Borrower’s Consent as Waiver of SARFAESI Auction Formalities and Validity of NPA Classification on the 90th Day: Commentary on CANARA BANK (Erstwhile Syndicate Bank) v. Karishma Enterprises & Ors., 2025 DHC 10911-DB

Borrower’s Consent as Waiver of SARFAESI Auction Formalities and Validity of NPA Classification on the 90th Day: Commentary on CANARA BANK (Erstwhile Syndicate Bank) v. Karishma Enterprises & Ors., 2025 DHC 10911-DB

1. Introduction

The Division Bench of the Delhi High Court in Canara Bank (Erstwhile Syndicate Bank) v. Karishma Enterprises & Ors., 2025 DHC 10911-DB (W.P.(C) 6494/2016, decided on 06.12.2025), addresses two interlinked and important questions in banking and securitisation law:

  1. When can a bank validly classify an overdraft/cash-credit account as a Non-Performing Asset (NPA) under the RBI’s prudential norms—specifically, whether classification on the 90th day of continuous irregularity is premature; and
  2. Whether a borrower who explicitly consents, before the Debts Recovery Tribunal (DRT), to the sale of a mortgaged property to satisfy bank dues, can later challenge the auction on the ground of non-compliance with procedural requirements under the SARFAESI Act, 2002 and the Security Interest (Enforcement) Rules, 2002 (SARFAESI Rules).

The Court sets aside an order of the Debts Recovery Appellate Tribunal (DRAT), Delhi, and reinstates the legality of the bank’s classification of the account as NPA and the consequent auction sale of the mortgaged property. The ruling crystallises an important principle: explicit borrower consent to the sale of a secured asset can amount to a waiver of strict insistence on certain SARFAESI procedural safeguards, provided no real prejudice or mala fides is shown, and clarifies the computation of the NPA classification period for OD/CC accounts.

2. Summary of the Judgment

Parties:

  • Petitioner / Appellant: Canara Bank (erstwhile Syndicate Bank), a body corporate under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970.
  • Respondent No.1: M/s Karishma Enterprises (proprietorship firm, borrower).
  • Respondent No.2: Guarantor and mortgagor (owner of three mortgaged properties).
  • Respondent No.3: Auction purchaser of one of the mortgaged properties.

Core issues decided:

  1. Whether the bank prematurely declared the borrower’s account as NPA (i.e., before expiry of the required 90 days of continuous irregularity).
  2. Whether the borrowers’ explicit consent, recorded by the DRT on 16.04.2014, to sell only one mortgaged property to satisfy bank dues, and their subsequent conduct, precluded them from challenging the SARFAESI auction on procedural grounds.
  3. Whether the DRAT, by its order dated 02.03.2016 setting aside the DRT’s decision, had misapplied the law and ignored earlier orders and the borrowers’ conduct.

Held:

  • The Bank’s classification of the account as NPA on 31.03.2013 was lawful and timely. The 90-day period from 01.01.2013 to 31.03.2013 was correctly computed, and classification on the 90th day (or immediately thereafter) is not premature.
  • The borrowers had expressly consented before the DRT that sale of one of the mortgaged properties would suffice to clear the dues and agreed that only one property be auctioned. They further participated in the sale process and were afforded repeated opportunities to redeem the property by paying the dues. In these circumstances, they waived objections based on minor or technical non-compliance with SARFAESI Rules 8 and 9.
  • The procedural safeguards under SARFAESI—particularly those concerning valuation, publication and conduct of auction—are designed primarily for the borrower’s benefit. Where the borrower voluntarily assents to the sale, and no prejudice or mala fides is shown, the borrower cannot later impeach the sale on purely technical grounds.
  • The DRAT, in its impugned order dated 02.03.2016, failed to consider the earlier consent order dated 16.04.2014 of the DRT, the borrowers’ conduct, and the DRAT’s own earlier order dated 16.12.2014 disposing of Appeal No.303/2014 as infructuous after the property had been sold. The High Court therefore set aside the DRAT’s order and allowed the writ petition.

