In a landmark judgment affirming the protection of borrower rights, the Debt Recovery Tribunal (DRT) has set aside an illegal auction conducted by IIFL Home Finance Limited, exposing a fraudulent scheme involving Surpreet Enterprises, Shanti Kumar Chelluri, Ashish Kumar Chelluri, and Amit Kumar Chelluri.
The case, heard under SA No. 81 of 2020, revealed serious procedural violations and blatant abuse of the SARFAESI Act by IIFL. The Tribunal found that IIFL, instead of following the mandatory legal process, bypassed key borrower protections by:
Failing to serve the mandatory 30-day sale notice required under Rule 8(6) of the Security Interest (Enforcement) Rules, 2002.
Conducting a premature and hurried auction, in violation of Rule 9(1).
Colluding with tenant Surpreet Enterprises and individuals Shanti Kumar Chelluri, Ashish Kumar Chelluri, and Amit Kumar Chelluri to wrongfully dispossess the borrower.
Evidence placed before the Tribunal showed that Surpreet Enterprises, posing as a tenant, worked hand-in-glove with the Chelluri family and IIFL officers to manipulate the auction process. The property was sold to Amit Kumar Chelluri through a tainted and illegal transaction, with IIFL facilitating the breach of trust and statutory obligations.
The DRT, taking a strong stand against this fraudulent exercise of power, held that:
The auction sale was void ab initio — illegal from inception.
The sale certificate issued to Amit Kumar Chelluri was canceled.
The property was restored back to the rightful borrower.
IIFL was directed to refund the auction consideration.
This decision serves as a crucial reminder that financial institutions cannot misuse SARFAESI proceedings to conspire with third parties for wrongful gain. It strengthens borrower protection and reinforces that due process is the cornerstone of any enforcement action.
Legal experts have hailed this judgment as a powerful warning to banks and auction purchasers alike: fraudulent sales, collusion, and procedural violations will not be tolerated under Indian law.
The DRT’s ruling shines a light on systemic abuse in asset recovery processes and restores faith in the judiciary’s commitment to uphold the rights of borrowers against institutional injustice.
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