Authorized Officer, Bank Of Baroda vs Vikas Kumar & Ors.

JUSTICE R. D. KHARE, CHAIRPERSON

The above mentioned appeals have been filed 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 judgment dated 03.08.2024, whereby the T.S.A. No. 01/2024 filed by the respondents-borrowers has been allowed by the Tribunal below.

Brief facts of the matter as gathered from the Appeal Dy. No. 1147/2024 filed by the appellant-Bank are that the respondents No. 1&2 were granted a housing loan to the tune of Rs. 1.69 crore and odd vide sanction letter dated 23.05.2018. In order to secure the same, the said respondents as well Manoj Tyagri stood as guarantors and the respondents no. 1 & 2 created equitable mortgage over their house bearing plot No. B-3/137, Viraj Khand, Gomti Nagar, Lucknow by depositing original title deed with the Bank. Since the respondents-borrowers did not maintain the financial discipline, therefore, the account was classified as NPA on 30.06.2021 and a demand notice dated 27.07.2021 under section 13(2) of the SARFAESI Act was issued for a sum of Rs. 1,52,49.033/-. Against the said demand notice, the respondent No. 1-borrower filed a representation/objection dated 07.09.2021 U/s 13(3A) of the SARFAESI Act before the appellant-Bank, which was received on 09.09.2021 and the same was decided on 21.09.2021, which was communicated through e-mail on 21.09.2021 and also sent the same to the borrowers through registered post on 22.09.2021. Since the respondents-borrowers did not pay any heed to the said demand, therefore, the possession notice dated 30.09.2021 U/s 13(4) of the SARFAESI Act was issued.

It appears that after obtaining the valuation report from the approved valuer on 31.01.2022, the appellant-Bank issued e-auction sale notice dated 07.04.2022 scheduling the auction of the property in question on 12.05.2022.

It transpires that the respondents-borrowers challenged the proceedings of the Bank including the aforesaid auction sale by filing S.A. No. 442/2021 before the Tribunal below, which was disposed off vide order dated 09.05.2022 directing the appellant-Bank not to proceed with the auction sale, if the respondents-borrowers deposit the outstanding dues. Since the borrowers did not comply the said order as alleged, therefore, the appellant-Bank proceeded with the auction sale fixed on 12.05.2022 and the property was sold for a sum of Rs. 2,31,36,30/- against the reserve price of Rs. 2,31,26,000/- in favour of the respondent No.3-auction purchaser.

It further transpires that the respondents-borrowers had filed several writ petitions before the Hon'ble High Court, Lucknow Bench, Lucknow against the process of the appellant-Bank in other accounts, which were clubbed together and decided by the common judgment and order dated 12.05.2022, by which the respondents- borrowers were directed to deposit the entire amount in installments, failing which the appellant-Bank was at liberty to continue with the proceedings already initiated against the respondents-borrowers, but in the meantime, the auction sale proceedings were directed to remain stayed. Since the respondents-borrowers failed to honour the said order, therefore, the auction sale dated 12.05.2022 was confirmed and after deposition of entire sale consideration, the appellant-Bank issued sale certificate on 22.08.2022 and the sale deed was also executed on 27.12.2022 in favour of the respondent No. 3-auction purchaser.

It is averred that thereafter, the appellant-Bank obtained an order dated 03.10.2022 from the CJM, Lucknow for taking physical possession of the property in question, which was taken on 15.12.2022 and the same were challenged by the respondent-borrowers before the Tribunal below including the demand notice, possession and the auction sale by filing S.A. No. 926/2022 along with application for condonation of delay on 22.12.2022. The said S.A. was subsequently transferred to DRT, Allahabad from the DRT, Lucknow pursuant to the order dated 02.02.2024 passed in writ petition No. 1042/2024 preferred by the respondent No. 3-auction purchaser and the said S.A. was registered as T.S.A No. 01/2024 before the DRT, Allahabad. The Tribunal below vide order impugned has allowed the same and demand notice, possession notice, sale notice, auction dated 12.05.2022 and the order dated 03.10.2022 passed by the CJM, Lucknow have been set-aside. Being aggrieved by the said order, the Appeal Dy. No. 1147/2024 has been filed by the appellant-Bank and the Appeal Dy. No. 1220/2024 by the respondent No. 3-auction purchaser.