3. Factual and Procedural Background

3.1 Credit facilities and security

  • On 19.09.2007, the bank sanctioned a credit facility of Rs. 100 lakhs to Respondent No.1 (Karishma Enterprises) via Sanction Letter No. SOD/ODMS.
  • Security was provided by Respondent Nos.1 and 2 through:
    • Deposit of title deeds relating to three properties (275, 325, and 400 sq. yds.) in Kabool Nagar, Shahdara, Delhi.
    • Execution of a Composite Hypothecation Agreement, Deed of Guarantee, and letter confirming deposit of title deeds, all dated 12.10.2007.
  • In 2008, additional credit of Rs. 225 lakhs was sanctioned to M/s Madhav Enterprises (through Respondent No.2), for which Respondent No.2 extended the existing mortgage and confirmed that liabilities under Karishma Enterprises’ facility would continue.
  • The credit facility was reviewed and renewed on:
    • 19.09.2009 – Rs. 100 lakhs renewed; fresh security/guarantee documents executed on 25.09.2009.
    • 20.12.2010 – again renewed; corresponding renewal documents executed the same day.

3.2 Default and deterioration of the account

  • The borrowers defaulted in repayment and failed to adhere to financial discipline.
  • Stock statement dated 06.07.2012 (for quarter ending June 2012) showed nil stock of raw material and work-in-process, indicating lack of ongoing business or manufacturing activity.
  • By 31.12.2012:
    • The OD and CC accounts had become “highly irregular” and were in excess of sanctioned limits.
    • No evidence was produced that the accounts were brought back within limits thereafter.
  • The bank issued reminders on 27.02.2013, 09.03.2013, and 19.03.2013, asking the borrowers to regularise the accounts and provide documents for renewal, warning of SARFAESI action if they failed. They did not comply.

3.3 NPA classification and SARFAESI measures

  • On 31.03.2013, the bank classified the account as a Non-Performing Asset (NPA).
  • On 22.04.2013, a Section 13(2) SARFAESI notice was issued, demanding repayment of dues.
  • A Court Receiver was appointed on 05.08.2013 (later replaced by Smt. Madhuri Gupta on 30.08.2013). Symbolic possession notices were issued on 03.10.2013 for two of the three properties (325 and 275 sq. yds.). The 400 sq. yds. property was already taken over by ARCIL, so possession could not be taken.

3.4 Borrower’s initial legal challenges

  • In September 2013, Respondent Nos.1 and 2 filed W.P.(C) No.5701/2013 before the Delhi High Court, challenging SARFAESI measures. On 10.09.2013, they withdrew the writ petition with liberty to file a Section 17 SARFAESI application before the DRT.
  • They then filed S.A. No.325/2013 before the DRT. On 17.09.2013, the DRT granted an interim order:
    • Restraining the bank and receiver from further steps provided the borrowers deposited Rs. 20 lakhs within 30 days (Rs. 5 lakhs in the first week).
    • In case of default, the bank was free to proceed under SARFAESI.
  • The borrowers did not comply, and SARFAESI measures continued.

3.5 Auction process and consent order

  • The bank issued a sale notice on 10.01.2014 to auction the mortgaged properties. The borrowers challenged this by I.A. No.376/2014 in S.A. No.325/2013.
  • On 16.04.2014, the DRT passed a significant order:
    • On submissions made on behalf of the borrowers that sale of one property would be sufficient to satisfy bank dues, the DRT directed that only one of the mortgaged properties be put to sale.
    • This is the consent/order that becomes central to the High Court’s later analysis (para 16, 35).
  • In pursuance of this order, the bank auctioned the 275 sq. yds. property for Rs. 214 lakhs, slightly above the assessed market value of Rs. 213 lakhs (para 17).

3.6 Appeal No.303/2014 and its disposal as infructuous

  • Despite having obtained the 16.04.2014 order on their own submissions, the borrowers filed Appeal No.303/2014 before the DRAT, challenging that very order.
  • During the pendency of that appeal:
    • The property was sold for Rs. 2.14 crores.
  • On 16.12.2014, the DRAT recorded that:
    • The property had already been sold.
    • Substantial dues had been recovered.
    • Borrowers’ counsel did not press the appeal, which was disposed of as infructuous.
    • The DRAT directed the DRT to decide the main S.A. No.325/2013 in accordance with law (para 19).

