Supreme Court sets aside SARFAESI auction held in breach of a tribunal's restraint order

A finance company enforced a mortgage over a hill resort under the SARFAESI Act, 2002, issuing an auction notice fixing a reserve price of Rs. 20 crore. Before the sale, the Debt Recovery Appellate Tribunal restrained the secured creditor from proceeding further under the Act; despite this, a bid was received and the earnest money accepted. After the restraint was lifted over a year later, the bid was opened and the sale certificate issued to a third party nominated by the bidder, rather than the bidder herself, without fresh notice to the borrower of the revived sale.

Both the borrower and the purchaser appealed against the High Court's judgment. The Supreme Court held the auction illegal on several independent grounds: receiving a bid in defiance of a subsisting restraint order is a nullity, following the maxim actus curiae neminem gravabit; the thirty-day window under Rule 9(1) of the Security Interest (Enforcement) Rules, 2002, during which a borrower may redeem the property under Section 13(8) of the SARFAESI Act, cannot be shortened by excluding the restraint period; the borrower was entitled to notice before the bids were opened; and a sale certificate could not issue to a non-bidder nominee under Rules 9(2) and 9(6). Since the right to property, though no longer a fundamental right, is a constitutional right under Article 300A that can be taken away only by authority of law, the illegal sale conferred no title, and the auction was set aside.