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Varimadugu Obi Reddy vs. B. Sreenivasulu & Ors.

Civil Appeal · 2022 INSC 1207Decided 16 Nov 2022
Civil Appeal No. 8470 of 2022
Ajay Rastogi · C.T. Ravikumar

Background

A bank sold a mortgaged property in an e-auction after the borrowers defaulted on their loans, and the appellant was declared the highest bidder and issued a sale certificate. The borrowers challenged the auction before the Debts Recovery Tribunal, which rejected their objections, but the Telangana High Court later set aside the entire sale on the grounds that (a) the auction notice had a typographical error in the property's door number, and (b) the auction purchaser paid the final 75% of the bid amount four days after the technical 15-day deadline. The auction purchaser appealed to the Supreme Court against the High Court's order cancelling the sale.

Decision Breakdown

The Supreme Court held that the door-number typo (which appeared consistently and did not create any real ambiguity about which property was being sold, and caused no proven prejudice to the borrowers) was inconsequential and did not invalidate the auction. On the four-day delay in depositing the balance amount, the Court held that the 15-day period under Rule 9(4) of the Security Interest (Enforcement) Rules, 2002 is not absolutely rigid and can be extended by agreement; here the delay occurred amid genuine confusion caused by the borrowers' own parallel litigation and repeated requests for more time before the Tribunal, and the borrowers were not shown to have suffered any prejudice from the short delay. The Court restored the Tribunal's order, set aside the High Court's judgment, and allowed the appeal, while directing that a leftover surplus sale amount (after loan adjustment) be paid back to the borrowers/guarantor with accrued interest.

Lesson Learnt

Minor clerical errors in an auction notice and short, explainable delays in payment will not automatically void a bank e-auction sale unless the objecting party can show real prejudice or ambiguity was caused; procedural technicalities are not read so strictly as to defeat a bona fide auction purchaser's rights when the borrower's own conduct contributed to the delay.

Official source (sci.gov.in)View Judgment (PDF)

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