3.7 Further opportunity to redeem and dismissal of S.A.

  • On 13.04.2015, after the sale and during S.A. 325/2013, the DRT again:
    • Specifically asked the borrowers whether they wanted to save the property by paying bank dues.
    • Granted them opportunity to bring or deposit the money, stating that further arguments would be heard if they did so (para 20).
  • The borrowers did not avail this opportunity.
  • On 29.09.2015, the DRT dismissed S.A. No.325/2013 (para 21).
  • On 30.09.2015, the bank:
    • Confirmed the auction sale in favour of Respondent No.3 (auction purchaser).
    • Issued the sale certificate and handed over title documents (para 21).
  • Meanwhile, the bank had filed O.A. No.347/2015 for recovery of Rs. 1,81,84,429/-, which it later withdrew in good faith after disposal of the S.A. (para 21).

3.8 Impugned DRAT order in Appeal No.37/2016

  • Respondent Nos.1 and 2 then filed Appeal No.37/2016 before the DRAT challenging the DRT’s final order dated 29.09.2015.
  • By order dated 02.03.2016 (the “Impugned Order”), the DRAT:
    • Allowed the appeal.
    • Set aside the DRT’s dismissal of S.A. No.325/2013.
    • Inter alia held that:
      • The bank had allegedly prematurely classified the account as NPA (before 90 days had elapsed).
      • There was non-compliance with Section 13(3A) SARFAESI and Rules 8(6) and 9 of SARFAESI Rules in conducting the auction (para 25).

3.9 Writ petition before the High Court

  • Aggrieved by the DRAT’s order dated 02.03.2016, the bank filed the present writ petition (W.P.(C) 6494/2016) before the Delhi High Court.
  • The High Court framed the central issue as whether the DRAT had:
    • Failed to appreciate the borrowers’ prior conduct and their explicit consent to sale of the property as recorded by the DRT on 16.04.2014.
    • Ignored that Appeal No.303/2014, filed against that consent-based order, had been disposed of as not pressed / infructuous by the DRAT on 16.12.2014 (para 2).
  • Ultimately, the High Court allowed the writ petition and set aside the DRAT’s Impugned Order (paras 44–45).

4. Analysis

4.1 “Precedents” and prior adjudications considered

The portion of the judgment provided does not refer to specific reported Supreme Court or High Court precedents by name. Instead, it relies on:

  • The statutory status of the RBI’s IRACP (Income Recognition, Asset Classification and Provisioning) norms, said to have binding force under Sections 21 and 35A of the Banking Regulation Act, 1949 (para 29).
  • A chain of prior orders within the same litigation:
    • The DRT’s interim order dated 17.09.2013 requiring a Rs. 20 lakh deposit.
    • The DRT’s crucial consent order dated 16.04.2014, limiting sale to one property on the borrowers’ own submission.
    • The DRAT’s order dated 16.12.2014 in Appeal No.303/2014, disposing of the challenge to the 16.04.2014 order as infructuous after the property’s sale.
    • The DRT’s order dated 13.04.2015 granting a further opportunity to the borrowers to pay and save the property.
    • The DRT’s final order dated 29.09.2015 dismissing S.A. No.325/2013.

These prior orders function, within this case, as a form of procedural precedent—constraints on what the borrowers can later claim. Taken together, they underpin the High Court’s findings that:

  • The borrowers had participated in and consented to the sale process.
  • A prior challenge to the consent order had been effectively abandoned.
  • Repeated opportunities were offered to redeem the secured asset.

At the doctrinal level, the Court’s views align with established Supreme Court jurisprudence that:

  • RBI directions issued under Sections 21 and 35A of the Banking Regulation Act have statutory force and must be complied with by banks.
  • While SARFAESI’s procedural rules protect borrowers, rights conferred for a party’s benefit can be waived by that party, especially where there is express consent and no prejudice.

