Anil Kumar Batla And Ors. vs Allahabad Bank And Ors.

S.N.H. Zaidi, J

Both these appeals have been directed against the order dated 19.11.2010 of DRT-II, Delhi whereby S.A. No. 47/2008 has been disposed of with the direction that on payment of the dues of Rs. 1,72,14,846/- along with interest and cost by the S.A. applicant within 30 days, the sale of mortgaged property and the sale certificate would be cancelled and the sale proceeds deposited with the bank would be refunded to the auction purchasers along with interest but, in the event of non-payment of the amount, the S.A. applicant would hand over the possession of the mortgaged property to the bank. The facts giving rise to these appeals, in brief, are that in February 2004 Allahabad bank had sanctioned a credit facility of Rs. 2.10 crores to M/s. Sudha Fashions Pvt. Ltd. to which Smt. Archana Mishra stood as guarantor and also mortgaged her property bearing No. 353, Sector-19, Faridabad, Haryana, hereinafter referred to as the property in question. Mr. Ashok Kumar Dubey also stood as guarantor and mortgaged his property. When the borrower company defaulted in repayment of loan amount, the bank declared the account as Non Performing Asset (NPA) on 31.5.2006 and issued the demand notice dated 1.9.2006 under section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short, the SARFAESI Act) to the borrower, guarantors and mortgagors claiming an amount of Rs. 1,72,14,846/-. The bank took symbolic possession of the property in question on 4.7.2007 and published the possession notice in the newspapers. On 22.7.2008, the bank issued a notice for the sale of the property in question with a reserve price of Rs. 75 lacs and invited sealed bids by 29.8.2008. The sale notice was published on 26.7.2008 in Delhi edition's of the newspapers, namely, 'The Economic Times' and 'Rashtriya Sahara'. Being aggrieved by the actions of the bank, Smt. Archana Mishra filed S.A. No. 47/2008 before DRT-II, Delhi on 19.8.2008 challenging the sale notice and the actions of the bank. As no interim relief qua the property in question was granted by the DRT, the proposed auction took place as per schedule on 29.8.2008 and the highest bid of Anil Kumar Batla and Randhir Singh Yadav for Rs. 84.2 lacs was accepted and after the confirmation of sale and deposit of sale consideration, the sale certificate was issued in their favour on 3.10.2008. On 5.12.2008, the bank took the actual physical possession of the property in question with the assistance of the police in pursuance of the order of the District Magistrate passed under section 14 of the SARFAESI Act.

The bank thereafter filed an application (I.A. No. 880/2008) for dismissal of the S.A. on the ground that since the property in question had been sold, entire sale consideration had been received and the sale certificate had been issued, the S.A. had become infructuous. Smt. Archana Misra also filed application (I.A. No. 887/2008) challenging the auction, confirmation of sale and also asked for a direction to the bank to de-seal the property in question. She also filed a writ petition [W.P(C) No. 8968/2008] before the Delhi High Court but the writ petition was dismissed as withdrawn with liberty to the petitioner to approach the DRT for the relief available under the law and a direction that the status quo of the property in question be maintained. Smt. Archana Mishra thereafter filed application (I.A. No. 14/2009) for setting aside the sale as well as for restoring the possession of the property and redemption of mortgage was also prayed for on payment of Rs. 95 lacs against the sale price of Rs. 84.20 lacs. She filed another application (I.A. No. 16/2009) for impleading the auction purchasers in the S.A. and for restraining the bank from handing over the possession to them. The application (I.A. No. 14/2009) was disposed of by the DRT with the direction to the bank that if she would deposit Rs. 95 lacs within 15 days, the possession of the property in question be restored to her. The said amount was deposited by her, as per the order dated 9.6.2009. This order was assailed by the auction purchasers in Appeal No. 164/2009 before the DRAT and this Tribunal, vide order dated 2.7.2009, directed Smt. Archana Mishra not to create any third-party interest in the property in question but the prayer for the delivery of possession of the property to them was declined. On 18.7.212, the bank restored the possession of the property back to Smt. Archana Mishra. Being aggrieved with the order dated 2.7.2009 of this Tribunal as well as restoration of the possession of the property in question to the S.A. applicant, the auction purchasers filed a writ petition [W.P(C) No. 10262/2009] before the Delhi High Court and the Hon'ble Court disposed it off with a direction to this Tribunal to dispose of Appeal No. 164/2009. The said appeal, preferred by the auction purchasers, was allowed by this Tribunal vide order dated 5.7.2010 and Smt. Archana Mishra was directed to return the possession of the property in question to the bank. Smt. Archana Mishra assailed that order before the Delhi High Court in W.P(C) No. 4434/2010 and the Hon'ble Court stayed the delivery of the possession as directed by this Tribunal.

