Supreme Court – Auction Sale Invalid for Multiple Infirmities
Judgment dated 30.9.2026 of the Supreme Court of India in Civil Appeal Nos.10077-10078 of 2014 of Sterling Holiday Resorts Limited Vs. M/s P.M. Associates and others with connected civil appeals.
On 12.9.2011, IFCI opened the bids and declared the successful bidder. On the same day, full consideration of Rs.20.10 crores was paid. The sale certificate was issued to the purpose as recorded by the High Court on 16.9.2011.
In the meanwhile, by the order dated 5.1.2012, the Supreme Court permitted the borrower to deposit the balance dues with IFCI in terms of the decree dated 23.10.2009 of the DRT, Delhi. In compliance of the said order , the borrower deposited Rs.8.80 crores.
In the meanwhile, the borrower challenged the auction notice dated 25.3.2010 in the High Court, whereas, the purchaser filed writ petition for registration of the sale certificate.
On 3.2.2021, the borrower paid further sum of Rs.3.72 crores in full and final settlement of IFCI dues.
On 8.2.2012, IFCI cancelled the auction sale certificate and refunded Rs.20 crores with interest.
The question was whether the auction process started with notice dated 25.3.2010 and culminated in the sale certificate dated 16.9.2011 was conducted in accordance with law.
Thirty days’ notice under Rule 8(6) and 9(1) is intended to afford the borrower a real and final opportunity to redeem the secured asst under Section 13(8) of the SARFAESI Act. A sale in breach of the said mandatory requirements is not sustainable.
INFIRMITIES IN THE AUCTION PROCESS 31. A careful scrutiny of the record discloses that the auction process in question suffers from multiple infirmities, each striking at a distinct safeguard in the statutory scheme. We shall deal with them in turn.
The sale was effected during the operation of DRT restraint order.
Violation of Rule 9(1) in effecting sale before expiry of thirty days. The bids were opened on 12.9.2011, concluded on 12.9.2011 and the sale certificate was issued on 16.9.2011 i.e. before expiry of third days.
No notice of opening of the bids on 12.9.2011 was given to the Borrower. Thus, the borrower was completely kept in the dark.
The purchaser of the property was a “nominee” of the bidder. However, neither the Rules nor the auction notice contemplate a nomination by the bidder in favour of a third party. The bidder was Ms.Rukmai but the sale certificate was issued in favour of her partnership firm M/s P.M. Associates.
Shockingly, the purchaser firm came into existence only on 12.9.2011 i.e. the bids were opened.
The original sale records were never produced. The details of other bidder have not been furnished.
The cumulative effect of the infirmities is unmistakable. The bid was received in defiance of a subsisting restraint, the sale was concluded before expiry of mandatory period, the certificate was issued to an entity which did not submit the bid nor existence.