Learned counsel for the appellant submitted that the Tribunal below has failed to appreciate the provision of section 17(1) of the SARFAESI Act, as the same provides for limitation of forty five days from the date on which any measure had been taken place under section 13(4) of the said Act and in the present case, the demand notice under section 13(2) of the SARFASI Act was issued on 27.07.2021, the possession notice on 30.09.2021, the auction sale took place on 12.05.2022 and the S.A. was filed on 23.12.2022, it was thus contended that the S.A. was filed at very highly belated stage and the delay condonation application filed in support of the S.A. did not whisper anything about the condonation of delay so far as the proceedings upto the auction sale dated 12.05.2022 is concerned, hence the challenge pertaining to proceedings upto the auction sale held on 12.05.2022 was time barred and without jurisdiction and the same cannot be agitated and adjudicated by the learned Tribunal below.

Learned counsel further submitted that the Tribunal below has illegally and arbitrarily held that the demand notice dated 27.07.2021 was not served upon the respondent No. 2-Smt. Ridhi, as the correct fact is that the demand notice dated 27.07.2021 was dispatched to respondents No. 1 and 2 separately at their correct addresses and were duly served upon them, which is admitted by the respondents No. 1 and 2 in the pleadings made in the Writ Petition No. 5786 of 2022 filed before the Hon'ble Lucknow Bench of the Allahabad High Court. It was thus contended that the Tribunal below has failed to appreciate the fact that once the respondents-borrowers have admitted the service of demand notice dated 27.07.2021, then the appellant-Bank is not required to proof the service of demand notice dated 27.07.2021.

Learned counsel also submitted that the Tribunal below has illegally and arbitrarily held that the appellant-Bank has not disposed of the representation of the borrowers within fifteen days as provided under the Act and the Rules made thereunder, as the correct fact is that the alleged representation of the respondent No. 1 dated 07.09.2021 was served upon the appellant-Bank on 09.09.2021 and the same was duly decided by the appellant-Bank on 21.09.2021 and the decision was communicated through E-mail on the same date and was also communicated through registered post on 22.09.2021, which was well within the prescribed period of fifteen days, hence there is no illegality or infirmity in the disposal of the representation of the respondent-borrowers by the appellant-Bank.

Learned counsel further submitted that the Tribunal below has illegally and arbitrarily held that the symbolic possession notice dated 30.09.2021 was issued within sixty days from the date of dispatch of demand notice dated 27.09.2021, as the demand notice was dispatched by the appellant-Bank on 30.07.2021. It was further contended that the Tribunal below has failed to appreciate the fact that the demand notice dated 27.07.2021 was dispatched on 30.07.2021 and possession notice was issued on 30.09.2021, which was issued well beyond the mandatory period of sixty days in view of the fact that July and August are of 31 days. It was thus contended that the Tribunal below has erred in calculating sixty days, as the same ought to have been calculated from the date of dispatch of demand notice and not from the date of service and as such the appellant-Bank has issued possession notice after expiry of clear sixty days from the date of dispatch of demand notice.

It was further contended that the learned tribunal below has illegally and arbitrarily held that the appellant-Bank has not issued mandatory notices to one of the alleged guarantor-Manoj Tyagi, as the correct fact is that the alleged Manoj Tyagi was never a guarantor in the present housing loan account, which is under challenge in the present proceedings. It was further contended that the said fact is clear from the perusal of the sanction letter of the Bank dated 23.05.2018, which has been duly acknowledged by the respondents No. 1 and 2. It was also contended that the alleged Manoj Tyagi stood as guarantor in another credit facility granted to respondents No. 1, so due to inadvertence, his name was mentioned in the application filed by Bank under section 14 with regard to property in question.

Learned counsel further submitted that the Tribunal below has illegally and arbitrarily held that there is violation of Rule 9(3) of the Security Interest (Enforcement) Rules 2002 for the reason that the respondent No. 3/auction purchaser has not deposited 25% of the bid amount within the prescribed time, as the Tribunal below has failed to appreciate the fact that the auction sale was held on 12.05.2022 and on the same day, an interim order was passed by the Hon'ble High Court, by which the respondents-borrowers were directed to deposit the entire outstanding dues in installments and the appellant-Bank was restrained from proceeding any further, therefore, the appellant-Bank did not confirm the sale on 12.05.2022 and the same was confirmed on 25.05.2022 consequent upon non-compliance of the order of the Hon'ble High Court by the respondents-borrowers and after confirmation of sale on 25.05.2022, the respondent No. 3-auction purchaser deposited 15% of the bid amount on the very next day i.e. on 26.05.2022 and the remaining 75% of the bid amount was deposited on 22.08.2022, which is well within the period of ninety days from the date of confirmation of sale i.e. 25.05.2022 and as such there is no violation of Rule 9(2), 9(3) and 9(4) of the Security Interest (Enforcement) Rules, 2002.

