Karnataka High Court
Smt G Kavitha Rajagopal vs The Authorised Officer on 13 March, 2026
-1-
HC-KAR
NC: 2026:KHC:15039
WP No. 28218 of 2025
C/W WP No. 29083 of 2025 ®
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 13TH DAY OF MARCH, 2026
BEFORE
THE HON'BLE SMT. JUSTICE LALITHA KANNEGANTI
WRIT PETITION NO. 28218 OF 2025 (GM-DRT)
C/W
WRIT PETITION NO. 29083 OF 2025 (GM-DRT)
IN WP No. 28218/2025
BETWEEN:
SMT. G.KAVITHA RAJAGOPAL
AGED ABOUT 40 YEARS
C/O. G.K. RAJAGOPAL NAIDU,
NO. 81, FERNS MEADOWS,
BILESHIVALE MAIN ROAD,
SSR GROUP OF INSTITUTIONS,
KOTHANUR, BENGALURU NORTH - 560 077
Digitally signed
by SUVARNA T ...PETITIONER
Location:
HIGH COURT
OF (BY SRI. VIKRAM HULIGO SR.COUNSEL A/W
KARNATAKA
SRI. H.N VASUDEVAN.,ADVOCATE)
AND:
1. THE AUTHORISED OFFICER
CANARA BANK
ASSET RECOVERY MANAGEMENT-1 BRANCH,
2ND FLOOR, NO.86,
SPENCER TOWER MG ROAD,
BENGALURU - 560 001
EMAIL. [email protected].
-2-
NC: 2026:KHC:15039
WP No. 28218 of 2025
C/W WP No. 29083 of 2025
HC-KAR
2. THE MANAGING DIRECTOR AND CEO
CANARA BANK NO.112, JC ROAD,
BENGALURU - 560 002.
EMAIL. [email protected]
...RESPONDENTS
(BY SRI. K.G.RADHAVAN, SR.COUNSEL A/W
SRI. VIGNESH SHETTY, ADVOCATE FOR R1 AND R2;
SRI. D.R.RAVISHANKAR, SR.COUNSEL FOR
SRI.V.R.VINAYAKUMAR ADVOCATE FOR
IMPLEADING APPLICANT ON IA2/25)
THIS WP IS FILED UNDER ARTICLE 226 AND 227 OF THE
CONSTITUTION OF INDIA PRAYING TO ISSUE A WRIT OF
CERTIORARI AND QUASH THE CANCELLATION LETTER DATED
10.09.2025 BEARING REF- ARM-1/CR-435/395/202526 ISSUED
BY THE RESPONDENT BANK AT ANNEXURE - A AND ISSUE A
WRIT OF MANDAMUS DIRECTING THE RESPONDENT BANK TO
CONSIDER THE PETITIONERS REQUEST DATED 29.08.2025 TO
ISSUE SALE CERTIFICATE AT ANNEXURE K, AND TO PASS
APPROPRIATE ORDERS IN ACCORDANCE WITH THE LAW AND
ETC.,
IN WP NO. 29083/2025
BETWEEN:
M/S. GAJANANA BUILDERS AND DEVELOPERS
A PARTNERSHIP FIRM DULY REGISTERED UNDER THE
PROVISIONS OF THE PARTNERSHIP ACT,
HAVING ITS OFFICE AT
NO.07, 2ND FLOOR, N L ENCLAVE,
KEMPEGOWDA ROAD, NEAR UTTAM SAGAR HOTEL,
RAMAMURTHYNAGAR
BENGALURU NORTH - 560 016
REPRESENTED BY ITS GPA HOLDER
MR. G K RAJAGOPAL NAIDU
S/O G KRISHNA NAIDU,
AGED ABOUT 43 YEARS,
RESIDING AT NO.88,
FERNS MEADOWS,
-3-
NC: 2026:KHC:15039
WP No. 28218 of 2025
C/W WP No. 29083 of 2025
HC-KAR
BILESHIVALE MAIN ROAD,
BENGALURU - 560 077
...PETITIONER
(BY SRI.UDAY HOLLA, SR.COUNSEL A/W
SRI. MANJUNATH.S, ADVOCATE)
AND:
1. THE AUTHORIZED OFFICER
CANARA BANK
ASSET RECOVERY MANAGEMENT-1 BRANCH,
2ND FLOOR, NO.86, SPENCER TOWER MG ROAD,
BENGALURU - 5600 01
[email protected]
2. THE MANAGING DIRECTOR AND CEO
CANARA BANK
NO.112, J.C.ROAD,
BENGALURU - 56 0002
[email protected]]
...RESPONDENTS
(BY SRI. K.G.RADHAVAN, SR.COUNSEL A/W
SRI. VIGNESH SHETTY, ADVOCATE FOR R1 AND R2;
SRI. D.R.RAVISHANKAR, SR.COUNSEL FOR
SRI.V.R.VINAYAKUMAR ADVOCATE FOR
IMPLEADING APPLICANT ON IA1/25)
THIS W.P. IS FILED UNDER ARTICLE 226 AND 227 OF
THE CONSTITUTION OF INDIA PRAYING TO QUASH THE
CANCELLATION LETTER DTD. 10.09.2025 BEARING
REF.ARM-1/CR-435/394/2025 ISSUED BY THE RESPONDENT
BANK AT ANNX-A AND DIRECT THE RESPONDENT BANK TO
ISSUE SALE CERTIFICATE AND TO PASS APPROPRIATE
ORDERS IN ACCORDANCE WITH THE LAW AND ETC,
THESE WRIT PETITIONS HAVING BEEN HEARD AND
RESERVED ON 09.12.2025, COMING ON FOR
PRONOUNCEMENT OF ORDER THIS DAY, THE COURT
PRONOUNCED THE FOLLOWING:
CORAM: HON'BLE SMT. JUSTICE LALITHA KANNEGANTI
-4-
NC: 2026:KHC:15039
WP No. 28218 of 2025
C/W WP No. 29083 of 2025
HC-KAR
CAV ORDER
The writ petition No.28218/2025 is filed seeking the
following prayer:
"PRAYER
Wherefore, it is most respectfully prayed that this
Hon'ble Court be pleased to;
a. Issue a Writ of Certiorari and Quash the cancellation
letter dated 10.09.2025 bearing Ref:ARM-1/CR-
435/395/202526 issued by the Respondent Bank at
Annexure A.
b. Issue a Writ of Mandamus directing the Respondent
Bank to consider the Petitioner's request dated
29.08.2025 to issue sale certificate at Annexure J, and
to pass appropriate orders in accordance with the law.
c. Pass such other orders as this Hon'ble Court deems
fit to grant, including cost of the proceedings, in the
interest of justice and equity."
2. The writ petition No.29083/2025 is filed seeking the
following prayer:
"PRAYER
Wherefore, it is most respectfully prayed that this
Hon'ble Court be pleased to;
a. Issue a Writ of Certiorari and Quash the cancellation
letter dated 10.09.2025 bearing Ref:ARM-1/CR-
435/394/2025 issued by the Respondent Bank at
Annexure A.
b. Issue a Writ of Mandamus directing the Respondent
Bank to issue sale certificate and to pass appropriate
orders in accordance with the law.
c. Pass such other orders as this Hon'ble Court deems
fit to grant, including cost of the proceedings, in the
interest of justice and equity."