However, since such external cases are not expressly cited in the text reproduced, any detailed linkage to them must be understood as contextual, not as part of the Court’s explicit reasoning on record.

4.2 Legal reasoning

4.2.1 NPA classification and the 90-day rule

A key plank of the borrowers’ challenge was that the bank had prematurely declared the account as NPA, allegedly before the statutory 90 days of continuous irregularity had elapsed. DRAT had apparently accepted this argument.

The High Court reconstructs the timeline (paras 27–34):

  1. By 31.12.2012:
    • The OD and CC accounts were already in excess of sanctioned limits.
    • The excess was “neither marginal nor temporary” (para 28).
  2. No regularisation:
    • There was no evidence that the accounts were brought within limits in January, February, or March 2013.
    • Contemporaneous bank statements showed persistent excess/irregularity (para 32).
  3. IRACP norms:
    • For OD/CC accounts, an NPA arises when the outstanding remains continuously in excess of the sanctioned limit/drawing power for more than 90 days (para 29).
    • The norms have statutory force and classification as NPA is a mandatory obligation; banks cannot defer it beyond the prescribed period.
  4. Computation of 90 days:
    • The irregularity was complete as on 31.12.2012.
    • Counting starts from the next day: 01.01.2013 (para 31).
    • January (31 days) + February (28 days) + March (31 days) = 90 days from 01.01.2013 to 31.03.2013 (inclusive).
    • Thus 31.03.2013 is the 90th day (para 31).
  5. Declaration on 31.03.2013:
    • The bank declared the account NPA on 31.03.2013 (para 33).

The Court then addresses the crux: does “more than 90 days” mean the bank must wait till the 91st day or later? The Court holds:

  • Classification on the very date of completion of the 90-day period (31.03.2013) or “immediately thereafter” cannot be termed premature (para 33).
  • Given the undisputed irregularity and lack of any attempt to regularise the account even after 31.03.2013, the declaration on that date is at the outer limit of permissible time and is lawful (para 33).
  • Even arguendo, if there were any technical prematurity, borrowers showed no steps on the “subsequent day” to infuse funds or otherwise regularise the account (para 33). Thus, no prejudice is demonstrated.

This reasoning has two important dimensions:

  1. Strict arithmetical counting, but flexible reading of “more than 90 days”:
    The Court accepts an exact arithmetic count (leading to 31.03.2013 as the 90th day), yet treats classification on that day as compliant with the norm that requires irregularity for “more than 90 days”. This moves away from a hyper-literal stance (which would insist on waiting until the 91st day) and focuses on the substance: unremedied irregularity over a full three calendar months.
  2. Burden of proof on borrower:
    Once the bank demonstrates continuous irregularity, the Court holds that the burden shifts to the borrower to show that the classification was incorrect (para 32). No such material was produced. This is critical: borrowers cannot merely allege premature NPA classification; they must substantiate it with account statements or evidence of regularisation.

In conclusion, the Court finds the NPA classification on 31.03.2013 to be:

  • In conformity with IRACP norms (paras 30–34);
  • Mandatory for the bank in light of prolonged irregularity (para 29); and
  • Not premature, even when read against the phrase “more than 90 days” (para 33).

4.2.2 Borrower consent, waiver, and SARFAESI procedural safeguards

The second major axis of reasoning concerns the effect of borrower consent to the auction and its impact on alleged non-compliance with:

  • Section 13(3A) of the SARFAESI Act (consideration of borrower’s objections/representations), and
  • Rules 8 and 9 of the SARFAESI Rules (procedure for valuation, publication, reserve price and auction sale of immovable property).

The DRAT had faulted the bank on these grounds. The High Court, however, emphasises the borrowers’ express consent and conduct:

  1. Consent before the DRT (16.04.2014):
    • The DRT’s order records that, on submissions from the borrowers’ side, it was acknowledged that sale of one property would suffice to clear dues (para 16, 35).
    • The DRT therefore directed the bank to sell only one property.
    • This is treated as “explicit consent” to the sale of the mortgaged property (para 35).
  2. DRAT’s order in Appeal No.303/2014 (16.12.2014):
    • Borrowers had challenged the 16.04.2014 consent order.
    • However, during pendency, the property was sold for Rs. 2.14 crores against dues of Rs. 1.06 crores (para 19, 36).
    • In light of this, borrowers’ counsel did not press the appeal, which the DRAT disposed of as infructuous (para 19, 36).
  3. Subsequent opportunity to redeem (13.04.2015):
    • Even after sale, the DRT again inquired whether the borrowers wanted to save their property by paying dues, asking them to deposit the amount if so (para 20, 37).
    • They did not avail this chance.

