Pre-deposit verification and recovery auction: stay orders fail when the debt due is higher than the amount assumed.

A pre-deposit order requiring at least 25% of the debt due could not be satisfied by accepting a lower deposit without verifying the recovery record; where the sale proclamation showed liability far above the figure assumed, the stay orders halting auction were legally unsustainable and were quashed, with the auction stay vacated. A writ challenge to restraint on alienation and auction also failed because the record, prior proceedings and consent terms showed continuing liability beyond the amount asserted, and no jurisdictional defect in the recovery process was established; the writ petition was dismissed with costs. The governing principle was that recovery or auction cannot be restrained on an incorrect factual premise about the debt due.

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Issues: (i) Whether the Registrar, DRAT and the Recovery Officer, DRT-I were justified in treating the deposit of Rs.1.25 crores as sufficient pre-deposit and in staying the public auction of the secured flat. (ii) Whether the writ petition seeking restraint against alienation and auction of the secured flat was maintainable and liable to succeed on the ground that the recovery steps lacked jurisdiction or were confined only to Rs.5 crores.

Issue (i): Whether the Registrar, DRAT and the Recovery Officer, DRT-I were justified in treating the deposit of Rs.1.25 crores as sufficient pre-deposit and in staying the public auction of the secured flat.

Analysis: The order dated 2 December 2021 required a pre-deposit of at least 25% of the debt due as claimed by the secured creditor or determined by the DRT, whichever was less. The record showed that the sale proclamation itself reflected an amount far in excess of Rs.5 crores, and the officers concerned proceeded on an incorrect premise by accepting the smaller figure without verification. The Court found that this approach was legally unsustainable and inconsistent with the recovery record.

Conclusion: The impugned orders accepting the deposit as sufficient and staying the auction were quashed and set aside, and the stay on the public auction was vacated.

Issue (ii): Whether the writ petition seeking restraint against alienation and auction of the secured flat was maintainable and liable to succeed on the ground that the recovery steps lacked jurisdiction or were confined only to Rs.5 crores.

Analysis: The recovery record, earlier proceedings, consent terms and prior unsuccessful challenges showed continuing liability beyond the limited figure asserted by the petitioners. The Court held that the recovery authorities had acted in accordance with the existing proceedings and that the attempt to obstruct the auction was not justified. The petitioners' challenge did not establish any jurisdictional defect in the recovery process.

Conclusion: The writ petition was dismissed with costs.

Final Conclusion: The Court sustained the recovery process in one writ petition and interfered with the stay orders in the other, resulting in partial success overall.

Ratio Decidendi: Where the record and sale proclamation disclose that the debt due is far higher than the figure assumed for pre-deposit, the authority must verify the correct basis under the governing stay order before halting recovery or auction proceedings.

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