Borrower Who Ignored Private Treaty Sale Notice Cannot Later Question Lack Of Written Terms: DRAT Chennai
Kirit Singhania
17 March 2026 9:06 PM IST
The Debts Recovery Appellate Tribunal at Chennai has held that a borrower who neglects to respond to notice of a proposed private treaty sale, despite having knowledge of it, cannot later challenge the sale as invalid for want of written terms of the private treaty.
The tribunal was dealing with cross-appeals filed by ICICI Bank and the auction purchaser challenging the order of the Debts Recovery Tribunal, Chennai, dated February 18, 2013, which had set aside the sale of secured property.
Chairperson Justice G. Chandrasekharan in an order dated January 27, 2026, observed:
“When first respondent had neglected to respond to the notice of sale of property through private treaty, this Tribunal is of the view that first respondent cannot claim that sale held without reducing the terms of sale through private treaty in writing, is not valid and the same cannot be countenanced and accepted.”
The dispute arose after the borrower defaulted on loan repayment, leading ICICI bank to initiate proceedings under the SARFAESI Act. After two failed auction attempts, the bank decided to sell the secured asset through private treaty and issued a notice dated May 30, 2012 informing the borrower of the proposed sale.
The notice was served on the borrower's mother, who was also the power of attorney holder. No objections were raised by the borrower to the proposed private treaty sale.
Before the tribunal, the borrower contended that the sale was invalid as there was no written agreement recording the terms of private treaty between the parties.
Rejecting this contention, the tribunal held that when the borrower had neglected to respond to the notice despite having knowledge of the proposed sale, he could not later challenge the sale on technical grounds relating to absence of written terms.
However, the tribunal noted that there was non-compliance with mandatory requirements under the SARFAESI Rules, particularly the absence of a clear 30 day notice of sale. On this ground, it upheld the DRT's decision setting aside the sale, while directing refund of the sale consideration to the auction purchaser.
Both appeals were dismissed by the appellate tribunal.
For Appellant Bank: T. Srinivasaraghavan & Associates
For Respondents: Advocate K.J. Parthasarathy, R. Usha Priya & Co.