Recently Madhya Pradesh High Court Bench at Indore in the matter of Mrs. Rashmi Gupta & Others Vs. SMFG India Credit Company Ltd. (Formerly) Fullerton India Credit Co. Ltd.) and Others has come across issue wherein Debt Recovery Tribunal, Jabalpur (M.P.) (DRT) rejected the application of auction purchaser for restraining the bank to conduct second auction / re-auction.

In the said case Respondent Non-Banking Financial Corporation (NBFC) auctioned the secured asset under Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI) and Security Interest (Enforcement) Rules 2002 wherein the sale was confirmed in favour of Petitioner auction purchaser being highest bidder.  The Petitioner deposited 25% of sale consideration as per rule but thereafter due to interim order of DRT restraining the issue of sale certificate, did not deposit the balance sale consideration.

The Respondent NBFC insisted upon deposit of balance sale consideration and having failed to obtain the same, published notice for second auction of secured asset.

The action of the Respondent NBFC was challenged before DRT by the auction purchaser by application for staying the second auction but the same was rejected by the DRT and the issue was brought before High Court of M.P. Bench at Indore in MP No. 5122/2024 under article 227 of Constitution of India.

The High Court vide final order dated 18/11/2024 allowed the miscellaneous petition and set aside the order of DRT and Respondent was directed not to proceed with fresh auction of the secured asset without leave of the DRT.

The High Court observed that Petitioner auction purchaser prima facie could not have deposited the remaining amount on account of the interim protection granted by the DRT to the borrower and therefore Respondent / Bank was not in a position to issue the sale certificate in favour of auction purchaser. Since the Petitioner were not going to get sale certificate, the question of depositing the remaining amount did not arise therefore the learned DRT has wrongly rejected the application. If the Respondent Bank is permitted to proceed with fresh auction sale. It will create third party right during pendency of securitization application filed by the borrower and again Respondent Bank will not be in a position to issue sale certificate in favour of new auction purchaser in view of the interim order and therefore in order to avoid such complication, the DRT ought to have restrained the Bank to proceed with second auction proceeding. The auction purchaser was represented by Lex Maven Law Firm through its advocate Mr. Akash Rathi assisted by Advocate Suyash Malpani and Advocate Bhamini Rathi.