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Judgment
R.S. Kulhari, J
This appeal has been preferred under section 18 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short "the SARFAESI Act") against the order dated 03.12.2018 passed by the Presiding Officer, DRT, Lucknow, whereby the S.A. filed by the corporate guarantor-respondent no. 1 was allowed.
The brief facts of the matter are that appellant-Bank granted various credit facilities to the respondent no. 2 in the year 2014, to which the respondent no. 1- Company executed a deed of corporate guarantee dated 30.05.2014 through its directors namely Mrs. Kiran Vatsya and Smt. Ranjana Singh and created equitable mortgage over the immovable property. As the borrower committed default in repayment of the loan, the account was classified as NPA on 30.06.2015 and the appellant- Bank issued the demand notice dated 16.07.2015 under section 13(2) of the SARFAESI Act for a sum of Rs. 8,64,30,530/-. Since the borrowers did not pay any heed to the demand as raised by the Bank, therefore, the possession notice dated 19.11.2015 was issued under section 13(4) of the said Act. Thereafter, the Bank issued the sale notice dated 23.08.2017, which was published on 24.08.2017 for auction of the property.
The respondent no. 1-Guarantor challenged the sale notice dated 23.08.2017, valuation of the property, validity of mortgage as well as the service of demand notice and the possession notice by filing S.A. No. 426-A of 2017 before the Tribunal below. Since the said sale could not be materialized, therefore, the appellant-Bank published another sale notice dated 05.01.2018 scheduling the auction on 30.01.2018. Accordingly, the property was sold and sale certificate was issued in favour of the respondent no. 3-Auction Purchaser. The respondent no. 1-Guarantor moved an amendment application on 16.02.2018 to amend its securitization application pending before the Tribunal below, which was allowed and the amendments were incorporated in the S.A. on 19.02.2018.
The Tribunal below vide impugned order allowed the S.A. observing that the demand notice was not properly served on the borrowers/guarantors and the sale was conducted before 30 days as was mentioned in the sale notice, thus set aside the demand notice, sale notice and the sale certificate and directed the Bank to restore the possession of the secured assets to the respondent no. 1 within one month from the date of the order. It was also directed that the auction purchaser will be returned the sale consideration and expenses incurred on the property after the sale along with 6% simple interest from the date of deposit till payment. However, the issue of possession notice was recorded to be barred by limitation and no illegality was found in mortgage of property. Being aggrieved by the said order, the present appeal has been filed by the appellant-Bank.
No one has appeared on behalf of the respondents- Borrowers despite service of notice, as they had also not appeared before the Tribunal below.
Learned counsel for the appellant-Bank submitted that the corporate-guarantor had challenged the demand notice dated 16.07.2015, possession notice dated 19.11.2015 and sale notice dated 23.08.2017 by filing the S.A. on 19.09.2017. The possession notice dated 19.11.2015 was duly served, published and affixed as per the requirement of law. However, the S.A.- applicant-company had challenged the possession notice also, which was apparently time barred. The Tribunal below has categorically observed that the issue of possession notice was barred by limitation, yet considered the issue of the demand notice without condoning the delay and erred in observing that the issue of demand notice may be raised at any stage.
It was also contended that the demand notice sent to the S.A.-applicant was returned unserved with the remark "no such firm in this address" and the demand notices sent to the Directors of the company were duly served. However, the same was published as abundant precaution in two newspapers, so the finding with regard to the demand notice is perverse and is not sustainable.
It was further contended that since it was a second sale, therefore, only 15 days' time was required to serve the sale notice, which was duly served, published and affixed. However, due to typographical error, the term "30 days" was mentioned in the sale notice, so the S.A.- applicant cannot take the benefit of the clerical error. The borrowers/guarantors have never tendered any amount before auction or even after expiry of 30 days. Now, the sale certificate has been issued in favour of the auction purchaser, therefore, the S.A.-applicant is not entitled for any relief.