The S.A. was contested by both the bank and the auction purchasers and the Tribunal below disposed it off by the order impugned with the directions as stated above. Feeling aggrieved with that order and the directions, both the auction purchasers and the S.A. applicant have preferred these appeals, which are being disposed of by a common order.

I have heard Mr. Amrendra Kumar Singh, the learned counsel appearing for the appellant/auction purchasers, Mr. B.S. Nagar, the learned counsel for the appellant Smt. Archana Mishra and Mr. M.K. Manav, the learned counsel for the Allahabad Bank and perused the record. No arguments have, however, been put forth by the learned counsel for respondent Nos. 3 to 5 in both the appeals.

Mr. Singh has pointed out that the auction purchasers had participated in the bid process to purchase the property in question in accordance with the sale notice published by the bank in the newspapers and as they were the highest bidder, the sale was confirmed in their favour and after due deposit of the sale price the sale certificate was Issued to them. He has contended that the guarantor/mortgagor was not denying the factum of mortgage of the property in question and it was also not in dispute that the borrower had defaulted in repayment of the loan amount, as such the creditor bank was empowered to exercise its right under the SARFAESI Act to enforce its security interest qua the secured asset and it had rightly proceeded to sell the property in question for the recovery of the outstanding amount of debt. His further contention is that the Tribunal below while holding that there was no irregularity or illegality in issuing the notices under sections 13(2) or 13(4) of the said Act, has wrongly granted an opportunity to the mortgagor to redeem the mortgage under section 13(8) of the Act. Another contention is that after the issuance of the Sale Certificate dated 3.10.2008, the procedure for the sale of the property had been completed and the auction purchasers had become the absolute owners of the property in question, as such the mortgagor could not be allowed to redeem the mortgage even on payment of the entire amount of debt along with interest, cost and expenses. It has also been contended by him that since the Tribunal below has not set aside the sale of the property in question, therefore, the question of the redemption of the mortgage does not arise. Mr. Singh has also contended that if the sale certificate issued to the bona fide auction purchasers is cancelled, it would cause great prejudice to them as they had invested huge sums to purchase the property and the very purpose of the sale would become redundant. His further contention is that the sale was conducted by the bank as per the Enforcement Rules.

Mr. Nagar has painted out that the S.A. was initially filed challenging the notices issued by the bank but since the property in question was sold during the pendency of the S.A., therefore, the sale had also been challenged and cancellation of the sale certificate issued to the auction purchasers had been sought by amending the S.A. He has also pointed out that learned Tribunal below had framed 6 points for adjudication as per paragraph 13 of the judgment and while point No. 1 relating to the classification of the account as NPA, point No. 3 qua the legality of the notices issued under section 13(2) and 13(4) of the SARFAESI Act and point No. 4 qua the setting aside of the sale have been decided against the applicant, point No. 2 relating to the limitation of the S.A. and point No. 5 qua the applicants entitlement to redeem the property have been decided in her favour and point No. 6 relating to relief has accordingly been disposed of.

