08 August 2024 Securities and Banking Law >> Corporate Law  

In a recent case of Invest Assets Securitisations & Reconstruction Private Limited, Mumbai v/s Bank of Baroda, Vadodara & Others, the petitioner, an assignee, sought judicial review under Articles 226 and 227 of the Constitution of India, challenging the orders of the Debts Recovery Appellate Tribunal (DRAT) and the Debts Recovery Tribunal (DRT). The primary contention was the alleged non-compliance with Regulation 37(1) of the Debts Recovery Tribunal Regulations, 2015, which deals with the sale of immovable property.

Factual Background:

The dispute centred around the sale notice issued on September 24, 2021, for a secured asset. The petitioner contended that the DRAT's dismissal of their appeal was flawed because it failed to consider a critical aspect of the regulatory compliance. Specifically, Regulation 37(1) mandates that before fixing the reserve price of the property, the Recovery Officer must obtain a valuation report from an approved valuer and issue a proclamation of sale in Form-22. The petitioner argued that these steps were not followed, thus invalidating the auction sale.

Arguments Presented:

The petitioner, represented by Senior Advocate Shri Ashish Kamat, emphasized that the failure to adhere to Regulation 37(1) constituted a procedural lapse that rendered the sale void. The petitioner referenced several legal precedents to argue that non-compliance with such mandatory provisions should result in the invalidation of the sale.

On the other hand, Dr. Abhinav Chandrachud, representing the auction purchaser, countered that the petitioner had not raised these objections in a timely manner. They argued that the reserve price had been fixed after several failed attempts at auction, suggesting that the eventual sale price reflected the market value of the property. Furthermore, the failure to object before the Recovery Officer and the subsequent delay in raising the issue was seen as a significant factor against the petitioner's claim.

Court’s Analysis:

The court meticulously examined the procedural history and the arguments presented by both sides. It noted that the petitioner had failed to raise objections concerning Regulation 37(1) until after the sale was confirmed and the possession was delivered. This delay in challenging the process was deemed crucial in determining the outcome of the case.

The court also considered whether the non-compliance with Regulation 37(1) was mandatory or directory. It concluded that even if the regulation was mandatory, it was primarily for the benefit of creditors. Such provisions could be waived by the conduct of the party entitled to benefit from them. Since the petitioner had not raised objections in a timely manner, their right to challenge the process based on this non-compliance was considered waived.

Outcome:

The court determined that the DRAT’s decision to dismiss the appeal was not flawed, despite the procedural oversight. The petitioner’s conduct, including the failure to timely object and the subsequent delay in raising the issue, contributed significantly to the dismissal of the writ petition. The court also found that the sale process, despite the procedural lapse, did not result in any substantial injustice to the petitioner.

Conclusion:

This case underscores the importance of timely objections in legal proceedings, particularly when challenging procedural compliance. It illustrates that failure to adhere to procedural regulations must be addressed promptly to avoid waiving the right to contest the process. Additionally, it highlights that even if a regulatory provision is deemed mandatory, its benefit can be waived by the party entitled to it through their conduct. The court’s decision reflects a balanced approach, taking into account both procedural adherence and practical considerations in the enforcement of legal regulations.