Auction Purchaser Can Challenge Before DRT Action Of Secured Creditor In Forfeiting Deposit Made By It: SC [Read Judgment]

Auction purchaser is entitled to challenge the action of the secured creditor before the DRT by filing an application under Section 17(1) of the SARFAESI Act, the court held.

The Supreme Court, in Agarwal Tracom Pvt Ltd Vs Punjab National Bank, has held that an action of secured creditor in forfeiting the deposit made by the auction purchaser is a part of the measures taken by the secured creditor under Section 13(4) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

The bench comprising of Justice RK Agrawal and Justice AM Sapre upheld a Delhi High Court judgment which had dismissed the Writ petition filed by an auction purchaser on the ground of alternate remedy. The Bench held that the Auction purchaser is entitled to challenge the action of the secured creditor before the DRT by filing an application under Section 17(1) of the SARFAESI Act.

Referring to various provisions of the SARFAESI Act, the court observed that the expression “any of the measures referred to in Section 13(4) taken by secured creditor or his authorized officer” in Section 17(1) would include all actions taken by the secured creditor under the Rules which relate to the measures specified in Section13(4).

The bench said: “The expression "provisions of this Act and the Rules made thereunder" occurring in sub-sections (2), (3), (4) and (7) of Section 17 clearly suggests that it includes the action taken under Section 13(4) as also includes therein the action taken under Rules 8 and 9 which deal with the completion of sale of the secured assets.”

The court also observed that the auction purchaser is one such person, who is aggrieved by the action of the secured creditor in forfeiting their money and, therefore, falls within the expression “any person” as specified under Section 17(1) and hence is entitled to challenge the action of the secured creditor before the DRT by filing an application under Section 17(1) of the SARFAESI Act.

Read the Judgment Here