-5-
NC: 2026:KHC:15039
WP No. 28218 of 2025
C/W WP No. 29083 of 2025
HC-KAR
The facts of the case in WP.No.28218/2025 are:-
3. It is the case of the petitioner that the petitioner is the
successful bidder and auction purchaser of the property and
remitted an amount of Rs.4,01,64,250/- being 25% of the bid
amount with the respondent/Canara Bank on 24.02.2025 and
was awaiting the respondent Bank to issue the sale certificate
after accepting remaining 75% of the amount i.e.,
Rs.12,04,92,750/- of the bid amount. The respondent/Bank
also issued sale intimation letter dated 24.02.2025 confirming
the petitioner as the successful bidder. It is the case of the
petitioner that she was making arrangements to remit the
remaining 75% of the bid amount to be deposited with the
respondent/Bank within the timeline mentioned under the sale
intimation letter. However, she came to know that the original
borrower approached this Court and filed WP.No.6510/2025 on
04.03.2025 challenging the entire auction proceedings and a
Co-ordinate Bench of this Court granted interim order of status
quo on 14.03.2025. The respondent/Bank purportedly issued an
intimation letter dated 12.03.2025 which however, was not
communicated contemporaneously to the petitioner but was
-6-
NC: 2026:KHC:15039
WP No. 28218 of 2025
C/W WP No. 29083 of 2025
HC-KAR
sent only on 18.03.2025 through e-mail which was sent during
the subsistence of the interim order of stay dated 14.03.2025
granted in WP.No.6510/2025. The petitioner had responded to
the said communication vide e-mail dated 19.03.2025
highlighting that in view of the subsisting status quo order of
this Court, the intimation dated 12.03.2025 carries no legal
efficacy and cannot be acted upon unless and until the said
interim order is vacated by this Court. It is the case of the
petitioner that she was unable to deposit the remaining 75% of
the amount due to the operation of the status quo order in
WP.No.6510/2025. The said writ petition was disposed of on
22.07.2025. The Co-ordinate Bench of this Court had granted
three weeks' time to the borrower to approach the Debts
Recovery Tribunal. Consequently, the interim order continued
to remain in force till 13.08.2025.
4. It is stated that the petitioner commenced making
arrangements to remit the remaining 75% of the bid amount.
In the meanwhile, another guarantor approached the DRT on
11.08.2025 by initiating proceedings vide Diary No.2217/2025.
The Tribunal was pleased to grant an interim stay restraining
-7-
NC: 2026:KHC:15039
WP No. 28218 of 2025
C/W WP No. 29083 of 2025
HC-KAR
the respondent/Bank from issuing the Sale Confirmation Letter,
if not already issued. It is stated that the said proceedings are
still pending adjudication and the matter has been reserved for
orders. It is stated that the original borrower filed a writ appeal
challenging the rejection order dated 22.07.2025 in
WA.No.1324/2025 pending before this Court. The petitioner
herein filed an impleading application in the said appeal
proceedings and the same is pending consideration. It is during
the hearing of the appeal proceedings, the respondent No.4
informed the Court that it has submitted the OTS request to the
respondent/Bank and the same has been forwarded by the
respondent/Bank to its head/central office. The petitioner
challenged the said OTS proposal in WP.FR.No.27499/2025 and
the same is pending consideration as the entire action of the
respondent/Bank accepting the OTS request and internally
forwarding the same to its head office for confirmation is
opposed to the principles enunciated by the Hon'ble Apex Court
in Celir LLP Vs. Bafna Motors (Mumbai) Pvt and Others1.
5. The petitioner had sent the copies of the writ petition
to the respondent/Bank vide an email dated 08.09.2025 and
1
(2024) 2 SCC 1
-8-
NC: 2026:KHC:15039
WP No. 28218 of 2025
C/W WP No. 29083 of 2025
HC-KAR
the respondent/Bank thereafter issued the impugned letter
dated 10.09.2025 cancelling the auction held on 24.02.2025
while an interim order of stay has been granted by the DRT-1
challenging the auction proceedings is pending before the DRT
in Diary No.2217/2025. It is stated that the respondent/Bank
being fully aware of subsistence of the interim order passed by
DRT, issued another letter dated 28.08.2025 to the petitioner
requesting to make the balance payment of 75% of the bid
amount. The petitioner vide her letter dated 29.08.2025
responded to the Bank stating that she is even ready to remit
the remaining amount but she is prevented to deposit the
remaining amount due to the operation of stay granted by the
DRT in Diary No.2217/2025 and further stated that she is ready
to deposit the remaining amount and close the transaction
simultaneously.
6. It is the case of the petitioner that she did not default
in payment of the balance bid amount but was prevented from
paying the balance bid amount first due to the operation of the
interim order in WP.No.6510/2025 which continued till
13.08.2025 and the interim order of stay dated 11.08.2025
-9-
NC: 2026:KHC:15039
WP No. 28218 of 2025
C/W WP No. 29083 of 2025
HC-KAR
granted by the DRT-1 in the Diary No.2217/2025. Due to this
legal embargo, the petitioner was not able to deposit the
remaining bid amount. It is stated that the impugned
communication from the respondents in cancelling the sale is
contrary to the provisions of Securitisation and Reconstruction
of Financial Assets and Enforcement of Security Interest Act,
2002 (hereinafter referred to as 'SARFAESI Act') and Security
Interest (Enforcement) Rules, 2002 (hereinafter referred to as
'Rules'). It is submitted that the petitioner has not violated any
of the provisions of Rule 9 of the Rules specifically Rule 4
warranting the respondent/Bank to cancel the auction. The
petitioner was always ready and willing to deposit the remaining
75% of the bid amount. However, the operation of interim
order prevented her from depositing the amounts which cannot
be a reason for the respondent/Bank to cancel the auction
proceedings in which the petitioner emerged as a successful
bidder.
7. It is further submitted that the whole act of the
respondent/Bank is contrary to the judgment of the Hon'ble
Apex Court in IDBI Bank Ltd. Vs. Ramswaroop Daliya and
- 10 -
NC: 2026:KHC:15039
WP No. 28218 of 2025
C/W WP No. 29083 of 2025
HC-KAR
Others2, wherein the Hon'ble Apex Court had held that the
auction sale cannot be cancelled if default in payment of the
balance amount within the period mentioned is not attributable
to the auction purchaser. The period of 15 days stipulated in
Rule 9 of the Rules for the deposit of the balance sale amount
may be extended as may be agreed upon in writing. It is stated
that the act of the respondent/Bank in cancelling the auction
sale when the petitioner emerged as the successful bidder
waiting for the respondent/Bank to issue sale certificate having
received 25% of the bid amount from the petitioner is infringing
upon her legitimate rights to acquire the property. It is
submitted that if the illegal actions of the banks are permitted
to perpetrate, then all auctions under the SARFAESI Act would
be meaningless and simply rendered otiose and the very object
of Section 13 and the overall scheme of the SARFAESI Act
enabling the Bank from recovering its dues in a timely manner
without intervention of the Courts would be simply defeated.
