2015 (3) TMI 815 - HC - Indian Laws

To challenge order passed by the Debt Recovery Appellate Tribunal (DRAT) - Sale of asset under SARFEASI Act - Public notice need to be published in two leading newspapers. - Held that - Unless and until a clear 30 days notice is given to the borrower, no sale or transfer can be resorted to by a SECURED CREDITOR. In the event of any such sale properly notified after giving 30 days clear notice to the borrower did not take place as scheduled for reasons which cannot be solely attributable to the borrower, the SECURED CREDITOR cannot effect the sale or transfer of the SECURED ASSET on any subsequent date by relying upon the notification issued earlier. In other words, once the sale does not take place pursuant to a notice issued under Rules 8 and 9, read along with Section 13(8) for which the entire blame cannot be thrown on the borrower, it is imperative that for effecting the sale, the procedure prescribed above will have to be followed afresh, as the notice issued earlier would lapse. In that respect,the only other provision to be noted is sub-rule (8) of Rule 8 as per which sale by any method other than public auction or public tender can be on such terms as may be settled between the parties in writing. As far as sub-rule (8) is concerned, the parties referred to can only relate to the SECURED CREDITOR and the borrower. It is therefore, imperative that for the sale to be effected under Section 13(8), the procedure prescribed under Rule 8 read along with 9(1) has to be necessarily followed, inasmuch as that is the prescription of the law for effecting the sale as has been explained in detail by us in the earlier paragraphs by referring to Sections 13(1), 13(8) and 37, read along with Section 29 and Rule 15.In our considered view any other construction will be doing violence to the provisions of the SARFAESI Act, in particular Section 13(1) and (8) of the said Act. In view of our reasons and in view of the conclusion arrived at by the Appellate Tribunal, with which we have agreed to, the position of law as opined by the Supreme Court in Mathew Varghese's case 2015 (1) TMI 461 - SUPREME COURT , we do not see any reason for this Court to interfere with the impugned judgment in exercise of our discretionary jurisdiction under Article 226 and 227 of the Constitution of India. We accordingly dismiss the writ petition.

Summary

Issues Involved:
1. Validity of the sale notice and its publication under Rule 8(6) of the Security Interest (Enforcement) Rules, 2002.
2. Compliance with the procedural requirements of the SARFAESI Act.
3. Right to redemption by the guarantor/mortgagor.
4. Entitlement to refund of sale consideration with interest.

Issue-wise Detailed Analysis:

1. Validity of the Sale Notice and Its Publication:
The primary issue was whether the sale notice was published in compliance with Rule 8(6) of the Security Interest (Enforcement) Rules, 2002. The rule mandates that the sale notice must be published in two leading newspapers, one in vernacular language, having sufficient circulation in the locality where the property is situated. The Appellate Tribunal found that the "Rashtriya Sahara" newspaper, used for the sale notice, did not have sufficient circulation in Faridabad where the property was located. The Tribunal noted that "Rashtriya Sahara" had a separate edition for Haryana, and the publication in the Delhi edition, particularly on a page meant for East Delhi, did not meet the requirement of sufficient circulation in Faridabad. The High Court agreed with this finding, emphasizing that the intent of the rule is to ensure maximum coverage to secure the best price for the property.

2. Compliance with Procedural Requirements of the SARFAESI Act:
The High Court upheld the Appellate Tribunal's finding that the sale process did not comply with the procedural requirements of the SARFAESI Act. Specifically, the publication of the sale notice did not meet the criteria set out in Rule 8(6) of the Enforcement Rules. The Court referenced the Supreme Court's decision in Mathew Varghese v. M. Amritha Kumar, which underscored the necessity of following the prescribed procedure to protect the constitutional and human rights of property holders.

3. Right to Redemption by the Guarantor/Mortgagor:
The respondent (guarantor/mortgagor) had offered Rs. 95 lakhs to redeem the mortgage, which was higher than the auction price of Rs. 84.2 lakhs. The Appellate Tribunal and the High Court recognized this right to redemption, noting that the respondent had deposited the amount within the stipulated time. The Court found that the bank's refusal to accept this higher amount and its failure to comply with the procedural requirements invalidated the sale.

4. Entitlement to Refund of Sale Consideration with Interest:
Given the invalidation of the sale, the Appellate Tribunal directed that the auction purchasers (petitioners) be refunded their sale consideration of Rs. 84.2 lakhs with interest at 9% per annum from the date of deposit until the date of payment. The High Court upheld this direction, ensuring that the petitioners were compensated for the invalidated sale.

Conclusion:
The High Court dismissed the writ petition, agreeing with the Appellate Tribunal's findings and conclusions. The sale was invalidated due to non-compliance with Rule 8(6) of the Enforcement Rules, and the right to redemption by the guarantor/mortgagor was upheld. The petitioners were entitled to a refund of their sale consideration with interest, and the procedural safeguards under the SARFAESI Act were reinforced. The Court emphasized that the prescribed procedure must be followed to protect the rights of property holders and ensure fair recovery of dues.