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Judgment
JUSTICE R. D. KHARE, CHAIRPERSON
The present appeal has been filed under section 18 of the Securitization and Reconstruction of Financial Asset and Enforcement of Security Interest Act, 2002 (hereinafter referred to as "the SARFAESI Act") against the judgment dated 11.12.2024, whereby the Securitization Application No. 646/2024 filed by the respondents-borrowers has partly been allowed.
Brief facts of the matter are that the respondents-borrowers were granted certain credit facilities by the appellant-Bank, to which the property in question was mortgaged by the borrowers by the depositing original title deeds with the Bank. Since the borrowers did not maintain the financial disciplines, therefore, the account was classified as NPA on 02.05.2021 and a demand notice dated 5.10.2021 was issued under section 13(2) SARFAESI Act followed by possession notice dated 10.01.2022 under section 13(4) of the said Act.
The respondents-borrowers filed the S.A. No. 312/2023 challenging the demand notice and possession notice before the Tribunal below, which was dismissed as withdrawn on the ground that the possession notice was withdrawn by the Bank due to some technical reason and the respondents-borrower were given liberty to approach the appellant-Bank for settlement, but the borrowers did not do so, therefore, afresh possession notice was issued by the appellant-Bank under section 13(4) of the said Act on 29.12.2023.
It appears that consequent upon issuance of fresh possession notice dated 29.12.2023, the appellant-Bank had put the property in question for auction on 10.01.2024, 04.03.2024 and 12.04.2024, but the said auctions failed. The appellant-Bank had issued 4th sale notice on 18.06.2024 for auctioning the mortgaged property on 23.07.2024, in which two bidders participated and the property was auctioned for a sum of Rs. 302.80 lacs and after deposition of entire sale consideration, the sale certificate was issued and sale deed was also executed in favour of the respondent No. 6 and physical possession of the property in question was also handedover to the auction purchaser.
The respondents-borrowers challenged the demand notice, possession notice and sale notice dated 18.06.2024 before the Tribunal below by filing S.A. No. 646/2024. The Tribunal below vide order impugned has partly allowed the S.A. of the respondents-borrowers and the auction sale notice dated 18.06.2024 and its subsequent actions have been set-aside. Being aggrieved by the said part of impugned order, the present appeal has been filed by the appellant-Bank.
Learned counsel for the appellants submitted that the Tribunal below vide order dated 11.12.2024 allowed the S.A. of the borrowers without applying his judicious mind and failed to consider that appellant-Bank has obtained the valuation report dated 04.09.2023 and sale was conducted on 23.07.2024, which is within a year from the date of obtaining the valuation report. It was further contended that the auction purchaser had deposited the entire auction amount well within time, which is evident from the sale certificate dated 05.08.2024, therefore, the appellant-Bank has issued the sale certificate and executed the sale-deed in favour of the respondent no. 6-auction purchaser.
It was lastly contended that the entire SARFAESI action initiated by the appellant-Bank against the respondents-borrowers is in accordance with the provisions of the SARFAESI Act and Rules made thereunder. 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 since appellant-Bank has failed to obtain afresh valuation report of the immovable property in question as provided under Rule 8(5) of the Security Interest (Enforcement) Rules, 2002 (hereinafter referred to as "Rules, 2002") after issuance of possession notice dated 29.12.2023 under section 13(4) of the SARFAESI Act, 2002 read with Rule 8(1) & (2) of the Security Interest (Enforcement) Rules, 2002, therefore, the order impugned has rightly been passed by the Tribunal below in S.A. No. 646 of 2024.
Learned counsel further submitted that the appellant-Bank obtained valuation report on 04.09.2023 and possession notice was issued on 29.12.2023 and publication of the possession notice as provided under Rule 8 (2) was done on 04.12.2023, i.e. prior to issuance of possession notice dated 29.12.2023, thus the appellant-Bank failed to act in accordance with the settled norms and Rules as provided under the Rules, 2002 and as such impugned auction sale notice dated 18.06.2024, auction sale conducted on 23.07.2024 and sale certificate dated 05.08.2024 have rightly been set-aside by the Tribunal below.