8. The respondent No.1/Bank has filed the statement of
objections. It is stated that the prayer that is sought in the writ
petition amounts to gross misuse of the process of law. The
2
2024 SCC OnLine SC 2878
- 11 -
NC: 2026:KHC:15039
WP No. 28218 of 2025
C/W WP No. 29083 of 2025
HC-KAR
said prayer cannot be sought in the writ petition. The petitioner
ought not to be permitted to misuse the process of law. It is
stated that the petitioner has an alternative remedy before the
Debts Recovery Tribunal and the petitioner cannot come before
this Court. It is stated that when there was default on the part
of the borrower, the Bank had initiated the proceedings under
the SARFAESI Act by issuing demand notice dated 26.06.2020,
demanding repayment of outstanding liabilities of
Rs.31,96,75,247/-. The respondent/Bank took symbolic
possession of the subject property on 22.12.2020 under Section
13(4) of the SARFAESI Act. Being aggrieved by the possession
notice dated 22.12.2020, one Mr.K.N.Surya Prakash claiming to
be the subsequent purchaser along with his wife has preferred
SA.No.264/2025 before the Debts Recovery Tribunal and the
same is pending for adjudication. The Bank has put the
schedule properties for sale by issuing e-auction sale notice
fixing the sale on 03.06.2021. However, the sale did not
materialise. The respondent/Bank again issued another sale
notice dated 05.12.2024 and one of the guarantors i.e., M.
Suresh Kumar challenged the same before this Court in
- 12 -
NC: 2026:KHC:15039
WP No. 28218 of 2025
C/W WP No. 29083 of 2025
HC-KAR
WP.No.33927/2024 and later withdrew the writ petition and the
same was dismissed as not pressed on 12.02.2025.
9. The respondent/Bank once again issued a sale notice
dated 21.01.2025 for the schedule properties and fixed public
auction on 24.02.2025 for recovery of an amount of
Rs.45,70,00,000/- as on 04.12.2024 and successfully
conducted the auction on 24.02.2025. The owner of the
property namely Mr. Suresh Kumar challenged the very same
measure/sale notice dated 21.01.2025 before this Court in
WP.No.4792/2025 and after hearing the matter, this Court had
dismissed the writ petition on 24.02.2025 in view of the
alternative remedy available before the Debt Recovery Tribunal.
One Mr.D.Ravikumar claiming to be a partner of Corporate
Guarantor filed the securitisation Application challenging the
sale notice dated 21.01.2025 and the Debt Recovery Tribunal
granted a conditional interim order dated 20.02.2025, however
failed to comply the interim order granted by the Debt Recovery
Tribunal and the same is pending for adjudication. One H.M.
Manasa, wife of K.N.Surya Prakash also preferred
- 13 -
NC: 2026:KHC:15039
WP No. 28218 of 2025
C/W WP No. 29083 of 2025
HC-KAR
S.A.No.130/2025 claiming to be the subsequent purchaser for
setting aside the sale notice dated 21.01.2025.
10. The borrower has also filed a writ petition before this
Court in WP.No.6510/2025, challenging the sale notice dated
21.01.2025. The Court had granted status quo as regards the
property. The said writ petition was disposed of by order dated
22.07.2025, rejecting the contention in respect of jurisdiction
and relegating the borrower to avail alternative remedy before
the Debts Recovery Tribunal, Bengaluru. Pursuant to the said
order, another guarantor approached the Debts Recovery
Tribunal by filing Diary No.2217/2025 and on 11.08.2025, the
Debt Recovery Tribunal directed that "In the meantime
respondent bank is directed not to confirm the sale if it is not
done by the respondent bank". it is submitted that the same is
pending for adjudication. Subsequently, the borrower filed the
SA challenging the sale notice dated 21.01.2025 before the
Debt Recovery Tribunal at Bangalore in S.A. i.e., Diary
No.2224/2025 on 11.08.2025 and that is also pending
consideration.
- 14 -
NC: 2026:KHC:15039
WP No. 28218 of 2025
C/W WP No. 29083 of 2025
HC-KAR
11. It is stated that in view of the circumstances and the
pending litigations before the High Court and the Debt Recovery
Tribunal, the respondent/Bank issued a letter dated
10.09.2025, informing the petitioner that the auction
proceedings held on 24.02.2025 stood cancelled. The
respondent/Bank, in the said communication, also requested
the petitioner to collect the demand draft representing 25% of
the bid amount, which had been deposited with the Bank
towards the sale consideration from the concerned branch. The
respondent/Bank, acting bonafide and with utmost fairness had
already refunded the entire amount. It is further stated that the
borrower by letter dated 11.09.2025 approached the
respondent/Bank with a proposal for one time settlement. Since
no sale was pending, in view of the cancellation of the sale
notice dated 21.01.2025 and the refund of the entire bid
amount to the auction purchaser, the respondent/Bank found it
viable and appropriate to consider the borrower's OTS proposal.
The OTS offer submitted by the borrower was brought to the
notice of the Court and the Court considered the same on
17.09.2025.
- 15 -
NC: 2026:KHC:15039
WP No. 28218 of 2025
C/W WP No. 29083 of 2025
HC-KAR
The facts of the case in WP.No.29083/2025 are:-
12. It is the case of the petitioner that the petitioner is a
firm registered under the Indian Partnership Act and is
represented by its GPA Holder, Mr.G.K.Rajagopal Naidu. The
petitioner firm was the successful bidder and auction purchaser
of the property and also remitted an amount of
Rs.2,51,69,000/- being 25% of the bid amount with the
respondent/Canara Bank on 24.02.2025 and was awaiting the
remaining 75% i.e., Rs.7,55,07,000/ of the bid amount. The
respondent/Bank also issued a sale intimation letter confirming
the petitioner as the successful bidder. When the petitioner
were making arrangements to remit the remaining 75% of the
bid amount within the timeline, the borrower approached this
Court and filed WP.No.6510/2025 on 04.03.2025 challenging
the entire auction proceedings and this Court granted interim
order of status quo on 14.03.2025. The said writ petition was
disposed of on 22.07.2025. Consequently, the interim order
continued to remain in force till 13.08.2025. The petitioner had
made arrangements to remit the remaining 75% of the bid
amount. In the meanwhile, another guarantor M/s. MSK
- 16 -
NC: 2026:KHC:15039
WP No. 28218 of 2025
C/W WP No. 29083 of 2025
HC-KAR
Shelters approached the DRT on 11.08.2025 by filing
proceedings vide Diary No.2217/2025. The DRT had granted
interim stay restraining the respondent/Bank from issuing the
sale confirmation letter, if not already issued and the matter
was reserved for orders. This being the factual situation, the
original borrower filed writ appeal challenging the rejection
order dated 22.07.2025 in WA.No.1324/2025.
