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Judgment
THE APPELLATE TRIBUNAL :
Instant Appeal is preferred against a judgment and order dated 12th February, 2019 passed by Learned DRT-2 Hyderabad allowing the S.A. No. 169 of 2018 filed by the Respondents herein. Securitisation Application under Section 17 of the SARFAESI Act, 2002 (hereinafter referred to as the ‘Act’) was filed by the Respondents to set aside the Sale Certificate issued by the Bank in favour of the Auction Purchaser/ Respondent No. 2 and further to set aside the e-auction held on 09.03.2018 conducted in pursuance of Sale Notice dated 16.02.2018.
As per the pleadings, Securitisation Applicant availed the financial facilities from the Bank by creating the equitable mortgage of the schedule property as a security. Working capital of Rs. 9 crore was sanctioned vide letter dated 02.06.2014. When the overdue interest amount of Rs.36,37,085/- was demanded by the Bank, Rs.20 lacs was deposited on 10.06.2016. Enhancement proposal was thereafter made. It was also informed to the Bank that the Securitisation Applicant has entered into a Development Agreement with M/s Uma Estates and Project Private Limited. Bank vide letter dated 03.12.2016 asked for some more documents which was duly responded on 21.12.2016. OTS proposal was also submitted which was also not considered. Bank issued notice under Section 13(2) of the ‘Act’ on 22.01.2016 wherein the date of NPA was not mentioned and principal amount and interest was not shown separately. Possession Notice was issued on 27.10.2016 which was not served upon the SARFAESI Applicants. Since OTS proposal was also declined by the Bank, e-auction notice dated 21.12.2017 was issued by the Bank fixing the auction on 14.02.2018. Thereafter, another Sale Notice was issued on 16.02.2018 fixing the auction on 09.03.2018 fixing the reserve price at Rs. 10.85 crore. Notice dated 16.02.2018 was neither served upon the Securitisation Applicants nor affixed on the secured assets. Two separate notices were not issued under Rule 8(6) and 9(1) of the Security Interest (Enforcement) Rules, 2002 (hereafter referred to as the ‘Rules’). Valuation was fixed at a low price. Auction was conducted on 09.03.2018 wherein only one single bidder was there. It was done for Rs. 10.87 crore. Sale Certificate was also issued and registered. Leave was sought to set aside the Sale Certificate issued by the Bank and to set aside the proceedings initiated by the Bank under Section 13(4) of the ‘Act’ with consequential reliefs.
Opposition filed by the Bank challenging that the Securitisation Application is barred by Limitation. Sale Certificate dated 23.03.2018 is challenged while e- auction sale Notice was issued for e-auction dated 09.03.2018. The total amount in accordance with law is deposited by the Auction Purchaser. No issue was ever raised regarding valuation of the property. As far as the OTS proposal is concerned, it was duly considered and the borrower was communicated that the offer is low.
Account was classified as NPA on 21.01.2016 which finds place in the Notice under Section 13(2) of the ‘Act’ dated 22.01.2016. Securitisation Applicants himself admits that on receiving the Possession Notice, he informed the Bank regarding agreement with M/s Uma Estates Pvt. Ltd. Accordingly, now he cannot challenge the non-service of Possession Notice. E-auction Notice dated 16.02.2018 fixing the e-auction on 09.03.2018 was duly served upon the Securitisation Applicants and was affixed on the secured assets.
Schedule property was duly valued on 18.01.2017 before putting the secured asset for auction. Reserve price was fixed on the basis of the Valuation Report. The Valuation Report submitted by the Securitisation Applicant is post auction wherein inflated rates have been shown.
Respondent No. 2/ Auction Purchaser also made the same statement as made by the Bank.
Having considered the submissions made by the Learned Counsel for the parties, Learned DRT held that the Bank followed the provisions of SARFAESI Act and Rules therein in letter and spirit while issuing the Demand Notice, Possession Notice and E-Auction Sale Notice and service of the same. This finding is not challenged by the Securitisation Applicants and accordingly, attained finality.
However, Learned DRT held that there is violation of Rule 8(5) of the Security Interest (Enforcement) Rules, 2002(hereinafter referred to as the ‘Rules’). Valuation was fixed on the basis of the report of January, 2017 while the auction was conducted on 09.03.2018 which was in violation of Rule 8(5) of the Rules. Further, Learned DRT also took note of the fact that the issuance of the Sale Certificate is in continuation of the sale process. Sale Certificate was issued on 23.03.2018 and the S.A. was filed on 03.05.2018 which was filed well within time.
Accordingly, Learned DRT allowed the S.A. and set aside the e-auction held on 09.03.2018.
