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Judgment
P.K. Bhasin, Chairperson
The challenge is this appeal is to the final order dated 20.10.2016 passed by the Debt Recovery Tribunal-I,Chandigarh in Securitisation Application(S.A.) No.20/2015 filed by the appellant-borrower under Section 17 whereby the S.A. has been dismissed. The appellant had filed the S.A. to challenge the actions of the respondent no. 1 taken under Section 13(2) and 13(4) of SARFAESI Act including the auction conducted on 04.06.2015 in which property i.e. land and building Naturarpathy Centre at Rect. &kila no. 28/182, 19, 20, 29/12, 17/1, at village Alipur, Tehsil Sohna Distt.. Gurgaon admeasuring 27 kanal 9 marlaand the superstructures thereon(property in question) mortgaged by appellant in favour of the respondent no. 1 bank was sold to the sole participant, respondent no.2 herein, for Rs. 11.75 crores which price according to case of the appellant was throw away price inasmuch as the real market value was more than Rs. 50 crores.
The facts leading to the initiation of SARFAESI measures by the respondent no.1 and challenge thereto by the appellant have been noticed the learned DRT its impugned order in detail and I deem it appropriate to re-produce the same here. It reads as under:-
"1. The Applicant has filed this application under Section 17 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (The SARFAESI Act, 2002) challenging the action taken by the Respondent Bank under The SARFAESI Act.
Briefly stated facts are that the Applicant Co. had been Sanctioned credit facility of Rs.8.20 crore whereas the Bank had disbursed only Rs.7,76,62,288/-. It has been also stated that the project could not be completed as per schedule due to escalation in prices and other various factors (Exh.A2). The Applicant applied for enhancement in loan which was not responded by the Bank. It has been stated that despite all these circumstances the Applicant had made total repayment of Rs.2.45 crore till date out of which Rs.50 lakh have been deposited recently on 31.03.2015. The Applicant had given Bank guarantee too but the Respondent Bank did not reply otherwise the Bank could have recovered full amount (Exh.A3). It has been further stated that the Bank did not declare the account NPA at any stage and issued Notice underSec. 13(2) dt.13.04.2013 (Exh.A4) to which Applicant had filed objections dt.06.06.2013 which are still to be responded (Exh.A5). It has been also stated that the Bank failed to follow the provisions and norms made under the Act as while taking possession of the property under Sec. 13(4) of The Act, the same was not affixed on the property. Moreover, when the Applicant approached about knowing the sale of the property, the Bank did not inform the sale proceed to the Applicant dueto which the Applicant do not know who is the highest bidder. It has been alleged that the Bank has not published proper publication for sale of property in question without following procedures as laid down under Rule 8 as the Bank has failed to give prior 30 days' notice to the Applicant before fixing sale. It has been stated that on 04.06.2015, the Bank hurriedly sold the property to third party at throw away price of Rs.11.75 crore whereas the property is worth more than Rs.50 crore (Exh.A7) without serving the sale notice upon the Applicant.
The Applicant had even submitted OTS proposals to the Bank for settlement of the account but the Bank did not respond since it was after the property of the Applicant.
The Applicant has stated that since the Bank has failed to disburse the loan as per sanction, did not reply to the objections filed to Notice under Section 13(2), the notices were never served, affixed, published as per the provisions of the Act besides making allegations that the property has beensold at throw away price and that the Resp. No.3 has failed to deposit the auction money well in time as per the provisions,the actions of the Bank in initiating the action under the SARFAESI Act against the Applicant and then selling the property be set aside and SA be allowed.