13. The respondent/Bank thereafter issued the impugned
letter dated 10.09.2025 cancelling the auction held on
24.02.2025 while an interim order of stay has been granted in
Diary No.2217/2025. It is submitted that the petitioner was
prevented from paying the balance bid amount due to the
operation of the interim order in WP.No.6510/2025 which
continued till 13.08.2025 and the interim order of stay granted
by the DRT in Diary No.2217/2025. It is stated that the
impugned communication is wholly contrast with the provisions
of the SARFAESI Act and Security Interest (Enforcement) Rules
2002. It is stated that the entire action of the respondent/Bank
is contrary to the judgment in case of IDBI Bank referred supra.
It is stated that the petitioners absolutely did not default in
- 17 -
NC: 2026:KHC:15039
WP No. 28218 of 2025
C/W WP No. 29083 of 2025
HC-KAR
payment of the remaining bid amount to attract cancellation of
the auction, but could not deposit the amount due to operation
of interim orders. It is stated that if the illegal actions of the
banks are permitted to perpetrate, then all auctions under the
SARFAESI Act would be meaningless and simply rendered
otiose and the very object of Section 13 and the overall scheme
of the SARFAESI Act enabling the bank from recovering its dues
in a timely manner without intervention of the Courts would be
simply defeated.
14. The respondent No.1/Bank has filed the statement of
objections in the similar line as stated in WP.No.28218/2025. It
is stated that in view of the circumstances and the pending
litigations before the High Court and the Debt Recovery
Tribunal, the respondent/Bank issued a letter dated
10.09.2025, informing the petitioner that the auction
proceedings held on 24.02.2025 stood cancelled. The
respondent/Bank, in the said communication, also requested
the petitioner to collect the demand draft representing 25% of
the bid amount, which had been deposited with the Bank
towards the sale consideration from the concerned branch. The
- 18 -
NC: 2026:KHC:15039
WP No. 28218 of 2025
C/W WP No. 29083 of 2025
HC-KAR
respondent/Bank, acting bonafide and with utmost fairness had
already refunded the entire amount. It is further stated that the
borrower by letter dated 11.09.2025 approached the
respondent/Bank with a proposal for one time settlement. Since
no sale was pending, in view of the cancellation of the sale
notice dated 21.01.2025 and the refund of the entire bid
amount to the auction purchaser, the respondent/Bank found it
viable and appropriate to consider the borrower's OTS proposal.
The OTS offer submitted by the borrower was brought to the
notice of the Court and the Court considered the same on
17.09.2025.
15. Learned Senior counsel Sri.Vikram Huligol, appearing
for the petitioner in WP.No.28218/2025 had relied on the
judgment of the Hon'ble Apex Court in Celir LLP's case referred
supra. He relied on paragraph Nos.64, 69 and 105 which reads
thus:
"64. We are of the view that the failure on the part of
the borrower in tendering the entire dues including the
charges, interest, costs etc. before the publication of
the auction notice as required by Section 13(8) of the
SARFAESI Act, would also sufficiently constitute
extinguishment of right of redemption of mortgage by
the act of parties as per the proviso to Section 60 of the
Act 1882. Furthermore, in the case on hand, there was
no claim for right of redemption by the borrower either
- 19 -
NC: 2026:KHC:15039
WP No. 28218 of 2025
C/W WP No. 29083 of 2025
HC-KAR
before the publication of the auction notice or even
thereafter. The borrowers entered into the fray only
after coming to know of the confirmation of auction. Be
that as it may, once the Section 13(8) stage was over
and auction stood concluded, it could be said that there
was an intentional relinquishment of his right of
redemption under Section 13(8), whereby the Bank
declared the appellant as the successful auction
purchaser having offered the highest bid in accordance
with the terms of the auction notice.
69. However, with the advent of the 2016 Amendment,
Section 13(8) of the SARFAESI Act now uses the
expression "before the date of publication notice for
public auction or inviting quotations or tender from
public or private treaty for transfer by way of lease,
assignment or sale of the secured assets" which by no
stretch of imagination could be said to be in
consonance with the general rule under the Act 1882
that the right of redemption is extinguished only after
conveyance by registered deed. Thus, in the light of
clear inconsistency between Section 13(8) of the
SARFAESI Act and Section 60 of the Act 1882 the
former special enactment overrides the latter general
enactment in light of Section 35 of the SARFAESI Act.
Thus, the right of redemption of mortgage is available
to the borrower under the SARFAESI Act only till the
publication of auction notice and not thereafter, in light
of the amended Section 13(8).
105. The Bank is duty-bound to follow the provisions of
the law as any other litigant. It is to be noted that the
Bank i.e., the secured creditor acts under the SARFAESI
Act through the authorised officer who is appointed
under Section 13(2). Thus, the authorised officer and
the Bank cannot act in a manner so as to keep the
sword hanging on the neck of the auction purchaser.
The law treats everyone equally and that includes the
Bank and its officers. The said enactments were
enacted for speedy recovery and for benefitting the
public at large and does not give any license to the
Bank officers to act de hors the scheme of the law or
the binding verdicts.
16. Learned Senior Counsel placed reliance on the
judgment of the Hon'ble Apex Court in case of IDBI Bank Ltd.
- 20 -
NC: 2026:KHC:15039
WP No. 28218 of 2025
C/W WP No. 29083 of 2025
HC-KAR
referred supra. He had relied on paragraph Nos.3, 12, 16 and
17 which read as follows:
"3. The respondents who were the petitioners in the
writ petition are the auction purchasers of the property
which comprises of 2 guntas of land of Survey No. 121
part, situated at Bogaram village, Keesara Mandal,
Medchal Malkajgiri district, Telangana. Pursuant to the
e-auction notice dated 17.03.2018, the auction took
place on 10.04.2018. The respondents were the highest
bidders for a total sum of Rs.1,42,50,000/-. They
deposited 25% of the bid amount i.e., Rs. 36,00,000/-
on the day of the auction itself. The auction was
confirmed but the sale certificate was not issued and
the sale deed was not executed as the respondents
could not deposit the balance sale consideration within
15 days, may be for the reason that the appellant-Bank
refused to accept the balance amount for various
reasons. Finally, the appellant-Bank vide
communication dated 24.12.2019 cancelled the auction
and refunded the amount deposited by the respondents
by means of four demand drafts which were never
encashed by the respondents.
12. The communication dated 24.12.2019, by which
the appellant-Bank took a decision to cancel the
auction sale and to return the amount deposited by the
respondents, is completely silent as regards the
default, if any, committed by the respondents in
depositing the balance auction amount as per the
mandate of Rule 9(4) of the Rules. The said plea was
taken by the appellant-Bank for the first time through
the counter affidavit filed in the writ petition. It is well
recognized that the validity of an order can only be
adjudged on the basis of the reasoning contained in the
order and the said reasoning cannot be supplemented
in any manner much less by means of a counter
affidavit or a supplementary affidavit when the parties
have entered into a litigation. In Mohinder Singh Gill &
Anr. v. Chief Election Commissioner and Ors.4 it has
been clearly laid down that the parties are not
permitted to raise new pleas not contained in the order
impugned while assailing the correctness or the
validity of such an order. In view of the law so laid
down, the appellant- Bank was certainly not entitled to
raise the plea of default under Rule 9(4) of the Rules
through the counter affidavit.
