Paras 1-3).
Issue of Consideration
Whether any infraction of mandate contemplated under Rule 9 of The Security Interest (Enforcement) Rules, 2002 vitiates the sale of immovable property secured by the Bank.
Law Points
- Rule 9 of Security Interest (Enforcement) Rules
- 2002 must be strictly complied with
- non-compliance is fatal to auction sale
- confirmed sale does not bar judicial scrutiny
- rights of auction purchaser are not absolute
- process must be fair
- transparent
- strictly compliant
- failure to repay does not validate vitiated proceedings
