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Judgment
The challenge under this appeal preferred under section 18 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short "the SARFAESI Act") is the order dated 27.08.2019 passed by the Presiding Officer, DRT, Jabalpur, whereby the securitization application (S.A.) filed by the borrowers was allowed.
The brief facts of the matter are, that the respondents No. 1 & 2 availed certain credit facilities from the appellant-Bank. The loan was secured by equitable mortgage of five properties. The borrowers committed default in repayment of the loan, therefore, the Bank issued the demand notice dated 21.04.2017 under section 13(2) of the SARFAESI Act and took the symbolic possession of the property on 28.07.2017 by issuing possession notice under section 13(4) of the said Act. Since the borrowers did not pay any heed to the notices, therefore, the Bank put the properties for auction by issuing sale notice on 23.11.2018 and again on 28.02.2019, but the same were rendered infructuous for want of bids. Subsequently, the sale notice was issued on 2.7.2019 fixing the date of auction on 19.07.2019. The said sale notice was published in the newspapers on 3.7.2019. However, the sale notice was dispatched on 4.7.2019 to the borrowers. The properties were auctioned in favour of the respondents no. 3 to 9.
The borrowers challenged the proceedings of the Bank by filing the present S.A. stating inter alia amongst others that a clear 15 days' sale notice was not served as required under Rule 9(1) of the Security Interest (Enforcement) Rules, 2002 (in short "the Rules, 2002"). The Tribunal below vide impugned order observed that no 15 days' sale notice was served prior to the auction of the properties, therefore, set aside the sale notice dated 2.7.2019 and all the proceedings pursuant to the said sale notice in view of the judgment passed by the Hon'ble Supreme Court in Mathew Varghese Vs. M. Amritha Kumar and others, (2014) 5 Supreme Court Cases 610. Being aggrieved by the said order, the appellant-Bank has filed the present appeal.
Respondents no. 1 & 2 filed reply. Reply was also filed on behalf of the respondents no. 3 to 9. However, none has appeared to argue the matter before this Tribunal.
Learned counsel for the appellant submitted that although the sale notice dated 2.7.2019 was dispatched on 4.7.2019, but the borrowers were aware about the sale of the property from the publication of the sale notice in the newspapers, which was made on 3.7.2019. Further, the borrowers have never intended to redeem the property nor have shown any interest in depositing the loan amount, as such no prejudice was caused to them, even if 15 days' sale notice was not served to them. Therefore, the Tribunal below has erred in setting aside the sale.
On the contrary, the learned counsel for the respondents no. 1 & 2 contended that a clear 15 days' sale notice for the subsequent sale is mandatory. The Bank is required to serve, affix and publish the sale notice as per Rule 9(1) of the Rules, 2002. The publication is in addition to the service of sale notice and is not an alternative , as laid down by the Hon'ble Supreme Court in Mathew Varghese Vs. M. Amritha Kumar (Supra). The borrowers were not even aware about the publication of sale notice on 3.7.2019. Thus, there is no infirmity in the impugned order.
Considered the rival contentions of the learned counsels for the parties and perused the record.
It is undisputed that the sale in question was third sale, therefore, the Bank was required to serve 15 days' sale notice to the borrowers/guarantors before auction of the property. The record submitted by the Bank discloses that the sale notice dated 2.7.2019 was dispatched from Indore on 4.7.2019. The notice was to be delivered at Tehsil-Shamgarh, District Mandsaur. Thus, the same was delivered at the earliest on 5.7.2019 or 6.7.2019 after taking reasonable time in transit. The sale was conducted on 19.7.2019, therefore, there was no clear 15 days' sale notice to the borrowers even from the date of dispatch of sale notice on 4.7.2019. The property was sold within 15 days from the date of dispatch. The Hon'ble Supreme Court has laid down in Mathew Varghese Vs. M. Amritha Kumar (Supra) that the terms "or" mentioned under Rule 9(1) shall be read as word "and". The proviso to Rule 9(1) also provides that "the authorized officer shall serve, affix and publish the notice of sale for not less than 15 days to the borrowers for any subsequent sale. The Hon'ble Allahabad High Court has also held the 30 days' notice as mandatory in Dayanath Pandey Vs. State of U.P. and others, 2008(3) ADJ 235 (DB).
Thus, it is obvious that for subsequent sale the Bank is required to provide 15 days' sale notice to the public at large by publishing the sale notice in the newspapers and simultaneously a 15 days' sale notice is required to be served to the borrowers/guarantors separately. A mere publication of 15 days' sale notice in the newspapers does not serve the purpose of the statute. Even otherwise, the Bank has not produced any evidence that the copy of publication in the newspapers has been sent to the borrowers within 15 days or any evidence to the effect that the borrowers had any knowledge of publication of sale notice on 3.7.2019.
Service of 15 days' auction sale notice is a statutory requirement and service of the same is a substantial right of the borrowers. Any deviation from this provision is a substantial procedural irregularity, which cannot be said to be of minor nature. Such statutory requirement is required to be strictly followed by the Bank and cannot be ignored on the ground that any prejudice was not caused to the borrowers. The Bank cannot take the advantage of the situation that the borrowers have never intended to redeem the property nor have deposited any amount. Thus, the Bank has failed to serve 15 days' sale notice before auction of the property and the Tribunal below has rightly set aside the sale and consequential proceedings initiated pursuant to the said auction sale notice.
In view of the above, the appeal is devoid of merits, hence the same is dismissed with no order as to costs.
A copy of this judgment be sent to the parties as well as the DRT concerned and be also uploaded on the e-DRT portal.