On this factual foundation, the Court states a clear principle (paras 41–43):

  • The procedural safeguards under SARFAESI and Rules 8 and 9 of the SARFAESI Rules—relating to valuation, publication, reserve price, and conduct of auction—are primarily meant to protect the borrower.
  • Where the borrower:
    • Voluntarily assents to sale of the secured asset, and/or
    • Makes statements before the DRT/DRAT or conducts themselves in a way that evidences unequivocal acquiescence,
    the borrower will be treated as having waived the right to rely upon minor procedural irregularities in those safeguards.
  • This is subject to two important caveats:
    • The waiver is effective only where the borrower’s consent is “explicit and informed” (para 42).
    • The sale can still be challenged if there is mala fides or “demonstrable prejudice” caused to the borrower (para 42).

On the facts, the Court finds:

  • The borrowers’ consent, as recorded in the 16.04.2014 order, was unequivocal.
  • They were allowed to bring a better purchaser or pay the dues, including by the later 13.04.2015 order; they did neither.
  • The property fetched Rs. 2.14 crores against dues of about Rs. 1.06 crores, indicating no financial prejudice or under-valuation.
  • No mala fides of the bank or collusion in the auction were pleaded or proved.

On this basis, the Court holds (para 43):

“Strict adherence to the procedural requirements under the SARFAESI Act and Rules 8 and 9 … cannot be insisted upon, as the sale of the secured asset was undertaken with the unequivocal consent of the borrowers… Once such consent was furnished… the borrowers effectively waived their right to later challenge minor procedural deviations…”

In effect, the Court recognises a form of doctrinal waiver and estoppel:

  • Waiver: Because procedural safeguards under SARFAESI are for the borrower’s benefit, they can be waived by the borrower, provided the waiver is voluntary and informed.
  • Estoppel / approbation and reprobation: Having first secured an order based on their submission that sale of one property sufficed, and having allowed the sale to go through without pressing their appeal, borrowers cannot later attack the sale on procedural technicalities.

4.2.3 Conduct of the parties and criticism of the DRAT

The High Court is critical of the DRAT’s Impugned Order on several counts:

  1. Ignoring prior consent and orders:
    • The DRAT, when allowing Appeal No.37/2016, did not adequately consider that:
      • The DRT’s 16.04.2014 order was a consent-based one (paras 16, 35).
      • Appeal No.303/2014 against that order had already been disposed of as infructuous on 16.12.2014 (para 19).
      • The borrowers had been given repeated opportunities (including on 13.04.2015) to pay and save the property (para 37).
    • Hence, the DRAT should have viewed the borrowers’ subsequent challenge as an attempt to resile from their earlier stand and to prolong litigation (paras 24(iv), 39).
  2. Misapplication of NPA computation:
    • The Court explicitly notes the DRAT “miscalculated the period of ninety days” (para 24(i)).
    • By recalculating from 31.12.2012 and properly applying the IRACP norms, the High Court corrects this miscalculation (paras 27–34).
  3. Overlooking the absence of prejudice:
    • Even if there were minor procedural lapses, the DRAT did not analyse whether the borrowers had suffered any concrete prejudice.
    • The price realised (Rs. 2.14 crores) and repeated opportunities to redeem were ignored.

The High Court thus finds that the DRAT’s exercise of appellate jurisdiction was flawed both factually and legally, justifying interference in writ jurisdiction.