The learned counsel for the auction purchaser adopted the arguments as advanced by the learned counsel for the Bank.
On the contrary, the learned counsel for the guarantor/S.A.-applicant submitted that the demand notice was not served as the same was not affixed on the premises as required under Rule 3 of the Security Interest (Enforcement) Rules, 2002 (in short "Rules 2002"). Therefore, the Tribunal below has rightly set aside the entire proceedings of the Bank. It was further contended that the issuance of demand notice does not give rise any right to challenge the proceedings and the same can be raised at any stage because every step taken by the Bank under section 13(4) of the Act provides a separate cause of auction, thus, the issue of demand notice was not time barred. Learned counsel relied on the judgment passed by the Hon'ble Supreme Court in Indian Overseas Bank Vs. M/s Ashok Saw Mill, AIR 2009 SC 2420.
It was also argued that although it was a second sale, hence 15 days' sale notice was sufficient, but the Bank has issued 30 days' notice, therefore, the Bank had to wait for 30 days and ought not to have auctioned the property before expiry of 30 days, whereas the same was auctioned on 24th day i.e. on 30.01.2018 from the date of publication of the sale notice i.e. 6.1.2018. Thus, the Bank has violated the provisions of the statute and the appeal is liable to be dismissed.
Having heard the learned counsels for the parties and on perusal of record, it is apparent that the Tribunal below has found the issue of possession notice as time barred and has not recorded any finding with regard to compliance of Rule 8(1) and (2) of the Rules, 2002. However, the issue of service of demand notice was stated to have been within the limitation on the basis that the issuance of demand notice does not give rise any right to file the S.A. Another infirmity as observed was, mentioning of "30 days" in the sale notice and accordingly, the entire proceedings were set aside.
So far as the issue of service of demand notice is concerned, there is no dispute on the proposition of law that the borrower/guarantor cannot challenge the demand notice before the DRT and may submit objection/representation under section 13(3-A) of the SARFAESI Act before the authorized officer. It is also undisputed that every step taken by the Bank under section 13(4) of the SARFAESI Act is challengeable before the DRT and gives rise separate cause of action as laid down by the Hon'ble Supreme Court in Indian Overseas Bank Vs. M/s Ashok Saw Mill (Supra). The borrower/guarantor is free to challenge the possession notice or the sale notice within stipulated period of limitation or to show the plausible/sufficient reason for not challenging the same within stipulated period. If the borrower/guarantor chooses not to challenge the issue of possession notice, then he has no occasion to raise the issue of demand notice before challenging the sale notice, but once the borrower/guarantor alleges the infirmity of service of possession notice and seeks quashing of possession notice, then it has to raise the issue of demand notice at that stage only, otherwise at later stage, the S.A. applicant has to file application for condonation of delay.
In the instant case, the S.A. applicant had challenged the entire proceedings including demand notice, possession notice and the sale notice by filing the S.A. on 19.09.2017. The S.A. applicant has not averred any specific infirmity with regard to compliance of Rule 8(1) and (2) of the Rules, 2002 for service of possession notice and has simply alleged that the demand notice and the possession notice were not served. At para 5.25 of the S.A., it has been stated that whenever the applicant came to know about the possession notice, he approached before the authorized officer, but none of the dates were mentioned as to when it came to know and when it approached before the authorized officer. The documents produced by the Bank with regard to service of possession notice are reliable in proving that the possession notice dated 19.11.2015 was duly published in two newspapers, one in vernacular language and was affixed and sent through registered post to the borrowers/guarantors on 19.11.2015 (postal receipts at pages no. 252 & 253 of the memo of appeal). It is not the case of the SA applicant that they were not present at the time of symbolic possession or were not aware about its publication and affixation. Thus, there appears to be no infirmity in issuance of possession notice. Since the possession was taken on 19.11.2015 and the S.A. was filed on 19.09.2017, thus the issue of possession notice was obviously time barred and the Tribunal below has rightly observed it to be barred by limitation. This finding of the Tribunal was not challenged by the S.A.-applicant/guarantor, so it had attained finality.