The Respondent Bank in its Reply has stated that the Applicant has mis-stated and concealed the facts from this Tribunal. The Bank has alleged that the Applicant had mis-utilised the funds. It has been stated that as per occupation certificated issued by Town Planner Gurgaon the total constructed area of the property in question is only about 30,000 sq. ft. and the amount was disbursed for construction purpose. If construction cost is taken at Rs. 1000/-sq. ft. even then the Applicant has used Rs.3 crore for construction purpose out ofRs.77,662,288/- and the remaining amount had apparently been mis-utilised (Exh.B1). It has been stated that the Bank had disbursed the loan amount in accordance with the terms and conditions of the sanction. It has been further stated that time and again the Applicant through its promoter was requested to regularize the account in various meetings but nothing happened. The Bank has stated it wrong that the Applicant had deposited Rs.2.45 crore after declaration of account as NPA instead the Applicant haddeposited Rs.1.65 crore. As no proposal was accepted by the bank, therefore, no guarantee towards settlement and thesamewascommunicated vide letter dt.21.05.2015(Exh.B3).
It has been stated that the account was declared NPA on 31.03.2013 and thereafter issued Notice under Sec. 13(2)dt.13.04.2013. Denying the averments of the Applicant, the Bank has stated that no objections were filed against notice under Sec. 13(2) whereas only a request was made for the purpose of restructuring and rephrasing in pursuance thereto the Bank had written a letter dt.08.06.2013 asking for various documents for the purpose of considering the same. However, in the meeting dt.03.08.2013, it was communicated that no restructuring or rephasement or further exposure could be considered by the Bank and the applicants were asked to deposit the amount in terms of demand notice. It has been further stated that the Bank has initiated the action against the Applicant strictly as per law laid down since declaring the account NPA to sale of property, viz. publishing of possession as well as sale notices in newspapers (Exh.B4 to Exh.B7 besides affixing of notices on spot and sending of the same to borrower/mortgagor.
The Bank has denied the allegation that the property was sold in hurried manner. In fact the sale was earlier published on 27.02.2015 with reserve price of Rs.10.75 crore and at that time due to the request of the Applicant and taking it recovery of Bank dues, the same was deferred. Thereafter, it was published on 03.05.2015 for sale on 04.06.2015 withreserve price of Rs.11.75 crore after getting valuation report from the approved valuer and has stated it incorrect that the value of the property is Rs.50 crore as stated by the Applicant (Exh.B8). With regard to OTS, the Bank has stated to have accepted OTS for lumpsum payment of Rs.9.50 crore on or before 30.11.2015 vide letter dt.15.11.2014 (Exh.B9) but the borrower failed todeposit the amount as per terms of OTS.
Applicant has marked Exh.A1 to Exh. A19 on its side whereas the Respondent Bank hasmarked Exh. B1 to B1 ontheir side.
The counsel for the Applicant has argued that the Bank has not conveyed the date of NPA of the account ratherwrongly declared the account as NPA which otherwise was within the limit and despite filing the objections to Notice under Sec. 13(2) within 45 days, no reply has been filed by the Bank, hence subsequent actions of the bank are void. Another objection of the counsel for the Applicants was regarding valuation which the bank has fixed at Rs.35 crore whereas it is worth more than Rs.70 crore. Moreover, the property is equipped with machinery, other fixtures of crores of rupees. The counsel for the Applicants further stated that the claim of the Bank of serving the Applicants is not an admissible proof. Moreover, no fixation has been made as per rule and that the possession is still with the Applicants whereas the property has been sold to the only bidder without taking over possession firstly on as is where is basis which against the rules framed under The Act.
The counsel for the Applicants have also taken support from citations Vasu p. Shetty Vs. M/s Hotel Vandana Palace (SC), M. Rajendran Vs. Authorised Officer, Corporation Bank, Villpuram (Madras) (D.B)(2012 Air (Madras) 21:2012(1) BankJ856, Union Bank of India Vs. Rajendra Wadhwa (Madhya Pradesh) (DP), M/s IAA Hospital Pvt. Ltd. Vs. The Authorisedofficer, UCO Bank (P&H) (D.B), Mardia Chemicals Ltd. Vs. Union of India (SC).
