Supreme Court Affirms Discretionary Writ Power Over Technical Non-Compliance in Auction Sales

1. Introduction

In M.S. Sanjay v. Indian Bank (2025 INSC 177), the Supreme Court of India addressed a significant dispute arising from an auction sale conducted under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI Act). The case involved the Appellant (auction purchaser), the Respondent Bank (mortgagee), the borrower (original debtor), and the guarantor, who challenged the auction on technical grounds. Although the High Court had set aside the Debt Recovery Appellate Tribunal’s decision affirming the sale, the Supreme Court ultimately restored the auction’s validity.

This Judgment underscores the discretionary nature of High Court’s writ jurisdiction under Article 226 of the Constitution of India and highlights that purely technical or procedural irregularities should not, by themselves, invalidate completed auctions that have otherwise progressed lawfully and in good faith.

2. Summary of the Judgment

The matter originated when the Respondent Bank proceeded to auction a mortgaged property after the borrower defaulted on repayment. The Appellant placed the highest bid, paid the requisite sum, and received a sale certificate, which remained unchallenged for several months. The guarantor eventually questioned the legality of the auction before the Debt Recovery Tribunal (DRT), alleging failure to comply with mandatory notice periods under the SARFAESI Act and relevant rules.

While the DRT overturned the auction on these technical grounds, the Debt Recovery Appellate Tribunal (DRAT) reinstated it. On further appeal, the High Court once again nullified the auction. The Supreme Court then stepped in, criticizing the guarantor’s belated challenge based on minor notice discrepancies and emphasizing the need to temper statutory procedural requirements with equity and practicality. The Supreme Court upheld the Appellant’s purchase and set aside the High Court’s order, recognizing that the lack of a strictly observed notice period did not justify undoing an auction that stood uncontested for years and involved considerable investment.

3. Analysis

3.1 Precedents Cited

The Judgment draws heavily on Shiv Shanker Dal Mills v. State of Haryana, wherein the Supreme Court had declared that illegal or invalid statutory actions do not automatically mandate relief in a writ proceeding if setting aside such actions would cause more injustice than it would remedy. The Court, citing Kewal Krishna Puri v. State of Punjab, emphasized the principle that relief under Article 226 is discretionary and guided by the paramount consideration of public interest and equity. These landmark rulings influenced the Supreme Court to allow the auction purchaser to retain the property despite minor procedural deviations.

3.2 Legal Reasoning

The Supreme Court’s reasoning hinged on several pillars:

Equitable Considerations: The purchaser took possession many years ago, invested significant resources in developing the property, and relied upon the apparent finality of the auction sale. Any interference at that advanced stage, the Court warned, would cause unjust hardship.
Discretionary Nature of Writ Jurisdiction: A key observation is that a writ remedy under Article 226 is not granted as a matter of course. The Court emphasized that purely technical or procedural non-compliance—particularly when there is no substantial prejudice—is an insufficient basis for nullifying concluded transactions.
Delay and Conduct of the Guarantor: The Supreme Court noted that the guarantor did not object until months after the sale certificate had been issued. This inaction suggests a deliberate or negligent disregard of the initial proceedings, and subsequently mounting a challenge only on technical notice irregularities undermines equity.
Public Interest and Finality: Referencing Shiv Shanker Dal Mills, the Court held that if upholding a completed transaction despite certain minor errors furthers public interest—by preserving the rights of a bona fide purchaser and preventing long-drawn-out litigation—then the High Court’s discretionary writ power should be exercised to let the sale stand.

3.3 Impact

This Judgment is likely to have a broader impact on future cases involving auction sales under the SARFAESI Act and similar statutory frameworks:

Reaffirmation of Judicial Discretion: Courts can now point to this precedent to refuse to overturn long-completed transactions where technical breaches caused no substantive injustice.
Heightened Emphasis on Equity: Parties challenging auctions well after the fact must show genuine prejudice or harm instead of relying solely on shortfalls in procedural compliance.
Reduced Frivolous Litigation: The Supreme Court’s rebuke of the guarantor’s actions, though without imposing exemplary costs, signals a cautionary note to those seeking to exploit technicalities long after an auction is complete.

4. Complex Concepts Simplified

Below are explanations of some legal terms and concepts referenced in the Judgment:

SARFAESI Act: The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI) is an Indian law enabling banks to recover dues without intervention from the courts, primarily through auctioning mortgaged or secured properties.
Debt Recovery Tribunal (DRT): A specialized tribunal established to expedite the recovery of debts owed to banks and financial institutions. It has original jurisdiction over SARFAESI-related applications.
Debt Recovery Appellate Tribunal (DRAT): An appellate forum where decisions of the DRT can be challenged.
Article 226: A constitutional provision granting High Courts the power to issue various writs. However, such reliefs are discretionary and based on equitable considerations, not automatically available upon establishing a technical breach.
Writ Petition: A formal written request presented to a High Court or the Supreme Court brushing upon the violation of legal and fundamental rights, wherein the petitioner seeks extraordinary remedies.

5. Conclusion

In M.S. Sanjay v. Indian Bank, the Supreme Court reinforced a pivotal principle in auction-related disputes: courts possess and should appropriately exercise discretion when faced with purely technical infringements of statutory norms, particularly if setting aside an otherwise bona fide sale would lead to substantial hardship or inequity. The Judgment clarifies that procedural irregularities, without demonstrable prejudice, need not overshadow the practical realities of completed transactions.

Ultimately, the ruling underscores that while legal requirements must be respected, the administration of justice must also account for the equities between parties. This precedent will guide lower courts in resisting the temptation to annul finalized sales on minor procedural grounds, promoting stability and fairness in judicial outcomes.