Court Emphasizes Concurrent Remedy Under Section 30 of RDDBFI Act, 1993, Over Rules 60 and 61 of Income Tax Act; Sets Aside Single Judge's Writ Order Favoring Auction Purchaser Amid Material Irregularities in Sale Process
In a significant judgment dated September 7, 2026, the Allahabad High Court (Division Bench comprising Justices Saral Srivastava and Garima Prashad) clarified the legal remedies available to borrowers under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDDBFI Act). The Court held that a borrower aggrieved by the confirmation of sale order passed by a Recovery Officer under the Act can directly file an appeal before the Debt Recovery Tribunal (DRT) under Section 30 of the RDDBFI Act without being mandated to first invoke Rules 60 or 61 of the Second Schedule of the Income Tax Act, 1961, which require a pre-deposit.
This ruling arose from two special appeals (Nos. 339 and 376 of 2024) filed by M/s Durga Rice and Dall Mills and others against a writ order passed by a Single Judge that had set aside the DRT and DRAT's orders allowing the borrower's appeal to set aside the confirmation of sale. The sale in question involved mortgaged immovable property auctioned by the Bank of Baroda (formerly Banaras State Bank Limited) following the borrower's default on a loan.
The Court analyzed the provisions of Sections 25, 29, and 30 of the RDDBFI Act in detail. Section 25 empowers the Recovery Officer to attach and sell the borrower's movable or immovable property. Section 29 incorporates procedural provisions of the Income Tax Act's Second and Third Schedules, with necessary modifications, into the recovery process. Section 30, however, begins with a non-obstante clause, indicating that it overrides Section 29 and expressly grants any person aggrieved by the Recovery Officer's order a right to appeal directly to the Tribunal within 30 days of receipt of the order.
The Court emphasized that the confirmation of sale order passed under Rule 63 of the Second Schedule of the Income Tax Act is an order made under Section 25(a) of the RDDBFI Act. Therefore, it is an appealable order under Section 30 of the RDDBFI Act. The Court rejected the contention that the borrower must first avail remedies under Rules 60 or 61 of the Income Tax Act, which require a pre-deposit, before approaching the DRT. The Court held there is a concurrent remedy available to the borrower: either to file an application before the Recovery Officer under Rules 60 or 61 or to directly appeal before the DRT under Section 30 without any pre-deposit.
Further, the Court held that the DRT has the power under Rule 18 of the Debts Recovery Tribunal (Procedure) Rules, 1993, to grant reliefs necessary to secure the ends of justice, including setting aside auction proceedings even if not explicitly prayed for, provided such relief is implicit in the grounds of appeal. The Court upheld the DRT's authority to consider material irregularities in the auction process such as incorrect property description, inadequate publication of sale notice (published only in English instead of the local Hindi language as mandated by Rule 52(2) of the Second Schedule), undervaluation of the property, and lack of competitive bidding (only one bidder participated).
Importantly, the Court ruled that the rights of an auction purchaser accrue only after the Recovery Officer confirms the sale; mere acceptance of a bid or payment of the bid amount does not vest any rights. Consequently, non-challenge to orders preceding confirmation of sale did not prejudice the auction purchaser.
The Court also referred to Supreme Court precedents emphasizing that while bona fide auction purchasers deserve protection, such protection is not absolute and can be overridden if the sale process suffers from fraud or material irregularities.
Rejecting the Single Judge's ruling that the appeal was not maintainable for lack of pre-deposit, the Division Bench set aside the writ order and restored the decisions of the DRT and DRAT which had set aside the confirmation of sale and sale certificate. The Court noted that the auction purchaser had not challenged the DRT's findings on irregularities and was not entitled to relief.
This judgment clarifies the procedural rights of borrowers under the RDDBFI Act, affirms the supervisory role of recovery tribunals in ensuring fair auction proceedings, and underscores that confirmation of sale is not a mere ministerial act but a judicial function requiring scrutiny.
Bottom Line:
Recovery of Debts - Borrower can directly file an appeal under Section 30 of the RDDBFI Act, 1993 against the order of confirmation of sale passed by the Recovery Officer without first invoking Rule 60 or 61 of the Second Schedule of the IT Act, 1961.
Statutory provision(s):
Recovery of Debts Due to Banks and Financial Institutions Act, 1993 Sections 25, 29, 30; Income Tax Act, 1961 (Second Schedule) Rules 52, 60, 61, 63; Debts Recovery Tribunal (Procedure) Rules, 1993 Rule 18
M/s Durga Rice and Dall Mills v. Shri Ram Avtar, (Allahabad)(DB) : Law Finder Doc Id # 2973642
