2016 (9) TMI 821 - HC - Indian Laws

E-auction - procedure prescribed under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - Held that - For the whole of the entire loan transaction availed by a borrower and if he has created different security interests in different movable/immovable properties by using the expression that secured asset, an option has been provided to the borrower to retrieve that particular secured asset, which is sold by the secured creditor, like in the instant case, where more than one collateral security has been created by the borrower as the security for the loan availed and now only one such security interest has fallen for sale by e-auction mode, the right of the borrower to retrieve that secured asset cannot be denied. For retrieving that particular secured asset, it may not be really necessary for the borrower to liquidate the entire outstanding liability in the loan account and it is enough, if he pays the value fetched at the sale/public auction of that particular secured asset and retrieve it. But, at the same time, the incidental costs, charges and expenses, which the bank may have incurred for undertaking the securitization measures, may also have to be tendered. Hence, apart from repayment of ₹ 3,60,10,000/-, which is the price offered and paid by the 2nd respondent herein for the secured asset, which was sold by the 1st respondent on 23.12.2015, the petitioner shall also pay the securitization expenses incurred by the bank and also such expenses in the form of compensatory costs to the 2nd respondent for the monies deposited by him in the form of interest, not exceeding @ 9% per annum, on or before 09.05.2016. The 1st respondent and/or State Bank of India, Main Branch, Srikakulam, shall not register the Sale Certificate already issued in favour of the 2nd respondent with regard to the secured asset sold on 23.12.2015. Should the petitioner commit any default in paying the aforesaid monies on or before 09.05.2016, the bank would be at perfect liberty to register the Sale Certificate already issued in favour of the 2nd respondent, at his expenses and deliver vacant possession of the secured asset purchased by him. Should the petitioner honour the commitment, which he made to this Court today, it is needless for us to observe that the Sale Certificate issued in favour of the 2nd respondent with regard to the secured asset shall be cancelled and possession of the secured asset should be restored to the writ petitioner.

Summary

Issues:
Challenge of e-auction sale notice issuance and procedure under SARFAESI Act.

Analysis:
The petitioner sought a Writ of Mandamus challenging the e-auction sale notice issued by the 1st respondent, the Authorised Officer of the State Bank of India, Main Branch, for not following the SARFAESI Act procedure properly. The petitioner, an Educational Welfare Society, had availed financial benefits from the bank and provided collateral security. The loan account became a Non-performing Asset (NPA), leading to the bank taking possession of the secured asset and issuing a sale notice. The petitioner claimed to have made partial payments but failed to clear the outstanding liability, resulting in the e-auction sale notice challenged in the writ petition.

The court observed that the bank's actions under Section 13 of the SARFAESI Act for securitization of the loan could not be faulted as the petitioner met the borrower description and the bank met the creditor description. The sale notice issued and e-auction conducted were found to be in compliance with the Rules. However, the petitioner's right to redeem the mortgaged property by paying the e-auction amount was acknowledged based on legal principles and the SARFAESI Act provisions.

The court highlighted Section 13(8) of the SARFAESI Act, emphasizing the borrower's right to tender dues before the sale date to prevent the transfer of the secured asset. It was noted that the borrower could redeem the specific secured asset sold in the e-auction by paying the auction amount and associated expenses. The court directed the petitioner to repay the e-auction amount to the 2nd respondent, cover securitization expenses, and compensatory costs by a specified date to avoid the transfer of the Sale Certificate.

In conclusion, the court disposed of the writ petition, providing directions for repayment and cancellation of the Sale Certificate if the petitioner honored the commitment. The judgment highlighted the borrower's right to redeem the specific secured asset sold in the e-auction by meeting the payment obligations within the stipulated timeline.