He has mainly stressed that the sale of the property in question is full of illegalities and serious irregularities as it was conducted by the bank in utter violation of the mandatory requirement of the relevant rules. His contention is that the proviso to sub-rule (6) of rule 8 of the Security Interest (Enforcement) Rules, 2002 (for short, the Enforcement Rules), mandates that if the sale of the immovable secured asset is to be effected by either inviting tenders from the public or by holding public auction, the secured creditor shall cause a public notice to be published in two leading newspapers, one in vernacular language, having sufficient circulation in the locality by setting out the terms of sale but, despite the fact that the property in question is situated in Faridabad Haryana, the bank had published the sale notice in Delhi editions of "The Economic Times" in English and "Rashtriya Sahara" in Hindi which have no circulation in Faridabad. According to him, though "The Economic Times" is known for business ventures but its circulation is limited to a specific class which has interest in financial matters and "Rashtriya Sahara" is not even a widely circulated newspaper in Delhi and its Delhi edition has no circulation in Faridabad. He has further contended that 'Rashtriya Sahara' newspaper has two completely separate editions for Delhi and Haryana/Rajasthan and both the editions are printed separately. It has also been contended by him that original copies of both Delhi and Haryana/Rajasthan editions of 'Rashtriya Sahara' w.e.f. 11.3.2013 to 18.3.2013 filed by the appellant Smt. Archana Sharma along with her reply to the bank's application clearly show that the newspaper has an independent edition for the States of Haryana and Rajasthan, as such there is no question of the circulation of Delhi edition of the said newspaper in Faridabad, which is in Haryana. According to him, the publication of the sale notice in that newspaper on 26.7.2008 meant for east Delhi was contrary to the requirement of the proviso to rule 8 (6) of the Enforcement Rules.

Mr. Nagar has further contended that the learned Tribunal below, while reproducing the grounds of challenge taken qua the bank's actions in the S.A., has also mentioned in paragraph 8(xiv) of the judgment that the bank never issued any publication in newspaper which has wide circulation and the publication appears to have been issued in newspapers which had meager publicity in Delhi only and not in Faridabad and those papers are read by only small section of people, but the Tribunal below has neither addressed itself on this issue nor returned any finding qua the circulation of Delhi editions of those newspapers in Faridabad and has given only one-line finding that it did not find any illegality and the sale had been conducted in accordance with rules, without giving any reasons in support of its view.

The contention of the bank's counsel Mr. M. K. Manav, on the other hand, is that the Delhi edition of 'Rashtriya Sahara' has wide circulation not only in Delhi but in the National Capital Region (NCR) including Faridabad and no East Delhi edition of the newspaper is published. Filing the original copies of 'The Economic Times' and 'Rashtriya Sahara' dated 26.7.2008 wherein the sale notice was published and a certificate of the Head of Sales and Marketing Department of 'Rashtriya Sahara' showing that the copies of 'Rashtriya Sahara' Delhi are circulated in Faridabad along with an application after the order was reserved, it has been contended that the circulation of Delhi edition of the newspaper in Faridabad, Haryana is sufficiently established, as such rule 8(6) of the Enforcement Rules was duly complied with in conducting the sale.

I intend to deal with the contentions of the appellant guarantor/mortgagor in the first instance before considering the submissions of the appellant auction purchasers, who were impleaded after the property in question was sold to them during the pendency of S.A.

Perusal of the order impugned would show that the learned Tribunal below has though reproduced as many as 21 grounds on which the actions of the bank were challenged in the S.A. but it has not specifically dealt with or given any finding in respect of all those grounds. The learned counsel for the S.A. applicant/appellant has not pressed all those grounds before this Tribunal and has laid stress mainly on non-compliance of the requirement of rules in conducting the sale of the property in question. In my opinion, the finding of the Tribunal below on point No. 4 qua the setting aside of sale is not sustainable as it is devoid of any reasons and any judicial finding sans reasons is not tenable in law. The contention of Mr. Nagar has force that though the sale notice was specifically challenged on the ground that it was not published in any newspaper having sufficient circulation in the locality and was published in such newspapers which had no circulation in Faridabad, where the property in question is situated, but the learned Tribunal below has erred in not dealing with this ground while returning a general finding in paragraph 40 of the judgment that it did not find any illegality in respect of conducting the sale.

