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Judgment
D. Murugesan, J.—This writ petition raises an important question as to whether as per sub rule (6) of Rule 8 of the Security Interest
(Enforcement) Rules, a public notice for holding public auction to sell the secured movable assets giving 30 days time could be extended.
The Petitioners are the borrowers of certain loan facilities from the Respondent Union Bank of India, Nungambakkam Branch, Chennai. As the
Petitioners are the defaulters, the debt was declared as non-performance assets and thereafter, the Respondent bank issued notice u/s 13(2) of the
Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (herein after referred to as SARFAESI Act)
giving 60 days time to the Petitioners to honour the demand made in that notice. As the Petitioners did not meet the demand, the Respondent bank
issued possession notice dated 11.12.2010 u/s 13(4) of the SARFAESI Act. Thereafter, a notice dated 5.2.2011 under Rule 8(6) of the Security
Interest (Enforcement) Rules was served on the Petitioners indicating that the properties would be brought for sale on 10.3.2011. It appears that
though the sale was scheduled to be held on 10.3.2011, it was unilaterally rescheduled to 14.3.2011 by subsequent communication dated
7.2.2011. This communication dated 7.2.2011 has been served on the Petitioners. Questioning not only the communications dated 5.2.2011 and
7.2.2011, but also the possession notice dated 11.12.2010, the Petitioners have approached this Court by way of the present writ petition.
Mr. G.R. Lakshmanan, learned Counsel appearing for the Petitioners would contend that in terms of sub rule (6) of Rule 8 of the Security
Interest (Enforcement) Rules, 2002, the notice dated 5.2.2011 fixing the sale on 10.3.2011 was not notified and on the other hand, the
Respondent bank had intimated even when such notice published in the newspapers rescheduling the date of sale from 10.3.2011 to 14.3.2011.
The above act of the Respondent bank is in clear violation of Rule 8(6) of the Security Interest (Enforcement) Rules and in that sense, the sale
notice dated 5.2.2011 and the subsequent communication dated 7.2.2011 are liable to be set aside. He would further submit that on merits, the
notice u/s 13(4) of the SARFAESI Act is also illegal.
Mr. Srinath Sridevan, learned Counsel appearing for the Respondent bank would contend that the Petitioners have not brought to the notice of
this Court the public notice dated 8.2.2011 issued in the English Daily ""The New Indian Express"" as well as in the Tamil Daily ""Dinamani"" on
10.2.2011 in terms of the proviso to sub rule (6) of Rule 8 of the Security Interest (Enforcement) Rules. Learned Counsel would further submit
that the earlier communication dated 5.2.2011 and the subsequent notice dated 8.2.2011 are in accordance with the proviso to sub rule (6) of
Rule 8 of the Security Interest (Enforcement) Rules. The Respondent bank has complied with the requirements as per the rules and the Petitioners
suppressing the publication dated 10.2.2011, have obtained interim order of stay and therefore, no auction could be conducted and for that reason
a sum of Rs. 1,05,635/- has been incurred for publication. The above amount should be imposed by way of cost on the Petitioners in view of the
suppression of the publication.
We have carefully considered the above submissions. The writ petition revolves as to the interpretation of sub rule (6) of Rule 8 of the Security
Interest (Enforcement) Rules. For that reason, the sub rule (6) of Rule 8 is extracted here under:
Sale of immovable secured assets:
(1) ...
(2) ...
(3) ...
(4) ...
(5) ...
(6) the authorised officer shall serve to the borrower a notice of thirty days for sale of the immovable secured assets, under Sub-rule (5):
Provided that if the sale of such 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 in two leading newspapers one in vernacular language having sufficient circulation in the locality by setting out
the terms of sale, which shall include--
(a) the description of the immovable property to be sold, including the details of the encumbrances known to the secured creditor;
(b) the secured debt for recovery of which the property is to be sold;
(c) reserve price, below which the property may not be sold;
(d) time and place of public auction or the time after which sale by any other mode shall be completed;
(e) depositing earnest money as may be stipulated by the secured creditor;
(f) any other thing which the authorized officer considers it material for a purchaser to know in order to judge the nature and value of the property.
As per sub rule (5), the authorized officer shall obtain valuation of the property from an approved valuer and in consultation with the secured
creditor, fix the price of the property and thereafter, the authorized officer may sell the whole or any part of such immovable secured asset by any
of the following methods:
(a) by obtaining quotations from the persons dealing with similar secured assets or otherwise interested in buying the such assets; or
(b) by inviting tenders from the public;
(c) by holding public auction; or
(d) by private treaty.
For the purpose of this submission, sub rule (6) of Rule 8 is relevant which we have extracted above. A careful reading of that rule shows that in
terms in sub rule (6) of Rule 8, it is mandatory on the part of the authorized officer to serve to the borrower a notice of thirty days for sale of the
immovable secured assets in Sub-rule (5). In this case, the authorized officer has decided to sell the property by inviting tenders from the bidders.
