Calcutta High Court Denies Relief To SARFAESI Auctions Buyer After DRT Bars SBI From Issuing Sale Certificate

The Calcutta High Court has held that State Bank of India cannot be faulted for withholding a sale certificate to a successful auction purchaser when it is restrained from doing so by a subsisting Debts Recovery Tribunal order. The Court refused to direct the bank to either complete the sale or refund ₹11.41 crore paid by the purchaser.

Justice Ravi Krishan Kapur held:

“This is not a case where the respondent bank has failed to issue the sale certificate on its own volition. There is no arbitrariness, malafides, or violation of any statutory duty of the respondent bank. On the contrary, there is an order of restraint passed by the Debts Recovery Tribunal prohibiting the respondent bank from issuing the sale certificate.”

The case arose after State Bank of India auctioned two commercial spaces at Shakespeare Sarani in Kolkata following a loan default by T.M. Exports Pvt. Ltd. R.S.H.S Impex Pvt. Ltd. emerged as the successful bidder and paid ₹11.41 crore for the properties.

Before the sale certificate could be issued, the Debts Recovery Tribunal passed an interim restraint order in pending proceedings. The order was passed at the instance of guarantor-cum-mortgagor Westwind Marketing Pvt. Ltd., preventing SBI from issuing the certificate.

The restraint continued thereafter. R.S.H.S Impex, which was later impleaded as a party to the tribunal proceedings, approached the High Court seeking issuance of the sale certificate. In the alternative, it sought refund of the sale consideration with interest.

The petitioner argued that SBI had failed to comply with its obligation to issue the final sale certificate after receiving the full consideration.

SBI opposed the plea. It argued that the petitioner had an effective alternative remedy before the tribunal and that the bank was merely complying with the restraint order.

The bank also submitted that it had forwarded a draft sale certificate. SBI submitted that it had repeatedly asked the petitioner to take possession of the secured asset, but the petitioner declined.

The petitioner relied on the Supreme Court's ruling in Celir LLP vs. Bafna Motors (Mumbai) Pvt. Ltd. & Ors. It argued that a successful auction purchaser acquires a vested right to a sale certificate.

The High Court, however, held that the ruling was distinguishable. Unlike in Celir, SBI had not withheld the certificate on its own but was prevented from acting by a tribunal order.

Justice Kapur further observed:

“In view of the efficacious statutory alternative remedy available to the petitioner, it would be appropriate for the petitioner to approach the Debts Recovery Tribunal.”

Noting that the petitioner had participated in the auction with full knowledge of the pending litigation disclosed in the sale notice, the Court found no reason to entertain the writ plea. It also noted that the petitioner was already a party before the tribunal.

The court held that entertaining the writ petition could lead to conflicting judicial decisions. It accordingly dismissed the plea while granting liberty to the petitioner to seek appropriate relief before the DRT.

For Petitioner: Advocates Pranit Bag, Pradeep Jewrajka, Pooja Jewrajka, Ayush Singhania, Rahul Poddar

For Respondent Bank: Senior Advocate Probal Mukherjee; Advocates Deblina Lahiri, Mrinmoy Chatterjee

For Union of India: Advocate Rajesh Kumar Shah