- 21 -
NC: 2026:KHC:15039
WP No. 28218 of 2025
C/W WP No. 29083 of 2025
HC-KAR
16. In the case at hand, the correspondence between
the parties reveals that the respondents only sought
extension of time for the reason that the appellant-
Bank itself was not in a position to accept the amount
as there was a complaint to the CBI, an advisory of the
ED and a stay from the High Court. The silence on part
of the appellant-Bank in either immediately revoking
the sale confirmation or refusing to extend the time,
impliedly amounted to extension of time in writing with
consent.
17. Secondly, the non-deposit of the balance sale
consideration within the time limit prescribed under
Rule 9(4) was not attributable to the respondents so as
to call them defaulters within the meaning of the
provisions of Rule 9 (4) and (5) of the Rules."
17. Learned Senior counsel submits that the borrower's
right of redemption extinguishes once auction notice is
published as per Section 13(8) of the SARFAESI Act, the right of
the borrower to re-extinguish the moment the auction notice is
published by the bank. It is further submitted that the auction
sale cannot be cancelled if default in payment of the balance
action is not attributable to the auction purchaser. It is argued
that the bank cancelled the auction due to pendency of
litigation before the High Court and DRT but not stating for
default of payment of the amount by the auction purchaser.
Basing on the judgments referred supra, it is submitted that as
there is no default on the part of the petitioner in paying the
amount, he is always ready and willing to pay the amount. But
- 22 -
NC: 2026:KHC:15039
WP No. 28218 of 2025
C/W WP No. 29083 of 2025
HC-KAR
for the pending litigation, he could not pay the amount. Just
because the litigation is pending, that cannot be the ground for
the bank to cancel the auction. It is submitted that to facilitate
the borrower, the Bank has cancelled the auction and under the
guise of OTS, Bank is trying to favour the borrower.
18. Learned Senior Counsel Sri.Uday Holla, appearing for
the petitioner in WP.No.29083/2025 relying on the judgments
in IDBI Bank's case and Celir LLP's case referred supra submits
that cancellation of the sale is arbitrary, illegal and contrary to
the provisions of the SARFAESI Act. It is submitted that the writ
petition may be allowed by setting aside the impugned
proceedings.
19. Learned Senior Counsel Sri.K.G.Raghavan, appearing
for respondent/Bank submits that the bank due to the pending
litigation and in the larger interest had cancelled the auction.
Learned counsel has relied on the judgement of the Hon'ble
Apex Court in case of Agarwal Tracom Pvt. Ltd. Vs. Punjab
- 23 -
NC: 2026:KHC:15039
WP No. 28218 of 2025
C/W WP No. 29083 of 2025
HC-KAR
National Bank3. He had relied on paragraph Nos.34 and 35
which reads thus:
"34. In the light of foregoing discussion, we are of the
considered opinion that the Writ Court as also the
Appellate Court were justified in dismissing the
appellant's writ petition on the ground of availability of
alternative statutory remedy of filing an application
under Section 17(1) of SARFAESI Act before the
concerned Tribunal to challenge the action of the PNB
in forfeiting the appellant's deposit under Rule 9(5).
We find no ground to interfere with the impugned
judgment of the High Court.
35. The appellant is, accordingly, granted liberty to file
an application before the concerned Tribunal (DRT)
under Section 17(1) of the SARFAESI Act, which has
jurisdiction to entertain such application within 45 days
from the date of this order. In case, if the appellant
files any such application, the Tribunal shall decide the
same on its merits in accordance with law uninfluenced
by any of the observations made by this Court and the
High Court in the impugned judgment."
20. Relying on the above judgment, it is submitted that
the writ petition is not maintainable and the petitioner has to
avail the appropriate alternative remedy. Learned Senior
counsel had also relied on the judgment of the High Court of
Kerala in case of Ajmal K.V. and Another Vs. Union Bank of
India and Others4. He had relied on paragraph Nos.24, 25, 26
and 27 which reads as follows:
3
(2018) 1 SCC 626
4
2024:KER:18508
- 24 -
NC: 2026:KHC:15039
WP No. 28218 of 2025
C/W WP No. 29083 of 2025
HC-KAR
"24. When the borrowers offered a One Time Settlement
in the meanwhile, the Bank has accepted the proposal.
There is nothing which prevents the Bank from entering
into a One Time Settlement with the borrowers as long
as auction sale of the property is not concluded by
issuance of Sale Certificate. In these cases, such One
Time Settlements were placed before the Debts
Recovery Tribunal. The Debts Recovery Tribunal directed
the borrowers to implead the auction purchasers in the
SA. The petitioners were thus impleaded in the
proceedings before the Debts Recovery Tribunal. The
petitioners did not raise any objections against the One
Time Settlement.
25. As long as sale is not confirmed in favour of the
petitioners, the petitioners would not acquire any right
or interest over the property. As the sale is not
confirmed in favour of the petitioners, the petitioners
cannot urge that they should be issued with Sale
Certificate. In fact, the terms of sale notice itself contain
a clause that the sale can be cancelled at any time and it
is the discretion of the Bank to cancel the same or
proceed with the sale. As the sale is not confirmed in
favour of the petitioners herein, the petitioners have not
acquired any interest or right over the property
auctioned.
26. It is true that the right of redemption is available to
the borrowers will stand extinguished upon publication
of notice of auction. However, that will not prevent the
parties to a loan agreement from entering into a One
Time Settlement. As long as the sale of the mortgaged
assets is not confirmed in favour of the auction
purchasers and as long as the Sale Certificates are not
issued, the auction purchasers cannot be heard to
contend that the Bank should not enter into a One Time
Settlement with the borrowers. The prayer of the
petitioners to issue Sale Certificate in respect of the
auctioned property is unsustainable.
27. However, the fact remains that pursuant to the esale
conducted by the Bank, the petitioners in both these
writ petitions have deposited substantial amount
towards purchase price, with the Bank. The amount is
still in deposit with the Bank. Taking into consideration
the facts and circumstances of the case, I am of the
view that the 1st respondent-Bank should pay
reasonsable interest to the petitioners in the writ
petitions.
- 25 -
NC: 2026:KHC:15039
WP No. 28218 of 2025
C/W WP No. 29083 of 2025
HC-KAR
The writ petitions are disposed of declining the
prayer of the petitioners to compel the Bank to issue
Sale Certificates. However, there will be a direction to
the 1st respondent-Bank to refund the amount
deposited by the petitioners along with 12% interest
from the date of deposit of the amount till the date of
refund."
21. Learned Senior counsel had also relied on the
judgment of the Hon'ble Apex Court in case of Eastern
Coalfields Ltd. Vs. Bajrangi Rabidas5 in paragraph Nos.18
and 19 which reads as follows:
"18. The question that arises for consideration is that
once he had availed the benefit by not stating the
correct fact, whether the equitable jurisdiction
under Article 226 of the Constitution of India should be
extended to him. The Division Bench has recorded a
finding the respondent could not have been allowed to
participate in the examination without producing the
Matriculation certificate. The said finding is based on an
assumption and has been arrived at totally being
oblivious of the enquiry report which records the
statement of the respondent. In this context, we may
profitably reproduce a passage from Union of India v. C.