4.3 Impact and implications

4.3.1 Clarification on NPA classification for OD/CC accounts

The judgment significantly clarifies, at least within the jurisdiction of the Delhi High Court, how banks and tribunals should approach NPA classification for OD/CC accounts:

  • Continuous irregularity (outstanding above sanctioned limit/drawing power) for three calendar months can be treated as satisfying the “more than 90 days” requirement when the 90th day is reached (here, 31.03.2013).
  • Classification on the 90th day or immediately thereafter is not to be considered premature, especially where no attempt is made by the borrower to regularise the account on the 91st day or beyond.
  • Banks have a regulatory obligation to classify NPAs in a timely manner; they are not expected to grant informal grace periods beyond the statutory norm.
  • Borrowers challenging NPA classification bear a substantial evidentiary burden and cannot succeed on mere allegations without showing actual regularisation or error in the account.

4.3.2 Borrower consent and waiver of SARFAESI procedural safeguards

On SARFAESI procedure, the judgment has a potentially far-reaching effect:

  • It draws a clear distinction between:
    • Procedural protections that are for the borrower’s benefit (and can therefore be waived), and
    • The need for a generally fair and bona fide process (which cannot be waived if there is mala fide or collusion).
  • Where borrowers, in a just and informed manner, consent before the DRT to the sale of a secured asset, tribunals and courts can treat this as a waiver of strict insistence on every technical requirement of Rules 8 and 9, provided:
    • A fair price is realised;
    • No mala fides are evident; and
    • Borrowers have been given adequate opportunities to pay and redeem.
  • This strengthens the finality of auction sales, particularly where third-party rights (auction purchaser) have intervened and where the borrower has actively participated or acquiesced in the process.

4.3.3 Litigation strategy for borrowers and banks

The judgment sends clear signals to both sides:

  • For borrowers:
    • They must be cautious when giving consent statements before the DRT; such statements can significantly limit their later legal options.
    • Repeated failure to comply with conditional orders (e.g., to deposit certain sums) and to use opportunities to redeem the property may weigh heavily against them in subsequent rounds of litigation.
    • They cannot “approbate and reprobate”—i.e., benefit from a consent order limiting sale to one property and then challenge the very sale process later.
  • For banks:
    • The decision supports the position that banks, if they document consent and act fairly in auction, can rely on such consent to defend against later technical challenges.
    • Still, banks should continue to observe the substance of SARFAESI procedures (valuation, adequate publicity, fair reserve price), both to avoid genuine challenges and to secure market confidence.

4.3.4 Protection of third-party auction purchasers

By upholding the sale in favour of Respondent No.3, the High Court reinforces the principle that:

  • Once a sale certificate has been issued and title documents handed over to an auction purchaser, courts will be reluctant to disturb such concluded sales—particularly when:
    • The borrower had consented;
    • A fair price was realised; and
    • The borrower had abandoned or failed in earlier challenges.
  • This improves certainty and stability for participants in SARFAESI auctions, which is crucial to ensuring robust bidding and optimal price realisation.