It was further contended that the Tribunal below has illegally and arbitrarily held that there is violation of Rule 8(6) of the Rules, 2002 for the reason that the sale notice dated 07.04.2022 was published in the two widely circulated newspaper, namely 'Financial Express' (English) and 'Amar Ujala' (Hindi) on the same day i.e. on 07.04.2022, as the fact is that the provisions of the Rule 8(6) specifically provides for service of notice of thirty days for sale of immovable secured assets and it further provides that the secured creditor shall cause public notice to be published in 2 leading newspapers including one in vernacular language having wide circulation in the locality. It was further contended that in compliance of Rule 8(6), the appellant-Bank has duly served thirty days' auction notice and the same has also been published in 2 widely circulated newspapers and as such there is no violation of Rule 8(6) of the Rules, 2002. It was, therefore, prayed that the order impugned may be set aside and the appeal filed by the appellant-Bank may be allowed.

Learned counsel for the respondents-borrowers submitted that the borrowers had filed S.A. No. 442/2021 against the demand notice, possession notice and sale notice before the Tribunal below, which was finally disposed off vide order dated 09.05.2022 with direction that in case respondents-Borrowers deposit the entire dues of the bank, as mentioned in letter dated 25.04.2022 submitted by the Bank, NOC in the said Housing Loan account be issued by the bank to the Respondents-Borrowers, however since the bank has to recover huge amount from the Respondents-Borrowers in other accounts, title papers of the subject property may not be released to the Respondents-Borrowers. The learned Tribunal while passing the order dated 09.05.2022 further made it clear that in case the subject property is not a secured asset in other loan accounts, the Bank shall not proceed against the subject property under SARFAESI Act, 2002.

Learned counsel further submitted that at this stage it is worth to mention here that two writ petitions of the respondents-Borrowers pertaining to other accounts were pending consideration before the Hon'ble High Court i.e. Writ C No. 2218 of 2022 filed by the respondents-Borrowers against possession notice dated 12.01.2022 issued in respect of loan account No. 46900600000395 and Writ C No. 2219 of 2022 filed by the respondents-borrowers against the possession notice dated 20.01.2022 issued in respect of loan account No. 46900600000120. It was further contended that the Writ C No. 2751 of 2022 filed by the respondents-borrowers was taken up for hearing before the Hon'ble High Court at Lucknow along with Writ C No. 2218 of 2022 and Writ C No. 2219 of 2022 on 12.05.2022 and the Hon'ble High Court vide judgment and order dated 12.05.2022 disposed of all the 3 writ petitions on the basis of statement/willingness of the petitioners (borrowers) to pay the entire outstanding amount in easy installments and the petitioners in order to show the bonafides handed four cheques amounting to Rs. 20,00,000/- to the counsel for the Bank. The operative portion of the said judgment is as under:-

Learned counsel further submitted that out of above referred four cheques, the cheque No. 143684 amounting to Rs. 9,90,000/- could not be encashed as the Bank without following normal course of banking after receiving the cheques in the High Court directly sent all the cheques to clearing house by hand, however, the proceeds of the cheque was deposited between 13.05.2022 to 17.05.2022 with extra amount of Rs. 15,000/- with delay of only 5 days.

Learned counsel further submitted that the appellant-Bank accepted the said amount and as per directions of the Hon'ble High Court vide order dated 12.05.2022, further amount of Rs. 30,00,000/- was to be deposited by the respondents-Borrowers on or before 23.05.2022 and the borrowers deposited amount of Rs. 7.50 lacs on 20.05.2022 through RTGS and deposited 4 cheques of Rs. Rs. 23,50,000/- with the Bank, but the Bank deliberately did not send the said cheques for clearing and kept the same with them and on 25.05.2022 telephonically informed the respondents-Borrowers that since one cheque of 12.05.2022 has been dishonor earlier, as such the borrowers are required to deposit the amount in cash and the respondents-Borrowers without any delay with intention to comply the directions of the Hon'ble High Court on 25.05.2022 transferred amount of Rs. 18,70,000/- through RTGS and on 26.05.2022 deposited Rs. 2,00,000/- and Rs. 1,65,000/- through RTGS and as such the delay caused in deposition of amount cannot be attributed to the Borrowers, as it was occurred on account of inaction on the part of the appellant-Bank. It is further contended that the respondent-borrower deposited Rs. 31.00 lacs till 26.05.2022 out of amount of Rs. 30.00 lacs. It was further contended that the Bank has never informed the respondents-Borrowers regarding the amount of 12 monthly installments required to be deposited by the respondents-Borrowers in compliance of order dated 12.05.2022 passed by the Hon'ble High Court.

