Public auction


Whether a public auction can be treated as a valid public auction if it is not patronized by public or not participated by public.

In the instant matter State Bank of India organized a public auction which was not patronized by any public participation /void of public participation. In absence of any public bid/participation SBI submitted its own bid and declared the sale confirmed in its own favor.

Now SBI has been claiming that it has purchased the assets in public auction where as the owner of the assets is alleging that SBI has fraudulently grabbed its assets on the excuse of a fabricated public auction sale.

The borrower is suffering since last ten years. Further the bank is also holding movable assets of the borrower since last ten years unsold, unattended and recently issued a recovery certificate without setting off, of the value of the movable assets. Can a criminal suit be filed against the bank?

Question from - Civil Law

According to SARFAESI Act, Bank is bound to secure maximum sale amount of secured assets. There is some mandatory provisions in the SARFAESI Act regarding sale of secured assets like valuation of property from an approved valuer and in consultation with the secured creditor, fixing reserved price of the assets, notice to the borrower, appearance of borrower at the public auction, organize public auction after giving due publication in at least 2 leading newspapers and one of them should be in vernacular language.

If bank fails to comply these mandatory provisions the aggrieved person can file an appeal, under section 17 SARFAESI Act, before the Debt Recovery Tribunal. Aggrieved person can seek remedy like cancellation of certificate of sale issued under section 6 SARFAESI Act, set aside the public auction or revaluation of secured assets etc.

The section 34 SARFAESI Act, puts a Bar on Civil Courts in entertaining suits in respect of the matter in which the Bank has initiated a proceeding under SARFAESI Act, 2002. In view of many judgments of constitutional courts from time to time under Article 32, 136  and 227 of Constitution of India, it is settled that the Civil Court has no jurisdiction to entertain any proceeding or suit in a matter in which the Bank has initiated proceedings under SARFAESI Act, 2002.

In Mardia Chemicals and others v. Union of india and others (2004) 4 SCC 311, Central Bank of India v. State of Kerala and others (2009) 4 SCC 94, United Bank of India v. Satyavati Tondon and others (2010) 8 SCC 110, Indian Overseas Bank and others v. Ashok Saw Mill (2009) 8 SCC 366. it is held by the Supreme Court that putting bar on the jurisdiction of the civil court (section 34) to entertain any petition regarding dispute arising out of the procedure adopted under SARFAESI Act is constitutional and valid.

You cannot file criminal case against the malpractice of the bank regarding auction of secured assets. You should file an appeal before the DRT under section 17.

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