5. Complex Concepts Simplified

Non-Performing Asset (NPA)
A loan or advance where the borrower has stopped repaying principal and/or interest in accordance with the agreed schedule. Under RBI’s IRACP norms, for OD/CC accounts, an asset becomes NPA when the account remains continuously overdrawn (i.e., exceeding sanctioned limits or drawing power) for more than 90 days.
OD/CC Account
Overdraft (OD) and Cash Credit (CC) are types of working capital facilities:
  • OD: The customer is permitted to draw funds in excess of the account balance, up to a sanctioned limit.
  • CC: A revolving line of credit based on security of stock, receivables, etc., where the borrower can draw up to the sanctioned limit as needed.
An OD/CC account becomes irregular if the outstanding exceeds the sanctioned limit/drawing power and remains so without being brought back within limits.
IRACP Norms
Income Recognition, Asset Classification and Provisioning norms issued by the RBI, prescribing how banks must:
  • Recognise interest income;
  • Classify assets as standard, sub-standard, doubtful or loss;
  • Make provisions for bad and doubtful debts.
These norms, when issued under the Banking Regulation Act, have statutory force.
SARFAESI Act, 2002
The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, enables banks and financial institutions to enforce their security interests (e.g., mortgages) without first obtaining a court decree. Key provisions:
  • Section 13(2): Notice to the borrower to discharge liabilities within 60 days, failing which the secured creditor may take measures under Section 13(4).
  • Section 13(3A): Requires the secured creditor to consider objections/representations by the borrower to the Section 13(2) notice and communicate reasons for non-acceptance.
  • Section 13(4): Provides for taking possession of secured assets, taking over management, etc., if the borrower fails to comply with the Section 13(2) notice.
  • Section 17: Gives the borrower a right to file an application before the DRT against the measures taken under Section 13(4).
Security Interest (Enforcement) Rules, 2002 (Rules 8 & 9)
These Rules prescribe detailed procedures for sale of immovable property:
  • Rule 8: Deals with possession, valuation, and issuance and publication of sale notice, among other steps.
  • Rule 9: Deals with time of sale, payment of price, transfer of property, and issue of sale certificate.
They aim to ensure transparency and fairness, primarily for the benefit of borrowers and to secure good prices.
DRT and DRAT
  • Debts Recovery Tribunal (DRT): A specialised tribunal to adjudicate recovery claims by banks and financial institutions and applications under Section 17 SARFAESI.
  • Debts Recovery Appellate Tribunal (DRAT): The appellate body above the DRT.
ARCIL
Asset Reconstruction Company (India) Limited, one of the asset reconstruction companies that acquire non-performing assets from banks and work to resolve/recover them. In this case, one of the mortgaged properties had been taken over by ARCIL, so the bank could not take its possession.
Symbolic Possession
Under SARFAESI, banks initially take “symbolic” possession of immovable property by issuing and affixing possession notices. Actual physical possession may be taken later, often with assistance of a court receiver or magistrate, if necessary.
Waiver and Estoppel (in this context)
  • Waiver: The voluntary relinquishment of a right. Here, rights conferred by SARFAESI procedures (e.g., certain notice/publication requirements) can, to some extent, be waived by the borrower when they explicitly consent to sale.
  • Estoppel / approbation and reprobation: A party cannot take inconsistent positions—benefiting from a consent order and later challenging the very process enabled by that consent.

6. Conclusion

The Delhi High Court’s decision in Canara Bank (Erstwhile Syndicate Bank) v. Karishma Enterprises & Ors. establishes two central propositions of enduring significance for banking and securitisation law:

  1. NPA Classification on the 90th Day is Valid:
    • For OD/CC accounts, continuous irregularity from 01.01.2013 to 31.03.2013 (90 days) justified the bank’s classification of the account as NPA on 31.03.2013.
    • The Court rejects a hyper-technical reading of “more than 90 days,” holding that classification on the 90th day or immediately thereafter is lawful where irregularity is undisputed and the borrower takes no remedial steps thereafter.
    • Borrowers carry the burden of proving incorrect classification once the bank shows continuous irregularity.
  2. Borrower Consent as Waiver of Certain SARFAESI Procedural Safeguards:
    • Procedural protections in Rules 8 and 9 of the SARFAESI Rules are primarily for the borrower’s benefit and can be waived through explicit, informed consent to sale of the secured asset before the DRT.
    • Where borrowers participate in the sale process, seek and obtain a consent order limiting sale to one property, and later abandon an appeal against that order, they cannot subsequently attack the auction on purely technical grounds, absent mala fides or demonstrable prejudice.
    • This approach promotes finality in SARFAESI auctions, protects bona fide auction purchasers, and discourages opportunistic or dilatory litigation.

By setting aside the DRAT’s Impugned Order and restoring the bank’s enforcement measures, the judgment reinforces a pragmatic and commercially sensible balance: it upholds the rigour of regulatory norms on NPAs while recognising that borrowers who have consciously consented to a sale cannot later wield procedural safeguards as a weapon to unravel completed transactions. For future cases within the Delhi High Court’s jurisdiction, this ruling is likely to be a significant precedent on both NPA classification timelines and the scope of borrower waiver under SARFAESI.

Case Details

Year: 2025
Court: Delhi High Court

Judge(s)

Justice Harish Vaidyanathan ShankarJUSTICE ANIL KSHETARPAL

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