Learned counsel further submitted that the perusal of order dated 12.05.2022 reveals that the Bank informed the Hon'ble High Court Lucknow that as on 12.05.2022 the total outstanding amount in the loan accounts was Rs. 4,82,31,572/-, however the actual outstanding as per Statement of Account was Rs. 4,08,04,024/-, out of which Rs. 50,00,000/- was deposited by the respondents-Borrowers and the remaining amount was to be deposited in 12 equal monthly installments, which commences from 01.06.2022. It was further contended that after deducting Rs. 50,00,000/- from Rs. 4,08,04,024/-, the amount comes to Rs. 3,58,04,024/- and this amount was divided in 12 monthly installments, the amount of each installment comes to Rs. 29,83,668/- and the respondents-Borrowers deposited the 1st installment of Rs. 29,84,000/- timely upto 01.06.2022, the IIInd installment of Rs. 29,84,000/- was deposited prior to 01.07.2022 i.e. on 30.06.2022, the IIIrd installment of Rs.29,84,000/- was also deposited before time i.e. on 30.07.2022 instead of 01.08.2022, the IVth installment of Rs.29,84,000/-was deposited in time on 01.09.2022, the Vth installment of Rs. 29,84,000/- was deposited on 01.10.2022.

Learned counsel further submitted that the respondents-Borrowers were depositing the amount timely in compliance of the Hon'ble High Court order dated 12.05.2022, but the Bank confirmed the sale by issuing Sale Certificate dated 22.08.2022 on wrong presumption that the respondents-Borrowers have not deposited the Ist installment payable on 01.06.2022, as informed vide letter dated 04.06.2022 and also obtained order dated 03.10.2022 under Section 14 of the SARFAESI Act, 2002 from the Court of Chief Judicial Magistrate, Lucknow and on the basis of order dated 03.10.2022 took forcible physical possession of the property on 15.12.2022 and as such the respondents-Borrowers, who were required to deposit the VIth installment of Rs. 29,84,000/- upto 01.11.2022 only deposited Rs. 5,10,000/- on 01.11.2022, as the Bank not only issued the Sale Certificate, but also obtained order under Section 14 of the SARFAESI Act, 2002. It was further submitted that the Authorized Officer of the Respondent Bank has filed Affidavit before the Chief Judicial Magistrate, Lucknow without disclosing the amount deposited by the respondents-Borrowers and obtained the order dated 03.10.2022 for taking physical possession of the property in question.

Learned counsel further submitted that the respondents-Borrowers filed Writ-C No. 5786 of 2022 challenging Sale Certificate dated 22.08.2022 as well as ADM Order dated 23.07.2022 passed in respect of mortgaged property in the loan account of M/s PK International under Section 14 of the SARFAESI Act, 2002. Learned counsel further submitted that the respondents-Borrowers against the order dated 03.10.2022 passed under Section 14 by the CJM, Lucknow also filed Writ C No. 8877 of 2022.

Learned counsel further submitted that the Writ C No. 3759 of 2022, Writ C No. 5786 of 2022 and Writ C No. 8877 of 2022 could not be adjudicated upon merits before the Hon'ble High Court, therefore, the respondents-Borrowers on 20.12.2022 requested the Hon'ble High Court to permit the petitioner to withdraw the said writ petitions as referred above with liberty to avail alternative remedy under Section 17 of the SARFAESI Act, 2002 and the Hon'ble High Court vide order dated 20.12.2022 dismissed the same with liberty as prayed for by the respondents-Borrowers.

Learned counsel further submitted that the respondents-Borrowers in view of the liberty granted by the Hon'ble High Court Lucknow filed the present Securitization Application with the prayer as mentioned in the said S.A.