In the context of demand notice, the order of the Tribunal below is self-contradictory. Since the issue of possession notice was time barred, therefore, the issue of demand notice was also barred by limitation, as the S.A. applicant was required to raise this issue along with the issue of possession notice and cannot take the plea that the same can be raised at the time of sale notice. Thus, no benefit can be given to the S.A. applicant on account of service of demand notice being barred by limitation.
Secondly, the finding recorded by the Tribunal below on merit qua service of demand notice is perverse. Admittedly, the demand notice sent to the guarantor-SA applicant was returned with the remark "no such firm in this address" and also that the Bank had published the demand notice in two newspapers, one in vernacular language as per requirement of Rule 3 of the Rules, 2002. Although the affixation of demand notice on the premises of the borrower/guarantor is the requirement of the statute and the Bank has not produced any evidence in this regard, but in peculiar facts of the matter, it is to be noticed that since no such firm was in existence at the premises/address given by the S.A.- applicant, therefore, there was no point for affixing the demand notice on any premises, where the guarantor was not residing or conducting his business. Thus, even by not affixing the demand notice did not cause any prejudice to the S.A. applicant. Thus, the finding of the Tribunal below is not sustainable.
With regard to issuance of sale notice, undisputedly, the authorized officer has mentioned "30 days" in the sale notice dated 5.1.2018 as under:-
"the undersigned hereby call upon the Borrowers/Guarantors/Corporate Guarantor(s) to pay the said amount due within 30 days hereof together with costs, charges and expenses incurred by the Bank, which shall be appropriated in terms of the provisions as envisaged in section 13(7) of the SARFAESI Act, 2002, failing which the undersigned will dispose of the said property as proposed above."
However, the date of sale has been specifically mentioned to be 30.01.2018 in the body of the sale notice. Thus, the term "as proposed above" has to be read with the date of sale mentioned in the sale notice. The S.A. applicant was well aware about the date of auction. If it had any objection with regard to the contradiction of the date of auction and 30 days period, it was free to approach before the authorized officer to tender the outstanding dues or to pray for deferment of the sale till expiry of 30 days, but no such effort was made by the S.A. applicant. Moreover, since it was the second sale, therefore, only 15 days' notice was required as per the statute and the mentioning of term "30 days" instead of "15 days" was merely a typographical error, which cannot replace the requirement of law. This typographical error is liable to be ignored and the S.A. applicant cannot take any advantage of this human error, particularly, when the borrowers/guarantors have never shown any inclination in repayment of the loan or redemption of their property.
It is also to be seen that the auction purchaser has deposited the entire sale price and the sale certificate has been issued, thus, a valuable right has been created in favour of the auction purchaser. On the other hand, the S.A. applicant is not entitled for any relief on account of technical irregularity in affixation of the demand notice and the typographical error in issuance of the sale notice, which can be ignored in view of the principle laid down by the Hon'ble Allahabad High Court in Rafeeq Ahmed Vs. State of U.P. & Ors. AIR 1999 Allahabad 272. In the said judgment, the Hon'ble High Court has held that if the borrowers/guarantors are not interested in repayment of the loan, they should not be permitted to play with the procedure of law. Further, the Hon'ble Punjab & Haryana High Court in case of M/s National Rice and General Mills & Ors. Vs. Bank of India & Ors., AIR 2009 P&H 129 has held that if any minor irregularities or error were occurred in the process and those do not go to the root cause of the case and had not resulted in any loss to the borrowers, are to be ignored, particularly when they have never shown their inclination to pay the dues with interest.
In view of the above, the impugned order is not sustainable. Accordingly, the appeal is allowed and the impugned order dated 3.12.2018 is quashed and set aside. The Bank is free to proceed further in accordance with law. No order as to costs.
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