Kiran Raj

The Supreme Court of India Division Bench of Justice J.B. Pardiwala and Justice R. Mahadevan, on Friday (March 13), held that conclusion of an auction sale does not bar re-valuation of auctioned property where credible questions arise about the adequacy of the reserve price. The Court clarified that protection afforded to a bona fide auction purchaser is not absolute, and supervisory jurisdiction may be invoked to ensure recovery proceedings secure the best possible value, balancing the interests of both creditor and borrower.

Indian Bank, Pondicherry entered into an agreement with a borrowing company for an 'at par facility' in respect of cheques issued by them, subject to the company maintaining a cushion fund. The company defaulted on this condition, leading to a shortfall. Guarantors created an equitable mortgage by depositing title deeds of five scheduled properties as security for the shortfall. When the company failed to repay despite a legal notice, Indian Bank filed proceedings before the Debts Recovery Tribunal seeking recovery of outstanding dues with interest.

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The DRT passed a final order holding Indian Bank entitled to recover the dues from the company, its directors, and guarantors jointly and severally. Subsequently, the secured properties were attached and brought to public auction under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, following the procedure prescribed under the Second Schedule to the Income Tax Act, 1961. A valuation report was obtained prior to the auction, sixteen bidders participated, and a third-party purchaser emerged as the highest bidder. The sale was confirmed and a registered sale certificate was issued in the purchaser's favour.

The guarantors thereafter challenged the DRT's order before the Debts Recovery Appellate Tribunal, which affirmed the legality of the auction and protected the purchaser's rights. The guarantors subsequently approached the High Court, which upheld the recovery proceedings but remitted the question of property valuation to the DRT for fresh consideration, observing that if the properties were sold below their actual worth, the auction purchaser may be directed to make good the difference.

The Court observed that "while there can be no quarrel with the settled proposition that the rights of a bona fide auction purchaser deserve due protection and that confirmed court sales should not ordinarily be interfered with, it is equally well established that such protection is not absolute. Where credible issues are raised regarding the adequacy of valuation or the fairness of the process leading to the fixation of the reserve price, the supervisory jurisdiction of the Court may be invoked to ensure that the recovery proceedings have been conducted in a manner that secures the best possible value of the property. The objective of recovery proceedings is not merely to complete the sale but to realise the maximum value of the secured asset so as to balance the interests of the creditor and the borrower."

Rejecting the appellant's contention, the Court, relying on Rajiv Kumar Jindal v. BCI Staff Welfare Association (2023), held that confirmation of an auction sale by itself would not render the matter entirely immune from further scrutiny, particularly when credible issues regarding the adequacy of valuation or fixation of the reserve price arise. In that case, it was observed that "the purpose of an auction is to obtain the most remunerative price for the property by affording an opportunity to intending purchasers to participate in a process of competitive bidding, thereby ensuring transparency and fairness in the sale" and that "if the process of competitive bidding is curtailed or compromised, the possibility of underbidding or securing an inadequate price cannot be ruled out. In such circumstances, the court is required to exercise its discretion with circumspection so as to safeguard the legitimate interests involved in the sale process."

Applying the law to the facts, the Court observed that "the contention of the learned senior counsel for the appellant that the confirmation of the sale renders the matter entirely immune from further scrutiny cannot be accepted in the absolute terms in which it has been urged. The principle of finality attached to court-confirmed auction sales cannot operate to shield the process from judicial examination where the question relates to the adequacy of valuation or fixation of reserve price, particularly when such examination is necessary to ensure that the secured asset has fetched the best possible price. The requirement that the recovery process be fair, transparent and based on a proper assessment of value must co-exist with the principle of finality governing confirmed sales."

On the scope of the High Court's remand, the Court stated that the direction issued merely remits the matter to the DRT for examination of valuation with reference to relevant materials on record, and that "such a limited remand does not prejudge the rights of the auction purchaser, but enables the DRT to assess whether the valuation and fixation of the reserve price were in accordance with law." It further recorded that the remand does not disturb the recovery already effected by the bank nor does it render the auction proceedings void.

The Court concluded that "no error can be found in the course adopted by the High Court in remitting the matter to the DRT for reconsideration of the issue of valuation, which reflects a balanced exercise of jurisdiction and does not require interference by this Court."

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The Court directed: "We however leave the issue regarding the valuation adopted for the Schedule A to E properties in the Recovery Proceedings to be decided by the DRT afresh. In case, the properties have been sold for a lower value, the 9th respondent may be directed to pay for the same."

"In the light of the above discussion, we are constrained to uphold the ultimate conclusion arrived by the DRT and the DRAT while remitting the case back to the DRT as far as valuation of Schedule A to E properties in the recovery proceedings. Accordingly, the Civil Appeal stands dismissed. However, there is no order as to costs. Pending application(s), if any, shall stand disposed of."

Advocates Representing the Parties

For Petitioner(s): Mr. Nachiketa Joshi, Sr. Adv. Mr. Sai Shashank, Adv. Mr. Monu Kumar, Adv. Mr. Ayush Anand, AOR

For Respondent(s): Mr. Brijesh Kumar Tamber, AOR Mr. V Chitambaresh, Sr. Adv. Mr. Chand Qureshi, AOR Mr. Ch. Leela Sarveswar, Adv. Mr. Sonal Gupta, Adv. Mr. A. Syedmusthaba, Adv. Mrs. J.vijyakumari, Adv. Mr. Vijay Kumar, Adv. Mr. Sundeep Pandhi, Adv. Ms. Velasree S, Adv. Mr. Rajat Baijal, Adv. Mr. Punit Agarwwal, Adv. Mr. Sajal Jain, AOR

Case Title: Om Sakthi Sekar v. V. Sukumar & Ors.

Neutral Citation: 2026 INSC 237

Case Number: Civil Appeal No. 3362 of 2026 arising out of SLP (C) No. 2122 of 2022

Bench: Justice J.B. Pardiwala and Justice R. Mahadevan