So far as the question relating to the legality of the sale of property in question is concerned, the proviso to rule 8(6) of the Enforcement Rules provides that if the sale of secured asset is being effected by either inviting tenders from the public or by holding public auction, the secured creditor shall cause a public notice published in two leading newspapers, one in vernacular language, having sufficient circulation in the locality by setting out the terms of sale in it. The perusal of the original copies of both the Delhi and Haryana/Rajasthan editions of 'Rashtriya Sahara' newspaper dated 11.3.2013 to 18.3.2013 filed by the S.A. applicant/appellant shows that Delhi edition was mainly related to the local news of Delhi but on some days it had specific page for Ghaziabad and Noida. It had no page for any other area of NCR, including Faridabad, whereas the Haryana/Rajasthan edition besides having the local news of those States had, on some dates, specific pages for western U.P., Madhya Pradesh, Punjab and Himachal Pradesh. The Haryana/Rajasthan edition did not contain any local news of Delhi. The certificate issued by the Sales and Marketing Department of Rashtriya Sahara, New Delhi though says that Delhi edition of the newspaper has circulation in Faridabad but, in my view, the said certificate cannot be accepted as proof of sufficient circulation of Delhi edition in Faridabad, as no circulation detail has been mentioned in it to show whether or not the circulation is sufficient. The said certificate is general in nature and does not appear to satisfy the requirement of rule 8(6) of the Enforcement Rules. I am also of the view that when the said newspaper had an independent edition for the State of Haryana, it appears unlikely that the edition meant for Delhi would have any circulation in Faridabad. The respondent bank has not come up with any explanation as to why the notice was not published in Haryana edition of 'Rashtriya Sahara' and was published in Delhi edition and that too on such a page which was meant for east Delhi. I, however, agree with the bank's counsel that the said newspaper does not have any east Delhi edition, but it does appear that the Delhi edition has a specific page for east Delhi as is reflected from the copy of the original newspaper filed by the bank along with its application. In view of above, I am of the considered view that by publishing the sale notice in Delhi edition of 'Rashtriya Sahara' on 26.7.2008, which does not appear to have sufficient circulation in Faridabad locality, where the property in question is situated, the requirement of the proviso to rule 8(6) of the Enforcement Rules has not been sufficiently complied with. The main purpose of publication of the sale notice in a newspaper of vernacular language having sufficient circulation in the locality is that the residents of the locality may know about the intending sale and participate in the sale process. The said purpose is not achieved by publishing the notice in a newspaper which has no sufficient circulation in the locality. It is a well established principle that if a law requires a thing to be done in a particular manner, it should be done in that manner alone and in no other manner. Since the respondent bank has failed to comply with the requirement of the aforesaid rule 8(6), as such the sale of the said property on the basis of such notice cannot be held to have been conducted in accordance with the provisions of the law.

Mr. Nagar has pointed out that after making the payment of 25% of the amount of sale price as per rule 9(3) of the Enforcement Rules, the purchaser is required under sub-rule (4) to pay the balance sale price on or before the 15th day of the confirmation of sale or within such extended period as may be agreed upon in writing by the parties. He has further pointed out that the sale was conducted on 29.8.2008 and after the deposit of 25% of the sale price and confirmation of sale the auction purchasers had, vide letter dated 12.9.2008, asked for the extension of time for depositing the balance amount, which was allowed by the authorized officer vide letter dated 15.9.2008 and they were directed to deposit the balance amount on or before 25.9.2008, but the auction purchasers had again moved on 19.9.2008 for extension of time up to 30.9.2008 and the authorized officer, vide letter 20.9.2008, had extended the time up to 29.9.2008 and the balance sale price was deposited on that date. It has been contended, in this regard, that since the auction purchaser is the landlord of the bank's east Delhi branch building, as such the auction purchasers in connivance with the authorized officer of the bank had first managed to get the sale notice published in the east Delhi edition of a newspaper and thereafter obtained the extension of time twice for making the deposit by favouritism and colourable exercise of power. In my opinion, this contention has no force as rule 9(4) of the Enforcement Rules as well as condition No. 3 of the 'Terms and Conditions' of sale, set out in the sale notice, clearly provides for extension of time in respect of payment of balance amount of the sale price as per the agreement between the parties and since in the instant matter the authorized officer had accordingly extended the time for such payment, it cannot be said to have been done in violation of any rule and the Tribunal below has rightly held that the bank had the right to extend the time. I am also of the view that there is nothing on record which could substantiate the allegation that the authorized officer was in connivance with the auction purchasers or he had shown any undue favour or had exercised the power in violation of any rule. The auction purchaser's land lordship of the building of bank's branch cannot be accepted as a sufficient circumstance to infer the alleged colourable exercise of power by the authorized officer.