Learned counsel further submitted that in view of the above, it is crystal clear that SA No. 442 of 2021, Writ C No. 2751 of 2022, Writ C No. 3759 of 2022, Writ C No. 5786 of 2022 and Writ C No. 8877 of 2022 were never adjudicated on merits.

Learned counsel further submitted with regard to the limitation that once the Hon'ble High Court has granted the liberty to the respondents-Borrowers to approach the Tribunal below under Section 17 of the SARFAESI Act to challenge the securitization proceedings of the Bank and the Bank never objected to the liberty granted by the Hon'ble High Court vide order dated 20.12.2022, thus, the question of limitation as raised by the appellant-Bank and the Auction Purchaser are devoid of merits and cannot be considered. It was further contended that the section 14 of the Limitation Act, 1963 provides that in computing the period of limitation for any suit, the time during which the plaintiff was prosecuting the same with due diligence either in a court of first instance or of appeal or revision against the defendant shall be excluded.

Learned counsel for the respondents-borrower submitted that the demand notice dated 27.07.2021 was dispatched on 30.07.2021 to the respondent no. 1-Borrower only and no demand notice was ever served upon the respondent No. 2 and as such there is complete violation of Rule 3 of the Rules, 2002.

It was further contended that the respondent No. 1 filed objection against the demand notice dated 27.07.2021 on 07.09.2021, but the appellant-Bank did not consider the same in letter and spirit of provisions of section 13(3-A) of the SARFAESI Act, 2002, but decided it simply on the ground that the respondents-Borrowers failed to mention the paragraph in the objection and even the objection dated 07.09.2021, which is alleged to have been decided on 21.09.2021, has been dispatched on 22.09.2021 to the respondents-Borrowers i.e. after lapse of 15 days, thus there is complete violation of section 13(3A) of the SARFAESI Act, 2002. It was further contended that in paragraph No. 36 of the order impugned, the Tribunal below has specifically held that the demand notice dated 27.07.2021 has not been served upon the respondent No. 2, even otherwise the representation dated 07.09.2021 under section 13(3A) of the SARFAESI Act, 2002 filed by the respondents-Borrowers has not been decided within 15 days, which is provided in the Act, therefore, the demand notice u/s 13(2) dated 27.07.2021 is not sustainable in the eye of law.

Learned counsel further submitted that the possession notice dated 30.09.2021 has not been issued or served upon the guarantor namely Sri Manoj Tyagi, which is clear violation of Rule 8(1) of the Rules, 2002, as the guarantor is also covered under the definition of borrower as defined under section 2(f) of the SARFAESI Act, 2002. It was further contended that the Possession Notice was issued on 30.09.2021 and the demand notice was dispatched on 30.07.2021, thus the same was issued without affording the borrowers a clear 60 days' time to pay the outstanding amount to the Bank.

It was further contended that in paragraph No. 38 of the order impugned, the Tribunal below has specifically stated that symbolic possession notice was issued on 30.09.2021 and the appellant-Bank has obtained valuation report on 31.01.2022 and on the basis of said valuation report, the Bank has issued sale notice dated 07.04.2022, through which the auction was fixed on 12.05.2022, whereas the said sale notice was sent by speed post on 08.04.2022, but the sale notice dated 07.04.2022 was published in the newspapers namely "Financial Express" in English and "Amar Ujala" in Hindi on 07.04.2022 itself, which is prior to sending the same, thus the appellant-Bank has violated the provision of section 13(8) of the SARFAESI Act, 2002, whereby right to redemption of the property has been provided to the respondents-Borrowers.

Learned counsel further submit that 25% of the bid amount was not deposited within 24 hours from the date of sale in view of rule 9(3) of the rules, 2002 as the same was received on 26.05.2022 when the auction had taken place on 12.05.2022. It was further contented that the auction purchaser has also not deposited remaining 75% of the auction amount within 15 days from the date of confirmation or within the extended period, which violates rule 9(4) of the rules 2002.