On the other hand side, counsel for the Bank has argued that the Applicants were duly conveyed about the account being declared NPA as this fact can be seen that the Applicants themselves have written letters to clear the dues knowing fully well that their account was not running properly. Moreover, Notice under Sec. 13(2) was duly served but the Applicants have failed to file objections and whatever letters they have given for restructuring or settlements were duly replied. Since no objection was filed to Notice under Sec. 13(3A) by the Applicants, submitting of reply to the same does not arise.Further the Bank has sold the property after complying with all the rules, giving due notices as well as affixing the same on the property and publication was also carried out. It was onlythe Applicants who ignored each and every step of the Bank and further argued that the Applicants who are habitual in filing IAs, instead of letting the SA decided, continuously pressed upon to decide IA first whereas the Bank is suffering despite selling the property to the auction purchaser successfully and who after having got no possession is pressing for refund of money. The counsel for the RespondentBank has further drawn my attention towards conduct of the Applicants towards Hon'ble High Court whereby a fairopportunity was given to the Applicants to pay the dues but they have failed to fulfill the undertakings given before the Hobble High Court. Therefore, at this time, it is not required that their application should be heard even on equity base. The counsel for the Bank has further pointed out that the Applicants have also been successful in stretching the matter before District Magistrate stating that they would pay Rs.6 crore within two months just to gain time. Denying the allegation that the sale was not conducted as per rule, the counsel for the Bank stated that the same was conductedstrictly as per rules and that the whole consideration amounthas been deposited and clarified on the issue of 1% deposit of sale consideration towards taxand prayed that the SA shouldbe dismissed as the Applicants have already stretched thismatter for years. Counsel for the Bank has relied upon citations ITC Vs. Blue Coast Hotels Ltd. &Ors(SLP @ 10215-10217/2016), Payorite Print Media Pvt. Ltd. Vs. State Bank of India andOrs., IFCI Ltd. Vs. Om Shivay Real Estate Pvt. Ltd.
On the other hand side, counsel for the Auction purchaser vehemently opposed the contention of the Applicants and aggressively argued that either his money should be returned or the possession should be given to him as without any fault on his part he has participated in the auction but the Applicants have been successful in delaying the proceedings before District Magistrate and then before Hon'ble High Court and further pointed out that earlier IA filed for interim relief has been dismissed. The contention of the auction purchaser was that the sale deed has been executed on 26.06.2015 for the sale which was conducted on 19.06.2015, the same has been mutated in his favour on 08.07.2015 and TDS has certificate has also been procured. Despite that the auction purchaser is not able to get fruits of his property. The Auction Purchaser has further pointed out that after the sale, even single penny has not been paid by the Applicant and are contesting on flimsy ground, therefore, prayed that either SA should be dismissed or he should be provided with possession or his sale proceeds be returned with interest with compensations to him.
Before prayer of the Applicant could be considered, it is worth mentioning that on filing of the SA in which subsequently property was put to sale, considering the prayer of the Applicant dispossession of the Applicant was stayed. Thereafter the applicant kept on filing IAs one after the other and also approached Hon'ble DRAT as well as Hon'ble High Court. Before the Hon'ble High Court, the Applicants undertook to deposit Rs.3 crore and Rs.1 crore within a week and the order passed on 1. 08.2016 by the Hon'ble High Court is reproduced as under:
"Learned counsel for respondent no. 1 on instructions form Dr.Ramesh Kumar Saksena, Director Respondent No. 1 states that the entire sale consideration along with reasonable interest to the auction purchaser shall be paid by respondent No.1. In order to show the bonafides, he states that demand draft for a sum of Rs. 3 crores shall be produced in the Court on the next date of hearing and further sum of Rs. 1 crore within nextone week and the balance payment shall be made within four weeks thereafter."
Thereafter on 24.08.2016, the applicant further undertook to pay the dues and a detailed order was passed by the Hon'ble High Court, extracts of which are reproduced hereunder:
"....Learned counsel for respondent no. 1 on instructions from Ms. Eva Saksena, Director of respondent no.1 submits that they shall produce a demand draft for Rs. 4 crores in terms of order dated 01.08.2016. It was further stated by him that in case, he is unable to do so, the writ petition may be accepted....''