Another contention raised by Mr. Nagar is that the bank had sold the property in question for Rs. 84.2 lacs whereas the appellant mortgagor had deposited Rs. 95 lacs with the bank and had offered to redeem the mortgage on such amount as, the amount deposited by her was much greater than the sale price paid by the auction purchasers, but the learned Tribunal below has wrongly allowed her to redeem the mortgage on deposit of the entire dues plus interest, costs, expenses and charges. The auction purchasers have also assailed this direction of the Tribunal below. According to Mr. A.K. Singh, after the issuance of sale certificate by the bank on deposit of the entire sale consideration, the sale process had come to an end and the auction purchasers had become the absolute owners of the property in question for the purposes of the SARFAESI Act and since the appellant/mortgagor did not come forward to settle the dues or to redeem the mortgage before the date fixed for sale, the mortgage cannot be redeemed under section 13(8) of the SARFAESI Act as the amount of Rs. 95 lacs was deposited much after the completion of sale. In this regard, Mr. Singh has relied upon the judgment in K. Chidambara Manickam v. Shakeena & Ors., AIR 2008 MAD 108.

So far as the redemption of the mortgage is concerned, sub-section (8) of section 13 of the SARFAESI Act provides that-

(8) If the dues of the secured creditor together with all costs, charges and expenses incurred by him are tendered to the secured creditor at any time before the date fixed for sale or transfer, the secured asset shall not be sold or transferred by the secured creditor, and no further step shall be taken by him for transfer or sale of that secured asset.

The above provision makes it clear that the dues along with all costs, charges and expenses are required to be tendered to the secured creditor before the date fixed for sale and if such dues etc. are accordingly tendered, then the secured asset shall not be sold. In my opinion, the contention of the auction purchasers that with the issuance of sale certificate the process of sale was completed and they had become the absolute owners of the mortgaged property as such the mortgage cannot be redeemed, is not acceptable because it has been found that the respondent bank had not conducted the sale in accordance with the relevant rules and it was not a valid sale. The view of the Madras High Court expressed in K. Chidambara Manickam v. Shakeena & Ors. (supra) has thus no application in this matter. An invalid sale, even if confirmed, does not disentitle a mortgagor to claim the right of redemption under the law. The S.A. applicant, being the mortgagor, thus has a right to redeem the mortgage in accordance with section 13(8) of the SARFAESI Act. The learned Tribunal below has though allowed the redemption of the mortgage as per terms of section 13(8), yet since it has held the sale valid, therefore, in the light of the said finding, the redemption of mortgage could not have been allowed after the completion of sale. The direction of the Tribunal below in the order impugned is, therefore, not tenable.

Since the sale of the property in question in favour of the Appellant/auction purchasers is bad in law, therefore, no right of the auction purchasers had accrued in that property on the basis of such sale. They are, however, entitled to get their sale price back from the bank along with interest from the date of deposit, at the rate directed by the Tribunal below, which appears to be reasonable. In view of the aforesaid discussion, Appeal No. 50/2011 and the S.A. No. 47/2008 filed by the guarantor/mortgagor are allowed and the actions of the respondent bank taken qua the sale of the property in question are held to be not in accordance with the rules made under the SARFAESI Act. The order impugned as well as the sale certificate issued in favour of the auction purchasers are accordingly set aside. Consequently, Appeal No. 477/2010 filed by the auction purchasers is dismissed. They are entitled to get back the amount of sale consideration deposited by them with interest. The respondent bank is, accordingly, directed to refund the sale consideration of Rs. 84.2 lacs to the appellant/auction purchasers along with interest @9% p.a. from the date of its deposit until the date of payment. Parties shall bear their own cost of these appeals.