Waiver and equitable estoppel bar a SARFAESI challenge where the borrower induced deferment and later disputed enforcement.

A borrower cannot sustain a SARFAESI challenge on an alleged failure to respond under Section 13(3A) where its own repeated requests for restructuring and indulgence induced deferment of enforcement and third-party rights later arose; waiver and equitable estoppel were applied against the borrower. The valuation and sale were also upheld because the secured asset was separately identified in the valuation report, no legal requirement existed to auction machinery separately, no prejudice was shown, and the final bid exceeded both the reserve price and assessed value. Interference with the auction was unwarranted on the facts, and the sale was sustained.

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Issues: (i) Whether the borrower could succeed in challenging the enforcement measures on the ground that the secured creditor failed to respond to its representations under Section 13(3A) of the SARFAESI Act, 2002. (ii) Whether the valuation of the secured asset was vitiated because the machinery was not separately auctioned and the valuation report was allegedly stale. (iii) Whether the auction and sale of the secured asset were liable to be interfered with on the facts of the case.

Issue (i): Whether the borrower could succeed in challenging the enforcement measures on the ground that the secured creditor failed to respond to its representations under Section 13(3A) of the SARFAESI Act, 2002.

Analysis: The borrower repeatedly sought restructuring, moratorium, and indulgence after receipt of the demand notice and after the measures under Section 13(4). The secured creditor had considered the borrower's requests, deferred action for a substantial period, and granted repeated opportunities. The borrower did not comply with the promised payment and documentation, and third-party rights had intervened by the time the challenge was pursued. On these facts, the borrower's conduct amounted to waiver of the grievance and also attracted the principle of equitable estoppel.

Conclusion: The challenge based on alleged violation of Section 13(3A) was not sustainable and the issue was decided against the borrower.

Issue (ii): Whether the valuation of the secured asset was vitiated because the machinery was not separately auctioned and the valuation report was allegedly stale.

Analysis: The valuation report separately identified the land, building, and machinery. The report was not disputed. There was no legal requirement that the machinery had to be sold separately, and no prejudice to the borrower was shown. The later auction fetched a bid higher than the reserve price and the assessed value. The age of the valuation report did not vitiate the sale in the circumstances, particularly because subsequent auctions failed and the final bid exceeded the valuation and reserve price.

Conclusion: The valuation process and the sale were upheld on this ground, against the borrower.

Issue (iii): Whether the auction and sale of the secured asset were liable to be interfered with on the facts of the case.

Analysis: The borrower had repeatedly sought time and restructuring, remained inactive when later auction notices were issued, and challenged the proceedings only after the property had been sold and transferred to third parties. The overall conduct showed lack of bona fides and justified continued enforcement by the secured creditor.

Conclusion: Interference with the auction and sale was unwarranted.

Final Conclusion: The appeals succeeded, the writ petition challenge to the enforcement action failed, and the sale of the secured asset under the SARFAESI regime was sustained.

Ratio Decidendi: A borrower who, by repeated requests, induced the secured creditor to defer enforcement and allowed third-party rights to arise, may be held to have waived the procedural objection and be estopped from later challenging the measures under the SARFAESI Act.

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