Mrs. Urmila Devi & Anr. vs The Authorized Officer, Canara Bank & Ors.

JUSTICE R. D. KHARE, CHAIRPERSON

The present appeal has 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 and order dated 14.05.2025 passed by the DRT, Patna, whereby the S.A. No. 243/2021 and S.A. No. 08/2022 filed by the appellant No. 1 have been dismissed.

Brief facts of the matters are that the appellant no. 1 was granted a housing loan for a sum of Rs. 14.65 lacs, to which the appellant No. 1 created equitable mortgage over the property in question by depositing original title deed with the Bank. Since the borrowers did not adhere to the terms of the loan agreement, therefore, the account was classified as NPA on 19.11.2019 and demand notice dated 26.12.2019 was issued under section 13(2) of the SARFAESI Act for Rs. 13,82,992/- along with interest. Since the borrowers did not pay any heed to the said demand, therefore, the respondent-Bank issued possession notice dated 08.07.2020 under section 13(4) of the SARFAESI Act. The said notice was published in the newspapers on 14.07.2020. Thereafter, after getting the property valued from the approved valuer, the respondent-Bank issued sale notice on 10.09.2020 scheduling the auction of the property in question on 20.10.2020 with the reserve price of Rs. 46.22 lacs, but the said sale did not materialize. The respondent-Bank has again issued an auction sale notice on 10.12.2020 for auctioning the property in question on 19.01.2021 with the reserve price of Rs. 41,59,800/- and the property was sold for Rs. 41,79,800/-, which was confirmed vide letter dated 20.01.2021 and the sale certificate was issued on 24.09.2021 in favour of the respondent no. 3-Auction Purchaser and in the meantime, physical possession of the property in question was taken on 18.09.2021.

The appellants-Borrowers filed the S.A. No. 243 of 2021 under section 17 of the SARFAESI Act before the Tribunal below for direction to restore the possession, which was allowed vide order dated 17.10.2022 with direction to the Bank to revert back the possession of the mortgaged property to the appellants. Thereafter, the sale certificate dated 24.09.2021 was registered by the bank in favour of the respondent no. 3 vide sale deed dated 02.11.2021. Being aggrieved by the said measures taken by the bank, the appellant filed the S.A. No. 08/2022 on 03.01.2022 under section 17 of the SARFAESI Act, which was dismissed along with S.A. No. 243/2021 by the Tribunal below on 14.05.2025. Being aggrieved by the said order, the present appeal has been filed by the appellants.

Learned counsel for the appellant submitted that the mortgage is not proper and the demand notice and the possession notice were also not served upon the appellants. It was further contended that the details of immovable property as given in the demand notice and the possession notice are entirely different to each other. It was also contended that the respondent-Bank has issued the acceptance letter and confirmation letter for the same property, but the sale certificate was issued for another property, which is illegal and beyond the power of the respondent-bank.

It was lastly contended that the e-auction sale notice was not served to each borrower in view of the Rule 8(6) of the Rules, 2002 and the property mentioned in the said notice does not match with the mortgage deed executed by the appellants in favour of the respondent-Bank. It was further contended that the respondent no. 3 had not deposited the full auction amount within the stipulated period of 15 days as stipulated in the Act and Rules made thereunder. It was, therefore, prayed that the order impugned may be set aside and the appeal may be allowed.

Learned counsel for the respondent-Bank submitted that the appellant no. 1 executed a registered mortgage deed dated 15.12.2014 in favour of the bank, by which she mortgaged her immovable property in favour of the Bank to secure the said facility. It was further contended that the demand notice was served upon the appellants for liquidating the dues as demanded in the said notice, but they did not pay any heed to the said demand, therefore, the possession notice dated 08.07.2020 was served/affixed and published in the newspapers on 14.07.2020. It was also contended that since the appellants did not pay any heed to the demand raised in the demand notice, therefore, the auction sale notice was issued on 10.09.2020, by which the auction was fixed for 22.10.2020, but the same could not materialize for want of bidder, therefore, another sale notice was issued on 10.12.2020 scheduling the auction of the property in question on 19.01.2021. It was further contended that the said notice was affixed on the conspicuous part of the property in question and was also published in the newspapers on 17.12.2020. It was further contended that pursuant to the said notice, the property was sold for a sum of Rs. 41,79,800/- and the sale certificate was issue on 24.09.2021 and thereafter, the sale deed was also executed in favour of the respondent no. 3-Auction Purchaser on 02.11.2021. It was thus contended that the property in question was sold in accordance with the Act and Rules made thereunder, which has also been held by the Tribunal below vide order impugned. It was, therefore, prayed that the appeal filed by the appellant 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 the respondent no. 3 is a bonafide purchaser of the property in question, as the entire sale consideration was deposited in accordance with the Act and Rules made thereunder. It was, therefore, prayed that the appeal filed by the appellants may be dismissed with heavy costs.

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

Admittedly, the appellants had filed two S.As., first being S.A. No. 243/2021 before the Tribunal below for direction to the Bank for restoration of possession with the appellants and the second being S.A. No. 08/2022 for setting aside the auction sale and its subsequent actions taken by the Bank. Thus it is clear that the appellants have never challenged the mortgage created over the property in question nor challenged the demand notice and possession notice issued by the Bank, thus the appellants cannot be permitted to challenge the same directly before this Tribunal. As such the contention of the appellants that the mortgage created in favour of the Bank is not proper and no demand notice or possession notice have been served upon the borrowers is not tenable, hence the same is rejected.

So far as the auction sale dated 19.01.2021 is concerned, it is to be seen that after obtaining the valuation report in respect of the property in question, the sale notice under Rule 8(6) of the Rules, 2002 was issued on 10.12.2020 scheduling the auction of the property in question on 19.01.2021. The said notice was dispatched to the borrowers on 19.12.2020, copy of sale notice as well as postal receipts are placed at page no. 266 to 272 of the reply of the Bank. The said sale notice was also published in two newspapers on 17.12.2020. Copies of the said publications are placed at page no. 273 to 276 of the said reply. Thus, the sale notice was published prior to the service of the same upon the borrowers, which 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 erred in holding the auction sale and its entire subsequent actions to be valid and in accordance with the Act and Rules vide order impugned, which is not sustainable in the eye of law, therefore, the same to this extent is liable to be set aside.

In view of the discussions as recorded above, the order impugned to the extent of holding the auction sale and its subsequent actions to be valid and in accordance with the Act and Rules made thereunder is set aside and the appeal filed by the appellant is accordingly allowed with no order as to costs.

The respondent-Bank is directed to give the details of outstanding amount to the appellants within 15 days from today, who shall pay the same within one month thereafter.

The respondent-Bank is further directed to return the auction amount to the auction purchaser along with (8%) simple interest from the date of deposit till the date of payment.

In case, the appellants fail to deposit the outstanding amount as informed by the Bank within the time as stipulated above, the respondent-bank shall be at liberty to proceed for its recovery in accordance with the law from the stage of issuance of fresh sale notice.

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