The Bombay High Court has clarified that the Debts Recovery Appellate Tribunal (DRAT) lacks jurisdiction to issue directions regarding the possession of auctioned property once the appeal before it is rendered infructuous. This ruling reinforces the principle that appellate tribunals must confine their orders to the scope of the dispute actually before them, protecting the rights of bona fide auction purchasers who have fully paid the sale consideration.
Background & Facts
The Dispute
The petitioners, Narendra Nandkishor Borate and another, were auction purchasers of a residential property sold by Tata Capital Housing Finance Limited (Respondent No. 1), a secured creditor, under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). The property was auctioned to recover dues from Respondent Nos. 2 to 7, who were borrowers and guarantors under two defaulted loan accounts. The auction was conducted on 22nd May, 2024, and the petitioners emerged as successful bidders for the residential property.
Key Facts
- The secured creditor had two NPA accounts: one secured by a commercial property and another by a residential property.
- On 22nd May, 2024, the auction was held for both properties simultaneously.
- The petitioners deposited 25% of the bid amount on 22nd May, 2024, and the remaining 75% on 17th and 19th August, 2024.
- A sale confirmation letter was issued to the petitioners on 23rd May, 2024.
- A sale certificate was issued in favour of the petitioners on 22nd August, 2024, after full payment.
- Respondent Nos. 2 to 7 had filed two Securitisation Applications before the Debts Recovery Tribunal (DRT), Pune: SA No. 90 of 2024 (residential property) and SA No. 511 of 2023 (commercial property).
- On 3rd June, 2024, a common undertaking was submitted before the DRT, promising repayment and waiving objection to sale of both properties in case of default.
- Respondent Nos. 2 to 7 defaulted on the repayment schedule under the undertaking.
- On 31st July, 2024, the DRT disposed of SA No. 90 of 2024 (residential property) and closed the proceedings.
- On 22nd August, 2024, the DRT dismissed an application by Respondent Nos. 2 to 7 seeking extension of time to pay under the undertaking, relating only to SA No. 511 of 2023 (commercial property).
- On 10th December, 2024, the DRAT passed an order in Miscellaneous Appeal No. 2061 of 2024, which had been filed against the DRT’s dismissal of the extension application.
Procedural History
- 22nd May, 2024: Auction of residential and commercial properties conducted.
- 23rd May, 2024: Sale confirmation letter issued to petitioners.
- 17th and 19th August, 2024: Petitioners paid remaining 75% of sale consideration.
- 22nd August, 2024: Sale certificate issued to petitioners.
- 31st July, 2024: DRT disposed of SA No. 90 of 2024 (residential property) and closed proceedings.
- 22nd August, 2024: DRT dismissed application for extension of time to pay (filed in SA No. 511 of 2023).
- 10th December, 2024: DRAT passed impugned order in Miscellaneous Appeal No. 2061 of 2024.
- 23rd April, 2026: Bombay High Court heard Writ Petition No. 11067 of 2025.
The Parties' Positions
Petitioners (Auction Purchasers): Argued that the DRAT had no jurisdiction to interfere with the sale of the residential property after the appeal was infructuous and after the DRT had already disposed of the only pending proceeding concerning that property. They emphasized that they had paid the full consideration and were entitled to possession.
Respondent Nos. 2 to 7 (Borrowers/Guarantors): Contended that since the commercial property was sold for Rs. 3.07 crores and they had paid Rs. 65 lakhs, the entire debt was satisfied, making the sale of the residential property unnecessary. They sought to preserve the residential property through an interim application pending in SA No. 511 of 2023.
Respondent No. 1 (Secured Creditor): Stated that all actions were taken strictly in accordance with the SARFAESI Act and that the auction was lawful.
Relief Sought
The petitioners sought quashing of the DRAT’s order dated 10th December, 2024, particularly the direction that possession of the residential property be withheld pending decision of an unrelated application. They sought immediate enforcement of the sale certificate and delivery of possession.
The Legal Issue
The central question was whether the DRAT, having found an appeal to be infructuous due to the expiry of the time period sought for extension, retains jurisdiction to issue directions regarding the possession of a property that is no longer subject to any pending proceeding before the DRT.
