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2022 (11) TMI 921 - SC - Indian LawsValidity of e-auction sale - property sold by Bank against recovery of default loan - HC set aside the auction - default in repaying the outstanding loan amount and have also failed to pay the interest accrued to the loan accounts - loan accounts classified and NPA - HELD THAT - The indisputed facts which manifest from the record are that the respondent borrowers availed three loan facilities from the respondent Bank (secured creditor) to the tune of Rs.26 lakhs after executing necessary security documents. Respondent no.4 stood as guarantor and created equitable mortgage over her immovable property as security for due payment of the said loan amounts. The property is a residential building of 266 sq. yards of land - At this stage, the proceedings initiated by the respondent bank came to be assailed by the respondent borrowers before the Debts Recovery Tribunal of Andhra Pradesh at Hyderabad under Section 17(1) of the Act. It may be relevant to note that in the description of the property under Sections 13(2) and 13(4) of the Act, door number indicated was 12-3-393 in place of 12-3-39 and this question about the alleged error in the door number of the mortgaged property was available to the borrowers in the first round of litigation before the Tribunal, if at all, it has any material bearing in reference to the proceedings initiated by the respondent Bank (secured creditor), but the proceedings initiated at the instance of the respondent borrowers before the Tribunal came to be dismissed by a judgment dated 12th December, 2014 and no further appeal was preferred and accordingly it has attained finality. In the instant case, although the respondent borrowers initially approached the Debts Recovery Tribunal by filing an application under Section 17 of the SARFAESI Act, 2002, but the order of the Tribunal indeed was appealable under Section 18 of the Act subject to the compliance of condition of predeposit and without exhausting the statutory remedy of appeal, the respondent borrowers approached the High Court by filing the writ application under Article 226 of the Constitution. We deprecate such practice of entertaining the writ application by the High Court in exercise of jurisdiction under Article 226 of the Constitution without exhausting the alternative statutory remedy available under the law. The High Court under the impugned judgment has nonsuited the present appellant (auction purchaser) on the premise that there is an error in the description of the door number of the property and instead of 12-3-39 , it was indicated as 12-3-393 , although there was no error in the description of the property rather the dimensions with measurement and boundaries were properly indicated of the mortgaged property and on the premise that Rule 9(4) of the Rules has not been followed by the appellants by depositing 75% of the bid amount which ought to have been deposited by 11th April, 2015, instead it was deposited on 15th April, 2015 - there are substance in the submissions made by the learned counsel for the appellant for the reason that so far as the error in the description of door number of the property is concerned, which admittedly indicated throughout as 12-3-393 instead of 12-3-39 , but the fact is that the description of the mortgaged property from the commencement of the proceedings under Section 13(2) of the SARFAESI Act, 2002, due to human error instead of 12-3-39 , door number was indicated as 12-3-393 , but admittedly the fact is that there is no such property available in the locality/vicinity with Door no. 12-3-393 and as full description of the mortgaged property was mentioned/indicated, although there was a typographical error, but the respondent borrowers failed to demonstrate any prejudice being caused on account of the inadvertent error being caused in description of the mortgaged property. The four days delay which was caused in terms of the original auction notice, in no manner, would frustrate or annul the auction proceedings and the Debts Recovery Tribunal has rightly held that because in such state of flux, particularly when the bank/secured creditor requested the auction purchaser to wait for some time because the borrowers are negotiating with the bank in the light of interim order dated 26th March, 2015 of the Tribunal, delay in depositing 75% of the bid amount by four days in no manner would frustrate the rights of the parties inter se, more so, when the conduct of the borrowers in getting extension orders on two different occasions and still not depositing Rs.6 lakhs in terms of the order of the Tribunal would clearly reflect that the intention of the borrowers was only to frustrate the auction sale by one reason or the other, which they could not succeed. The finding returned by the Tribunal was well reasoned and duly supported with the material on record and the interference made by the High Court under the impugned judgment while recording a finding that it was in breach of Rule 9(4) of the Rules, 2002 is not legally sustainable in law and deserves to be set aside - Appeal allowed.
Issues Involved:
1. Validity of the e-auction sale notice due to typographical error in the property description. 2. Compliance with Rule 9(4) of the Security Interest (Enforcement) Rules, 2002 regarding the deposit of the auction price. 3. The maintainability of the writ petition filed by the respondent borrowers without exhausting the statutory remedy of appeal. Detailed Analysis: 1. Validity of the e-auction sale notice due to typographical error in the property description: The respondent borrowers contended that the e-auction sale notice contained an error in the property description, where the property was listed as "Door No.12-3-393" instead of "12-3-39". They argued that this error affected the auction's outcome, potentially reducing the property's value. The Tribunal dismissed this contention, noting that the error was typographical and did not cause any ambiguity or confusion about the property's identity. The High Court, however, found this error to be a serious infirmity, invalidating the auction process. The Supreme Court held that the typographical error did not cause any prejudice to the borrowers, as there was no other property with the number "12-3-393" in the locality. The full description of the property, including boundaries and measurements, was clear and unambiguous. The Court concluded that the error was inconsequential and did not vitiate the auction proceedings. 2. Compliance with Rule 9(4) of the Security Interest (Enforcement) Rules, 2002 regarding the deposit of the auction price: The respondent borrowers argued that the auction purchaser (appellant) failed to deposit the balance 75% of the bid amount within the stipulated 15 days, as required by Rule 9(4) of the Rules, 2002. The High Court agreed, stating that the delay in deposit breached the mandatory provision, rendering the auction sale null and void. The Supreme Court examined the pre-amended Rule 9(4), which allowed for an extension of the 15-day period if agreed upon in writing between the parties. The Court noted that the auction purchaser was ready to deposit the amount on time but was delayed due to the Tribunal's interim order and the bank's request to wait. The Court held that the four-day delay did not frustrate the auction proceedings, especially given the borrowers' conduct in repeatedly seeking extensions without making the required deposit. The Tribunal's finding that the delay did not vitiate the auction was upheld. 3. The maintainability of the writ petition filed by the respondent borrowers without exhausting the statutory remedy of appeal: The respondent borrowers bypassed the statutory remedy of appeal under Section 18 of the SARFAESI Act, 2002, and directly approached the High Court under Article 226 of the Constitution. The Supreme Court emphasized that the High Court should not entertain writ petitions when an effective alternative remedy is available, particularly in matters involving recovery of public dues. The Court cited its previous judgment in United Bank of India vs. Satyawati Tondon & Others, reiterating that the rule of exhausting alternative remedies is a rule of discretion and not compulsion. However, it is generally expected that parties should exhaust available statutory remedies before approaching the High Court. The Supreme Court deprecated the practice of bypassing statutory remedies and held that the High Court should not have entertained the writ petition. Conclusion: The Supreme Court allowed the appeal, quashing and setting aside the High Court's judgment. The Court found that the typographical error in the property description did not vitiate the auction proceedings, and the delay in depositing the balance auction amount was justified under the circumstances. The Court also emphasized the importance of exhausting statutory remedies before invoking the High Court's jurisdiction under Article 226 of the Constitution. The surplus amount from the auction sale, along with accumulated interest, was directed to be transferred to the borrowers' account.
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