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1. ISSUES PRESENTED AND CONSIDERED
1.1 Whether the auction sale conducted under the SARFAESI Act in 2007 was vitiated for want of the statutorily mandated gap between publication of sale notice and the date of sale.
1.2 Whether the amended Rule 9(1) of the Security Interest (Enforcement) Rules, 2002 (substituted in 2016) prescribing a shorter notice period for a second sale could be applied to a sale held in 2007.
1.3 Whether the High Court, in exercise of writ jurisdiction under Article 226 of the Constitution of India, ought to have set aside the auction sale on a technical ground relating to notice period despite long lapse of time, completion of sale, and substantial third-party developments on the property.
1.4 Whether the guarantor's challenge to the auction sale, initiated long after completion of the sale and issuance of the sale certificate, warranted interference or imposition of costs.
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1 & 2: Validity of auction sale and applicability of amended Rule 9(1)
Legal framework (as discussed)
2.1 The High Court proceeded on Rule 9(1) of the Security Interest (Enforcement) Rules, 2002, both in its unamended form (requiring 30 days' clear notice) and as substituted in 2016 (permitting 15 days' notice for a second sale). It also referred to Section 9 of the General Clauses Act, 1897 for computation of "clear days".
2.2 The High Court held that: (a) the amendment to Rule 9(1) in 2016 is procedural and operates prospectively; (b) therefore, the law applicable in 2007 required 30 days' clear notice; and (c) even assuming arguendo that the amended Rule applied and only 15 days' notice was required, the requirement of "clear" 15 days was not met on the facts when computed under Section 9 of the General Clauses Act.
Interpretation and reasoning
2.3 The Tribunal (DRT) had set aside the sale on the ground that the second publication of sale notice, dated 14.07.2007 and published on 16.07.2007, did not maintain a 30-day gap before sale, and expressed doubts on the timing of the valuation report and absence of demand notice.
2.4 The Appellate Tribunal (DRAT) reversed the DRT, holding, inter alia, that: (a) initially there was a gap of more than 30 days from the first sale notice; (b) the bank could not be held guilty for not maintaining a fresh 30-day gap after the second publication; (c) valuation and other documents were on record; and (d) the guarantor's objections were merely technical and unsupported by bona fide conduct.
2.5 The High Court, while restoring the DRT order, focused exclusively on the computation of clear notice period and, applying Section 9(1) of the General Clauses Act, concluded that there were not even 15 clear days between publication on 16.07.2007 and the dates of tender and sale (30.07.2007 and 31.07.2007 respectively), thereby invalidating the sale.
2.6 The Court noted that the High Court's interference was founded solely on this technical calculation of days and that the High Court did not account for the finality that had attached to the auction sale since 2007 or the subsequent developments on the property.
Conclusions
2.7 The Court did not endorse the High Court's approach of invalidating the sale purely on a technical question of days-counting under the Rules, in the face of long-settled rights and substantial third-party developments on the property.
2.8 The auction sale dated 31.07.2007, and the sale certificate issued on 30.11.2007 in favour of the auction purchaser, were restored and affirmed by setting aside the High Court's judgment and reviving the DRAT's order upholding the sale.
Issue 3: Scope of writ jurisdiction under Article 226 and discretionary interference with settled auction sales
Legal framework (as discussed)
3.1 The Court relied on the principles governing exercise of jurisdiction under Article 226 of the Constitution, particularly its discretionary and equitable character.
3.2 Reference was made to the decision in Shiv Shanker Dal Mills v. State of Haryana, which emphasised that the remedy under Article 226 is extraordinary and discretionary, and that courts may grant or withhold relief based on considerations of public interest and equity, even where a legal injury is shown.
Interpretation and reasoning
3.3 The Court observed that interference by a writ court for mere infraction of a statutory provision or norm, if such infraction has not resulted in injustice, is not automatic.
3.4 It reiterated that legal formulations cannot be applied in isolation from the factual realities; equity must temper the administration of law. Even where some illegality or invalidity in an action is found, the High Court can refuse to disturb the action if doing so is necessary to achieve substantial justice.
3.5 The Court held that the High Court erred in treating itself as a conventional appellate court by applying the rule on "clear days" in a purely technical manner, without factoring in:
(a) The auction sale having taken place in 2007.
(b) Full payment of sale consideration (approximately Rs. 24,00,000/-) and issuance of the sale certificate in 2007.
(c) The auction purchaser having been put in possession and having, with sanctioned plans, invested about Rs. 1.5 crores in construction and development on the property.
(d) The long lapse of time before the guarantor's challenge and the absence of earlier objection by borrower or guarantor.
3.6 The Court stressed that, in such circumstances, strict adherence to a technical defect in notice period, to unsettle an otherwise completed transaction and disturb third-party rights, was contrary to the equitable and discretionary nature of writ jurisdiction.
Conclusions
3.7 The Court held that the High Court ought not to have exercised its writ jurisdiction to set aside the auction sale solely on the ground of an alleged defect in notice period, particularly after such a long lapse of time and significant third-party development.
3.8 The High Court's interference was found inconsistent with the principles that Article 226 relief is discretionary, must be moulded to do substantial justice, and should not reduce the writ court to the role of a routine appellate forum on technicalities.
Issue 4: Conduct of the guarantor and consideration of costs
Interpretation and reasoning
4.1 The Court held the guarantor wholly responsible for dragging the auction purchaser into frivolous litigation on a very technical point, noting that:
(a) The borrower and guarantor remained silent until after the auction sale had been concluded and the sale certificate issued.
(b) The guarantor approached the Tribunal only in March 2008, despite the sale and issuance of the sale certificate in 2007.
(c) The challenge was premised on technical objections rather than substantive injustice, while public money of the bank and the bona fide rights of the auction purchaser were at stake.
4.2 The Court noted that it was inclined to impose costs on the guarantor for instituting frivolous litigation but ultimately refrained from awarding costs.
Conclusions
4.3 The guarantor's litigation was characterised as frivolous and technically motivated, unjustifiably jeopardising the auction purchaser's settled rights.
4.4 While no costs were imposed, the appeal was allowed, the High Court's judgment was set aside, and the DRAT's order upholding the auction sale was restored.
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