Meaning thereby that during the course of the proceedings, the Applicant who was making prayer for settlement and for paying the dues, has failed till date to pay the dues knowing fully well that their earlier OTS with the Bank which was duly acknowledged by the Applicants were not complied with. It is admitted fact that the Applicant failed to pay dues till date and the status remained the same even at the time of last hearing of arguments by the Applicant.
On the other hand side, the respondent bank who has firstly clarified on the issue that in response to Notice under Section 13(2) in objections, was ever submitted by the Applicants but merely a request was made for the purpose of restructuring and rephrasing the account which the Bank has duly replied through its letter dated 08.06.2013 and had asked the Applicants to submit required documents for considering their proposal. Rather the Bank has admitted that in the meeting dated 03.08.2013 it was communicated to the Applicants that no restricting or rephrasing or further exposure could be considered and that the Applicants were again asked to deposit amount in terms of demand notice. Since no objections were filed after perusing the documents I am too in agreement with the Bank and satisfied qua the same cannot be considered as objection but merely a letter of proposal.
On the other hand side, I have perused letter issued by the Bank on 08.06.2013 whereby the Bank has duly conveyed status of the account being NPA and requested the Applicants that if they desire any additional loan they should provide documents conveyed through this letter. Even vide Annexure B3 the bank again conveyed that proposal under OTS has not been approved and the Applicants were cautioned to deposit amount as demanded. Both these letters have otherwise been admitted by the Applicant and now they cannot deny that they were not aware of status of the account and the declaration of account as NPA was not conveyed to them. Rather in this letter dated 08.06.2013, the Bank itself has given status of the account. Moreover, the contentions of the Applicants are duly transpired from the pleadings wherein they themselves have admitted for making attempts for restructuring and rescheduling of the account which could only be when the status of account being NPA was in their knowledge and demands were made.
So far as the action of the Bank is concerned, the Bank has already placed on record EXh. B4 to Exh. B8 proving that the Bank has duly followed the procedures and not only conveyed to the Applicants about the demand but in compliance of the rules has got the same published as well as affixed.
Perusing the record, it has been found that the Bank has followed the due procedure till issuance of Notice under Section 13(4) and that no irregularity whatsoever has been found therein.
Further claim made by the Applicants for their settlement cannot be taken as a right, particularly keeping in view Exh. B9 dated 15.11.2014, which is reproduced as under:
"with reference to your letter dated 14.11.2014 we inform that as agreed by you, the Bank is in principally agree for a OTS by way of lumpsum payment of Rs. 9.50 crore on or before 30/11/2014 against the above term loan subject to final approval by the competent authority.''
I am fully in agreement with the arguments of the counsel for the respondent bank that the property which was put to sale was got evaluated before putting the same on sale fixing the reserve price as per norms. The claim of the Applicants that the property is worth more than Rs. 50 crore, is not maintainable particularly when they themselves have failed even to deposit OTS amount to the tune of Rs. 9.5 crore. The applicants who relied upon their valuation report Exh. A1 under the Head of Utilisation Certificate clearly showing that electrical, sanitary works including brick work were in progress meaning thereby that the property was still under finalization and it was merely a utilization certificate given on cost of every work and cannot be considered as proper valuation.
I also agree with the counsel for the Bank that the Bank has fixed the properties for sale on 04.06.2015, the notice was duly issued by the Bank on 02.05.2015 which is clear 30 days notice proved from publication. A very minute and hyper technical objection of the Applicant qua non serving of 30 days notice, we failed to understand that the Applicants who were pursuing their each and every steps on day to day basis how could be considered as not aware of the fixation of sale particularly when the Bank has duly complied with all the norms. Perusal of Exh. A15 itself shows that the Applicants have filed this SA on 08.06.2015 along with resolution dated 11.05.2015 for which the vakalatnama was duly signed on 08.06.2015 itself reflects that the applicants were fully aware about affixation of the sale when they themselves have written letter on 23.03.2015 whereby they have specifically mentioned ''meanwhile the SARFAESI Act to sell property on 30.03.2015 in pursuance to sale notice dated 23.02.2015 published on 27.02.2015 may kindly be deferred'' and thereafter applicant again a wrote a letter Exh. A1 with regard to illegal action being conducted illegally in the loan account and in the same letter they wished to liquidate the account giving some proposal and schedule of payment.