Rama Swamy and others[1]: -
"25. In matters relating to appointment to service
various factors are taken into consideration before
making a selection or an appointment. One of the
relevant circumstances is the age of the person
who is sought to be appointed. It may not be
possible to conclusively prove that an advantage
had been gained by representing a date of birth
which is different than that which is later sought to
be incorporated. But it will not be unreasonable to
presume that when a candidate, at the first
instance, communicates a particular date of birth
there is obviously his intention that his age
calculated on the basis of that date of birth should
be taken into consideration by the appointing
5
(2014) 13 SCC 681
- 26 -
NC: 2026:KHC:15039
WP No. 28218 of 2025
C/W WP No. 29083 of 2025
HC-KAR
authority for adjudging his suitability for a
responsible office. In fact, where maturity is a
relevant factor to access suitability, an older
person is ordinarily considered to be more mature
and, therefore, more suitable. In such a case, it
cannot be said that advantage is not obtained by a
person because of an earlier date of birth, if he
subsequently claims to be younger in age, after
taking that advantage. In such a situation, it would
be against public policy to permit such a change to
enable longer benefit to the person concerned."
19. The controversy can be viewed from another angle.
Thereafter, the learned Judges opined that there is no
justification in the proposition that principle of estoppel
would not apply in such a situation. As is manifest, in the
case at hand the respondent stated this on the higher
side to gain the advantage of eligibility and hence, we
have no trace of doubt that principle of estoppel would
apply on all fours. It is well settled in law that
jurisdiction of the High Court under Article 226 of the
Constitution is equitable and discretionary. The power of
the High Court is required to be exercised "to reach
injustice wherever it is found". In Sangram Singh v.
Election Commissioner, Kotah and another[2], it has been
observed that jurisdiction under Article 226 of the
Constitution is not to be exercised whenever there is an
error of law. The powers are purely discretionary and
though no limits can be placed upon that discretion, it
must be exercised along recognized lines and not
arbitrarily and one of the limitations imposed by the
courts on themselves is that they will not exercise
jurisdiction in such class of cases unless substantial
injustice has ensued or is likely to ensue. That apart, the
High Court while exercising the jurisdiction under Article
226 of the Constitution can always take cognizance of the
entire facts and circumstances and pass appropriate
directions to balance the justice. The jurisdiction being
extraordinary it is required to be exercised keeping in
mind the principles of equity. It is a well-known principle
that one of the ends of equity is to promote honesty and
fair play. If a person has taken an undue advantage the
court in its extraordinary jurisdiction would be within its
domain to deny the discretionary relief. In fact, Mr.
Singh, learned senior counsel for the appellants, has
- 27 -
NC: 2026:KHC:15039
WP No. 28218 of 2025
C/W WP No. 29083 of 2025
HC-KAR
basically rested his submission on this axis. In our
considered opinion, the Division Bench has erred in
extending the benefit to the respondent who had taken
undue advantage by not producing the Matriculation
Certificate solely on the motive to get an entry into
service. It is apt to note here that this Court in G.M.,
Bharat Coking Coal Ltd., West Bengal v. Shib Kumar
Dushad and others[3] has ruled that the decision on the
issue of date of birth of an employee is not only
important for the employee but for the employer also."
22. Relying on these judgments, learned Senior Counsel
appearing for the respondent/Bank submits that the
respondent/Bank is always at liberty to cancel the auction at
any point of time. Considering the pending litigation and also to
secure the amount, the auction was cancelled and they have
offered the OTS facility to the principal borrower.
23. Learned Senior counsel appearing for the impleading
applicant/borrower submits that the petitioner cannot come
before this Court and the alternative remedy is available before
the Debts Recovery Tribunal. It is submitted that the petitioner
has no locus to question the cancellation of auction. He had
relied on the judgment of the High Court of Andhra Pradesh in
- 28 -
NC: 2026:KHC:15039
WP No. 28218 of 2025
C/W WP No. 29083 of 2025
HC-KAR
case of M/s. India Finlease Securities Vs. Indian Overseas
Bank6. He had relied on the following paragraphs:
"The appellant, therefore, from time to time is informed
that the acceptance of bid or sale shall be subject to
confirmation by the secured creditor. Therefore, the
acceptance of the bid by the Authorized Officer on
31.3.2012, in our considered view, would not amount to
confirmation of sale by the secured creditor. It is a mere
acceptance of bid of the appellant by the authorized
officer and not confirmation of sale by the secured
creditor. The confirmation stated in Rule 9(2) and 9(4)
of the Rules is the confirmation by the authorized officer
and not the secured creditor i.e banks. Sub-rule (2) of
Rule 9 clearly provides that sale shall be "subject to
confirmation by the secured creditor". Only after
compliance of sub-rule (4), the secured creditor has to
confirm the sale. It is only on confirmation of sale by the
secured creditor sub-rule (6) of Rule 9 comes into
operation and the authorized officer is empowered to
issue a certificate of sale of the immovable property in
favour of the purchaser in the form given in Appendix V
to the Rules and to handover the delivery and
possession of the property. Unless these formalities are
complete, though the sale may be confirmed by the
authorized officer, the property does not vest in the
auction purchaser. Property would get transferred only
after sale was confirmed by the secured creditor and not
by the authorized officer. In the present case, the
secured creditor has not confirmed the sale and the
cheques issued on 13.4.2012 were received subject to
the outcome of the proceedings pending before the DRT.
Further, in the document "Details of auction
participants" dated 31.3.2012 signed by the Authorized
Officers and the authorized signatory of the appellant, it
is mentioned as follows:
"The sale in favour of the highest bidder shall be
confirmed on payment of the entire bid amount of
Rs.1800.00 lakhs (Rupees Eighteen crores only) and
the Bank reserves its right to cancel/modify the sale
before confirmation of the same."
6
AIR 2013 ANDHRA PRADESH 10
- 29 -
NC: 2026:KHC:15039
WP No. 28218 of 2025
C/W WP No. 29083 of 2025
HC-KAR
21. Therefore, it is clear that though the bid amount was
accepted by the authorized officer, it does not amount
to confirmation by the secured creditor and the bank
has the right to cancel/modify the sale before
confirmation of the same. The auction purchaser was
under the impression that the moment it paid the total
bid amount, it is deemed that the sale is confirmed. That
is not the intention of the Legislature. The intention of
the Legislature is that sale has to be confirmed
specifically by the "secured creditor" and not by the
"authorized officer". There is no dispute that neither the
sale was confirmed by the secured creditor by issuing
any written communication nor a certificate of sale was
issued by the authorized officer as required under sub-
rule (6) of Rule 9 of the Rules and delivery of possession
of property was passed on to the auction purchaser."