Learned Counsel for the Appellant would submit that as far as the issue of action of the Bank under the Securitisation Act is concerned, it was done in accordance with law as was held by the Learned DRT. These findings have not been challenged by the Securitisation Applicants and attained finality. Now the only issue remains to be looked into is as to whether there is substantial compliance of the provisions of Rule 8(5) of the ‘Rules’ or not? Learned Counsel for the Appellant would submit that the Bank fixed the valuation on the basis of report dated 18.01.2017 and 02.03.2017 obtained from approved valuer. Reserve price was fixed at Rs. 10.85 crores while sale was conducted for Rs. 10.87 crore. In the report of Shri Venkateswara Consultants dated 18.01.2017 the distress value was Rs.11,25,00,000/- and another Valuation Report dated 07.02.2017, the forced distress value was Rs.10,68,75,000/-while the market value was Rs. 14,25,00,000/- and the realizable value was Rs.12,11,25,000/- while the Securitisation Applicant filed a report dated 20.03.2018 wherein the land value was shown as Rs. 24,75,00,000/-. The rate was fixed at Rs.8,25,00,000 per cent. Learned Counsel for the Appellant would submit that Securitisation Applicant had submitted a valuation Report which is after sale of the secured assets. This report was on the basis of inflated rates with an intention to scuttle down the sale process. It is further submitted that no criteria has been taken by the valuer for assessing the value.
Per contra, Learned Counsel for the Respondent would submit that there was a huge rise in the value of the land as Hyderabad was becoming the proposed capital of the Telangana and the value of land was increasing. Learned Counsel has further placed reliance upon the judgment of Hon’ble Apex Court in OM Sakthi Sekar versus V. Sukumar & Ors [2026 SCC OnLine SC 368] and Sardar Associates and Others versus Punjab and Sind Bank and Others (2009) 8 SCC 257 while the Learned Counsel for the Appellant has placed reliance upon M/s Pochiraju Industries Ltd., Raju Versus Punjab National Bank AIR 2019 Hyd. 61.
It has been held by the Hon’ble Apex Court in the case of Om Sakhti Sekhar Versus V Sukumar (supra) that the objective of the recovery proceedings is not merely to complete the sale. Rather, to realize the maximum value of the secured assets so as to balance the interests of creditor and the borrower. Rights of a bonafide purchaser also deserves due protection and the confirmation of Sale should not ordinarily be interfered with, but it was equally established that such protection is not absolute while credible issues are raised regarding the adequacy of valuation or fairness of the process leading to fixation of the reserve price, the supervisory jurisdiction of the Court may be invoked to ensure that the recovery proceedings have been conducted in a manner that secures the best possible value of the property.
In M/s Pochiraju Industries Ltd. versus Punjab National Bank and others(supra), Hon’ble High Court placed reliance upon the judgment of Hon’ble Apex Court in J. Rajiv Subramaniyan and another Versus Pandiyas and others (2014) 5 SCC 651 wherein in Para No. 18 it was held that-
It is expected that all the banks and financial institutions which resort to the extreme measures under the SARFAESI Act, 2002 for sale of the secured assets to ensure that such sale of the asset provides maximum benefit to the borrower by the sale of such asset. Therefore, the secured creditors are expected to take bona fide measures to ensure that there is maximum yield from such secured assets for the borrowers."
In Ram Kishun and Others versus State of Uttar Pradesh and others (2012) 11 SCC 511, it was held that it becomes a legal obligation on the part of the authority that property be sold in such a manner that it may fetch the best price. It was further held that-
"In view of the above, it is evident that there must be an application mind by the authority concerned while approving/accepting the report of the approved valuer and fixing the reserve price, as the failure to do so may cause substantial injury to the borrower/guarantor and that would amount to material irregularity and ultimately vitiate the subsequent proceedings.”
In view of the above legal proposition, now we have to examine as to whether the property was sold for valuable consideration or not? Admittedly, the reserve price was fixed for Rs.10.85 crore. It was sold for Rs.10.87 crore. Two Valuation Reports were obtained by the Bank wherein in the one report, the forced value was Rs. 11.25 crore while in the other one it was Rs. 10.68 crore. It appears that the Authorised Officer has taken average of the two and fixed the reserve price. The perusal of the Valuation Report would indicate that the approved valuer has taken into consideration the attending circumstances, guideline value, prevailing market price and the guideline rate obtained from Registrar’s office which was Rs. 33 lacs per acre. In the other Report also, the Valuer had taken into consideration all the attending facts and circumstances. Guideline value was taken as Rs. 90 lacs per acre which was calculated at 3.00 Cents multiplied by Rs. 30 lacs. The figure of Rs. 30 lacs was obtained from the Registrar’s office/ State Government Gazette/ Income Tax notifications. This value would not be put to doubt while the report submitted by the borrower simply says that the valuation is on the basis of Rs.8,25,00,000/-per cent. Accordingly, the Valuation was assessed at Rs. 24,75,00,000/-. No criteria for taking the figure of Rs. 8,25,00,000/- per cent was given by the approved valuer after this report was obtained on 21.03.2018 which was much after the e-auction sale was conducted. It means that this report was obtained only to show that the property was sold for under valuation. If the borrower was actually serious and interested for assessment of the valuation, he should have obtained a report prior to the date e-auction but the same was not done. Accordingly, no reliance could be placed upon the report of the borrower filed after conclusion of the sale. Accordingly, we are of the considered view that the valuation as assessed by the Authorised Officer was in accordance with law. There is no violation of the Rule 8(5) of the ‘Rules’.
