The Andhra Pradesh High Court has reinforced procedural safeguards under the SARFAESI Act by directing the Debt Recovery Tribunal to decide pending interlocutory applications within ten days, even as it declined to entertain a writ petition challenging an imminent auction. The judgment underscores that while writ jurisdiction is not a substitute for statutory remedies, courts must ensure that statutory forums act with urgency to prevent irreparable loss to borrowers.
Background & Facts
The Dispute
The petitioner, a principal borrower, challenged the Union Bank of India’s publication of an auction notice dated 11.01.2026, fixing the auction date for 28.01.2026, without serving a formal sale notice on him or affixing it on the secured property. He contended this violated the proviso to Rule 9(1) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (Enforcement) Rules, 2002, which mandates both personal service and physical affixation of the auction notice.
Procedural History
The petitioner had already filed a securitization application (S.A. No. 351 of 2025) before the Debt Recovery Tribunal, Visakhapatnam, seeking to challenge the bank’s recovery measures. Concurrently, he filed four interlocutory applications (I.A. Nos. 394 - 397 of 2026) seeking interim relief to halt the auction pending adjudication. Despite the urgency - given the auction was scheduled for the very day the writ petition was heard - the Tribunal had not taken up these applications.
Relief Sought
The petitioner sought a writ of mandamus to declare the auction notice illegal, restrain the bank from conducting the auction, and direct the DRT to dispose of the pending interlocutory applications without delay.
The Legal Issue
The central question was whether the High Court could intervene under Article 226 to restrain an auction under the SARFAESI Act when the borrower had already approached the statutory forum (DRT), and whether the DRT’s inaction on urgent interlocutory applications amounted to a violation of natural justice.
Arguments Presented
For the Petitioner
The petitioner’s counsel relied on M/s. Muthoot Finance Ltd. v. P. Suresh Kumar and Saraswati Industrial Syndicate v. C.I.T., arguing that failure to serve notice under Rule 9(1) renders the auction void ab initio. He emphasized that the DRT’s delay in deciding I.A. Nos. 394 - 397 created an imminent risk of third-party interests being created, which could not be remedied later. He invoked the principle that procedural compliance is non-negotiable under SARFAESI.
For the Respondent
The bank’s counsel contended that the writ petition was an abuse of process, as the petitioner had an adequate statutory remedy before the DRT. He cited M/s. PNB v. M. S. S. Srinivasan to argue that High Courts must refrain from entertaining writ petitions where a specific statutory forum exists, unless there is a clear violation of fundamental rights or jurisdictional error.
The Court's Analysis
The Court acknowledged the petitioner’s valid grievance regarding non-compliance with Rule 9(1) but held that the existence of a statutory remedy before the DRT barred the exercise of writ jurisdiction under Article 226. However, the Court recognized the exceptional urgency: the auction was scheduled for the same day, and the DRT had failed to act on four pending applications despite the borrower’s plea for interim protection.
"The DRT cannot remain a silent spectator when the very purpose of the SARFAESI Act - to provide a time-bound mechanism for recovery - is undermined by its own inaction."
The Court emphasized that while it could not directly interfere with the auction, it could and must ensure that the statutory forum acted expeditiously. It noted that the sale certificate cannot be issued until 75% of the sale price is deposited, which provides a 15-day window for adjudication. This temporal buffer, the Court held, was sufficient to allow the DRT to decide the interlocutory applications without causing irreversible harm.
The Court further observed that natural justice demands that a borrower’s application for interim relief, particularly when an auction is imminent, must be heard with urgency. The Tribunal’s failure to do so constituted a breach of its statutory duty under Section 19(3) of the SARFAESI Act.
The Verdict
The writ petition was dismissed, but the Court directed the Debt Recovery Tribunal, Visakhapatnam, to dispose of I.A. Nos. 394 - 397 of 2026 within ten days. The Court clarified that even if the auction proceeds, no sale certificate may be issued until the DRT disposes of the applications, thereby preserving the borrower’s right to challenge the validity of the proceedings.
What This Means For Similar Cases
DRT Inaction Is Not a Ground for Writ, But a Ground for Judicial Reminder
- Practitioners must file writ petitions only after exhausting statutory remedies, but may seek urgent listing before High Courts if DRTs fail to act on interlocutory applications
- Courts may now issue time-bound directions to DRTs under Article 226, even while dismissing the writ, to prevent abuse of process
- A mere delay in hearing interlocutory applications by DRTs may now be treated as a violation of natural justice under Maneka Gandhi v. Union of India
Sale Certificate Delay Provides Critical Window for Relief
- The 15-day period for depositing 75% of sale proceeds under Rule 10(1) of the Enforcement Rules is now recognized as a statutory safety valve
- Borrowers can use this window to seek interim relief from DRTs or file contempt proceedings if DRTs fail to comply with court directions
- Banks cannot rely on auction completion to bypass pending challenges; the sale certificate remains suspended until DRT adjudication
Procedural Non-Compliance Under SARFAESI Is Not Automatically Fatal, But Must Be Raised Before DRT
- Failure to serve or affix notice under Rule 9(1) must be raised before the DRT, not in writ petitions
- High Courts will not entertain challenges to procedural lapses unless they are raised in the appropriate forum first
- Practitioners must ensure that all SARFAESI procedural objections are formally pleaded in I.A.s before the DRT to preserve them for appellate review