Learned counsel further submitted that in paragraph No. 38 of the Judgment dated 03.08.2024, the Tribunal below has specifically stated that the property in question has been auctioned sold on 12.05.2022 for a sum of Rs. 2,31,36,000/- against the reserve price of Rs. 2,31,26,000/-. It was further contended that the auction purchaser was only one participant in the auction sale dated 12.05.2022 and she has deposited 10% EMD on 11.05.2022 and 15% amount was deposited by the auction purchaser upto 26.05.2022 and the 75% of the Sale price was deposited upto 2.08.2022. It is further submitted that the auction purchaser has failed to comply with the Rule 9(3) of the Security Interest (enforcement) rules, 2002, as 15% amount was to be deposited immediately, i.e. on the same day or not later than next working day, but in the present case, the auction purchaser has deposited the same after 13 days, therefore, the Tribunal below has rightly set aside the sale proceedings of the appellant-Bank. It was also contended that the Statement of Account clearly reflects that the appellant-Bank has adjusted the auction money in the loan account of the respondents-borrowers on 31.08.2022. It was, therefore, prayed that the appeal filed by the appellant and the auction purchaser may be dismissed with heavy costs.

Learned counsel for the respondent-Auction Purchaser has adopted the arguments as advanced by the learned counsel for the respondent-bank, adding further that she is bonafide purchaser of the property in question in the present case and after deposition of entire sale consideration, the sale certificate has been issued by the Bank in favour of the Auction Purchaser. It was therefore prayed that the order impugned may be set aside and the appeals filed by the Bank and the Auction Purchaser may be allowed.

I have considered the rival contentions of the learned counsels for the parties and perused to the material available on record.

Undisputedly, the respondents No. 1 and 2 were granted three housing loans, two cars loans and two cash credit facilities, thus total seven different loans were granted to the respondents No. 1 and 2 including the housing loan account No. 31860600001514, which is under dispute only in the present case and each and every loan contains its separate security.

It appears that the respondents-borrowers challenged the demand notice, possession notice and sale notice dated 07.04.2022 as well the auction sale dated 12.05.2022 before the Tribunal below by filing S.A. No. 442/2021, which was disposed off finally vide order dated 09.05.2022. The relevant portion of said order is as under:-

From the above, it can be said that the appellant-Bank was under obligation not to proceed with the auction of the property in question on 12.05.2022 pursuant to the sale notice dated 07.04.2022, but the appellant-Bank was proceeding with the same, therefore, the respondent-Borrower challenged the said order before the Hon'ble High Court by filing the Writ-C No. 2751/2022 including the possession notice and the auction sale dated 12.05.2022.

It is averred that prior to the said writ petition, the respondents-borrower had already filed two writ petitions bearing Writ-C No. 2218/2022 before the Hon'ble High Court against the possession notice dated 12.01.2022 issued in respect of the loan account no. 46900600000395 and Writ-C No. 2219/2022 against the possession notice dated 20.01.2022 issued in respect of loan account no. 4690060000120, which were pending for consideration. However, the Hon'ble High Court by clubbing these two writ petitions with the Writ-C No. 2751/2022 has disposed off the same vide order dated 12.05.2022, copy of which has been placed at page no. 432 of the IInd Volume of the paper book. The relevant portion of the said order is as under:-

Pursuant to the above order, the respondents-Borrowers were continuously depositing the amount, although there were some deviation, but instead of taking the amount, the appellant-Bank obtained an order dated 03.10.2022 from the Chief Judicial Magistrate, Lucknow under section 14 of the SARFAESI Act and the physical possession of the property in question was accordingly taken on 15.12.2022, which ought not to have been done by the Bank. The said order and the physical possession proceedings dated 15.12.2022 were challenged by the respondents-Borrowers before the Hon'ble High Court by filing Writ-C No. 8877/2022, which was dismissed as withdrawn with liberty to avail the alternative remedy available under section 17 of the SARFAESI Act vide order dated 20.12.2022, copy of which is placed at page no. 419 of the IInd volume of the paper book. Thus, the respondent-Borrower has filed the present S.A. challenging the demand notice, possession notice, sale notice, auction sale dated 12.05.2022 as well as the order passed by the CJM under section 14 and its subsequent action along with application for condonation of delay.

While going through the order passed by the Tribunal below and the order passed by the Hon'ble High Court, it is clear that the matter had never been decided on merits either by the Tribunal below or by the Hon'ble High Court, as it was decided on the basis of willingness of the borrowers to liquidate the dues of the Bank. Thus, the S.A. filed by the respondents-Borrowers before the Tribunal below was maintainable.

