Supreme Court sets aside property auction due to irregularities, orders return of sale amount with interest. Creditor bank authorized for recovery.

The Supreme Court found material irregularities in the auction sale process of a property due to default on a loan, leading to the sale being set aside. The Court directed the return of the amount to the auction purchaser with simple interest. Additionally, the Court instructed the creditor bank to provide details of the total amount due from the borrowers and authorized the bank to sell the property through auction if the borrowers failed to pay, ensuring recovery of dues with procedural fairness.

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Issues involved:
1. Validity of auction sale of property.
2. Compliance with rules and regulations in conducting the auction.
3. Maintainability of the second application filed under Section 17 of the Act.
4. Decision on returning the amount to the auction purchaser.
5. Direction regarding future actions by the creditor bank.

Issue 1: Validity of auction sale of property

The case involved Respondent nos. 1 to 3 defaulting on a loan, leading to the property being classified as a non-performing asset. The creditor bank issued a notice under Section 13(2) of the Act for repayment. Subsequently, symbolic possession of the property was taken, leading to legal challenges by the borrowers. The property was auctioned, and the auction purchaser filed appeals against the validity of the sale.

Issue 2: Compliance with rules and regulations in conducting the auction

The High Court and Debt Recovery Appellate Tribunal reviewed the auction sale process and found material irregularities. The auction purchaser argued that the sale was conducted in accordance with the Act and Rules, emphasizing fair pricing and wide publicity. However, the courts noted undue haste by the creditor bank in conducting the auction without waiting for pending legal proceedings, leading to the sale being set aside.

Issue 3: Maintainability of the second application filed under Section 17 of the Act

The Appellant contended that the second application under Section 17 was not maintainable as it raised a different cause of action. However, the Supreme Court disagreed, stating that the second application, challenging the auction after it had taken place, was distinct from the earlier challenges to the notice and sale, making it a valid application.

Issue 4: Decision on returning the amount to the auction purchaser

The Supreme Court modified the order, directing the return of the amount paid by the auction purchaser with simple interest. This decision was based on the findings of irregularities in the auction process and the need to protect the auction purchaser's interests.

Issue 5: Direction regarding future actions by the creditor bank

The Supreme Court, utilizing its powers under Article 142 of the Constitution, directed the creditor bank to provide details of the total amount due from the borrowers by a specified date. If the borrowers failed to pay, the bank was authorized to sell the property through auction after giving public notice. This direction aimed to ensure the recovery of dues while maintaining procedural fairness.

In conclusion, the Supreme Court upheld the findings of irregularities in the auction process, directed the return of the amount to the auction purchaser, and provided clear instructions for future actions by the creditor bank to recover outstanding dues.

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