Not only this even before the District Magistrate on 21.04.2015 Exh. A17 which was proceeding parallel the Applicants specifically stated that they require 12 weeks to repay the dues and the Bank was asking for 6 weeks time and the DM in the said proceeding dated 21.04.2015 has given time of 2 weeks to the applicants to deposit Rs. 6 crore.
In totality, all the above correspondence as well as letters exchanged between the Applicant and the Bank and further notices duly published, affixed by the Bank prove beyond doubt that the Applicants were fully in touch with the Bank and were aware of the sale and due notices were not given to them.
We have not found any substance in the agreement of the Applicant that the Bank has served through public courier and no affixation was made and there was only a sole bidder who participated and the possession is still with them which do not have any merit in itself. Rather it seems that the applicants who were given sufficient time and opportunities to settle the matter and once it was settled they failed to honor terms and conditions and ultimately the Bank in compelling circumstances in continuation of the proceedings put the properties second time on sale after getting proper valuation which proves beyond doubt and the same was sold to the auction purchaser on as it where is basis.
In the light of the above discussions of the objections, all the issues raised by the Applicants in their arguments whereby they have raised preliminary objection not serving Notice under Section 13(2), not filing reply to the objections by the bank, possession notice not being served as per rules, not properly evaluated, physical possession is with the Applicant itself, sale on as is where is basis, found no cogent ground in their favor whereas the Bank has duly proved that the Applicants since from the last more than two years not fully aware about the status of the account but also aware about each and every step forwarded by Bank towards recovery particularly deferring first sale on the request of the Applicant when they wished to settle the account and ultimately on being failure on their part putting and shifting the burden on the Bank were neither bonafide nor on merits.
Having examined the averments made by the respective counsel of the parties and documents and evidence filed by them in support of their pleadings. I have come to the conclusion that the action taken by the Bank is absolutely in accordance with law just and proper.
Accordingly this SA is dismissed. Any application pending stands disposed of."
Feeling aggrieved by the rejection of S.A. the present appeal came to be filed by the security applicant. Counsel for all the parties were heard and they filed written submissions also.
The main controversy in this case is that before auctioning the property in question the appellants were not served with the mandatory auction notice as required under Rule 8(6) of Security Interest Enforcement Rules, 2002. Rules or not and if no personal/individual notice was served upon the appellant then what is the effect on the sale conducted on 4/6/2015.
The appellant in the S.A. had pleaded that it had not been served with the mandatory notice under Rule 8(6) at all before putting its property tosale. The respondent tried to explain this flaw in auction by pleading that necessary notice had been published two newspapers besides affixing outside mortgaged property and , therefore, the requirement notice stood complied with because the purpose of notice to the borrower to give him opportunity to clear the bank's dues before the auction. In this case the appellant was always aware of the fact that its property is going to be sold and just because it was not served with individual notice of sale as required under Rule 8(6) of the Rules of 2002 under SARFAESI Act the auction cannot be set aside on this technical irregularity.
Auction purchaser also took the same stand that since the appellant was all along aware of all the steps being taken by the bank to recover its outstanding dues to the tune of crores of rupees it cannot seek setting aside of auction sale in favour of the auction purchaser on the technical ground.In support of this submission Mr. Sanjiv Sagar, learned counsel for the auction purchaser relied upon the judgment of Hon'ble Supreme Court in "L & T Hosing Finance Ltd. Vs Trishul Developer & another", 2020(10) SCC 659.He also submitted that no prejudice is shown to have been caused to the appellant for this technical fault.
