Supreme Court Upholds Higher Bid in SARFAESI Auction Case, Awards Interest to Original Bidder

The Supreme Court of India recently delivered a significant judgment in the case of GBJ Hotels Private Limited vs. Sriharan Sripathmanathan & Ors., addressing complex issues surrounding auction sales under the SARFAESI Act. The case, decided by Justices Dipankar Datta and Manmohan on April 28, 2025, involved competing bids for distressed hotel assets and raised important questions about the sanctity of auction processes versus securing the best price for creditors.

The dispute originated when Edelweiss Asset Reconstruction Company Limited (ARCL), as the assignee of debt from Edelweiss Finvest Limited, initiated recovery proceedings against defaulting borrowers Sriharan Sripathmanathan and Asiana Hotel Management Company. GBJ Hotels had emerged as the successful auction purchaser with a bid of Rs. 108 crore in the SARFAESI proceedings. However, during subsequent High Court proceedings, GRT Hotels & Resorts Private Limited offered Rs. 120 crore for the same assets, prompting the High Court to direct GBJ Hotels to match this higher offer.

When GBJ Hotels declined to increase its bid, the High Court approved GRT Hotels’ higher offer, stating ‘better the price, better it is for the creditor.’ This decision aggrieved GBJ Hotels, which approached the Supreme Court arguing that the sanctity of the SARFAESI auction process had been violated. The Supreme Court, while acknowledging GBJ Hotels’ position as the original successful bidder, took a pragmatic approach to maximize recovery for the creditors.

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The Court observed:

‘We invited GBJ Hotels and GRT Hotels to improve their bids and submit the same in sealed covers… Obviously, this was in exercise of our inherent power to fetch the best of offers when the secured asset was reportedly worth much more than what was offered before the High Court.’

In the subsequent bidding process before the Supreme Court, GRT Hotels substantially increased its offer to Rs. 153 crore, outbidding GBJ Hotels by Rs. 17 crore. The Court noted that while it wasn’t examining the full quantum of debt (which Edelweiss ARCL claimed was approximately Rs. 186 crore), it was focused on securing the best available price for the distressed assets.

The judgment balanced competing interests by:

1. Confirming GRT Hotels as the successful bidder at Rs. 153 crore
2. Directing Edelweiss ARCL to pay GBJ Hotels 18% interest on the Rs. 27 crore deposit that had been returned
3. Clarifying that all other questions about the debt amount remain open for determination in appropriate forums

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The Court specifically noted that this order was made in the ‘special facts and circumstances of this case’ and should not be treated as a precedent. This caveat acknowledges the unique nature of the case where the secured assets appeared significantly undervalued in the original auction process.

Petitioner Name: GBJ Hotels Private Limited.
Respondent Name: Sriharan Sripathmanathan & Ors..
Judgment By: Justice Dipankar Datta, Justice Manmohan.
Place Of Incident: Chennai, Tamil Nadu.
Judgment Date: 28-04-2025.
Result: dismissed.

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