As sale follows possession, whether symbolic or physical, it is the final step. In view of the DRT's order, unless the IA is disposed of, the bank cannot take physical possession at this stage without DRT's specific order for that purpose. Approach the DRT for an appropriate order for the bank to take physical possession.

the IA/XXXX/XX challenges the legality of the possession notice under Section 13(4) of the SARFAESI Act, the bank taking physical possession could be considered in violation of the order.

2) The bank may argue they are taking possession to secure the property, but you can argue that until the sale is confirmed by the DRT, the status quo should be maintained. 

You can make an urgent application for "stay of dispossession" or "status quo" in the pending I.A. to prevent the bank from taking physical possession until the final outcome.

The DRT's order states that the  sale shall be subject to the outcome of the IA challenging the sale.”. It means  that the auction sale is not finally confirmed, that the rights of the auction purchaser are provisional and if the the borrower succeeds in the IA, the sale can be set aside.

Despite the above, you may please note that under Section 13(4) of the SARFAESI Act and Rule 8 of the Security Interest Rules, the secured creditor can take possession after auction, if the Auction already conducted, and DRT has not granted a stay of possession, then the bank can proceed  to obtain physical possession through the District Magistrate under SARFAESI Act Section 14. b This is because the DRT order only makes the sale conditional, but it has not stopped enforcement of sale. 

However the bank cannot complete  further steps namely the final confirmation of sale or registration of sale certificate and the final transfer of the property to auction purchaser until the IA is decided, and if they do so the bank may face legal complications if the sale has been set aside by DRT 

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1. For taking physical possession of the property, the lending Bank shall have to avail police help for which it shall have to apply to the DM u/s14 of the SARFAESI Act for his Order for taking physical possession with police help.

2. While applying for order u/s14 of SARFAESI Act, the Bank shall have to affirm 9 points under affidavit one of which is "whether there is any SARFAESI Application pending before ant DRT?"

3. DM will hardly agree to pass order for physical possession when such Order has been passed by the DRT.

4. However, legally the Bank can take physical possession of the said mortgaged property since there has been no stay order on such taking physical possession of the said property.

Unless there is any restraint order passed by the DRT, there is no impediment for Bank to issue Sale Certificate or deliver physical possession if the same is so taken already. 

Your query concerns the effect of a DRT order stating that the sale shall be subject to the outcome of an Interlocutory Application (I.A.) challenging the sale, and whether the bank can still take physical possession of the secured asset.

1. Meaning of the DRT direction “sale shall be subject to outcome of the I.A.”

When the Debt Recovery Tribunal states that the sale shall be subject to the outcome of the pending application, it normally means that:

• the sale is not finally confirmed in law,
• the rights of the auction purchaser remain conditional, and
• the final validity of the sale will depend on the decision in the pending application.

However, such wording does not automatically amount to a stay of all SARFAESI proceedings, unless the order expressly says that:

• possession is stayed, or
• further action under SARFAESI is restrained.

Proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 continue unless specifically stayed by the Tribunal.

2. Whether registration of the sale deed can take place

If the Tribunal has made the sale subject to the outcome of the challenge, many banks refrain from:

• issuing the final sale certificate, or
• completing registration of the property,

until the application challenging the sale is decided. This is done to avoid complications if the sale is later set aside.

3. Whether the bank can take physical possession

Under the SARFAESI framework, after completion of the auction process the secured creditor is entitled to take possession of the property under Section 13(4), and if necessary seek assistance from the Magistrate under Section 14.

Therefore, in principle:

• the bank can proceed with taking physical possession if there is no explicit stay order restraining possession.

However, the practical position depends entirely on the wording of the DRT order. If the Tribunal intended to maintain status quo, then taking physical possession could be treated as a violation of the spirit of the order.

Courts and tribunals sometimes use the phrase “subject to outcome” precisely to preserve the rights of the borrower or applicant until the challenge to the sale is adjudicated.

4. Practical legal risk

If the bank proceeds to take physical possession while the sale itself is under challenge:

• the applicant may approach the DRT again alleging circumvention of the Tribunal’s order, or
• seek an interim stay or restoration of possession.

Therefore banks generally examine whether the order contains any implicit restriction or interim protection before acting.

5. Practical course usually followed

Where a sale is under challenge and the Tribunal has passed such a direction, parties often:

• seek clarification from the DRT, or
• file an application requesting permission to proceed with possession.

This avoids later allegations that the bank acted in violation of the Tribunal’s order.

Summary

An order stating that the sale is “subject to the outcome of the application challenging the sale” does not automatically stop SARFAESI actions. If there is no explicit stay, the bank may legally proceed to take physical possession. However, because the validity of the sale itself is under challenge, taking possession without clarification from the Tribunal can create procedural complications, and banks often seek clarification from the DRT before proceeding further.