2015 (3) TMI 281 - HC - Indian Laws

Sale of immovable property by secured creditor under the provisions of the SARFAESI Act, 2002 - Contravention of Rule 9 of the Security Interest (Enforcement) Rules, 2002 - Failure to obtain consent for extended time - Held that - In Mathew Varghese 2015 (1) TMI 461 - SUPREME COURT the Supreme Court was of the view that, the secured creditor was entitled to enforce the secured asset in conformity with the provisions of the SARFAESI Act, 2002. In J. Rajiv Subramaniyan & Anr. 2014 (6) TMI 17 - SUPREME COURT the Supreme Court considered Mathew Varghese 2015 (1) TMI 461 - SUPREME COURT and was of the view that, the secured creditor as a trustee of the secured asset cannot deal with the same in any manner it likes and that such an asset can be disposed of only in the manner prescribed in the SARFAESI Act, 2002. Applying the ratio laid down in Mathew Varghese , J. Rajiv Subramaniyan & Anr. to the facts of this case, the irresistible conclusion is that, the secured creditor while enforcing the secured asset in the instant case did not do so in conformity with the provisions of the SARFAESI Act, 2002 by failing to obtain the consent of the writ petitioner who is the owner of the property put up for sale when extending the time for deposit of the balance purchase price by the purchaser. Such consent of the writ petitioner is mandatory as laid down in J. Rajiv Subramaniyan & Anr. In such circumstances I find that the sale conducted by the secured creditor in respect of the property of the writ petitioner put up for sale by the notice dated April 11, 2014 is vitiated. Such sale is declared as null and void. - Decided in favour of appellant.

Issues:
1. Challenge to measures taken by a secured creditor under the SARFAESI Act, 2002.
2. Mandatory nature of Rule 9 of the Security Interest (Enforcement) Rules, 2002.
3. Maintainability of the writ petition.
4. Validity of sale conducted by the secured creditor.
5. Effect of unilateral extension of time on sale validity.
6. Interpretation of provisions of the SARFAESI Act, 2002.
7. Possession of the immovable property by the writ petitioner.

Analysis:

1. Challenge to Secured Creditor's Actions:
The judgment deals with a challenge brought by the writ petitioner against the measures taken by a secured creditor under the SARFAESI Act, 2002. The petitioner, as the owner of an immovable property put up for sale by the secured creditor, claims that the sale is null and void as the creditor did not obtain her consent for extending the time to deposit the balance purchase price by the purchaser, as required by Rule 9 of the Security Interest (Enforcement) Rules, 2002.

2. Mandatory Nature of Rule 9:
The petitioner relies on Supreme Court cases to argue that Rule 9 of the Security Interest (Enforcement) Rules, 2002 is mandatory. The rule stipulates that the purchaser must deposit 25% of the sale price immediately and the balance within a specified period or with consent. The petitioner asserts that without her consent, the sale is invalidated, emphasizing the necessity of consent under Rule 9.

3. Maintainability of the Writ Petition:
The respondents argue that the petitioner waived her right to challenge the actions by not approaching the Debts Recovery Tribunal within the prescribed period under the SARFAESI Act, 2002. However, the court finds that the petitioner did not disable herself from moving the writ by not availing the statutory remedy within the specified time, thus maintaining the writ petition's validity.

4. Validity of Sale Conducted:
The court examines whether the sale of the petitioner's property by the secured creditor is vitiated due to the unilateral extension of time for depositing the purchase price. The petitioner alleges that the purchaser did not deposit the balance within the stipulated time, and the creditor extended the period without her consent, rendering the sale void.

5. Effect of Unilateral Extension on Sale Validity:
Relying on the provisions of Rule 9 and relevant Supreme Court judgments, the court concludes that the unilateral extension of time by the secured creditor without the petitioner's consent violates the SARFAESI Act, 2002. The court emphasizes the mandatory nature of obtaining the owner's consent before such extensions, declaring the sale null and void in this case.

6. Interpretation of SARFAESI Act Provisions:
The judgment interprets the provisions of the SARFAESI Act, 2002 in light of the mandatory requirements under Rule 9 of the Security Interest (Enforcement) Rules, 2002. By applying the principles laid down in various Supreme Court cases, the court determines that the secured creditor did not act in conformity with the Act, leading to the invalidation of the sale.

7. Possession of Immovable Property:
Lastly, the court addresses the possession of the immovable property by the petitioner and the interim order restraining the secured creditor. With the sale set aside, the interim order is vacated, allowing the creditor to proceed against the secured asset in accordance with the law.

In conclusion, the court declares the sale conducted by the secured creditor as null and void due to the failure to obtain the petitioner's consent for extending the time for depositing the purchase price, emphasizing the mandatory nature of such consent under Rule 9 of the Security Interest (Enforcement) Rules, 2002.

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