Learned Counsel for the Appellant vehemently argued that the limitation was sought from the date of issuance of the Sale Certificate which was not in accordance with law. Sale was conducted on 09.03.2018 and the S.A. was filed on 03.05.2018. Hence, the S.A. was filed beyond 45 days. Per contra, Learned Counsel for the Respondent would submit that the S.A. was filed within time as issuance of Sale Certificate is a consequence of sale process.
Learned Counsel for the Respondent has placed reliance upon the Authorised Officer Indian Overseas Bank and another versus Ashok Saw Mill (2009) 8 SCC 366. It is submitted that the Securitisation Application can be filed by the Applicant even on the issuance of Sale Certificate within 45 days from the date of issuance of the Sale Certificate. It is further submitted that the issuance of Sale Certificate is a measure which is covered under Section 13(4) of the ‘Act’. Per contra, Learned Counsel for the Appellant Bank would submit that issuance of the Sale certificate is a ministerial Act. Sale Certificate is issued in consequence of the auction sale having been concluded on deposit of the bid amount by the auction purchaser. The Securitisation Applicant cannot in any case, seek Limitation from the date of issuance of Sale Certificate, rather the Securitisation Application should have been filed within 45 days from the date of e-auction.
As far as issue of Limitation is concerned, Section 17 (1) of SARFAESI Act, 2002 categorically provides as under:
“17.[Application against measures to recover secured debts].-(1) Any person (including borrower), aggrieved by any of the measures referred to in sub-section (4) of section 13 taken by the secured creditor or his authorised officer under this Chapter, [may make an application alongwith such fee, as may be prescribed,] to the Debts Recovery Tribunal having jurisdiction in the matter within forty-five days from the date on which such measures had been taken: [Provided that different fees may be prescribed for making the application by the borrower and the person other than the borrower.] [Explanation. For the removal of doubts, it is hereby declared that the communication of the reasons to the borrower by the secured creditor for not having accepted his representation or objection or the likely action of the secured creditor at the stage of communication of reasons to the borrower shall not entitle the person (including borrower) to make an application to the Debts Recovery Tribunal under this sub-section.]”
Bare perusal of the provision would indicate that the Securitisation Application can be filed within 45 days from the date on which the measure under Section 13 (4) of the Act is taken by the secured creditor. Hon’ble Supreme Court in the case of Ashok Saw Mill (supra) held in Para No. 35 that –
“35.In order to prevent misuse of such wide powers and to prevent prejudice being caused to a borrower on account of an error on the part of the banks or financial institutions, certain checks and balances have been introduced in Section 17 which allow any person, including the borrower, aggrieved by any of the measures referred to in sub-section (4) of Section 13 taken by the secured creditor, to make an application to the DRT having 9 jurisdiction in the matter within 45 days from the date of such measures having taken for the reliefs indicated in sub-section (3) thereof.”
Issuance of Sale Certificate is in consequence of the sale conducted by the secured creditor. Sale Certificate is issued by the secured creditor when the Auction Purchaser deposits the amount in compliance with the Rule 9(3) and 9(4) of the ‘Rules’. It means that the action contemplated under Section 13(4) of the ‘Act’ was the e-auction conducted by the secured creditor and not the issuance of the Sale Certificate. Issuance of Sale certificate is nothing but a ministerial Act to be carried out by the secured creditor. In the present case, the sale was conducted on 09.03.2018 and the Securitisation Application was filed on 3rd May, 2018 while the Sale Certificate was issued on 09.03.2018 Securitisation Application is filed beyond 45 days from the date of sale which is not covered under Section 17(1) of the ‘Act’. It is not filed within 45 days of conducting the sale. Accordingly, the Securitisation Application filed by the Appellant is also time barred. Learned DRT had erred in recording a finding in favour of the Securitisation Applicant which is also liable to be set aside.
On the basis of discussion made above, we are of the considered view that the Learned DRT erroneously passed the impugned judgment without following the principles of law which is liable to be set aside. Appeal deserves to be allowed.
ORDER
Appeal is allowed. Impugned judgment and order dated 12th February, 2019 passed by the Learned Debts Recovery Tribunal II Hyderabad in S.A. No. 169 of 2018 (M/s Bhadri Impex Pvt. Ltd. Versus The Authorised Officer and another) is set aside. Consequently the S.A. No. 169 of 2018 also stands dismissed.
No Order as to costs.
File be consigned to Record Room.
Copy of the Judgment/ Final Order be uploaded in the Tribunal’s Website.
Order signed and pronounced by me in the open Court on this the 10th day of July, 2026.