Writ Petition by Property Owner Dismissed; Court Finds No Jurisdictional Error or Statutory Violation in Debts Recovery Appellate Tribunal’s Order Confirming Auction Sale
In a significant judgment delivered on November 5, 2026, the Allahabad High Court (Lucknow Bench) dismissed a writ petition filed by Smt. Rama Chaurasia challenging the auction sale of her mortgaged property under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). The Court upheld the order dated July 18, 2011, passed by the Debts Recovery Appellate Tribunal (DRAT), Allahabad, which had reversed the Debts Recovery Tribunal’s (DRT), Lucknow, order that had earlier set aside the Bank’s recovery proceedings and auction sale.
The property in dispute, jointly owned by the petitioner and Smt. Kiran Chaurasia, had been mortgaged with Canara Bank in 2003 as security for a loan taken by M/s Chaurasia Traders, a partnership firm related to the petitioner’s family. Due to default in repayment, the Bank initiated proceedings under the SARFAESI Act, culminating in the auction of the property in 2007. The auction purchaser, Dr. Ajay Gupta, was issued a sale certificate on January 24, 2008.
The petitioner’s challenge centered around several grounds: assertion that the land was agricultural and thus exempt under Section 31(i) of the SARFAESI Act; alleged non-service of statutory notices under Sections 13(2) and 13(4); classification of the loan account as a non-performing asset (NPA); and the Bank’s refusal to accept her tendered bank drafts for the outstanding loan amount after the auction notice was published but before the sale certificate was issued.
The High Court thoroughly examined the statutory scheme of the SARFAESI Act, including the enforcement provisions in Section 13, the exclusions in Section 31, and the adjudicatory mechanisms under Sections 17 and 18. It held that the exclusion of agricultural land under Section 31(i) applies only when agricultural character is established based on relevant evidence beyond mere revenue entries or absence of conversion orders under the Uttar Pradesh Zamindari Abolition and Land Reforms Act. The Appellate Tribunal’s finding that the petitioner failed to prove agricultural use or operations was not shown to be perverse or legally unsustainable.
Regarding service of statutory notices, the Court observed that Sections 13(2) and 13(4) govern distinct stages of enforcement and compliance must be assessed separately. Mere denial of receipt without supporting material does not invalidate the proceedings. The possession notice was issued in the name of one principal borrower, but the petitioner failed to demonstrate a legally material defect in service sufficient to quash the auction.
On the issue of the NPA classification, the Court noted that the existence of transactions in the borrower’s account does not preclude lawful classification as NPA, which depends on contractual and regulatory norms. No evidence was produced to show non-compliance with these norms.
The petitioner’s tender of bank drafts after publication of the auction notice and after sale confirmation was also addressed. The Court clarified that under Section 13(8), the secured creditor is not obliged to accept redemption amounts tendered after publication of the auction notice. Moreover, the tendered amount was less than the total outstanding dues including costs, and therefore did not satisfy statutory redemption conditions.
The Court further rejected the petitioner’s claim that the Bank should have first pursued recovery from the principal borrowers before enforcing the mortgage against her property, affirming that enforcement against the secured asset may proceed independently once valid security exists.
Allegations of undervaluation of the property and procedural irregularities in auction were dismissed as mere assertions without proof of fraud, collusion, or breach of mandatory statutory rules. The Bank’s publication of two sale notices and reduction of reserve price due to lack of bidders were deemed lawful.
The Court underscored that the High Court’s writ jurisdiction under Article 226 is not a forum for reappraisal of facts or a second appeal over the findings of specialized tribunals like DRAT, unless jurisdictional error, perversity, or violation of mandatory provisions is shown. Since no such infirmity was established, the writ petition was dismissed, and the sale certificate in favor of the auction purchaser was upheld.
The judgment also noted that subsequent sale deeds executed by the petitioner in 2014 and 2015 over the mortgaged property and related criminal proceedings based on allegations of forgery do not affect the legality of the auction sale.
This ruling emphasizes the strict adherence to the SARFAESI Act’s statutory framework for enforcement of security interests, the limited scope of judicial review in specialized recovery forums, and the importance of complying with procedural mandates to challenge auction sales effectively.
Bottom Line:
SARFAESI Act - Writ against DRAT order - Challenge to auction sale of mortgaged property rejected - Petitioner failed to prove that property was agricultural land excluded under Section 31(i), or that there was any legally established defect in service of notices, NPA classification, valuation, or auction procedure - Tender made after publication of sale notice and after confirmation of sale did not satisfy Section 13(8) so as to compel Bank to accept amount and cancel auction - Sale certificate in favour of auction purchaser upheld.
Statutory provision(s): SARFAESI Act, 2002 Sections 13(2), 13(4), 13(8), 17, 18, 31(i); Constitution of India Article 226; Uttar Pradesh Zamindari Abolition and Land Reforms Act Section 143; Indian Penal Code Sections 467, 468, 471, 419, 420