I am afraid the argument of the learned counsel for the bank and the auction purchaser that non-service of notice under Rule 8(6) of the Rules of 2002 is technical cannot be accepted. In fact this argument is in the teeth of various decisions of the Hon'ble Supreme Court where it has been held that this rule of service of individual notice of thirty days before auction is mandatory and cannot be dispensed with by a secured creditor even if notice ispublished in newspapers. In this regard reliance can be placed on one of the judgments on the point in issue which is in the case of "Mathew Varghese vs M. Amritha Kumar", (2014) 5 SCC 610.Relevant paras from this judgment are being re-produced below":-
"26.2. The Security Interest rules, 2002
"8. Sale of immovable secured assets. - (1) Where the secured asset is an immovable property, the authorized officer shall take or cause to be taken possession, by delivering a possession notice prepared as nearly as possible in Appendix IV to these Rules, to the borrower and by affixing the possession notice on the outer door or at such conspicuous place of the property.
* * *
(3) In the event if possession of immovable property is actually taken by the authorized officer, such property shall be kept in his own custody or in the custody of any person authorized or appointed by him, who shall take as much care of the property in his custody as an owner of ordinary prudence would, under the similar circumstances, take of such property.
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(5) Before effecting sale fo the immovable property referred to in sub-rule (1) of Rule 9, the authorized officer shall obtain valuation of the property from an approved valuer and in consultation with the secured creditor, fix the reserve price of the property and may sell the whole or any party of such immovable secured assets by any of the following methods -
(a) by obtaining quotation 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.
(6) The authorized 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 of rthe 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 authroised officer considers it material for a purchaser to know in order to judge the nature and value of the property....
* * *
Time of sale, issue of sale certificate and delivery of possession, etc. - (1) No sale of immovable property under these Rules shall take place before the expiry of thirty days from the date on which the public notice of sale is published in newspapers as referred to in the proviso to sub-rule (6) or notice of sale has been served to the borrower."
A careful reading of sub-section (8), therefore, has to be made to appreciate the legal issue involved and the submissions made by the respective counsel on the said provision:
29.1 A plain reading of sub-section (8) would show that a borrower can tender to the secured creditor the dues together with all costs, charges and expenses incurred by the secured creditor at any time before the date fixed for sale or transfer. In the event of such tender once made as stipulated in the said provision, the mandate is that the secured asset should not be sold or transferred by the secured creditor. It is further reinforced to the effect that no further step should also be taken by the secured creditor for transfer or sale of the secured asset. The contingency stipulated in the event of the tender being made by a debtor of the dues inclusive of the costs, charges, etc., would be that such tender being made before the date fixed for sale or transfer, the secured creditor should stop all further steps for effecting the sale or transfer. That apart, no further step should also be taken for transfer or sale.
29.2 When we analyse in depth the stipulations contained in the said sub-section (8), we find that there is a valuable right recognized and asserted in favour of the borrower, who is the owner of the secured asset and who is extended an opportunity to take all efforts to stop the sale or transfer till the last minute before which the said sale or transfer is to be effected. Having regard to such a valuable right of a debtor having been embedded in the said sub-section, it will have to be stated in uncontroverted terms that the said provision has been engrafted in the SARFAEI Act primarily with a view to protect the rights of a borrower, inasmuch as, such an ownership right is a constitutional right
protected under Article 300-A of the Constitution, which mandates that no person shall be deprived of his property save by authority of law.
29.3. Therefore, dehors the extent of borrowing made and whatever costs, charges were incurred by the secured creditor in respect of such borrowings, which hit comes to the question of releasing the dues by bringing the property entrusted with the secured creditor for sale to realize money advanced without approaching any court or tribunal, the secured creditor as a TRUSTEE cannot deal with the said property in any manner it likes and can be disposed of only in the manner prescribed in the SARFAESI Act.
29.4 Therefore, the creditor should ensure that the borrower was clearly put on notice of the date and time by which either the sale or transfer will be effected in order to provide the required opportunity to the borrower to take all possible steps for retrieving his property or at least ensure that in the process of sale the secured asset derives the maximum benefit and the secured creditor or anyone on its behalf is not allowed to exploit the situation of the borrower by virtue of the proceedings initiated under the SARFAESI Act. More so, under Section 13(1) of the SARFAESI Act, the secured creditor is given a free hand to resort to sale of the property without approaching the court or Tribunal.
