Wednesday, February 6, 2013

DRT Auction Rule Mandatory

The Supreme Court has ruled that the provision for deposit of 25 per cent of the purchase money in an auction sale under the Debt Recovery Act (DRT) is mandatory and the recovery officer cannot relax it. According to the law, if there is a default on this, the property shall be resold immediately. The court thus dismissed the appeal of the purchaser in the case, C N Paramasivan vs Sunrise Plaza, against the Madras High Court judgment. In this case, which was fought over two decades, the partners of a firm defaulted in repaying the loan advanced by Indian Bank. The property was sold in auction, which was challenged by the partners for violation of the rules. The debt recovery appellate tribunal held that the purchasers did not act bona fide and set aside the sale and asked the partners to deposit the entire loan amount. The buyer challenged that order, contending that the rule to deposit was not mandatory, but only directory. The high court rejected his petition, and the Supreme Court dismissed the appeal. 

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