Where the highest bid received during the public auction/tender is equal to the Reserve Price, no consent from the borrower is required under Rule 9 of the Security Interest (Enforcement) Rules, 2002 -Mahipal Singh Yadav Vs. Union Bank of India & Anr. – Delhi High Court
In this case, the highest bid amount received by the respondent Bank was the reserve price, the auction purchase was confirmed at the reserve price. The petitioner contended that the said auction at the reserve price, and confirmation thereof, are violative of Rule 9(2) of the Security Interest (Enforcement) Rules, 2002.
Hon’ble High Court holds that the whole purpose of undertaking the sale of the immovable property through a public auction/ tender would be defeated, if the authorised officer is obliged to first obtain the consent of the borrower – where the highest bid/ offer received during the public auction/ tender is equal to the reserve price, and not higher. The second proviso to Rule 9(2) would become relevant and be attracted, only if the case is not covered by the first proviso, namely, where the amount offered towards sale price is equal to, or more than the reserve price specified under sub-Rule (5) of Rule 8. It is only when the offered sale price is lower than the reserve price, that the second proviso comes into play, and in such a situation, without the consent of the borrower and the secured creditor, the authorised officer cannot confirm the sale. The second proviso to Rule 9(2) provides flexibility to the concerned parties, namely, the borrower and the secured creditor, to sell the secured asset, with their consent, at a price which is even below the reserve price.