With regard to the limitation, the contention of the appellant-Bank that the period of limitation is 45 days for filing the application under section 17 of the SARFAESI Act against any measures taken under section 13(4) of the said Act is true, but the benefit of section 5 and section 14 of the limitation Act can be extended to the plaintiff, if there is sufficient cause for the same. In the present case, the present S.A. was filed on 23.12.2022 by the respondents-borrowers against the order dated 03.10.2022 passed by the CJM, Lucknow along with e-auction sale notice dated 07.04.2022 as well as the physical possession of the property in question dated 15.12.2022 including the demand notice and possession notice. The said issue has elaborately been considered and decided by the Tribunal below vide order impugned. The reason assigned by the Tribunal below while condoning the delay is prime facie found to be convincing and sufficient, therefore, the order impugned to this extent is not required to be interfered with by this Tribunal, particularly in view of the order passed by the Hon'ble High Court on 20.12.2022 and the order dated 02.02.2024 passed by the Hon'ble High Court in Writ C No. 4042/2024 filed by the respondent No. 3-auction purchaser; wherein it has been held as under:-

From the above, it is clear that the S.A. was to be decided on the merits in accordance with law, which has accordingly been done by the Tribunal below by condoning the delay occurred in filing the same by the respondents-borrowers. Thus the Tribunal below has rightly allowed the application for condonation of delay filed by the borrowers along with their S.A.

The contentions of the appellant-Bank that the respondents-borrowers were not entitled to be heard on merits in view of non compliance of the orders passed by the Tribunal below as well as the Hon'ble High Court is not sustainable. In this regard, it appears that at the time of disposing off the Writ-C Nos. 2751 of 2022 along with Writ C No. 2218/2022 and Writ C No. 2219/2022, the respondents-borrowers had handedover four cheques amount to Rs. 20.00 lacs to the counsel for the Bank, details of which are mentioned in the preceding paragraph of this judgment, but the claim of the Bank that out of four cheques, the cheque No. 143684 dated 12.05.2022 for Rs. 9.90 lacs could not be encashed for want of credit balance in the concerned account. As per record the said amount was deposited by the borrowers between the 13.05.2022 to 17.05.2022 with extra amount of Rs. 15000/-, although there was delay of 5 days, which does not matter. As per the said order, Rs. 30.00 lacs was to be deposited on or before 23.05.2022, out of which Rs.7,50,000/- was deposited on 20.05.2022 through RTGS and for remaining amount, four cheques were deposited by the borrowers with the Bank, but inspite of presenting the same, the Bank informed the borrowers on 25.05.2022 that since one cheque of 12.05.2022 had earlier been dishonoured, therefore, the borrowers are required to deposit the amount in cash. Accordingly, Rs. 18,70,000/- was transferred through RTGS and on 26.05.2022, Rs. 2,00,000/- lacs and Rs. 1,65,000/- were also transferred through RTGS. It is not the case of the appellant that the said cheques were presented, but were not encashed. If it was so, then the matter would have been otherwise. Thus, the responsibility of delay, if any, occurred in depositing the said amount, cannot be attributed to the borrowers, as the delay, if any, occurred in deposition of amount by the borrowers can be said to be on part of the appellant-Bank by not presenting the said cheques for its clearing.

As per the aforesaid order, the remaining amount was to be deposited in twelve equal monthly installments, which was to commence from 01.06.2022. However, the respondents-Borrowers have deposited total amount of Rs. 1,54,80,000/-, which is over and above the demand raised by the Bank in demand notice dated 27.07.2021 in respect of the housing loan account No. 31860600001514, which is under dispute in the present case. As such it cannot be said that the respondents-borrowers were not complying with the order dated 12.05.2022 passed by the Hon'ble High Court, but it appears that the remaining amount could not be deposited due to initiation of proceedings by the appellant-bank for taking physical possession of the property in question 15.12.2022 pursuant to the order dated 03.10.2022 and issuing the sale certificate on 22.08.2022 in favour of the auction purchaser. As such the contention of the appellant-Bank that the respondents-borrowers were not entitled to be heard on merits on account of non compliance of the order of the Hon'ble High Court is not tenable.

