2011 (6) TMI 974 - HC - Indian Laws

Summary

Issues Involved:
1. Jurisdiction under Article 226 of the Constitution of India.
2. Consent letter and private negotiation.
3. Representation by GE-WINN MANAGEMENT & Company and compliance with SARFAESI Rules 8(5) and 8(8).

Detailed Analysis:

1. Jurisdiction under Article 226 of the Constitution of India:
The appellants contended that the writ petitioners cannot invoke Article 226 of the Constitution of India since an alternative forum is available under the SARFAESI Act. The court noted that the writ petitioners argued that the bank did not follow the procedures under the SARFAESI Act, and there was a gross violation of principles of natural justice. The court referred to several judgments, including V. Noble Kumar v. Standard Chartered Bank Auto and Mortgage Constructions, which emphasized compliance with procedural rules. The court concluded that it has jurisdiction to entertain the writ petition due to the demonstrated procedural violations and the long pendency of the writ petition.

2. Consent Letter and Private Negotiation:
The appellants argued that the writ petitioners had given a consent letter for the private sale, which authorized the bank to proceed with the sale. The court examined the facts and found that the writ petitioners had indeed given a consent letter for private negotiation but noted that the bank did not follow the proper procedure for private treaty sales as per Rule 8(8) of the Security Interest (Enforcement) Rules, 2002. The court highlighted that the presence of the debtor and their written consent are essential for a valid private treaty sale, which was not evident in this case. The court concluded that the sale was conducted without proper consent from the writ petitioners.

3. Representation by GE-WINN MANAGEMENT & Company and Compliance with SARFAESI Rules 8(5) and 8(8):
The court scrutinized the role of GE-WINN MANAGEMENT & Company, which was purportedly representing the writ petitioners during the sale. The court found no valid connection between GE-WINN MANAGEMENT & Company and the writ petitioners, and the bank failed to explain the involvement of this entity. The court determined that the bank did not follow the required procedures under Rule 8(5) and Rule 8(8) of the Security Interest (Enforcement) Rules, 2002, which mandates obtaining quotations, inviting tenders, or holding a public auction before proceeding with a private treaty sale. The court held that the sale was not conducted in compliance with the rules, rendering it invalid.

Conclusion:
The court upheld the writ petition, directing the writ petitioners to return the amount of Rs. 1.41 crores to the appellants with 9% interest per annum from April 2007. The bank was ordered to refund the amount deposited by the appellants with interest from 15.12.2006. The auction purchaser was directed to hand over possession to the bank upon receiving the refunded amount. The court confirmed the order of the learned Single Judge with modifications, emphasizing the importance of following procedural rules and principles of natural justice in property sales under the SARFAESI Act.