In the counter affidavit, it is stated that the valuation of the property was obtained by the authorized officer from an approved valuer in consultation
with the secured creditor. In conformity with the said rule, by notice dated 5.2.2011, the Petitioners were informed that the secured assets would
be brought for sale on 10.3.2011. The said notice reads as follows:
Sir/Madam,
Where as the bank acting through its Authorized Officer, in exercise of its powers u/s 13(4) of Securitisation Reconstruction of Financial Assets
and Enforcement of Security Interest Act, 2002 (SARFAESI) has decided to put up for sale the properties described in schedule-1, part-A for
realization of debts due to the Bank from M/s. Indi Shopee, as mentioned in part B of schedule-1 enclosed herewith.
Notice is hereby given under Rule 8(6) of the Security Interest (Enforcement) Rules, 2002, that sale of properties described in Schedule-1 Part-
A shall be held by the Authorized Officer as per the details set out here under:
Date of Sale 10.03.2011
Time of Sale 11. AM onwards
Place of Sale UNION BANK OF INDIA, 37, COLLEGE
ROAD, NUNGAMBAKKAM, CHENNAI-6.
Reserve Price fixed in rupees FOR LOT NO.1 Rs.16.00 crores (consisting of
fifteen title deeds)
FOR LOT NO.2 Rs.7.42 crores (consisting of
one title deed)
Take notice that in the event of schedule-1, part B debts and the costs of sale being tendered by you on or before the date of sale, then
Authorized Officer would stop the sale. No communication or offers would be entertained from you once the sale is complete.
Take further notice, that in the event the sale proceeds of the schedule-1 part A property is not sufficient to satisfy the schedule-1 part-B debts,
then bank would take recourse to the remedies available under law for recovery of balance amount.
The above notice, in our opinion, is in conformity with sub rule (6) of Rule 8 of the Security Interest (Enforcement) Rules.
Apart from the above communication, notice of thirty days for sale of immovable secured assets was communicated to the borrowers. In the
event the sale of secured assets being effected by either inviting tenders from the public or by holding public auction, the secured creditor shall
cause a public notice in two leading newspapers one in vernacular language having sufficient circulation in the locality by setting out the terms of
sale. The said proviso empowers the authorized officer to independently issue a sale notice published in the newspapers apart from a notice as
required under sub rule (6) of Rule 8. In terms of proviso to sub rule (6) of Rule 8, the authorized officer has issued the sale notice dated 8.2.2011
and published in the English Daily ""The New Indian Express"" and Tamil Daily ""Dinamani"" dated 10.2.2011. This notice dated 8.2.2011 is in
conformity with the proviso to sub rule (6) of Rule 8 which has not been even disclosed in the affidavit filed in support of the writ petition. The
contention of the Petitioners that the notice dated 5.2.2011 ought to have been published and in the absence of any such publication, the
Respondent bank cannot extend the time by subsequent notice dated 7.2.2011, in our opinion, is on total misconception of the rule. In terms of
sub rule (6) of Rule 8, the Petitioners were informed by notice dated 5.2.2011. When a notification was published in the newspapers fixing a date
on 14.3.2011, the authorized officer has again intimated the Petitioners by subsequent notice dated 7.2.2011, stating that the sale would be held on
14.3.2011, which was in conformity with the sale notice dated 8.2.2011. This intimation is only in respect of the publication of notification and the
same cannot be considered to be a mere extension of time of the date of sale. As the requirement under sub rule (6) of Rule 8 and the proviso to
sub rule (6) of Rule 8 are at two different situations, one in respect of intimation to the borrower by way of notice of thirty days and another for
inviting tenders from the public for purchase of the property by giving thirty days notice in public auction, in that view of the matter, the challenge to
the notice dated 5.2.2011 fixing the sale on 10.3.2011 and the subsequent notice dated 7.2.2011 intimating the Petitioners of the date of sale as
14.3.2011 cannot be considered to be in contravention of sub rule (6) of Rule 8. Hence, the challenge to the above two notices is unsustainable.
For that reason, the writ petition is liable to be rejected.
As far as the challenge to the notice of possession u/s 13(4) of the SARFAESI Act, the Hon''ble Apex Court, in the decision reported in (2010)
8 Supreme Court Cases 110 United Bank of India v. Satyawati Tondon and Ors., has held that this Court cannot entertain a writ petition
questioning the possession notice u/s 13(4) of the SARFAESI Act as the Petitioners have got an effective alternative remedy of filing an appeal u/s
17(1) of the SARFAESI Act. Hence, the challenge to the possession notice cannot also be entertained.
For all the above reasons, the writ petition is dismissed as devoid of merits. Consequently, connected miscellaneous petition is closed.
Coming to the last submission made by Mr. Srinath Sridevan, learned Counsel appearing for the Respondent bank for imposition of costs, it is
true that the Petitioners have not disclosed the notice dated 8.2.2011 published in two dailies on 10.2.2011 and they have approached this Court
solely on the ground that earlier notice dated 5.2.2011 fixing the time and date of sale as 10.3.2011 was extended unilaterally in contravention of
Rule 8 (6) of the Security Interest (Enforcement) Rules. However, in our opinion, the writ petition has been filed only on misunderstanding of the
above rules. That apart, in any event, whatever the expenses incurred by the bank is only to be borne out by the Petitioners as the bank could
recover the same along with the dues and for that reason, except observing that the non-discloser cannot be appreciated, we are not inclined to
impose any cost.