It was also contended that the appellant-Bank has filed the present appeal on frivolous and nonexistent grounds and no case has been made out by the appellant-Bank, therefore, the sale notice dated 18.06.2024, auction sale dated 23.07.2024 and the sale certificate dated 05.08.2024 have rightly been set-aside by the Tribunal below vide order impugned, which needs no interference by this Hon'ble Tribunal and the present appeal is liable to be dismissed with costs.
Learned counsel for the respondent-auction purchaser submitted that the auction purchaser is a bonafide purchaser of the property in question, as there was no privity or connection with the loan transaction between the respondents-borrowers and the appellant-Bank and it is settled proposition of law that the rights of a bona fide auction purchaser, who has complied with Rule 9 of the Rules, 2002 cannot be disturbed in the proceedings under section 17 of the SARFAESI Act. It was further contended that once the sale has been completed, full consideration has been paid and the sale certificate is issued, the rights of the auction purchaser attain finality and in this regard, the Hon'ble Supreme Court has held that such rights cannot be lightly interfered with except unless there is clear proof of illegality, which is absent in the present case. It was, therefore, prayed that the order impugned may be set aside and the appeal filed by the appellant-Bank may be allowed.
I have considered the rival contentions of the learned counsels for the parties and perused the material available on record.
Undisputedly, the respondents-borrowers had challenged the demand notice, possession notice and sale notice by filing S.A. No. 646/2024 before the Tribunal below, which was partly allowed vide order impugned holding that there is no illegality/irregularity in the process of the respondent-Bank upto taking symbolic possession of the secured assets on 29.12.2023. The said part of the impugned order has never been challenged by the respondents-borrowers, therefore, the proceedings initiated by the Bank upto the symbolic possession of the property in question have become absolute and the order impugned to this extent has also attained finality.
The main controversy involved in the present case is, as to whether the Tribunal below has rightly set aside the auction sale dated 23.07.2024 on the ground of not getting the property in question valued from the approved valuer at appropriate time or not?
It is to be seen that the appellant-Bank after issuance of possession notice dated 29.12.2023 issued sale notice dated 18.06.2024 scheduling the auction of the property in question on 23.07.2024 with the reserve price of Rs. 301.80 lacs. As per Rule 8(5) of the Rules, 2002, before effecting sale of the immovable property, the authorized officer shall obtain valuation of the property from the approved valuer and in consultation with the secured creditor, fix the reserve price of the property and may sell the whole or any part of such immovable secured asset. The appellant-Bank had obtained the valuation report from the approved valuer on 04.09.2023, copy of which is placed from page No. 102 to 111 of the paper book. The admitted fact is that the reserve price was fixed by the Bank pursuant to the valuation report dated 04.09.2023, which was obtained prior to taking symbolic possession of the property in question on 29.12.2023, whereas Rule 8 (5) is very much clear that before effecting the sale, the Bank has to obtain the valuation report of the property in question for the purpose of fixing the reserve price. In the present case, after issuance of possession notice on 29.12.2023, the sale notice was issued on 18.06.2024 by the Bank with the reserve price of Rs. 301.80 lacs pursuant to valuation report dated 04.09.2023, which is prior to the date of symbolic possession of the property in question, whereas valuation of the property in question ought to have been done before proceeding for sale, but in the present case Bank did not do so, hence there is violation of Rule 8 (5) of the Rule 2002.
In addition to above, the said valuation report was obtained 04.09.2023 and auction was conducted on 23.07.2024, which is done after lapse of more than 09 months, whereas it is clear concept of the market that the property gets its new value at each interval of six months. In the present case, if the appellant-Bank before proceeding for sale had got the property in question valued from approved valuer, the property in question could have been sold at better price than the price in which the property has been sold. Thus it can be said that the property in question has not been sold by the Bank in accordance with the Act and Rules made thereunder.
In view of the discussions as recorded above, there is no infirmity or illegality in the order impugned, hence the same does not call for any interference by this Tribunal. Consequently, the appeal filed by the appellant-Bank is dismissed with no order as to costs.
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.