Authority: Supreme Court of India

Order Date: 30 September 2026

Case Overview

  • Parties: Sterling Holiday Resorts Limited (Borrower) vs. M/s P.M. Associates (Purchaser); IFCI Limited and Tourism Finance Corporation of India (TFCI) as secured creditors; Thomas Cook (India) Limited and Thomas Cook Insurance Services (India) Limited as proposed merger partners.
  • Background: Borrower developed a timeshare resort ‘The Fernhill’ at Ooty. Loans obtained in 1991: Rs 2.06 crore from IFCI and Rs 3.24 crore from TFCI, secured by a first charge over the resort.
  • Default led to O.A. No. 277 of 2000 before the DRT, Delhi, claiming Rs 8,87,36,938 (IFCI Rs 3,64,60,434). IFCI issued a SARFAESI notice on 30 Oct 2007 demanding Rs 17,71,78,482; Borrower’s Section 13(3A) representation on 26 Dec 2007 went unanswered.
  • On 21 Aug 2009 IFCI’s Authorised Officer (AO) issued a Section 13(4) notice of symbolic possession. DRT, Chennai restrained physical possession on 08 Sep 2009, subject to a deposit of Rs 3.40 crore (later enhanced to Rs 4 crore, which Borrower paid).
  • DRT, Delhi decree (23 Oct 2009) quantified liabilities: TFCI Rs 5,08,46,131; IFCI Rs 3,52,53,263, with interest at 13.5% (later 16%). Borrower settled TFCI liability by paying Rs 6.03 crore under a One‑Time Settlement.
  • IFCI issued an auction notice on 25 Mar 2010 fixing a reserve price of Rs 20 crore, scheduling auction for 28 Apr 2010.
  • DRAT, Chennai (07 Apr 2010) restrained the AO pending a Rs 1 crore deposit, which Borrower made on 08 Apr 2010, activating the restraint.
  • Despite the restraint, IFCI received bids; DRAT set aside the DRT order on 09 Mar 2011. High Court, on 06 Sep 2011, set aside the DRAT order, allowing the auction to proceed.
  • On 12 Sep 2011 IFCI opened bids and declared Ms Rukmani Khemchand the successful bidder. The full sale consideration of Rs 20,00,10,000 was remitted not by her but by M/s P.M. Associates, and a sale certificate dated 16 Sep 2011 was issued in favour of the Purchaser.
  • Borrower challenged the High Court judgment (SLP (C) 27587 of 2011). The High Court issued interim orders protecting the resort and later directed IFCI to produce original sale records, which were never produced.
  • Borrower deposited further sums: Rs 8,80,00,000 (13 Jan 2012) and Rs 3,72,00,000 (03 Feb 2012) to settle IFCI dues. IFCI cancelled the sale certificate on 08 Feb 2012 and refunded Rs 20,00,10,000 plus interest of Rs 61,34,554; Purchaser encashed the cheques.
  • High Court (23 Aug 2013) held the sale certificate valid, said AO could not cancel it, and ordered the Purchaser to re‑pay the refunded amount within two weeks for registration of the certificate.
  • Both parties appealed. The Supreme Court, noting the procedural infirmities, examined the statutory framework (Section 13(8) SARFAESI Act (pre‑2016 amendment) and Rules 8 & 9) and the auction notice clauses.
  • Identified infirmities:

1. Bid received after DRAT restraint (07 Apr 2010) despite the restraint being operative.

2. Sale concluded before the expiry of the mandatory 30‑day notice period (sale certificate issued 16 Sep 2011, while the 30‑day window, excluding the restraint period, expired on 23 Sep 2011).

3. No notice to Borrower of bid opening on 12 Sep 2011.

4. Sale certificate issued to a non‑bidder nominee (Purchaser partnership formed on 12 Sep 2011, after the auction date, and not the actual highest bidder).

5. Absence of original auction records and lack of inter‑se bidding evidence.

  • The Court held that these violations rendered the auction illegal; consequently, no sale right accrued to the Purchaser, and the sale certificate was void.
  • The Court also noted that the Borrower had fully settled IFCI dues, preserving its right of redemption under Section 13(8), and that there was no collusion.

Final Outcome

  • The Supreme Court quashed and set aside the High Court judgment dated 23 Aug 2013.
  • Civil Appeals Nos. 10077‑10078 of 2014 (Borrower) were allowed; Civil Appeals Nos. 10246‑10247 of 2014 (Purchaser) were dismissed.
  • The SLP (C) No. 508 of 2016 concerning the amalgamation scheme with Thomas Cook (India) Limited was dismissed.
  • No order as to costs; pending interlocutory applications, if any, stand disposed of.

Topics: Sale Certificate, SARFAESI Auction Procedure, Supreme Court Judgment