Authority: Supreme Court of India, Civil Appellate Jurisdiction

Order Date: 21 August 2026

Case Overview

  • The matter comprised multiple appeals heard together: Civil Appeal Nos. 9228‑9231 of 2013 (Lakshmi Mohan estate vs. Airtech Projects Engineers Pvt. Ltd.), SLP‑Civil Nos. 1441‑1446 of 2014 (Airtech as appellant), and SLP Diary No. 31322 of 2018 (Chief Manager & Authorized Officer of United Bank of India vs. Airtech). All appeals challenged the common judgment dated 22 Mar 2013 of the Madras High Court.
  • Background: Airtech obtained a cash‑credit facility from United Bank of India. By 31 Jul 2008 the loan stood at Rs 88,52,741 against a sanctioned limit of Rs 85 lakhs, leading the bank to declare the account a Non‑Performing Asset and issue a demand notice under Sec. 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.
  • The secured asset was a 4,900 sq ft land parcel with building at Door No 32, McNichols Road, Chetpet, Chennai, valued on 14 Oct 2008. Initial possession‑cum‑sale notice (12 Nov 2008) fixed the sale for 04 Jan 2009 (later corrected to 05 Jan 2009). The borrower obtained a stay from the Debts Recovery Tribunal‑II (DRT) on 29 Dec 2008, which was set aside by the High Court on 21 Apr 2009.
  • A fresh notice dated 18 Mar 2009 fixed the auction for 24 Apr 2009 and required bidders to submit an Earnest Money Deposit (EMD) of Rs 21,50,000 along with their offers by 23 Apr 2009 (Clause 7). The borrower again challenged the notice; the DRT granted a conditional stay on 21 Apr 2009 but allowed the auction to proceed, pending confirmation by 21 May 2009.
  • On 23 Apr 2009 the auction‑purchasers (Lakshmi Mohan estate) submitted their bid of Rs 2,17,40,000 together with an EMD of Rs 21,15,000, a shortfall of Rs 35,000. The other bidder made an identical shortfall. The auction on 24 Apr 2009 declared the estate’s bid the highest.
  • The same day the purchasers deposited an additional Rs 33,20,000, bringing total deposit to Rs 54,35,000 (25 % of the bid price) as required by Rule 9(3) of the Security Interest (Enforcement) Rules, 2002. The balance sale consideration was paid on 05 Oct 2009. A sale certificate was issued on 10 Oct 2009 and registered on 15 Oct 2009.
  • The borrower appealed to the Debts Recovery Appellate Tribunal (DRAT), which on 20 Jun 2011 held that the auction violated Rule 8(5) and ordered the bank to restore possession. The High Court set aside the DRAT order on 16 Aug 2011, remitting the matter; the DRAT reaffirmed its earlier finding on 31 Aug 2012. Subsequent writ petitions were dismissed by the High Court in the common judgment of 22 Mar 2013.
  • Counsel for the auction‑purchasers (Mr. Niranjan Reddy) argued that the EMD requirement was ancillary, not essential, and that both bidders had identical shortfalls. Counsel for the bank (Mr. Dhruv Mehta) contended that the shortfall was inconsequential and that the bank was prepared to refund any excess proceeds. Counsel for the borrower (Mr. Jayanth Bhushan) maintained that the EMD was a mandatory eligibility condition and that the balance consideration was paid beyond the 15‑day period.

Final Outcome

  • The Supreme Court quashed and set aside the impugned High Court judgment dated 22 Mar 2013 and the DRAT order dated 20 Jun 2011.
  • It held that the EMD shortfall was non‑statutory, ancillary, and did not vitiate the auction; the auction‑purchasers’ bid of Rs 2,17,40,000 was valid.
  • The Court directed United Bank of India to refund the surplus amount of Rs 1,33,94,054 to the borrower, with interest at 7 % per annum calculated from 23 Mar 2010 (the date the surplus was kept in a non‑interest‑bearing account) until actual payment.
  • Civil Appeal Nos. 9228‑9231 of 2013 and SLP Diary No. 31322 of 2018 were allowed; the SLP‑Civil Nos. 1441‑1446 of 2014 were disposed of.
  • No order as to costs was made.

Topics: Court Judgment, Secured Asset Auction, Bank Refund