24. Basing on this judgment, it is submitted that the
acceptance of the bid by the authorised officer would not
amount to confirmation. It is the mere acceptance of the bid
and not the confirmation of the sale by the secured creditor. it
is stated that as long as the sale is not confirmed, the petitioner
will not get any right. He has also relied on another judgment of
this Court in case of Laxminarasimhaiah Vs. Karnataka
Gramin Bank and Another arising out of
WP.No.25628/2024 dated 28.07.2025. He relied on
paragraph No.4, 5 and 6 which reads as follows:
"4. These rival submissions are considered in the light
of Rule 9 [1] to [5] of the Security Interest
[Enforcement] Rules, 2002 and the terms of the Sale
Notice. This Rule in its material part reads as:
- 30 -
NC: 2026:KHC:15039
WP No. 28218 of 2025
C/W WP No. 29083 of 2025
HC-KAR
9. Time of sale, issue of sale certificate and delivery
of possession, etc.
(1) No sale of immovable property under these
rules, in first instance shall take place before the
expiry of thirty days from the date on which the
public notice of sale is published in newspapers as
referred to in the proviso to subrule (6) of rule 8 or
notice of sale has been served to the borrower:
Provided further that if sale of immovable property
by any one of the methods specified by sub rule (5)
of rule 8 fails and sale is required to be conducted
again, the authorized officer shall serve, affix and
publish notice of sale of not less than fifteen days to
the borrower, for any subsequent sale.
(2) The sale shall be confirmed in favour of the
purchaser who has offered the highest sale price in
his bid or tender or quotation or offer to the
authorized officer and shall be subject to
confirmation by the secured creditor: Provided that
no sale under this rule shall be confirmed, if the
amount offered by sale price is less than the
reserve price, specified under subrule (5) of Rule 8.
Provided further that if the authorized officer fails
to obtain a price higher than the reserve price, he
may, with the consent of the borrower and the
secured creditor effect the sale at such price.
(3) On every sale of immovable property, the
purchaser shall immediately, i.e. on the same day or
not later than next working day, as the case may
be, pay a deposit of twenty five per cent of the
amount of the sale price, which is inclusive of
earnest money deposited, if any, to the authorized
officer conducting the sale and in default of such
deposit, the property shall be sold again.
(4) The balance amount of purchase price payable
shall be paid by the purchaser to the authorized
officer on or before the fifteenth day of
confirmation of sale of the immovable property or
such extended period [as may be agreed upon in
writing between the purchaser and the secured
creditor, in any case not exceeding three months.
(5) In default of payment within the period
mentioned in sub-rule (4), the deposit shall be
forfeited to the secured creditor and the property
- 31 -
NC: 2026:KHC:15039
WP No. 28218 of 2025
C/W WP No. 29083 of 2025
HC-KAR
shall be resold and the defaulting purchaser shall
forfeit all claim to the property or to any part of the
sum for which it may be subsequently sold.
The underlining is by this Court
The relevant term of the Sale Notice reads as
hereunder:
"6. The successful bidder should pay 25% of the bid
amount [inclusive of EMD] immediately on the same
day by NEFT/RTGS to credit A/C
No.105681013050189, Branch IFSC: PKGB0010568
and balance 75% of the bid amount within 15 days
thereafter. If the successful bidder defaults in
effecting payment or fails to adhere to the terms of
Sale in any manner, the amount already deposited
will be forfeited and he/she shall not have any
claim on such forfeited amount or to the property,
which shall be sold subsequently."
5. These Rules/terms require the auction purchaser to
deposit 25% of the sale price offered on the same day.
However, if the Rules require the remaining amount,
subject to the agreement in writing with the secured
creditor, to be paid within the next 15 days but not
later than three [3] months from the date of auction,
the afore terms contemplate only fifteen days. The
Apex Court in SBI v. C. Natarajan, while holding that
the Rules are validly made under the Statute, has
opined thus in the matter of the Courts interfering with
the Secured Creditor's decision to forfeit the
incomplete price offered.
The upshot of the aforesaid discussion is that
whenever a challenge is laid to an order of
forfeiture made by an authorised officer under sub-
rule (5) of Rule 9 of the Rules by a bidder, who has
failed to deposit the entire sale price within ninety
days, the tribunals/courts ought to be extremely
reluctant to interfere unless, of course, a very
exceptional case for interference is set up. What
would constitute a very exceptional case, however,
must be determined by the tribunals/courts on the
facts of each case and by recording cogent reasons
for the conclusion reached.
6. This Court must opine that the petitioner cannot
succeed in this petition because:
- 32 -
NC: 2026:KHC:15039
WP No. 28218 of 2025
C/W WP No. 29083 of 2025
HC-KAR
[a] the petitioner, having participated in the auction
proceedings being aware of the consequences [and
being put on notice thereof], should have offered
the entire sale price,
[b] if there was any default by the first respondent
in delivering possession [or otherwise in complying
with the terms of the sale requirement], the
petitioner should have availed the remedies in law
to operate upon tendering the full value offered.
[c] the petitioner has withdrawn from the auction
proceedings without tendering the entire sale price
offered, he cannot show cause against forfeiture in
the light of the statutory provisions and the terms
of the Auction Notice.
Further, this Court opines that the petitioner has not
offered the sale price to his own peril inviting the
consequences, and there is no reason to interfere
under Article 226 of the Constitution of India only
because the first respondent has refunded some part of
the price offered. As such, the petition stands
rejected."
25. Having heard the learned Senior counsels on either
side, perused the entire material on record. In the light of the
submissions made on either side, the only issue that falls for
consideration is "whether the secured creditor after conducting
public auction and after accepting 25% of the bid amount
cancel the sale on the ground of pending litigation and extend
the benefit of OTS to the borrower?"
26. The present writ petition raises issues of considerable
importance touching up on the sanctity of statutory auctions,
- 33 -
NC: 2026:KHC:15039
WP No. 28218 of 2025
C/W WP No. 29083 of 2025
HC-KAR
the rights of an auction purchaser in the light of scope and
object of the SARFAESI Act, 2002.
27. Before dwelling into the merits of the matter, it is
appropriate to look into what is the purport of the SARFAESI
Act. The intention behind enacting the Act is for the swift, self
contained enforcement mechanism for recovery of dues to the
financial institutions. The Act aims at enabling the Banks and
financial institutions to realize long term assets and enforce
security interests without the intervention of Courts or Tribunal
except to a limited extent. The provisions provide for a time
bound adjudication for effective enforcement, restricted
borrower's rights after certain stages. Sale through transparent
public auction with an intent to maximize the value of the
property. The SARFAESI Act is a remedy against the delays but
not a mechanism to perpetuate it.
28. At this juncture, it is appropriate to look at
unamended Section 13(8) of the SARFAESI Act:
"13. Enforcement of security interest.-
(8) If the dues of the secured creditor together with all
costs, charges and expenses incurred by him are
tendered to the secured creditor at any time before the
date fixed for sale or transfer, the secured asset shall
not be sold or transferred by the secured creditor, and
- 34 -
NC: 2026:KHC:15039
WP No. 28218 of 2025
C/W WP No. 29083 of 2025
HC-KAR
no further step shall be taken by him for transfer or sale
of that secured asset."
