Higher Post-Auction Offer Cannot Undo a Completed SARFAESI Sale, Rules Allahabad High Court

Higher Post-Auction Offer Cannot Undo a Completed SARFAESI Sale, Rules Allahabad High Court in Rama Chaurasia v. Debts Recovery Appellate Tribunal

Case: Smt. Rama Chaurasia v. Debts Recovery Appellate Tribunal, Allahabad and Others
Citation: 2026:AHC-LKO:80567
Date of Judgment: 05 November 2026
Court: Allahabad High Court (Lucknow Bench)
Coram: Justice Irshad Ali
Proceedings: WRIT-C No. 1004411 of 2011

Court Observation

“The Court cannot direct the Bank to accept an amount merely because it exceeds the auction consideration, without proof that the statutory requirements governing redemption were satisfied.”

Summary

The Allahabad High Court has held that merely offering a higher amount after an auction does not create a legal right to reopen a completed sale under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). Dismissing a writ petition, the Court affirmed the Debts Recovery Appellate Tribunal’s order upholding the auction sale of mortgaged land in Lucknow.

Rama Chaurasia and Kiran Chaurasia jointly owned land at Village Sarosa Bharosa, Alamnagar, Lucknow, purchased in 1987 and mortgaged in 2003 as security for a loan of about Rs 30 lakh granted to M/s Chaurasia Traders. After the loan account was classified as a non-performing asset, the bank auctioned the land; the highest bidder, Dr. Ajay Gupta, purchased it for Rs 33 lakh and was issued a sale certificate on 24 January 2008. The petitioner had tendered bank drafts of about Rs 34 lakh on 22 December 2007, which the bank returned in January 2008 on the ground that the land had already been sold. The Debts Recovery Tribunal had set aside the bank’s action in 2010, but the Appellate Tribunal reversed that order in July 2011. The High Court held that the petitioner had not proved that the land was agricultural and therefore excluded under Section 31(i) of the Act, that a bare assertion of non-service of notices under Sections 13(2) and 13(4) was not enough, and that the offer made after publication of the sale notices and after the sale had been confirmed did not satisfy the redemption requirements of Section 13(8).

Key Holdings

  • Although agricultural land is excluded from the SARFAESI Act under Section 31(i), the exclusion cannot be claimed merely on revenue entries or the absence of a conversion order; the actual nature and use of the land must be examined on the entire evidence, and agricultural operations were not proved here.
  • A bare allegation of non-receipt of statutory notices under Sections 13(2) and 13(4) of the SARFAESI Act cannot invalidate recovery proceedings; the borrower must demonstrate a material defect in service or procedure.
  • Classification of a loan account as a non-performing asset depends on repayment defaults, overdue amounts and applicable Reserve Bank of India norms, not merely on later entries in the account.
  • Merely offering an amount higher than the auction bid after the sale has been confirmed does not create a legal right to reopen the auction or compel the bank to accept the payment; redemption under Section 13(8) requires tender of the entire dues, costs and expenses before completion of the sale or transfer.
  • Once a valid security interest exists, the secured creditor can proceed against the secured asset in accordance with law even if the property owner is not the principal borrower.
  • A mere assertion that the property’s market value was about Rs 1.5 crore, without credible valuation material or proof of any violation of statutory auction procedures, cannot invalidate the sale.
  • Writ jurisdiction under Article 226 is not a further appeal; a specialised tribunal’s findings cannot be displaced merely because another view of the evidence may be possible.

Background

The land, Khasra No. 13333-5A at Village Sarosa Bharosa, Alamnagar, Lucknow, was purchased by the petitioner and Kiran Chaurasia through a registered sale deed dated 27 February 1987 and mortgaged in 2003 for the loan to M/s Chaurasia Traders. The Debts Recovery Tribunal, Lucknow, allowed the petitioner’s securitisation application on 17 August 2010 and set aside the bank’s action; the Debts Recovery Appellate Tribunal, Allahabad, reversed that order on 18 July 2011. The writ petition was filed on 27 July 2011, was reserved on 6 October 2026 and decided on 5 November 2026.

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Disclaimer: This is a summary prepared for informational purposes only and does not constitute legal advice. Readers should refer to the official judgment for the authoritative text.

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