Bank Cannot Cancel Confirmed Auction Sale Due To Pending DRT Proceedings: Kerala High Court

The Kerala High Court on 3 March held that a bank cannot unilaterally set aside a confirmed auction sale merely because proceedings challenging the sale are pending before the Debts Recovery Tribunal (DRT).

A Division Bench of Justice Anil K Narendran and Justice Muralee Krishna S was considering an appeal filed by the legal heirs of Vinod M.A., an auction purchaser. The Court stated:

“It is trite that the authorised officer of the Bank cannot set aside the sale which was already confirmed in the name of the predecessor of the appellants, only for the reason that the finalisation of proceedings pursuant to the same could not be completed due to a Securitisation Application filed by the borrowers pending before the Tribunal.”

Vinod M.A was the successful bidder in a 2018 e-auction conducted by Federal Bank and had deposited Rs. 9,00,500 (25% of the bid amount). The sale could not be completed as the borrowers challenged the auction before the DRT.

Following Vinod's death and the prolonged pendency of the Tribunal proceedings, his legal heirs sought a refund of the deposited amount with interest and compensation. The bank declined the request, citing the pending securitisation application. The Single Judge directed expeditious disposal of the DRT proceedings but did not order a refund, which led to the writ appeal.

The bank contended that the writ petition was not maintainable, as disputed questions of fact relating to the e-auction were already under consideration before the competent tribunal.

The Bench observed that the finalisation of the auction could not be done due to the pendency of proceedings before the DRT. Holding that the authorised officer could not set aside a confirmed sale under such circumstances, the Court noted that the reliefs sought in the writ petition, particularly the claim for compensation, cannot be adjudicated in writ jurisdiction.

It observed that the appropriate remedy would be to either take steps to finalise the proceedings before the DRT or approach the civil court for appropriate relief.

Accordingly, the appeal was dismissed.

For Appellants: Advocates C.Ajith Kumar, Rajeevu L.G and Varsha S.S

For Respondents: Liza P Cherian and Mohan Jacob George