The Supreme Court has held that even after confirmation of an auction sale in bank recovery proceedings, courts may permit scrutiny of the valuation of the secured property to ensure that the sale fetched a fair and adequate price.
A bench of Justice J.B. Pardiwala and Justice R. Mahadevan observed that while the rights of bona fide auction purchasers are generally protected, such protection is not absolute. Courts may still examine issues relating to the adequacy of valuation or fairness of the auction process.
The bench dismissed a civil appeal filed by auction purchaser Om Sakthi Sekar, thereby upholding the Madras High Court’s direction to the Debts Recovery Tribunal (DRT) to reconsider the valuation of the auctioned properties.
The dispute arose from recovery proceedings initiated by Indian Bank against a borrower company and its guarantors in connection with default in repayment of a banking facility. The borrower had entered into an arrangement with the bank in 1992 for an “at par facility” involving cheque payments backed by a cushion fund. However, the borrower repeatedly failed to maintain sufficient funds, leading to financial exposure for the bank.
To secure the liability, guarantors deposited title deeds of several properties situated in Puducherry, thereby creating an equitable mortgage. When the borrower failed to clear the dues despite legal notices, the bank approached the Debts Recovery Tribunal (DRT), Chennai seeking recovery of approximately ₹45.66 lakh along with interest.
In January 2010, the DRT allowed the bank’s claim and issued a recovery certificate against the borrower and guarantors. Subsequently, the mortgaged properties were attached and brought to auction as part of the recovery proceedings.
The auction of the mortgaged properties was conducted on 29 October 2010. The appellant, Om Sakthi Sekar, emerged as the highest bidder with a bid of about ₹2.10 crore, exceeding the upset price of ₹2 crore. The successful bidder paid the sale consideration and the DRT confirmed the sale in January 2011. A sale certificate was issued and registered shortly thereafter, transferring title to the auction purchaser.
However, the guarantors challenged the recovery proceedings and auction before the Debts Recovery Appellate Tribunal (DRAT). The DRAT ultimately upheld the validity of the auction sale and recognised the auction purchaser as a bona fide third-party bidder.
The guarantors later approached the Madras High Court through a writ petition challenging the recovery proceedings. While the High Court upheld the bank’s right to recover the dues and confirmed the legality of the auction sale, it expressed concern regarding the valuation adopted for the mortgaged properties.
The High Court therefore directed the DRT to reconsider the valuation of the properties and determine whether they had been sold at a lower value than their actual worth.
Challenging the High Court’s order, the auction purchaser argued before the Supreme Court that once an auction sale has been confirmed and a sale certificate issued, the rights of a bona fide purchaser cannot be disturbed except in cases of fraud or material irregularity.
The appellant also contended that the valuation report relied upon by the DRT had been prepared before the auction and was never challenged by the respondents at the relevant time. Reopening the issue more than a decade later, it was argued, would undermine the finality of judicial sales.
On the other hand, the respondents questioned the legality of the auction and raised allegations regarding procedural irregularities, including issues related to payment of the bid amount and the validity of the recovery certificate.
The Court emphasised that the objective of an auction in recovery proceedings is to secure the maximum realisable value of the secured asset through transparent competitive bidding. If questions arise regarding valuation or reserve price fixation, courts may permit scrutiny to ensure that the process was fair and that the property fetched the best possible price.
Importantly, the Court noted that the High Court had not set aside the auction sale but had only directed reconsideration of the valuation issue by the DRT. Such a limited remand does not invalidate the sale or disturb the recovery already effected by the bank.
Final Verdict
Holding that the High Court’s direction represented a balanced approach, the Supreme Court found no reason to interfere. The Court ruled that the limited remand to the DRT for reconsideration of valuation was legally permissible and necessary to ensure fairness in the recovery process.
Accordingly, the Supreme Court dismissed the civil appeal, leaving it open to the DRT to examine the valuation issue in accordance with law.
Case Details
Case Title: Om Sakthi Sekar Versus V. Sukumar & Ors.
Citation: JURISHOUR-361-SC-2026
Case No.: Civil Appeal No. 3362 Of 2026
Date: 13/02/2026
