The Debts Recovery Appellate Tribunal (DRAT) in Kolkata has dismissed an appeal by Kotak Mahindra Bank Ltd., upholding the order of the Debts Recovery Tribunal (DRT) in Visakhapatnam. The DRT had annulled an e-auction sale and directed the bank to refund the auction purchaser’s deposit with interest due to the bank’s negligence in serving the auction notice. The case was filed by borrower Vudutha Rajendra Prasad against Kotak Mahindra Bank and others, challenging the validity of the e-auction sale notice.
The DRT found that the bank’s authorized officer had failed to comply with statutory requirements under the Security Interest (Enforcement) Rules, 2002, particularly the obligation to serve and publish the sale notice. As a result, the auction was set aside, and the bank was directed to refund the deposit with 9% interest per annum. Kotak Mahindra Bank appealed to the DRAT, challenging only the award of interest, arguing that the tender documents contained a clause prohibiting bidders from claiming interest.
However, the DRAT upheld the DRT’s findings, observing that the authorized officer had committed patent illegalities by failing to serve and publish the mandatory notice. The Tribunal cited the Supreme Court’s ruling in CELIR LLP v. Bafna Motors (2024), reiterating that banks and their officers are duty-bound to strictly follow statutory provisions. The DRAT rejected the bank’s reliance on the tender clause, holding that such contractual terms cannot override statutory obligations or shield the bank from liability arising from its own negligence.
The Tribunal directed that the refund with interest must be completed within 30 days, reinforcing the principle that auction purchasers are entitled to protection when banks fail to adhere to statutory procedures. The case, Kotak Mahindra Bank Ltd vs MD Developers, Madala Narendra Kumar, was decided on December 16, 2025, with Justice Anil Kumar Srivastava presiding. The judgment emphasizes the importance of banks following statutory provisions and being held accountable for their negligence. The decision also highlights the need for banks to ensure that their procedures are in line with the law to avoid such situations in the future.