Telangana HC Upholds Sale of Mortgaged Property, Says 30-Day SARFAESI Notice Period Runs From First Valid Service

The Telangana High Court has upheld the auction sale of a mortgaged property by Bank of India, holding that the 30-day statutory period for an auction sale must be counted from the first valid service of the sale notice, not from a later supplementary communication.

Explaining its reasoning, the Division Bench of Justices Moushumi Bhattacharya and Gadi Praveen Kumar observed: “Acceptance of the borrower's contention would result in uncertainty and enable manipulation of timelines, thereby frustrating the very object of the SARFAESI Act, which is to ensure expeditious recovery of secured debts.”

The bench added, "Therefore, the date 25.05.2022 has to be taken as the relevant date, and reckoned from the said date, the auction held on 27.06.2022 clearly satisfies the statutory mandate.”

The ruling came in response to petitions filed by auction purchaser Jagan Mohan Pyrasani and the Bank of India against an order of the Debts Recovery Appellate Tribunal, Kolkata, which had set aside the auction sale.

Borrower Srikanth Reddy Kasu had taken a housing loan of ₹1.27 crore from Bank of India in 2017 by mortgaging his Kukatpally property. After default, the bank classified the account as a non-performing asset in January 2022, issued a demand notice for ₹1.48 crore, took symbolic possession, and issued a sale notice on May 23, 2022 for an e-auction on June 27.

The notice was affixed on the property on May 24, served on the borrower on May 25, and published in newspapers on May 26.

Pyrasani emerged as the highest bidder with a bid of ₹2.32 crore, far above the reserve price of ₹80.10 lakh. He paid the full consideration and received a sale certificate on August 6, 2022.

The borrower challenged the auction before the Debts Recovery Tribunal, Hyderabad, alleging procedural violations, but lost. However, the appellate tribunal held that the mandatory 30-day notice requirement had not been met and set aside the sale.

Before the High Court, the borrower argued that the sale notice was actually served only on June 4, 2022, leaving less than 30 days before the auction. He also argued that the property description was defective and claimed continued possession.

The bank and auction purchaser said the first valid service was on May 25 and that the June 4 communication was merely supplementary. They also pointed to the borrower's shifting stance on service of notice.

Relying on the Supreme Court's ruling in M. Rajendran v. KPK Oils and Proteins India Private Limited, the High Court held that the relevant rules contemplate a single composite sale notice.

“For the purpose of compliance with Rules 8(6) and 9(1), it is the first valid service that is relevant for computing the statutory period,” the Court observed.

Holding that the bank had complied with the law and that the appellate tribunal had wrongly interpreted the legal position, the High Court restored the auction sale.