Arguments Presented
For the Petitioner
The petitioners relied on the settled principle that an appellate tribunal’s jurisdiction is confined to the subject matter of the appeal. Once the DRAT acknowledged that the appeal was infructuous - because the extension period sought (5th September, 2024) had lapsed - it had no legal basis to examine the necessity of selling the residential property. The only pending securitisation application before the DRT was SA No. 511 of 2023, concerning the commercial property. The residential property’s sale had already been adjudicated and closed by the DRT on 31st July, 2024. The interim application filed by Respondent Nos. 2 to 7 in SA No. 511 of 2023 seeking cancellation of the residential sale was legally unsustainable, as interim relief cannot be granted without a pending final relief concerning the same property. The petitioners emphasized their status as bona fide purchasers who had fulfilled all obligations under the SARFAESI Act.
For the Respondent
Respondent Nos. 2 to 7 argued that the DRAT’s intervention was necessary to prevent unjust enrichment of the secured creditor, as the commercial property sale had already recovered the entire debt. They contended that the DRAT’s direction was a practical measure to avoid multiplicity of proceedings and ensure fairness. They relied on the common undertaking and the principle that only so much property as necessary to recover the debt should be sold. Respondent No. 1 supported the auction process as lawful but did not oppose the petitioners’ entitlement to possession.
The Court's Analysis
The Bombay High Court conducted a rigorous analysis of the DRAT’s order, focusing on jurisdictional limits under the SARFAESI Act and the nature of appellate authority. The Court observed that the DRAT, in paragraph 4 of its order, correctly concluded that the appeal was infructuous because the extension period sought (until 5th September, 2024) had expired by the time the appeal was heard on 10th December, 2024. This finding alone should have concluded the matter.
"The scope of this appeal is therefore limited to whether the DRT was justified in declining to grant an extension till 05.09.2024. They could not pay the amount even within that time and therefore, the appeal has now become infructuous."
Despite this clear conclusion, the DRAT proceeded to examine whether the sale of the residential property was necessary, even though no pending securitisation application remained before the DRT concerning that property. The Court emphasized that the DRT had already disposed of SA No. 90 of 2024 on 31st July, 2024, thereby extinguishing any substantive challenge to the residential property’s sale.
The Court held that the DRAT’s direction to withhold possession pending a decision in SA No. 511 of 2023 - a proceeding concerning only the commercial property - was legally untenable. The interim application filed by Respondent Nos. 2 to 7 seeking cancellation of the residential sale was not maintainable in a proceeding that had no connection to the residential property. The Court cited the settled doctrine that interim relief can only be granted in aid of a final relief that is pending in the same proceeding.
The Court further noted that the DRAT’s observation regarding the sufficiency of sale proceeds was an advisory opinion beyond its jurisdiction. The question of whether the secured creditor had over-recovered was a matter for the DRT to determine in a proper proceeding, not for the DRAT to decide in an appeal that had become infructuous.
The Court concluded that the DRAT’s order was a clear jurisdictional overreach, violating the principles of natural justice and statutory limits on appellate authority. The impugned direction was not merely erroneous - it was ultra vires.
The Verdict
The petitioners succeeded. The Bombay High Court quashed and set aside paragraph 6 of the DRAT’s order dated 10th December, 2024, which directed that possession of the residential property be withheld pending decision of the DRT. The Court held that the disposal of the appeal as infructuous was the only correct conclusion. The sale certificate issued to the petitioners on 22nd August, 2024, stands valid and enforceable. The secured creditor is directed to hand over possession of the residential property to the petitioners within four weeks of the judgment. No costs were awarded.
What This Means For Similar Cases
Appellate Tribunals Cannot Expand Jurisdiction Post-Infructuous Appeal
- Practitioners must challenge any appellate order that continues to adjudicate substantive issues after concluding the appeal is infructuous.
- The mere fact that a dispute remains pending elsewhere does not confer jurisdiction on an appellate tribunal to issue binding directions on unrelated matters.
Auction Purchasers Are Protected Upon Full Payment and Certificate Issuance
- Once a sale certificate is issued under the SARFAESI Act and full payment is made, the auction purchaser’s rights crystallize.
- Any stay on possession must be grounded in a valid, pending proceeding concerning the same property - not an unrelated application.
Interim Relief Cannot Be Granted Without a Pending Final Relief
- Applications seeking interim relief (e.g., cancellation of sale) must be filed in a proceeding that seeks a final remedy concerning the same asset.
- Filing such applications in unrelated proceedings (e.g., seeking to cancel residential sale in a commercial property proceeding) is legally unsustainable and will be dismissed.
