The Delhi High Court restored the validity of an auction sale conducted by Canara Bank (erstwhile Syndicate Bank) after the borrowers had defaulted on their credit facilities. The account had remained irregular for over 90 days and was lawfully classified as NPA on 31 March 2013 in line with RBI norms. When SARFAESI proceedings began, the borrowers not only failed to comply with DRT’s deposit directions but also expressly consented that auctioning one mortgaged property would satisfy the Bank’s claim.

The property was sold accordingly, yet the borrowers later challenged the process before DRAT, which set aside the DRT’s dismissal of their securitisation application. The High Court held that once borrowers had given written consent to the auction, they could not rely on minor procedural irregularities under Rules 8 and 9 of the SARFAESI Rules unless prejudice or mala fides were shown—which they were not. Their conduct amounted to waiver and acquiescence.

Allowing the Bank’s appeal, the Court set aside the DRAT order and confirmed the auction sale in favour of the purchaser.

Legal Issue

Whether the DRAT erred in setting aside the DRT’s dismissal of the borrowers’ securitisation application, particularly regarding (i) the Bank’s classification of the account as NPA under RBI norms, (ii) the borrowers’ consent to auction of mortgaged property, and (iii) waiver of procedural safeguards under the SARFAESI Act and Rules.

Brief Facts

The Bank sanctioned credit facilities to Respondent No.1, secured by mortgage of three properties and guarantee of Respondent No.2. By December 2012, the accounts became irregular and limits exceeded. On 31 March 2013, the account was declared NPA, followed by SARFAESI notice. Borrowers challenged the measures before DRT but were directed to deposit money, which they failed to do. Symbolic possession was taken, and in April 2014, borrowers consented that sale of one property would suffice. Accordingly, one property was auctioned for ?2.14 crores. Despite this, they filed appeals before DRAT, which were disposed of as infructuous since the property was already sold. Later, DRT dismissed their securitisation application in September 2015, confirming sale in favour of the auction purchaser. In 2016, DRAT set aside this dismissal, prompting the Bank’s challenge before the High Court.

Judgment

The High Court held that the Bank’s classification of the account as NPA on 31 March 2013 was lawful and in strict compliance with RBI’s prudential norms, as the account had remained irregular for the full 90-day period. The Court emphasized that borrowers had explicitly consented to auction of one property, which amounted to waiver of strict procedural safeguards under SARFAESI Rules 8 and 9. Once consent was given, they could not later challenge minor procedural lapses unless prejudice or mala fides were shown, which was absent here. The Court also noted that borrowers were repeatedly given opportunities to regularize accounts or deposit dues but failed to comply. Their conduct showed acquiescence in the sale process. DRAT erred in disregarding this prior consent and defaults. Accordingly, the appeal was allowed, DRAT’s order dated 02 March 2016 was set aside, and the auction sale in favour of Respondent No.3 was confirmed.

Read  the official order/judgement here

Case Title

Canara Bank (Erstwhile Syndicate Bank) v. M/s Karishma Enterprises & Ors.

Neutral Citation - 2025:DHC:10911-DB

Date

Judgment Reserved: 27 October 2025

Judgment Pronounced: 06 December 2025

Bench

Hon’ble Mr. Justice Anil Kshetarpal

Hon’ble Mr. Justice Harish Vaidyanathan Shankar