Therefore, by virtue of the stipulations contained under the provisions of the SARFAESI Act, in particular, Section 138), any sale or transfer of a secured asset, cannot take place without duly informing the borrower of the time and date of such sale or transfer in order to enable the borrower to tender the dues of the secured creditor with all costs, charges and expenses and any such sale or transfer effected without complying with the said statutory requirement would be a constitutional violation and nullify the ultimate sale.
Once the said legal position is ascertained, the statutory prescription contained in Rule 8 and 9 have also got to be examined as the said rules prescribe as to the procedure to be followed by a secured creditor while resorting to a sale after the issuance of the proceedings under Section 13(1) to (4) of the SARFAESI Act. Under rule 9(1), it is prescribed that no sale of an immovable property under the Rules should take place before the expiry of 30 days from the date on which the public notice of sale is published in the newspapers as referred to in the proviso to sub-rule (6) of Rule 8 or notice of sale has been served to the borrower. Sub-rule (6) of Rule 8 again states that the authorized officer should serve to the borrower a notice of 30 days for the sale of immovable secured assets. Reading sub-rule (6) of Rule 8 and sub-rule (1) of Rule 9 together, the service of individual notice to the borrower, specifying clear 30 days' time-gap for effecting any sale of immovable secured asset is a statutory mandate. It is also stipulated that no sale should be effected before the expiry of 30 days from the date on which the public notice of sale is published in the newspapers. Therefore, the requirement under Rule 8(6) and Rule 9(1) contemplates a clear 30 days' individual notice to the borrower and also a public notice by way of publication in the newspapers. In other words, while the publication in newspaper should provide for 30 days' clear notice, since Rule 9(1) also states that such notice of sale is to be in accordance with the proviso to sub-rule (6) of Rule 8, 30 days' clear notice to the borrower should also be ensured as stipulated under rule 8(6) as well. Therefore, the use of the expression "or" in Rule 9(1) should be read as "and" as that alone would be in consonance with Section 13(8) of the SARFAESI Act.
Such detailed procedure while resorting to a sale of an immovable secured asset is prescribed under rules 8 and 9(1). In our considered opinion, it has got a twin objective to be achieved:
33.1. In the first place, as already stated by us, by virtue of the stipulation contained in Section 13(8) read along with Rule 8(6) and 9(1), the owner/borrower should have clear notice of 30 days before the date and time when the sale or transfer of the secured asset would be made, as that alone would enable the owner/ borrower to take all efforts to retain his or her ownership by tendering the dues of the secured creditor before that date and time."(emphasis supplied)
In view of this authoritative pronouncement of Hon'ble Supreme Court the auction sale in this case liable to set aside and I need not examine other points raised by Mr. Rajeev Mehra, learned senior counsel for the appellant. The Judgment cited by Mr. Sanjiv Sagar, learned counsel for the auction purchaser, in the case of L&T Finance Ltd. (supra) was a case where there was procedural on the part of the secured creditor in issuing notice under Section 13(2) of SARFAESI Act and in view of that it was observed that prejudice should be shown to have been caused to the borrower Here in the present case there was violation of mandatory Rule 8(6) of the Rules of 2002 under SARFAESI Act. So, the judgement cited by Mr. Sagar does not come to the rescue of the auction purchaser.
In the result, this appeal succeeds and the impugned auction sale of the property of the appellant conducted on 04.06.15 is hereby set aside. As a result of this conclusion all the actions of the bank post the auction sale will also stand nullified. The appellant will be at liberty to deliver copy of this order to all the authorities where the same is required for giving full effect to this order. Similarly, the auction purchaser will also be entitled to demand return of auction money from the bank upon its surrendering possession. The bank will be at liberty to put the property to auction again.