So far as the merits of the case is concerned, it is to be seen that after classification of the account as NPA, the demand notice dated 27.07.2021 was issued to the respondent nos. 1 & 2-Borrowers. Copy of the said notice is placed at page nos. 88 to 93 of the 1^st volume of the paper book. As per affixation of the postal receipt on the 1^st page of the said notice at page nos. 88 and 91 of the paper book, the demand notice was sent only to the respondent no. 1-Vikas Kumar. However, the demand notice, copy of which is placed at page no. 91 of the paper book, was ticked by the Bank to send the same to the respondent no. 2, but the postal receipt affixed at the said notice pertains to Vikas Kumar, meaning thereby the said notice was sent only to the respondent no. 1-Vikas Kumar. Thus, it is clear that no demand notice was ever sent/served to the respondent no. 2- Mrs. Riddhi, which violates Rule 3(4) of the Rules, 2002, whereas the said Rule says "where there are more than one borrower, the demand notice shall be served on each borrower". In the present case, there are two borrowers, but the demand notice is found to have been served only upon one borrower i.e. respondent no. 1-Vikas Kumar. As such the Tribunal below has rightly set aside the same vide order impugned.

The next question is, as to whether the possession notice was issued before expiry of 60 days as given in the demand notice to the borrower for liquidating the dues of the Bank or not? After issuance of demand notice, the appellant-Bank issued possession notice in respect of Housing Loan Account No. 31860600001514 on 30.09.2021, copy of which is placed at page no. 516 and 517 of the 2^nd volume of the paper book. The postal receipts placed at page no. 518 of the said paper book show that the said notice was sent to the borrowers on 01.10.2021 through speed post, whereas the demand notice was dispatched to the borrowers on 30.07.2021. Generally, the local Daak is delivered by the postman within the span of minimum two days. Thus, it can be at best presumed that the demand notice was served upon the respondent no. 1 as early as possible on 01.08.2021, while the symbolic possession of the property in question was taken on 30.09.2021, which is on 60^th day, meaning thereby 60 days time was not given to the borrower for discharging their liability. Thus, it is clear that the possession notice was not issued after expiry of 60 days, which violates section 13(4) of the SARFAESI Act, as the said section itself says "in case borrower fails to discharge his liability in full within the period specified in sub-section (2), the secured creditor may take recourse to one or more of the following measures to recover his secured debt, namely; take possession of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale for realizing the secured asset". In view of this, the said possession notice can be said to be premature one. Thus, the Tribunal below has rightly set aside the same vide order impugned.

So far as the auction sale dated 12.05.2022 is concerned, it is to be seen that after obtaining the valuation report dated 31.01.2022 in respect of the property in question, the sale notice under Rule 8(6) of the Rules, 2002 was issued on 07.04.2022 scheduling the auction of the property in question on 12.05.2022. The said notice was dispatched to the borrowers on 08.04.2022, copy of sale notice as well as postal receipts are placed at page no. 573 and 574 of the 2^nd volume of the paper book. The said sale notice was published in two newspapers namely "Financial Express and Amar Ujala" on 07.04.2022. Copies of the said publications are placed at page no. 575 and 576 of the said paper book. If the said notice was prepared and issued on 07.04.2022, then how it could have been published on 07.04.2022 in the newspapers. If it was so, then meaning of it is that the said notice is post dated and it violates Rule 8(6) read with section 13(8) of the Act and Rules made thereunder. However, section 13(8) is being quoted herein below:-

The object of Rule 8(6) of the Rules, 2002 is to first provide an opportunity to the borrower for redeeming/saving his property within 30 days from the date of service of notice under the said Rule. As per provisions of the section 13(8) as quoted above, this opportunity is available to the borrower till the date of publication of sale notice only. In the present case, sale notice was published prior to issuance/service of the same to the borrowers. Thus, the appellant-bank has curtailed the opportunity of the borrowers from redeeming their property in question, which is against the provisions of the Rule 8(6) read with section 13(8) of the Act and Rules made thereunder. Thus, the Tribunal below has rightly set aside the auction sale also vide order impugned.

Since the demand notice, possession notice and sale notice are found to be defective and against the provisions of the Act and Rules made thereunder, therefore, the other issues raised by the Bank and the auction purchaser in the present case are not required to be dealt with, because they will not render any assistance in protecting the interest of the appellants.

In view of the discussions as recorded above, there is no infirmity or illegality in the order impugned, therefore, no interference is required to be made in the same by this Tribunal. Consequently, both the appeals filed by the Bank and the Auction Purchaser are liable to be dismissed, hence, the same are dismissed with no order as to costs.

A copy of this judgment be sent to the parties as well as to the DRT concerned and be also uploaded on e-DRT portal.