29. As per the unamended provision, the borrower can
redeem the secured asset at any time before the date fixed for
sale or transfer. This provision led for last minute interventions,
uncertainty in public auction and reduced participation of
bidders. In the year 2016, amendment was made to Section
13(8) of the Act which reads as under:
"13. Enforcement of security interest. -
(8) Where the amount of dues of the secured creditor
together with all costs, charges and expenses incurred
by him is tendered to the secured creditor at any time
before the date of publication of notice for public
auction or inviting quotations or tender from public or
private treaty for transfer by way of lease, assignment
or sale of the secured assets,--
(i) the secured assets shall not be transferred by way of
lease, assignment or sale by the secured creditor; and
(ii) in case, any step has been taken by the secured
creditor for transfer by way of lease or assignment or
sale of the assets before tendering of such amount
under this sub-section, no further step shall be taken by
such secured creditor for transfer by way of lease or
assignment or sale of such secured assets."
30. As per the amended provision, borrower can redeem
the mortgage only before publication of auction notice. The
unamended provision gave the right to the borrower to redeem
the mortgage till completion of sale after the amendment, it is
allowed only before issuance of auction notice. The borrower
- 35 -
NC: 2026:KHC:15039
WP No. 28218 of 2025
C/W WP No. 29083 of 2025
HC-KAR
rights are significantly curtailed after the amendment. Once the
auction process is set in motion and third party rights are
created, neither the borrower nor the secured creditor can be
permitted to defeat the statutory sale except in cases of fraud
or illegality.
31. A public auction under the SARFAESI Act is a
statutory sale which is conducted under an authority of law but
not a contractual transaction. There should be transparency
and fairness in conducting the auctions and there should be
finality. Looking at the litigation which is pending in High Courts
as well as in the Tribunals shows that the object and purport of
the Act could not be achieved in its fullest sense. Auction
process is the mode of recovery frame work under the Act.
There is no dispute about the fact that sale becomes absolute
upon confirmation, but it does not mean that in the
interregnum, the Bank can arbitrarily cancel the auction as per
the whims and fancies, change the cause of auction in favour of
the principal borrower. In this case, admittedly, there is no
default on the part of the auction purchaser. The only reason
stated by the secured creditor for canceling the auction is the
pending litigation. If pending litigation is the only reason to
- 36 -
NC: 2026:KHC:15039
WP No. 28218 of 2025
C/W WP No. 29083 of 2025
HC-KAR
cancel the auction, no sale can be taken to its logical conclusion
and no one will come forward to participate in the auction.
32. The Rules do not give the right of redemption to the
borrower once the auction notification is issued. In this case,
vide letter dated 10.09.2025, the auction is cancelled and on
the very next day the Bank has given the offer of one time
settlement. It appears that what cannot be done directly, the
Bank wants to do it indirectly. In this process, whenever the
principle borrower questions the auction and the secured
creditor cancel the same, nobody will come forward to
participate and their confidence on the auction process will
erode. The auction process once is set into motion and party
concludes, it acquires a decree of finality and it cannot be
unsettled except on legally sustainable grounds. Otherwise the
object of the SARFAESI Act itself is defeated.
33. Then coming to the contention of the counsel for
respondent/Bank that the auction purchaser has no right to
question the auction as the sale is not confirmed is concerned,
there is no doubt that auction is not confirmed, petitioner is
declared as the highest bidder and he paid 25% of the bid
- 37 -
NC: 2026:KHC:15039
WP No. 28218 of 2025
C/W WP No. 29083 of 2025
HC-KAR
amount. The auction purchaser will get a right to question the
arbitrary cancellation and he has a right to ask that the sale
has to be taken to its logical conclusion. Petitioner has a
legitimate expectation and a right against the arbitrary
rejection. Though the rights of an auction purchaser may be
inchoate but it cannot be at the discretion of the secured
creditor. In the auction conditions, there will be a condition that
the Bank has a right to cancel the auction and that does not
mean that it will give unbridled power to the secured creditor.
The rules are framed in such a way where there is protection to
the borrower as well as the auction purchaser. In the present
case, because of the lapses on the part of the auction
purchaser, if the auction is cancelled, the auction purchaser has
no case. The impugned proceedings clearly shows that it is
because of the pending litigation. The secured creditor acts as a
trustee of the auction process, they have an obligation to act
transparent, adhere to the declared terms and avoid favouring
borrower post auction. This Court has come across several
cases where the Banks are taking decision sometimes in favour
of the auction purchaser and sometimes in favour of the
borrower contrary to the Act, rules and the circulars issued by
- 38 -
NC: 2026:KHC:15039
WP No. 28218 of 2025
C/W WP No. 29083 of 2025
HC-KAR
the Reserve Bank of India. When they want to confirm the
auction in favour of the auction purchaser it is the argument of
the Bank that in the light of amendment to Rule 13(8) of the
Rules, the right of redemption is not available once the auction
notice is issued. When they want to favour the borrower like in
this case, they will cancel the auction and immediately the next
day the OTS facility will be given to the borrower.
34. Learned Senior counsel had relied on the judgment of
the Kerala High Court in case of Ajmal K.V. referred supra and
this Court is not able to concur with the view in the light of the
above discussion.
35. A public auction conducted by the statutory authority
must inspire confidence but can not create uncertainty like in
this case. The Reserve Bank of India is the regulatory authority
for Banks and financial institution, which lays down binding
norms governing conduct of Bank in recovery and enforcement
proceedings by issuing circulars from time to time and they are
binding on Banks. The Reserve Bank of India plays a key role in
maintaining financial disciplines. In the considered opinion of
this Court, there are still certain grey areas which require
- 39 -
NC: 2026:KHC:15039
WP No. 28218 of 2025
C/W WP No. 29083 of 2025
HC-KAR
immediate attention of the Reserve Bank of India. More
elaborate guidelines/ circulars needs to be issued governing all
steps of auction. There should be an accountability mechanism
against the arbitrary action of the officers, audit scrutiny of
such decisions are very necessary. The Reserve Bank of India is
requested to look into these aspects and issue circulars in
strengthening the process for effective recovery of money by
the banks and financial institutions.
36. In the light of the above discussions, this Court is of
the view that the impugned letter deserves to be set aside and
the respondent/Bank shall proceed from that stage in
accordance with law. Hence, this Court is passing the following:
ORDER
i. The impugned letters dated 10.09.2025 bearing Ref:ARM-1/CR-435/395/2025-26 and Ref:ARM- 1/CR-435/394/2025 issued by the respondent/ Bank are set aside.
ii. Accordingly, both WP.Nos.28218/2025 and 29083/2025 are allowed.
- 40 -
NC: 2026:KHC:15039 WP No. 28218 of 2025 C/W WP No. 29083 of 2025 HC-KAR iii. The Registrar (Judicial) is directed to communicate the copy of this order to the Reserve Bank of India.
iv. All I.As. in these petitions shall stand closed.
SD/-
(LALITHA KANNEGANTI) JUDGE MEG List No.: 1 Sl No.: 1